UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2010
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number 000-53002
EASY ENERGY, INC.
(Exact name of registrant as specified in its charter)
Nevada 26-0204284
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 105 - 5348 Vegas Dr., Las Vegas 89108
(Address of principal executive offices) (Zip Code)
(702) 442-1166
(Registrant's telephone number)
Indicate by check mark whether the registrant (l) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes [ ] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of November 10, 2010, the registrant's shares of common stock, par value
$0.00001, outstanding were 103,652,778.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements (unaudited).................................... 3
Balance Sheets.......................................................... 3
Statements of Operations................................................ 4
Statements of Cash Flows................................................ 5
Notes to Financial Statements........................................... 6
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................. 16
Item 3 - Quantitative and Qualitative Disclosures About Market Risk......... 19
Item 4 - Controls and Procedures............................................ 19
PART II - OTHER INFORMATION
Item 6 - Exhibits........................................................... 21
Signatures.................................................................. 22
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Easy Energy, Inc.
Balance Sheets
September 30, 2010 December 31, 2009
------------------ -----------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 2,623 $ 105,438
Available for sale marketable securities 2,580 --
Accounts receivable 74,309 --
Inventory -- 3,721
Deposits -- 447,865
----------- -----------
TOTAL CURRENT ASSETS 79,512 557,024
----------- -----------
OTHER ASSETS
Patent -- 8,500
----------- -----------
TOTAL OTHER ASSETS -- 8,500
----------- -----------
TOTAL ASSETS $ 79,512 $ 565,524
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 45,441 $ 5,996
Customer deposits -- 271,509
Loans payable - related party 193,110 485,199
----------- -----------
TOTAL CURRENT LIABILITIES 238,551 762,704
LONG TERM LIABILITIES
Loans payable - related parties 220,000 --
----------- -----------
TOTAL LIABILITIES 458,551 762,704
----------- -----------
STOCKHOLDERS' DEFICIT
Preferred stock, $0.0001 par value; 50,000,000 shares authorized;
none issued and outstanding -- --
Common stock, $0.00001 par value, 185,000,000 shares authorized;
105,102,778 and 101,702,778 shares issued and outstanding 1,051 1,017
Additional paid in capital 3,647,546 3,347,352
Accumulated deficit (4,027,636) (3,545,549)
----------- -----------
TOTAL STOCKHOLDERS' DEFICIT (379,039) (197,180)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 79,512 $ 565,524
=========== ===========
See accompanying notes to financial statements
3
Easy Energy, Inc.
Statements of Operations
(Unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2010 2009 2010 2009
------------ ------------ ------------ ------------
Sales $ 140,740 $ -- $ 715,327 $ --
COST OF GOODS SOLD 136,494 -- 518,416 --
------------ ------------ ------------ ------------
GROSS PROFIT 4,246 -- 196,911 --
------------ ------------ ------------ ------------
OPERATING EXPENSES
Research and development - primarily related party 15,389 62,570 187,534 356,684
General and administrative expenses 263,108 51,639 491,513 363,964
------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 278,497 114,209 679,047 720,648
INTEREST INCOME (EXPENSE) - NET 198 310 50 (240)
------------ ------------ ------------ ------------
NET LOSS $ (274,054) $ (113,899) $ (482,087) $ (720,888)
============ ============ ============ ============
NET LOSS PER COMMON SHARE - BASIC AND DILUTED $ (0.00) $ (0.00) $ (0.00) $ (0.01)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
DURING THE PERIOD - BASIC AND DILUTED 104,614,190 95,202,777 103,451,129 94,355,891
============ ============ ============ ============
See accompanying notes to financial statements
4
Easy Energy, Inc.
Statements of Cash Flows
(Unaudited)
Nine Months Ended September 30,
2010 2009
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (482,087) $ (720,888)
Adjustments to reconcile net loss to net
cash used in operating activities:
Stock issued for services 83,000 105,000
Share based payments 137,478 --
Changes in operating assets and liabilities:
Impairment loss - patent 8,500 --
Prepaid expenses -- 88,541
Inventory 3,721 --
Accounts receivable (74,309) --
Deposits 447,865 (434,369)
Accounts payable 39,445 22,763
Customer deposits (271,509) 295,400
---------- ----------
Net Cash Used In Operating Activities (107,896) (643,553)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in patent costs -- (8,500)
Increase in available for sale marketable securities (2,580) --
---------- ----------
Net Cash Used In Investing Activities (2,580) (8,500)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from related party loans 423,144 451,000
Repayments on related party loans (495,233) --
Proceeds from stock issued for cash 79,750 85,000
---------- ----------
Net Cash Provided By Financing Activities 7,661 536,000
---------- ----------
Net decrease in cash (102,815) (116,053)
Cash - beginning of period 105,438 124,533
---------- ----------
Cash - end of period $ 2,623 $ 8,480
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ -- $ --
========== ==========
Taxes $ -- $ --
========== ==========
See accompanying notes to financial statements
5
Easy Energy, Inc.
Notes to Financial Statements
September 30, 2010
Unaudited
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited condensed interim financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America and the rules and regulations of the United States
Securities and Exchange Commission for interim financial information and with
the instructions to Form 10-Q and Article 10 of Regulation S-X.
The financial information as of December 31, 2009 is derived from the audited
financial statements presented in the Company's Annual Report on Form 10-K for
the year ended December 31, 2009. The unaudited condensed interim financial
statements should be read in conjunction with the Company's Annual Report on
Form 10-K, which contains the audited financial statements and notes thereto,
together with the Management's Discussion and Analysis of Financial Condition
and Results of Operations, for the year ended December 31, 2009.
Certain information or footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted, pursuant to the
rules and regulations of the Securities and Exchange Commission for interim
financial reporting. Accordingly, they do not include all the information and
footnotes necessary for a comprehensive presentation of financial position,
results of operations, or cash flows. It is management's opinion, however, that
all material adjustments (consisting of normal recurring adjustments) have been
made which are necessary for a fair financial statement presentation. The
interim results for the period ended September 30, 2010 are not necessarily
indicative of results for the full fiscal year.
NOTE 2 NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Easy Energy, Inc. (the "Company") was incorporated under the laws of the State
of Nevada on May 17, 2007. The Company is headquartered in Karmiel, Israel.
The Company is in the business of developing and manufacturing battery charging
solutions for portable electronic devices.
During 2010, the Company emerged from the development stage as operations began.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America, or U.S. GAAP, requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
6
Easy Energy, Inc.
Notes to Financial Statements
September 30, 2010
Unaudited
RISKS AND UNCERTAINTIES
The Company's operations are subject to significant risk and uncertainties
including financial, operational, technological, intense competition, and
regulatory risks including the potential risk of business failure. The risk of
social and governmental factors is also a concern since the Company operates in
Israel and its sole supplier is based in China.
See Note 3 regarding going concern matters.
INVESTMENTS
(A) CLASSIFICATION OF SECURITIES
ASC 320, "ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES"
("ASC 320"), as amended and interpreted, requires that at the time of purchase,
designation of a security as held-to-maturity, available-for-sale or trading
depending on ability and intent to hold such security to maturity. Securities
classified as trading and available-for-sale are reported at fair value, while
securities classified as held-to-maturity are reported at amortized cost. The
Company may sell securities as part of the management of the investment
portfolio. Accordingly, all securities held at September 30, 2010 are designated
as available for sale. Any unrealized gains and losses are reported as other
comprehensive income as a component in the statement of stockholders' equity.
(B) OTHER THAN TEMPORARY IMPAIRMENT
ASC 320 provides guidance on determining when an investment is other than
temporarily impaired. The Company reviews its equity investment portfolio for
any unrealized losses that would be deemed other-than-temporary and require the
recognition of an impairment loss in income. If the cost of an investment
exceeds its fair value, the Company evaluates, among other factors, general
market conditions, the duration and extent to which the fair value is less than
cost, and the Company's intent and ability to hold the investments. Management
also considers the type of security, related-industry and sector performance, as
well as published investment ratings and analyst reports, to evaluate its
portfolio. Once a decline in fair value is determined to be other than
temporary, an impairment charge is recorded and a new cost basis in the
investment is established. If market, industry, and/or investee conditions
deteriorate, the Company may incur future impairments. The Company has not
recorded any equity investment losses for the three and nine months ended
September 30, 2010.
ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
Accounts receivable represents trade obligations from customers that are subject
to normal trade collection terms. The Company periodically evaluates the
collectability of its accounts receivable and considers the need to establish an
allowance for doubtful accounts based upon historical collection experience and
specific customer information. Accordingly, the actual amounts could vary from
the recorded allowances.
7
Easy Energy, Inc.
Notes to Financial Statements
September 30, 2010
Unaudited
The Company does not charge interest on past due receivables. Receivables are
determined to be past due based on payment terms of original invoices.
At September 30, 2010, the Company did not record an allowance for doubtful
accounts.
INVENTORY
Inventory, consisting of finished goods, are stated at the lower of cost or
market using the first-in, first-out (FIFO) valuation method.
DEPOSITS
The Company purchases its inventory from suppliers through a letter of credit.
The funds are held in banks which are released once the product is ready to be
shipped.
REVENUE RECOGNITION AND CUSTOMER DEPOSITS
The Company records revenue when all of the following have occurred: (1)
persuasive evidence of an arrangement exists, (2) the product is delivered, (3)
the sales price to the customer is fixed or determinable, and (4) collectability
of the related customer receivable is reasonably assured. Sales are recognized
upon shipment of products to customers.
There is no stated right of return for products, however, in the event that the
Company ceases a customer relationship, the Company is obligated to re-purchase
any unsold inventory held by the customer. To date, the Company has not had any
instance of this occurrence.
In the event that there is a defective product, the Company is obligated to
replace the defect. To date, the Company has not had any instance of this
occurrence.
The Company collects a percentage of the sales price from its customers in
advance of shipment. Upon shipment, customer deposits become earned revenues.
The Company had $0 and $271,509 of such deposits on hand as of September 30,
2010 and December 31, 2009, respectively.
Sales discounts are accounted for as a direct reduction of revenues. During the
nine months ended September 30, 2010 and 2009, the Company recorded discounts of
$5,645 and $0, respectively.
COST OF SALES
Cost of sales represents costs directly related to the production and
manufacturing of the Company's battery charging solutions for portable
electronic devices. Costs include manufacturing, assembling, freight and
packaging costs.
8
Easy Energy, Inc.
Notes to Financial Statements
September 30, 2010
Unaudited
RESEARCH AND DEVELOPMENT
The Company expenses research and development costs as incurred. Research and
development expenses consist primarily of assembly line, engineer's fees and
patent expense. These services are provided primarily by an affiliated entity of
the Company's CEO.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company's short-term financial instruments,
including accounts receivable and accounts payable, approximate fair value due
to the relatively short period to maturity for these instruments.
SHARE-BASED PAYMENT ARRANGEMENTS
Generally, all forms of share-based payments, including stock option grants,
warrants, restricted stock grants and stock appreciation rights are measured at
their fair value on the awards' grant date, based on the estimated number of
awards that are ultimately expected to vest. Share-based compensation awards
issued to non-employees for services rendered are recorded at either the fair
value of the services rendered or the fair value of the share-based payment,
whichever is more readily determinable. The expenses resulting from share-based
payments are recorded in cost of goods sold, research and development or general
and administrative expenses in the statement of operations, depending on the
nature of the services provided.
EARNINGS PER SHARE
In accordance with accounting guidance now codified as FASB ASC Topic 260,
"EARNINGS PER SHARE," basic earnings (loss) per share is computed by dividing
net income (loss) by weighted average number of shares of common stock
outstanding during each period. Diluted earnings (loss) per share is computed by
dividing net income (loss) by the weighted average number of shares of common
stock, common stock equivalents and potentially dilutive securities outstanding
during the period.
The Company had the following potential common stock equivalents at September
30, 2010 and December 31, 2009:
September 30, 2010 December 31, 2009
------------------ -----------------
Warrants 22,429,440 18,529,440
Options 1,000,000 --
---------- ----------
Total common stock equivalents 23,429,440 18,529,440
========== ==========
Since the Company reflected a net loss in for the periods ended September 30,
2010 and 2009, respectively, the effect of considering any common stock
equivalents, if outstanding, would have been anti-dilutive. A separate
computation of diluted earnings (loss) per share is not presented.
9
Easy Energy, Inc.
Notes to Financial Statements
September 30, 2010
Unaudited
RECENT ACCOUNTING PRONOUNCEMENTS
In January 2010, the Financial Accounting Standards Board (FASB) issued
Accounting Standards Update No. 2010-06, "IMPROVING DISCLOSURES ABOUT FAIR VALUE
MEASUREMENTS ("ASU 2010-06"). ASU 2010-06 amends ASC 820, "FAIR VALUE
MEASUREMENTS" ("ASC 820") to require a number of additional disclosures
regarding fair value measurements. The amended guidance requires entities to
disclose the amounts of significant transfers between Level 1 and Level 2 of the
fair value hierarchy and the reasons for these transfers, the reasons for any
transfers in or out of Level 3, and information in the reconciliation of
recurring Level 3 measurements about purchases, sales, issuances and settlements
on a gross basis. ASU 2010-06 also clarifies the requirement for entities to
disclose information about both the valuation techniques and inputs used in
estimating Level 2 and Level 3 fair value measurements. The amended guidance was
effective for financial periods beginning after December 15, 2009, except the
requirement to disclose Level 3 transactions on a gross basis, which becomes
effective for financial periods beginning after December 15, 2010. ASU 2010-06
did not have a significant effect on the Company's unaudited financial position
or results of operations.
NOTE 3 GOING CONCERN
As reflected in the accompanying unaudited condensed interim financial
statements, the Company has a net loss of $482,087 and net cash used in
operations of $107,896 for the nine months ended September 30, 2010, and a
working capital deficit and stockholders' deficit of $159,039 and $379,039,
respectively, at September 30, 2010.
The ability of the Company to continue its operations is dependent on
Management's plans, which include the raising of capital through debt and/or
equity markets with some additional funding from other traditional financing
sources, including term loans and notes, until such time that funds provided by
operations are sufficient to fund working capital requirements. The Company may
need to incur additional liabilities with certain related parties to sustain the
Company's existence.
The Company will require additional funding to finance the growth of its current
and expected future operations as well as to achieve its strategic objectives.
The Company believes its current available cash along with anticipated revenues
may be insufficient to meet its cash needs for the near future. There can be no
assurance that financing will be available in amounts or terms acceptable to the
Company, if at all.
The accompanying unaudited condensed interim financial statements have been
prepared on a going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. These
accompanying unaudited condensed interim financial statements do not include any
adjustments relating to the recovery of the recorded assets or the
classification of the liabilities that might be necessary should the Company be
unable to continue as a going concern.
10
Easy Energy, Inc.
Notes to Financial Statements
September 30, 2010
Unaudited
NOTE 4 INVESTMENT IN MARKETABLE SECURITIES AND FAIR VALUE
ASC 820 defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair
value measurements. Under GAAP, fair value of such securities is determined
based upon a hierarchy that prioritizes the inputs to valuation techniques used
to measure fair values into three broad levels.
The fair value of the Company's financial assets and liabilities reflects the
Company's estimate of amounts that it would have received in connection with the
sale of the assets or paid in connection with the transfer of the liabilities in
an orderly transaction between market participants at the measurement date. In
connection with measuring the fair value of its assets and liabilities, the
Company seeks to maximize the use of observable inputs (market data obtained
from sources independent from the Company) and to minimize the use of
unobservable inputs (the Company's assumptions about how market participants
would price assets and liabilities).
The following fair value hierarchy is used to classify assets and liabilities
based on the observable inputs and unobservable inputs used in order to value
the assets and liabilities:
Level 1: Quoted prices in active markets for identical assets or
liabilities. An active market for an asset or liability is a
market in which transactions for the asset or liability occur
with sufficient frequency and volume to provide pricing
information on an ongoing basis.
Level 2: Observable inputs other than Level 1 inputs. Examples of Level 2
inputs include quoted prices in active markets for similar assets
or liabilities and quoted prices for identical assets or
liabilities in markets that are not active.
Level 3: Unobservable inputs based on the Company's assessment of the
assumptions that market participants would use in pricing the
asset or liability.
11
Easy Energy, Inc.
Notes to Financial Statements
September 30, 2010
Unaudited
As of September 30, 2010, investment in marketable securities consisted solely
of Israeli government bonds, which are classified as available for sale
marketable securities and are carried at fair value.
Level 1: Level 2:
Quoted Prices Quoted Prices
in Active in Inactive Level 3:
Markets for Markets for Significant Total at
Identical Identical Unobservable September 30,
Assets Assets Inputs 2010
------ ------ ------ -------------
Israeli Bonds $ -- $2,580 -- $2,580
------- ------ ----- ------
Total $ -- $2,580 -- $2,580
======= ====== ===== ======
NOTE 5 STOCKHOLDERS' DEFICIT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010:
(A) STOCK AND OPTIONS.
On January 26, 2010, the Company issued 500,000 shares of common stock for
consulting services, having a fair value of $25,000 ($0.05/share), based upon
the quoted closing trading price. In addition the Company granted the consultant
500,000 options at an exercise price of $0.15 per share, which expire three
years from issuance. The options vested evenly over a period of 5 months
starting February 1, 2010. The Company determined the fair value of these
500,000 options was $17,181. For the nine months ended September 30, 2010, the
Company expensed $17,181.
On May 17, 2010, the Company granted the same consultant an additional 500,000
options at an exercise price of $0.04 per share, which expires three years from
issuance. 100,000 options vested immediately upon execution of this agreement,
and 100,000 options will vest monthly, on the first day of each month, during
the term of this agreement. The Company determined the fair value of these
500,000 options was $13,407. For the nine months ended September 30, 2010, the
Company expensed $5,362.
The consultant is also receiving $4,000/month as additional consideration.
On July 31, 2010 the Company issued 1,450,000 shares of common stock to its one
of shareholders pursuant to a settlement between the shareholder and the Company
and its president, having a fair value of $58,000 ($0.04/share) based upon the
quoted closing trading price for the Company's shares on the Over-the-Counter
Bulletin Board.
12
Easy Energy, Inc.
Notes to Financial Statements
September 30, 2010
Unaudited
The Company considered the following assumptions in determining fair value for
its 2010 stock option grants:
Expected term 3 years
Expected volatility 111% - 150%
Expected dividends 0%
Risk free interest rate 1.30% - 1.40%
Expected forfeitures 0%
The following is a summary of the Company's options that are outstanding and
exercisable at September 30, 2010:
Weighted
Average
Weighted Remaining
Average Contractual
Exercise Life in Intrinsic
Options Price Years Value
------- ----- ----- -----
Balance - December 31, 2009 -- $ -- -- $ --
Granted 1,000,000 $ 0.10
Exercised -- $ --
Forfeited/Cancelled -- $ --
--------- --------
Balance - September 30, 2010 - outstanding 1,000,000 $ 0.10 2.48 --
========= ======== ===== =======
Balance - September 30, 2010 - exercisable 1,000,000 $ 0.10 2.48 --
========= ======== ===== =======
(B) WARRANTS
On March 29, 2010, the Company issued 1,450,000 shares and 400,000 warrants in a
private placement for $79,750 ($0.055/share). The warrants expire in two years
and have an exercise price of $0.12/share.
On August 23, 2010, the Company issued to one of its non-employee directors and
Chairman of the Board of Directors a warrant to purchase 4,500,000 shares of
common stock of the Company. The exercise price for the shares is $0.05 per
share, and the warrants vest over a period of 3 years. The Company determined
the fair value of these 4,500,000 options was $141,423. For the nine months
ended September 30, 2010, the Company expensed $47,141.
On September 30, 2010, the Company issued to one of its non-employee directors a
warrant to purchase 4,500,000 shares of common stock of the Company. The
exercise price for the shares is $0.05 per share, and the warrants vest over a
period of 3 years. The Company determined the fair value of these 4,500,000
options was $134,397. For the nine months ended September 30, 2010, the Company
expensed $44,799.
On September 30, 2010, the Company issued to one of its non-employee directors a
warrant to purchase 1,500,000 shares of common stock of the Company. The
exercise price for the shares is $0.05 per share, and the warrants vest over a
13
Easy Energy, Inc.
Notes to Financial Statements
September 30, 2010
Unaudited
period of 3 years. The Company determined the fair value of these 1,500,000
options was $44,799. For the nine months ended September 30, 2010, the Company
expensed $14,933.
The Company considered the following assumptions in determining fair value for
its 2010 warrants grants:
Expected term 3 years
Expected volatility 114% - 120%
Expected dividends 0%
Risk free interest rate 0.67% - 0.76%
Expected forfeitures 0%
The following is a summary of the Company's warrants that are outstanding and
exercisable at September 30, 2010:
Weighted
Average
Weighted Remaining
Average Contractual
Exercise Life in Intrinsic
Warrants Price Years Value
-------- ----- ----- -----
Balance - December 31, 2008 16,029,440 $ 0.25
Granted 2,500,000 $ 0.15
Exercised -- $ --
Forfeited/Cancelled -- $ --
---------- ------
Balance - December 31, 2009 18,529,440 $ 0.24
Granted 10,900,000 $ 0.05
Exercised -- $ --
Forfeited/Cancelled -- $ --
---------- ------
Balance - September 30, 2010 - outstanding 29,429,440 $ 0.17 2.48 $ --
========== ====== ==== ======
Balance - September 30, 2010 - exercisable 22,229,440 $ 0.21 2.48 $ --
========== ====== ==== ======
NOTE 6 RELATED PARTY TRANSACTIONS
(A) DEBT
During the nine months ended September 30, 2010, the Company received $112,770
in advances from its Chief Executive Officer and an affiliate. These advances
were non-interest bearing, unsecured and due on demand. During the nine months
ended September 30, 2010, the Company repaid $263,689 to the Chief Executive
Officer and an affiliate. As a result, the amount due to this individual at
September 30, 2010 was $193,110.
14
Easy Energy, Inc.
Notes to Financial Statements
September 30, 2010
Unaudited
On March 28, 2010, the Company received $220,000 from family members of a
Company director. The loan is non-interest bearing and due January 1, 2012. In
the event of default, the Company would be required to issue 4,000,000 shares of
common stock. These loans have been classified as long term.
(B) RESEARCH AND DEVELOPMENT
The Company paid product development costs to a Company controlled by the
Company's Chief Executive Officer:
Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended
September 30, 2010 September 30, 2009 September 30, 2010 September 30, 2009
- ------------------ ------------------ ------------------ ------------------
$ -- $30,000 $150,500 $265,800
NOTE 7 CONCENTRATIONS
The Company has the following concentrations for sales and purchases for the
nine months ended September, 30, 2010 and 2009:
SALES 2010 2009
---- ----
A 57% --%
B 20% --%
C 17% --%
PURCHASES 2010 2009
---- ----
A (RELATED PARTY) 42% 77%
B 48% 10%
C --% 13%
NOTE 8 COMMITMENTS AND CONTINGENCIES
COMMITMENT
On August 25, 2010, the Company entered into a manufacturing agreement with a
third party to assist the Company in the manufacturing, assembling and selling
of products.
LITIGATIONS, CLAIMS AND ASSESSMENTS
From time to time, the Company may become involved in various lawsuits and legal
proceedings, which arise in the ordinary course of business. However, litigation
is subject to inherent uncertainties, and an adverse result in these or other
matters may arise from time to time that may harm its business. The Company is
currently not aware of any such legal proceedings or claims that it believes
will have, individually or in the aggregate, a material adverse affect on its
business, financial condition or operating results.
15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q for the quarter ended September 30, 2010, or
this Quarterly Report, contains certain forward-looking statements.
Forward-looking statements may include statements regarding our goals, beliefs,
strategies, objectives, plans, including product and service developments,
future financial conditions, results or projections or current expectations. In
some cases, you can identify forward-looking statements by terminology such as
"may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate,"
"predict," "potential" or "continue," the negative of such terms, or other
comparable terminology. Such forward-looking statements appear in this Item 2 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations, and include statements regarding our expectations regarding our
short- and long-term capital requirements, our business plan and estimated
expenses for the coming 12 months, and our anticipated launch of our YoGen
Max(TM) product. These statements are subject to known and unknown risks,
uncertainties, assumptions and other factors that may cause actual results to be
materially different from those contemplated by the forward-looking statements.
The business and operations of Easy Energy, Inc. are subject to substantial
risks, which increase the uncertainty inherent in the forward-looking statements
contained in this Quarterly Report. Except as required by law, we do not intend
to update or change any forward looking statements as a result of new
information, future events or otherwise. Further information on potential
factors that could affect our business is described Item 1A. "Risk Factors" of
our Annual Report on Form 10-K for the fiscal year ended December 31, 2009, or
our Annual Report. Readers are also urged to carefully review and consider the
various disclosures we have made in this Quarterly Report and in our Annual
Report.
Easy Energy, Inc. (referred to in this Quarterly Report as "Easy Energy", "us",
"we" and "our") was incorporated under the laws of the State of Nevada on May
17, 2007. We are an early stage company. We currently have no employees other
than our Chief Executive Officer and Chief Financial Officer.
Our principal executive office is located at Suite 105 - 5348 Vegas Dr., Las
Vegas, Nevada 89108. Our telephone number is (702) 442-1166. We also have
offices in Israel at 40 Baz St. Karmiel, Israel 20100, Tel. No. +972-4-988 8314.
We do not have any subsidiaries.
We are the sole owner of the YoGen(R) product suite of compact man-powered
generators, which are designed to provide an innovative and effective solution
to the currently underserved need of the almost limitless users of portable
electronics devices for a power source that will ensure those devices' ability
to operate in circumstances in which conventional recharging sources are
unavailable. Included in the product line are the basic YoGen, a slim,
pocket-sized charger for small devices such as cell phones, GPS, iPods, etc.,
which is operated by a convenient pull-cord, and the recently prototyped YoGen
Max, which is intended to replace a conventional cell phone battery and provide
pull-cord charging capability without the need for a stand-alone charger.
Our principal business plan is to continue to manufacture and market the YoGen
product and to seek third party entities interested in licensing the rights to
manufacture and market a man-powered charger. On August 25, 2010, the Company
entered into a manufacturing agreement with a third party to assist the Company
in the manufacturing, assembling and selling of products. Our target market
consists of consumers of disposable and rechargeable batteries, those who
heavily depend on their portable devices, especially cell phone users, and those
who are looking for "green" energy sources. We additionally plan to continue to
develop the YoGen Max and other devices in the YoGen product line.
During the fiscal period ended December 31, 2009 we completed the design of the
YoGen(R) and YoGen Max and started mass production of the YoGen for sale to our
manufacturer's representatives and global distributors. In January 2010, we
officially launched the YoGen to the North American markets at the 2010
International Consumer Electronics Show in Las Vegas, Nevada. The YoGen was
given an award as "Best of CES 2010". The Company expects to introduce the YoGen
Max for sale into the global marketplace during the first half of 2011.
Due to the uncertainty of our ability to meet our current operating and capital
expenses, in its report on our audited financial statements for the period ended
December 31, 2009, our independent registered public accounting firm included an
explanatory paragraph regarding our ability to continue as a going concern. Our
financial statements contain additional note disclosures describing the
circumstances that lead to this disclosure by our independent registered public
accounting firm.
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RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 2010 COMPARED TO THE
THREE MONTHS ENDED SEPTEMBER 30, 2009 (UNAUDITED)
REVENUES AND COSTS OF REVENUES
During the three months ended September 30, 2010 we achieved sales of $140,740
compared to $0 during the three months ended September 30, 2009. The increase in
revenues is attributable to sales of our YoGen product to global distributors as
we have emerged from our development stage.
Cost of revenues for the three months ended September 30, 2010 was $136,494
compared to $0 for the three months ended September 30, 2009. The increase is
attributable to expenses relating to the sales of our YoGen product to global
distributors.
RESEARCH AND DEVELOPMENT
Research and development costs for the three months ended September 30, 2010
decreased to $15,389 from $62,570 for the three months ended September 30, 2009.
The decrease is primarily attributable to a decrease in the amount spent on
development of our YoGen product.
GENERAL AND ADMINISTRATIVE
General and administrative expenses for the three months ended September 30,
2010 increased to $263,108 from $51,639 for the three months ended September 30,
2009. The increase is primarily attributable to expenses relating to the
issuance of warrants to our new directors, and an increase in legal, travel,
marketing and accounting expenses.
NET LOSS
We incurred a loss of $274,054 for the three months ended September 30, 2010
compared to $113,899 for the three months ended September 30, 2009. Net loss per
share from operations for the three months ended September 30, 2010 and 2009 was
$0 respectively. The increase in net loss for the three months ended September
30, 2010 is primarily attributable to expenses related to the issuance of
warrants to our new directors, and an increase in legal expenses and our cost of
goods sold, offset by revenues from sales of our YoGen product to global
distributors.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 2010 COMPARED TO THE
NINE MONTHS ENDED SEPTEMBER 30, 2009 (UNAUDITED)
REVENUES AND COSTS OF REVENUES
During the nine months ended September 30, 2010 we achieved sales of $715,327
compared to $0 during the nine months ended September 30, 2009. The increase in
revenues is attributable to sales of our YoGen product to global distributors as
we have emerged from our development stage.
Cost of revenues for the nine months ended September 30, 2010 was $518,416
compared to $0 for the nine months ended September 30, 2009. The increase is
attributable to expense relating to the sales of our YoGen product to global
distributors.
RESEARCH AND DEVELOPMENT
Research and development costs for the nine months ended September 30, 2010
decreased to $187,534 from $356,684 for the nine months ended September 30,
2009. The decrease is primarily attributable to a decrease in the amount spent
on development of our YoGen product, offset by an increase in the amount spent
on development of our new YoGen Max product and our YoGen BAT during the first
six months of 2010, as well as an increase in our patent expenses.
GENERAL AND ADMINISTRATIVE
General and administrative expenses for the nine months ended September 30, 2010
increased to $491,513 from $363,964 for the nine months ended September 30,
2009. The increase is primarily attributable to an increase in expenses related
to the issuance of warrants to our new directors, and an increase in travel,
accounting and public relations fees, offset by a decrease in marketing, and
consulting expenses.
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NET LOSS
We incurred a loss of $482,087 for the nine months ended September 30, 2010
compared to $720,888 for the nine months ended September 30, 2009. Net loss per
share from operations for the nine months ended September 30, 2010 and 2009 was
$0 and $0.01, respectively. The decrease in net loss for the nine months ended
September 30, 2010 is primarily attributable to the revenues from sales of our
YoGen product to global distributors, and a decrease in research and development
expenses, offset by an increase in general and administrative expenses and the
cost of goods sold.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2010, total current assets were $79,512 and total current
liabilities were $238,551, resulting in a working capital deficit of $159,039.
We finance our operations and plan to continue doing so with a combination of
stock issuances, loans and revenues from product sales. Our loans have come from
our Chief Executive Officer and an affiliate entity as described in Note 6 to
the financial statements. Cash on hand as of September 30, 2010 was $2,623. Our
cash resources at September 30, 2010 resulted from a long-term loan of $220,000
described below and stock issued in a private placement transaction of $79,750
described below, offset by a decrease in shareholder loans of $292,089 and net
loss of $482,087 during the nine months ended September 30, 2010.
Net cash used in operating activities was $107,896 during the nine months ended
September 30, 2010. Cash generated from operating activities in the nine months
ended September 30, 2010 resulted primarily from a $447,865 decrease in deposits
maintained by the Company with various manufacturers prior to the completion of
inventory held for resale, $83,000 of stock issued for services, $137,478 of
options issued for services, and a $39,445 increase in accounts payable, offset
by a $74,309 increase in accounts receivable due to sale of inventory, a
$482,087 net loss and a $271,509 decrease of customers' deposits, which resulted
from the increase of sales described above.
Net cash used in investing activities was $2,580 during the nine months ended
September 30, 2010 as a result of purchasing available for sale marketable debt
securities.
Net cash provided by financing activities was $7,661 during the nine months
ended September 30, 2010. Cash generated from financing activities for the nine
month period ended September 30, 2010 resulted primarily from $423,144 in
short-term and long-term related party loans and the issuance of common stock
for cash of $79,750, offset by $495,233 of repayments of related party loans.
On March 29, 2010, certain investors purchased 1,450,000 of our common shares at
a price of $0.055 per share and 400,000 warrants for aggregate proceeds of
$79,750. Each warrant is exercisable into one common share at an exercise price
of $0.12 for a two-year period expiring March 29, 2012.
In August 2010, we issued to one of our shareholders 1,450,000 shares of our
common stock pursuant to a settlement agreement in connection with a dispute
related to a ratchet mechanism that appeared in an investment agreement dated
January 16, 2008, having a fair value of $58,000 ($0.04/share).
On August 23, 2010, we issued to one of our non-employee directors and Chairman
of the Board of Directors a warrant to purchase 4,500,000 shares of our common
stock. The exercise price for the shares is $0.05 per share, and the warrants
vest over a period of three years. We determined the fair value of these
4,500,000 options was $141,423. For the nine months ended September 30, 2010, we
expensed $47,141.
On September 30, 2010, we issued to one of our non-employee directors a warrant
to purchase 4,500,000 shares of our common stock. The exercise price for the
shares is $0.05 per share, and the warrants vest over a period of three years.
We determined the fair value of these 4,500,000 options was $134,397. For the
nine months ended September 30, 2010, we expensed $44,799.
On September 30, 2010, we issued to one of our non-employee directors a warrant
to purchase 1,500,000 shares of our common stock. The exercise price for the
shares is $0.05 per share, and the warrants vest over a period of three years.
We determined the fair value of these 1,500,000 options was $44,799. For the
nine months ended September 30, 2010, we expensed $14,933.
Our current loan from a related party as of September 30, 2010 decreased to
$193,110, compared to $485,199 as of December 31, 2009. The decrease is
18
attributable to our re-payment of a portion of the loan to the related party.
The outstanding $193,110 constitutes advances from our Chief Executive Officer,
which advances are non-interest bearing, unsecured and due on demand.
Our long term loans payable to related parties as of September 30, 2010
increased to $220,000 compared to $0 as of December 31, 2009. On March 28, 2010,
we received the $220,000 loan from family members of Mr. Emanuel Cohen, our
Chief Financial Officer and a former director. The loan is non-interest bearing
and due on January 1, 2012. In the event of default, we would be required to
issue to the lenders 4,000,000 shares of common stock.
For a further discussion of our loans from related parties, please see the
section captioned "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Related Person Transactions" in our Annual Report
on Form 10-K for the year ended December 31, 2009.
GOING CONCERN
We have generated revenues since inception but they were not an adequate source
of cash to fund future operations. Our current cash may not be sufficient to
meet our anticipated requirements for the next 12 months. We believe that our
future growth will depend upon the success of our sales. There is no assurance,
however, that such growth may be achieved. Our future sustainability also
depends on our ability to raise sufficient capital to meet our future expenses,
either by making additional private placement offerings of our stock, incurring
additional debt or a combination of stock and debt offerings.
It is likely that we will need to raise additional working capital to fund our
ongoing operations and growth. The amount of our future capital requirements
depends primarily on the rate at which we increase our revenues and
correspondingly decrease our use of cash to fund operations. Cash used for
operations will be affected by numerous known and unknown risks and
uncertainties including, but not limited to, our ability to successfully market
our products and services and the degree to which competitive products and
services are introduced to the market. As long as our cash flow from operations
remains insufficient to completely fund operations, we will continue depleting
our financial resources and seeking additional capital through equity and/or
debt financing. If we raise additional capital through the issuance of debt,
this will result in increased interest expense. If we raise additional funds
through the issuance of equity or convertible debt securities, the percentage
ownership of our company held by existing stockholders will be reduced and those
stockholders may experience significant dilution. In addition, new securities
may contain rights, preferences or privileges that are senior to those of our
common stock.
There can be no assurance that acceptable financing to fund our ongoing
operations can be obtained on suitable terms, if at all. If we are unable to
obtain the financing necessary to support our operations, we may be unable to
continue as a going concern. In that event, we may be forced to cease operations
and our stockholders could lose their entire investment in our Company.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements, including any outstanding
derivative financial statements, off-balance sheet guarantees, interest rate
swap transactions or foreign currency contracts. We do not engage in trading
activities involving non-exchange traded contracts.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES.
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as
amended, or the 1934 Act, as of the end of the period covered by this Quarterly
Report, being the fiscal quarter ended September 30, 2010, we have carried out
an evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures.
This evaluation was carried out under the supervision and with the participation
of our management, including our Chief Executive Officer and Chief Financial
Officer. Based upon the results of that evaluation, our Chief Executive Officer
and Chief Financial Officer have concluded that, as of the end of the period
covered by this Quarterly Report, our disclosure controls and procedures were
ineffective, as they did not provide reasonable assurance that material
information related to us is recorded, processed and reported in a timely
manner.
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Our small size makes the proper identification and authorization of transactions
difficult, as our two executive officers are the only individuals overseeing
this process. Given our small size, we also have difficulties with separation of
duties for handling, approving and coding invoices, entering transactions into
the accounts, writing checks and requests for wire transfers. This does not
provide an adequate level of layers of internal controls, which in turn make it
difficult to accumulate information required to be disclosed by us in the
reports that we file or submit under the 1934 Act. Based on the foregoing, our
Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were ineffective as of September 30, 2010.
There was no change to our internal control over financial reporting that
occurred during the quarter ended September 30, 2010 that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS.
31.1 - Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer*
31.2 - Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer*
32.1 - Section 1350 Certification of Principal Executive Officer**
32.2 - Section 1350 Certification of Principal Financial Officer**
- ----------
* Filed herewith.
** Furnished herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EASY ENERGY, INC.
By: /s/ Guy Ofir
----------------------------------------
Guy Ofir, Chief Executive Officer
(Principal Executive Officer)
Dated: November 12, 2010
By: /s/ Emanuel Cohen
----------------------------------------
Emanuel Cohen, Chief Financial
Officer (Principal Financial and
Accounting Officer)
Dated: November 12, 2010
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