ITEM 1. BUSINESS
Use of Certain Defined Terms
Except as otherwise indicated by the context, references in this report to:
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“Energy Edge,” “EEDG,” “EES”, “The Gourmet Wing Company, Inc.”, “The Gourmet Wing Company”, “TGWC”, “we,” “us,” or “our,” “Successor” and the “Company” are references to the business of Energy Edge Technologies Corporation, a New Jersey Corporation, and its subsidiaries.
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“Securities Act” refers to the Securities Act of 1933, as amended.
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“Exchange Act” refers to the Securities Exchange Act of 1934, as amended.
Energy Edge Technologies Corporation
Energy Edge Technologies Corporation was incorporated in New Jersey in January, 2004. As of fiscal year end December 31, 2012, Energy Edge Technologies Corporation is comprised of two subsidiaries; Energy Edge Solutions and The Gourmet Wing Company, Inc.
During the fiscal year ended December 31, 2012, the Company acquired sixty-five percent (65%) of the capital stock of The Dry Fried Wing Company. On March 31, 2013, the Company acquired the remaining thirty-five percent (35%) of such stock. On April 5, 2013 the Company officially changed the name of The Dry Fried Wing Company to The Gourmet Wing Company, Inc. At the point of the merger with The Dry Fried Wing Company in the fourth quarter of 2012, the Energy Edge Solutions subsidiary was created to conduct the energy efficiency work of the Company.
Energy Edge Solutions (EES) EES is a company specializing in energy cost and consumption reduction for mid to large sized companies, institutions and government entities. EES consists of independently contracted professionals, industrial and electrical engineers, Leadership in Energy and Environmental Design (“LEED”) accredited professionals and business entrepreneurs. EES provides companies, institutions and government entities with turnkey, whole facility solutions that reduce energy consumption and corresponding costs and increase the efficiency of existing equipment and buildings. EES has experience in implementing and supporting industrial and commercial energy conservation measures, approaches and processes across a broad spectrum of industries and facility types. Our typical projects are guaranteed to reduce energy consumption (including electric, gas, fuel and water) and corresponding costs by 8% to 30%, provide 33% or better return on investment and decrease greenhouse gas emissions and our customers' carbon footprints.
The Company has experienced success with projects for a variety of customers including municipalities, breweries, pharmaceuticals, restaurants, food processing, manufacturing, printing, leisure, hospitals, office buildings, etc. EES projects are suitable and applicable for any type of customer whose energy bill exceeds $10,000 monthly. EES identifies where and how energy is being used and attempts to address the problems that contribute to inefficient systems and higher energy bills. EES utilizes industry experts for the design and implementation of advanced, Institute of Electrical and Electronics Engineers (“IEEE”), US Department of Energy (“DOE”) and US Green Building Council (“USGBC”) recommended passive engineering approaches and technologies that reduce energy losses and increase the efficiency of existing systems while providing financially advantageous project paybacks and return on investment for customers. Our unique custom turnkey projects maximize energy savings by treating the entire facility based on its distinctive features and energy usage.
The process begins when EES gathers information on the client facility and operation including energy consuming load profiles and variation, hours of operation, factors of energy influence, etc. EES collects 12 months of energy bills and completes a facility walk through. After information gathering, a project summary including savings, project cost, carbon footprint, financing terms, utility rebates, tax deductions, payback and return on investment is presented to the client. If the client approves the service and an agreement is signed, the project is initiated including engineering, procurement of all equipment, labor, insurance and warranties, waste disposal and before and after measurements. Most projects take between 1 and 4 weeks. EES continues to measure energy use and provides monthly billing analysis and quarterly reports to the client post-implementation and installation of the project.
EES applies different proven technologies and engineering approaches to positively affect the various energy consuming loads in a facility, and we work to improve the efficiency of equipment and systems to reduce energy consumption. We combine engineering experience with the expertise of our primary manufacturers. This allows us to develop turnkey projects with energy savings, reduction in greenhouse gas emissions and return on investment for our customers. All of the approaches and technologies we employ are proven, passive, DOE, USGBC and/or IEEE approved and recommended. Furthermore, many of our technologies are ENERGY STAR qualified and supplied by ENERGY STAR partners such as Phillips, GE, Telkonet and Intellidyne. All of the technologies we utilize are Underwriters Laboratory “UL” Listed, which means that they conduct the testing on electrical components and equipment, and Canada Standards Association “CSA” approved. The Canada Standards Association is similar to the Underwriters Laboratory but their testing is even more stringent and CSA approval is required by law in Canada. Many states and local utilities also offer incentives and rebates for our work and we help our customers to receive the incentives available as well as qualify them for applicable and available federal tax incentives.
Lastly, EES has developed a proprietary e-tool for developing unique, accurate, facility specific energy savings calculations and project designs called the Energy Edge Analyzer. The Energy Edge Analyzer and underlying formulas and algorithms were developed by analyzing hundreds of facilities of varying type, size, location, use, etc. The Energy Edge Analyzer allows team members to collect specific, pin point information on the various energy consuming loads and systems in a facility and input the data into the tool to produce fast, precise results including:
· Overall project design
· Guaranteed energy savings
· Available utility rebates
· Available federal, state and local incentives
· Client project cost
· Guaranteed client payback and ROI
· Financing options to eliminate out of pocket expense for customers
· Carbon footprint and greenhouse gas reductions
· Energy consumption breakdowns and profiles across respective loads
· Detailed engineering and design specifications down to the individual treated load
· Corresponding additional benefits of the specific design (i.e. extended equipment life, less downtime, heat load reductions, gain in electrical system capacity, cooling capacity, etc)
The results from the Energy Edge Analyzer can then be quickly imported to a client ready, professional proposal. The proposal incorporates the relevant information from above and includes everything from the executive summary to the sales agreement to graphs and charts, equipment spec sheets and dozens of customer referral letters.
Competitive Business Conditions within the Industry
While no company offers the comprehensive “whole facility approach” that is offered by EES, they all utilize a similar business model. The sustainable competitive advantage of EES will be its guarantee program, implementation and service model. The Company provides a solution that will give the maximum savings available without vast equipment overhaul.
Many of EES’s competitors do not have the same experience level of EES, and cannot supply a true guarantee and insurance backing. However, our competitors may be better funded, have access to more business expansion capital, have strategic business and local relationships developed, and may have stronger capability to develop or license technologies, which could potentially affect our ability to compete.
There are multiple ways a company can proceed with trying to reduce energy spending. Vendors in the industry typically take one of two approaches. The first approach is from an administrative and supply side point of view. Many companies offer professional services where energy bills are audited for errors and for procurement opportunities. Reports are provided that show what is being spent at various times and seasons. Along with the audit, the company researches possible energy procurement and demand response opportunities in deregulated energy markets that may be accessible to the client.
The second approach is to address the consumption side by attending to the different electrical and gas consuming equipment running in a facility. There are several companies providing a single or a two dimensional technological approach such as small lighting retrofit companies, electrical contractors, HVAC contractors, general contractors, etc. They provide lighting retrofits, or HVAC inspection and upgrades, or new windows, or building management software, or one or two efficiency technologies.
There are merits and benefits to both approaches to energy cost savings noted above. EES’s competitive advantage is detailed below in the section titled “Competitive Strengths Within The Industry”.
Independent Contractors
EES utilizes independent contractors, channel partners and vendor relationships to develop business opportunities. The members of our network typically operate under the Energy Edge moniker and work from various strategic regions across the United States. The nature and services include sales, engineering and project management. The terms of the arrangement is a sales commission of 50% or 40% of gross profit for sales and negotiated daily rates for engineering and project management work. Utilizing such a network of independent partners working on a 100% commission basis affords EES with great advantages such as expanded geographical reach and marketplace exposure, generation of a significantly larger number of sales leads and prospects, and no additional overhead. The US regions in which we have independent contractors/representation include:
a.
New Jersey
b.
New York
c.
Pennsylvania
d.
Florida
e.
Tennessee
f.
California
g.
Georgia
h.
Oklahoma
We understand that if we experience difficulties in maintaining vendor relationships or developing new relationships on a timely basis and on terms favorable to us, our business and financial condition could be adversely affected. Also, malfunctions of third party service providers could adversely affect our business which may impede our ability to attract and retain clients.
Effect of Existing Governmental Regulation on our Business
While there is no current regulation of this specific type of business other than the normal business restrictions that apply to all businesses, we know that there is a possibility that the laws, rules and regulations governing this type of business may change and may increase our operation costs. We intend to monitor the changes in regulations related to our business carefully and ensure that our business complies with all applicable laws and rules.
Business Strategies
Our business includes energy engineering studies and the designing and building of turnkey energy efficiency projects. We have grown the company by offering high quality services and products to customers we initially attracted using very simple techniques such as networking, channel partners, cold calling and mailers. We continue to add to our network of independent contractors and using these methods of prospecting. We also have begun utilizing more sophisticated methods of attaining customers and increasing the visibility of EES such as online marketing, traditional marketing and advertising and publicity and public relations campaigns.
Management will be looking for additional revenue streams in 2012 such as energy efficiency consulting for new building design and potential merger and acquisition targets to expand size, revenue and profitability of the company.
Industry Summary
Businesses are continually seeking ways to lower expenses and cut energy costs. The majority of Federal and state governments and local utilities have put several regulations and incentives in place (with more to come), encouraging and requiring companies to take active responsibility for lowering their energy consumption. A monsoon of media coverage has also created awareness of high energy consumption and the ultimate effects on the US and the rest of the world. It is to the advantage of any company, with a significant energy bill, to take advantage of the offer presented by EES, from a fiscal, environmental and social standpoint.
EES target markets include the industrial, commercial and government sectors, which account for more than half of the energy consumed in the US. The other two sectors are residential and transportation. On June 5, 2007, the 1st Annual World Environment Review took place and a few of the highlights pertaining to the US, in regards to the general population, are shown below:
·74% are concerned about climate change.
·80% think their Government should do more to tackle global warming.
·84% think that the US is too dependent on fossil fuels.
·72% think that the US is too reliant on foreign oil.
·79% think that the US Government should do more to increase the number of hybrid cars that are sold.
·67% think that the US Government should allow more off shore drilling.
The results show that the general population is building an awareness of the worldwide energy issue and are trending towards solutions that will assist with conserving the environment. It now becomes beneficial for companies to participate in these initiatives in order to reflect positively on society.
The American Recovery and Reinvestment Act of 2009 energy related funding allocates $1.6 billion for renewable energy and $12 million for energy efficiency. The revenue for the energy management services market in North America in 2008 was $20.35 billion and is projected to double to over $40 billion by 2013 due to favorable new government legislations and increased knowledge about the benefits of energy management. Source: Frost & Sullivan, North American Energy Management Investment Analysis, February 11, 2009.
Along with its “whole facility approach” the company provides additional advantages to its client with its 100% savings guarantee program. The guarantee ensures every dollar invested in an EES project by a customer will be returned via energy savings within the determined payback period. If any shortfall occurs, the difference between the savings and the investment will be refunded to the customer. This quells customer anxiety by removing the financial risk from the buying decision and ultimately increases closure rate, allowing EES a competitive advantage.
Competitive Strengths within the Industry
There is merit to both the administrative, supply side and the energy efficiency, consumption side solutions detailed in the “Competitive Business Conditions” section above. That is why EES has developed the ability to address both for customers.
The administrative solution has value for customers and EES offers these solutions by partnering with companies who offer such administrative solutions.. Partnering with such companies helps to generate interest with our current
customers and future prospects in the energy procurement and demand response (supply side savings) services, which helps the customer by lowering the base rate they pay for electricity and gas. These companies offer energy procurement services where companies can use them to broker deals with third party energy supplies in deregulated states. When our partners get paid by the customer EES receives commissions from them. In this way EES can provide administrative, supply side savings to its customers while also generating revenue for the firm. However, these administrative strategies focus only on the supply side cost and not on reducing actual energy usage, or reducing a company’s carbon footprint. To use less energy, the equipment and its supporting systems must be made to run more efficiently. This is where EES takes it to the next level by employing a holistic, comprehensive approach that is necessary to thoroughly enhance the energy efficiency and profile of all types of facilities.
As noted, there are many companies and individuals that focus only on one or two aspects of the dozens of areas that can be made more efficient. In management’s view, none of these companies offer a similar whole facility approach as offered by Energy Edge that can literally address the multitude of energy consuming loads across the lighting, HVAC, refrigeration, heating and production systems in today’s commercial, industrial and institutional facilities. Competitors typically cannot bring to bear the numerous technologies and approaches that EES can to ensure a significant, measurable impact and strong ROI for customers. In addition to the narrow scope and limited available energy treatment options and approaches, competitors cannot truly guarantee the energy savings and do not offer true, insured guaranteed savings programs. The general methods of competition used by companies in our industry include:
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Reducing profit margins when competing head to head with providers of similar products or services to win business based on price.
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Extending product warranties beyond the manufacturers’ warranties.
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Offering performance contracting where the company offers to complete a project for no upfront cost to the customer in return for a percentage of the energy cost savings over a pre-determined period of time.
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Offering turnkey installations requiring no labor from the customer’s staff.
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Offering ongoing service contracts.
Management believes that EES maintains a distinct advantage over its competition by offering a comprehensive energy cost reduction suite of services including whole facility energy consumption reduction, energy procurement and demand response programs. And EES reduces the financial risk from the buying decision for customers with guaranteed savings and ROI.
EES utilizes an experienced team of independently contracted professionals and has acquired in depth information that only years in the industry can provide. As it relates to competitor’s ability to enter this market and become a successful market participant, it would be necessary for them to surpass the following market barriers in the same manner that EES has:
· Strategic Partnerships & Vendor Relationships - Strategic alliances will allow for better pricing on products and technologies used on client projects. It also allows for quick delivery and expert assistance as needed. With sound partnerships with manufacturers the Company is best positioned to negotiate excellent deals, as well as gain benefits from volume buying.
· Guarantee Program is an attractive solution to potential customers. Other technology vendors have also shown interest in utilizing such a program.
· Knowledge and Know How - Any company entering the energy conservation industry must have a vast amount of knowledge and experience spanning multiple engineering fields and several industries in order to provide expert solutions to clients of such a high caliber.
The Gourmet Wing Company, Inc.
The Gourmet Wing Company, Inc. (TGWC) is a newly formed fast casual restaurant company in the chicken wing segment. TGWC is primarily engaged in the business of licensing, operating, developing and franchising a system of distinctive quick-service and fast casual restaurants serving high quality food. At December 30, 2012, there was one licensed TGWC restaurant in operation in the United States. The revenues from our restaurant business will be
primarily derived from franchise royalties received from TGWC licensed restaurants. TGWC will also sell food and supplies to its franchisees/licensees.
Each TGWC restaurant will offer an extensive menu specializing in seasoned and marinated chicken wings and featuring filet of chicken breast sandwiches, which are prepared to order with the customer’s choice of condiments. TGWC menu also includes chicken nuggets, French fries, baked potatoes, freshly prepared salads, soft drinks, flat-breads topped with various meats and cheeses and desserts. In addition, the restaurants will sell a variety of promotional products on a limited time basis.
TGWC strives to maintain quality and uniformity throughout all restaurants by publishing detailed specifications for food products, preparation and service, continual in-service training of employees, restaurant operational audits and field visits from TGWC supervisors. In the case of licensees, field visits will be made by TGWC personnel who review operations, including quality, service and cleanliness and make recommendations to assist in compliance with TGWC specifications.
TGWC anticipates no material shortages of food, equipment, fixtures or other products that are necessary to maintain restaurant operations and believes that sufficient alternate suppliers are available. Suppliers to TGWC system must comply with United States Department of Agriculture (“USDA”) and United States Food and Drug Administration (“FDA”) regulations governing the manufacture, packaging, storage, distribution and sale of all food and packaging products.
Trademarks and Service Marks
TGWC or its subsidiaries intend to register certain trademarks and service marks in the United States Patent and Trademark Office and in international jurisdictions. TGWC believes its registered marks are of material importance to its business. Domestic trademarks and service marks expire at various times and TGWC generally intends to renew trademarks and service marks that are scheduled to expire.
Seasonality
TGWC restaurant operations are moderately seasonal. TGWC average restaurant sales will normally be higher during the summer months than during the winter months. Because the business is moderately seasonal, results for any quarter are not necessarily indicative of the results that may be achieved for any other quarter or for the full fiscal year.
Competition
Each TGWC restaurant will be in competition with other food service operations within the same geographical area. The quick-service/fast casual restaurant segment is highly competitive and includes well-established competitors. TGWC will compete with other restaurant companies and food outlets, primarily through the quality, variety, convenience, price, and value perception of food products offered. The number and location of units, quality and speed of service, attractiveness of facilities, effectiveness of marketing and new product development by TGWC and its competitors are also important factors. The price charged for each menu item may vary from market to market (and within markets) depending on competitive pricing and the local cost structure. TGWC also competes within the food service industry and the quick service/fast casual restaurant sector not only for customers, but also for personnel, suitable real estate sites and qualified franchisees/licensees.
TGWC competitive position is differentiated by a focus on quality, its use of fresh, never frozen chicken and beef in the United States, its unique and diverse menu, its promotional products, its choice of condiments and the atmosphere and décor of its restaurants.
Many of the leading restaurant chains continue to focus on new unit development as one strategy to increase market share through increased consumer awareness and convenience. This results in increased competition for available development sites and higher development costs for those sites. Competitors also employ marketing strategies such as frequent use of price discounting, frequent promotions and heavy advertising expenditures. Continued price discounting including the use of coupons, in the quick service/fast casual restaurant industry and the emphasis on value menus could impact TGWC.
Other restaurant chains have also competed by offering high quality chicken and sandwiches made with fresh ingredients and artisan breads and there are several emerging restaurant chains featuring high quality food served at in-line locations. Several chains have also sought to compete by targeting certain consumer groups, such as capitalizing on trends toward certain types of diets (e.g., low carbohydrate or low trans fat) by offering menu items that are promoted as being consistent with such diets.
Additional competitive pressures for prepared food purchases come from operators outside the restaurant industry. A number of mall-based and major grocery chains offer fresh wings and other chicken-based offerings and fully prepared food and meals to go as part of their deli sections. Some of these chains also have in-store cafes with service counters and tables where consumers can order and consume a full menu of items prepared especially for that portion of the operation. Additionally, convenience stores and retail outlets at gas stations frequently offer chicken and other foods.
Quality Assurance
TGWC’s quality assurance program is designed to verify that the food products supplied to our restaurants are processed in a safe, sanitary environment and in compliance with our food safety and quality standards. TGWC has the right to terminate franchise and license agreements if franchisees/licensees fail to comply with quality standards.
Growth Strategy
Finance our overall operations and growth by using different sources of funds that will minimize dilution without becoming over-leveraged including a balanced mix of revenue, long term debt, specific short-term debt, common equity and preferred equity.
Market trends suggest that the demand for energy resources will rise dramatically over the next 25 years. Global demand for all energy sources is forecast to grow by 57%. These numbers include all energy types.
EES currently has over $3 million in potential business in the sales pipeline. The $3 million is comprised of prospects that have already received the initial analysis and project summary (Step 2) and are deciding whether to move forward with a project. These prospects have provided us with 12 months of utility bills, extensive facility information, production data and complete access to their operations. We have prepared comprehensive analysis and a project summary including the guaranteed savings, project cost, payback, ROI, financing terms, and carbon footprint reduction. EES continues to add new prospects to the sales pipeline, however we cannot provide any assurance that any of this potential business will result in firm orders.
EES intends to enter into more strategic, vendor and distributorship relationships with additional industry leading energy efficiency manufacturers and suppliers in 2012.
EES has grown the current business using very simple techniques such as networking, channel partners, cold calling and mailers. EES will continue to add to our network of independent contractors and using these methods of prospecting. ETC has recently begun utilizing more sophisticated methods of attaining customers and increasing the visibility of EES such as online viral marketing, traditional marketing and advertising and extensive publicity and public relations campaigns.
EES will be looking for additional revenue streams in 2012 such as energy efficiency consulting for new building design and potential acquisition targets to expand the size, revenue and profitability of the company.
TGWC currently has plans to develop three prototype restaurants in locations selected based on specific demographic data including:
a. competitor concepts and sales volumes
b. trade area profiles, including customer demographics, day-part occasions, concept density
c. emerging trade areas and developments
d. consumer foodservice DMA spending levels (comparative analysis)
e. local labor costs, unemployment levels and skill pools
TGWC plans to seed the market with Company units utilizing a “build and flip” strategy, selling the Company units to franchisees with additional development requirements while recouping the Company’s initial investments plus turnkey fees.
ITEM 1A.
ITEM 1A. RISK FACTORS
This report includes forward-looking statements about our business and results of operations that are subject to risks and uncertainties. See "Forward-Looking Statements," above. Factors that could cause or contribute to such differences include those discussed below. In addition to the risk factors discussed below, we are also subject to additional risks and uncertainties not presently known to us or that we currently deem immaterial. If any of these known or unknown risks or uncertainties actually occur, our business could be harmed substantially.
(1) While we have had sustainable revenues in the past, there is no assurance our future operations will result in such revenues . Our revenues depend on continual new business development.
While a number of our customers have written about their satisfaction with our services, because of this success, they may not need us to provide additional services in the near future, unless they expand and have additional facilities for us to provide an energy audit. Accordingly we are continually dependent upon developing new clients for our continued revenue production and growth, and any inability to continue business development growth would materially impact our revenues and adversely impact a shareholder’s investment.
(2) Our existing and anticipated working capital needs, the acceleration or modification of our expansion plans, lower than anticipated revenues, or increased expenses or other events will all affect our ability to continue as a going concern.
Supporting the increased costs of infrastructure as well as expanding business development to attract new clients will significantly increase our costs of operations. If we cannot generate sufficient revenues to operate profitably, we may suspend or cease operations.
(3) We anticipate incurring operating losses and negative cash flows in the foreseeable future resulting in uncertainty of future profitability and limitation on our operations.
We anticipate that the Company will incur operating losses and negative cash flows in the foreseeable future, and will accumulate increasing deficits as we increase our expenditures for (i) infrastructure, (ii) sales and marketing, (iii) equipment, (iv) personnel, and (v) general operating expenses. Any increases in our operating expenses will require us to achieve significant revenue before we can attain profitability. In the event that we are unable to achieve profitability or raise sufficient funding to cover our losses, we may not be able to meet our obligations as they come due, raising substantial doubts as to our ability to continue as a going concern.
(4) We are dependent on outside financing for expansion of our operations.
For the near future, we are dependent on the continued availability of outside financing in order to continue the growth our business. There can be no assurance that financing sufficient to enable us to continue our operations will be available to us in the future. Our failure to obtain future financing or to produce levels of revenue to meet our financial needs could result in our inability to continue as a going concern and, as a result, investors in the Company could lose their entire investment.
(5) We will need additional capital, which may not be available on acceptable terms, if at all, and any additional financing may be on terms adverse to your interests.
We will need additional cash to fund our operations. Our capital needs will depend on numerous factors, including market conditions and our profitability. We cannot be certain that we will be able to obtain additional financing on favorable terms, if at all. If additional financing is not available when required or is not available on acceptable terms, we may be unable to fund expansion, successfully promote our brand name, develop or enhance our services, take advantage of business opportunities, or respond to competitive pressures or unanticipated requirements, any of which could seriously harm our business and reduce the value of your investment.
If we are able to raise additional funds, if and when needed, by issuing additional equity securities, you may experience significant dilution of your ownership interest and holders of these new securities may have rights senior to yours as a holder of our Common Stock. In this case, the value of your investment could be reduced.
(6) Our Growth Plan is based upon Management’s projection of what may happen in the future, and such predictions may not occur. Actual results may differ materially.
Our growth plan is based upon Management's projections of estimated available cash flow, expenses, revenue, revenue over profit, earnings before interest, taxes and depreciation, sales cycle time and other measures of projected economic performance. These projections are made in Management's view of what may happen in the future, and are not based upon historical projections.
(7) We rely on strategic vendors to provide strategic contracting services integral to our service package.
We rely on strategic vendors, to provide strategic contracting services integral to our overall client service package. If we experience problems with any of our strategic vendors, the satisfaction of our customers could suffer and our business could be adversely affected. If we experience difficulties in maintaining these relationships or developing new relationships on a timely basis and on terms favorable to us, our business and financial condition could be adversely affected. Malfunctions of third party service providers could adversely affect our business which may impede our ability to attract and retain clients.
(8) Our success is tied to maintaining adequate understanding of and access to developing energy efficiency technology.
Our future revenues and profits, if any, substantially depend on our maintaining an adequate understanding of and access to new and developing energy efficiency technologies. We also must remain current on appropriate implementation methods of such technologies, and in certain instances, obtain licensing and other access agreements
to use such technologies. Any loss of personnel or inability to gain access to such technologies could impair our ability to remain a going concern. Also, lack of capital to hire sufficiently experienced personnel could also adversely affect our operations and revenue.
(9) Our Competitors may have more resources and develop proprietary technologies that we do not have access to, and pursue similar business and acquisition strategies.
For the most part, the energy efficiency audit services market has been fragmented, regionally directed, and composed of many different segments of service providers. Part of our business plan and our past success has been our architecture of energy audits for clients that integrate the provision of energy savings service from multiple vendors and consultants, and we intend with sufficient future capital raises to pursue a strategy of acquiring or joint venturing with such vendors and consultants regionally, nationally and internationally. Any such strategy is dependent upon the success of such capital raises, and is not assured. Other competitors may be better funded, have access to more business expansion capital, have strategic business and local relationships longer developed, and may have stronger capability to develop or license proprietary technologies, all among other factors, that could adversely affect our ability to compete.
(10) Growth of internal operations and business may strain our financial resources.
We will be significantly expanding the scope of our operating and financial systems in order to build and expand our business. Our growth rate may place a significant strain on our financial resources for a number of reasons, including, but not limited to, the following:
·
The need for continued development of the financial and information management systems
·
The need to manage strategic relationships and agreements with subscribers; and
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Difficulties in hiring and retaining skilled management, technical, service and other personnel necessary to support and manage our business
We may not be able to adequately address these risks and, if we do not, our ability to successfully expand our business could be adversely affected.
(11) Failure to manage growth effectively could prevent us from achieving our goals.
Our strategy envisions a period of rapid growth that may impose a significant burden on our administrative and operational resources. Our ability to effectively manage growth will require us to substantially expand the capabilities of our administrative and operational resources and to attract, train, manage, and retain qualified management and other personnel. Our failure to successfully manage growth could result in our sales not increasing commensurately with capital investments. Our inability to successfully manage growth could materially adversely affect our business.
(12) Any failure to adequately expand a direct sales force will impede our growth.
We expect to be substantially dependent on a direct sales force to attract new clients and to manage customer relationships. We plan to expand our direct sales force and believe that there is significant competition for qualified, productive direct sales personnel with advanced sales skills and technical knowledge. Our ability to achieve significant growth in revenue in the future will depend, in large part, on our success in recruiting, training and retaining sufficient direct sales personnel and sustaining revenue to support such hires. Recent hires and planned hires may not become as productive as expected, and we may be unable to hire sufficient numbers of qualified individuals in the future in the markets where we do business. We expect to face competition in the recruitment of qualified personnel, and we can provide no assurance that we will attract or retain such personnel. If we are unable to hire and develop sufficient numbers of productive sales personnel our business prospects could suffer.
(13) If our services do not gain expanded market acceptance, we may not be able to fund future operations.
A number of factors may affect the market acceptance of our network, including, among others:
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the perception by users of the effectiveness of our services
·
our ability to fund our sales and marketing efforts; and
·
the effectiveness of our sales and marketing efforts.
If our services do not gain acceptance by new clients, we may not be able to fund future operations, including the development of new products and services, and/or our sales and marketing efforts for our current products and services, which inability would have a material adverse effect on our business, financial condition and operating results.
(14) We have incurred increased costs as a result of being a public company.
Since we have become a public company, we have incurred significant legal, accounting and other expenses. The laws, rules and regulations governing public companies has increased our legal and financial compliance costs and has made some activities more time-consuming and costly.
(15) Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses.
New or changed laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which may result in additional expenses. While there is limited regulation of our business at the state and federal level, any change to such regulation could adversely affect our business. Our clients are often regulated, and their ability to pay us or our ability to provide services may be impacted by changes in regulation. We are committed to maintaining high standards of corporate governance and public disclosure. As a result, we intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new or changed laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, our business may be materially impacted and our reputation may be harmed.
Risks Related to our Common Stock
(16) Our stock is a penny stock. Trading of our stock may be restricted by the Securities and Exchange Commission’s penny stock regulations which may limit a stockholder’s ability to buy and sell our stock.
Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities will be covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the Securities and Exchange Commission which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.
(17) The Financial Industry Regulatory Authority, or FINRA, has adopted sales practice requirements which may also limit a stockholder’s ability to buy and sell our stock.
In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
(18) The price of our common stock may be negatively impacted by factors which are unrelated to our operations.
The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of our competitors, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or us. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock.
(19) We do not expect to pay dividends and investors should not buy our Common Stock expecting to receive dividends.
We do not anticipate that we will declare or pay any dividends on our Common Stock in the foreseeable future. Consequently, you will only realize an economic gain on your investment in our Common Stock if the price appreciates. You should not purchase our Common Stock expecting to receive cash dividends. Since we do not pay dividends, and if we are not successful in establishing an orderly public trading market for our shares, then you may not have any manner to liquidate or receive any payment on your investment. Therefore our failure to pay dividends may cause you to not see any return on your investment even if we are successful in our business operations. In addition, because we do not pay dividends we may have trouble raising additional funds which could affect our ability to expand our business operations.
(20) We may seek to raise additional funds, finance acquisitions or develop strategic relationships by issuing capital stock.
We have financed our operations, and we expect to continue to finance our operations, acquisitions and develop strategic relationships, by issuing equity or debt securities, which could significantly reduce the percentage ownership of our existing stockholders. Furthermore, any newly issued securities could have rights, preferences and privileges senior to those of our existing stock. Moreover, any issuances by us of equity securities may be at or below the prevailing market price of our stock and in any event may have a dilutive impact on your ownership interest, which could cause the market price of stock to decline.
(21) Our historical results are subject to fluctuations which may be material.
Since the Company was organized in 2004, the likelihood of the success of the Company must be considered in light of the problems, expenses, and difficulties, complications and delays frequently encountered in connection with the competitive environment in which the Company will operate and there can be no assurance that the Company will be able to operate profitably.
(22) Legal actions.
There are presently no legal actions pending against the Company or to which it or any of its property are subject, however the Company does have knowledge of a possible legal action regarding an account payable in the amount of $13,500 in dispute.. In the event there was any such legal action, there would be costs of defense that would be variable. The Company anticipates a general increase in legal counsel cost going forward due to the increased compliance costs of running a public company and the legal work that may be necessary for implementing the Company’s business plan of expansion.
(23) Investors may never receive cash distributions which could result in an investor receiving little or no return on his or her investment.
Distributions are payable at the sole discretion of our board of directors. We do not know the amount of cash that we will generate, if any, once we have more productive operations. Cash distributions are not assured, and we may never be in a position to make distributions.
(24) We anticipate the need to sell additional authorized shares in the future. This will result in a dilution to our existing shareholders and a corresponding reduction in their percentage ownership in EEDG.
We may seek additional funds through the sale of our common stock. This will result in a dilution effect to our shareholders whereby their percentage ownership interest in EEDG is reduced. The magnitude of this dilution effect will be determined by the number of shares we will have to issue in the future to obtain the funds required. The sale of additional stock to new shareholders will reduce the ownership position of the current shareholders. The price of each share outstanding common share may decrease in the event we sell additional shares.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None
ITEM 2.
ITEM 2. PROPERTIES
The Company does not own any real property. The Company’s office and place of business is located at 1200 Route 22 East, Bridgewater, New Jersey 08807.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
We know of no material, active legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. The Company does have knowledge of a possible legal action regarding an account payable in the amount of $13,500 in dispute. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
ITEM 4.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The following table sets forth the quarterly high and low sales prices of our common stock for the last two fiscal years. Such prices are inter-dealer quotations without retail mark-ups, mark-downs or commissions, and may not represent actual transactions.
The Company’s common stock is subject to Rule 15g-9 of the Securities and Exchange Commission, known as the Penny Stock Rule. This rule imposes requirements on broker/dealers who sell securities subject to the rule to persons other than established customers and accredited investors. For transactions covered by the rule, brokers/dealers must make a special suitability determination for purchasers of the securities and receive the purchaser's written agreement to the transaction prior to sale. The Securities and Exchange Commission also has rules that regulate broker/dealer practices in connection with transactions in "penny stocks." Penny stocks generally are equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in that security is provided by the exchange or system. The Penny Stock Rules requires a broker/dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document prepared by the Commission that provides information about penny stocks and the nature and level of
risks in the penny stock market. The broker/dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker/dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker/dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. These disclosure requirements have the effect of reducing the level of trading activity in the secondary market for our common stock. As a result of these rules, investors may find it difficult to sell their shares.
On December 31, 2012, the shareholders’ list of our common shares showed 32 registered shareholders and 78,167,872 shares outstanding.
Dividend Policy
No cash dividends have been paid by the Company on its common stock. It is anticipated that the Company’s future earnings will be retained to finance its continuing development. The payment of any
future dividends will be at the discretion of the Company’s board of directors and will depend upon, among other things, future earnings, any contractual restrictions, success of business activities, regulatory and corporate law requirements and the general financial condition of the Company.
Recent Sales of Unregistered Securities
None.
Equity Compensation Plan Information
We currently do not have any stock option or equity compensation plans or arrangements.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
During our fiscal year ended December 31, 2012, we did not purchase any of our shares of common stock or other securities.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The following financial data is derived from, and should be read in conjunction with, the “Financial Statements” and notes thereto. Information concerning significant trends in the financial condition and results of operations is contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
ITEM 7.
ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Plan of Operation
Our goal over the next twelve months is to direct maximum marketing efforts to develop greater markets and demand for our professional services and products.
We intend to focus on the following activities specific to EES
·
Recruit and retain more employees, focusing on increasing our experienced sales team and strategic alliances.
·
Increase marketing initiatives that will further promote the business and its services.
·
Continue national expansion, becoming the premier service provider for full facility overhaul in the energy services industry.
·
Engage in mergers and acquisitions to grow the company
We intend to focus on the following activities specific to TGWC
·
Develop three prototype restaurants in locations selected based on specific demographic data including:
a. competitor concepts and sales volumes
b. trade area profiles, including customer demographics, day-part occasions, concept density
c. emerging trade areas and developments
d. consumer foodservice DMA spending levels (comparative analysis)
e. local labor costs, unemployment levels and skill pools
·
Seed the market with Company units utilizing a “build and flip” strategy, selling the Company units to franchisees with additional development requirements while recouping the Company’s initial investments plus turnkey fees.
Results of Operations
FOR THE YEARS ENDED DECEMBER 31, 2012 and 2011
Revenues:
Contract revenues for the twelve months ended December 31, 2012 was $452,304 compared to $461,710 for the twelve months ended December 31, 2011. The decline in sales revenue of $9,406 was mainly attributable to the comparable sales between periods and the delay of significant projects expected to close during 2012.
Contract Costs and Gross Profit:
Contract costs increased from $306,202 for the twelve months ended December 31, 2011 to $423,717 for the same period in 2012. The increase in contract cost was mainly attributable to higher commission expense, increased utilization of independent sales representatives, and equipment price increases.
Gross profit decreased from $155,508 for the twelve months ended December 31, 2011 to $28,587 for the same period in 2012. Gross profit as a percentage of revenue was 6.3% for the twelve months ended December 31, 2012, compared to 33.7% for the same period in 2011.The decrease in gross profit was attributable to the increased contract costs. .
Operating Expenses:
Operating expenses increased significantly from $598,027 for the twelve months ended December 31, 2011 to $811,439 for the same period in 2012. The increase in expenses was mainly due to higher consulting and general and administrative expenses.
General and Administrative Expenses:
General and administrative expenses increased from $190,139 for the twelve months ended December 31, 2011 to $289,733 for the twelve months ended December 31, 2012. The increase was due primarily to an account receivable that was charged to bad debt expense.
Net (Loss) Income:
We recorded a net loss of $742,971 for the twelve months ended December 31, 2012, as compared to a net loss of $448,290 for the same period in 2011. The increase was due mainly to the increased operating and general and administrative expenses.
Liquidity and Capital Resources
For the year ended December 31, 2012, we used $130,248 in cash flow from operating activities compared to cash used of $58,405 for the year ended December 31, 2011.
The Company has no debt outstanding at either December 31, 2012 or December 31, 2011 and has no current plans to seek debt financing.
Cash and cash equivalents were $18,553 as of December 31, 2012 compared to $3,243 as of December 31, 2011.
The Company’s current ratio was .64:1 at December 31, 2012 compared to 0.41:1 at December 31, 2011.
We have no material commitments for capital expenditures and know of no trends, demands, commitments, or events that will result in our liquidity changing in a material way for the foreseeable future.
Critical Accounting Policies
Please refer to “Note 2 - Summary of Significant Accounting Policies in Part IV, Item 15” in the attached financial statements.
Off Balance Sheet Arrangements
The Company has no off balance sheet arrangements.
Recently Adopted Accounting Pronouncements
Please refer to “Note 2 - Summary of Significant Accounting Policies in Part IV, Item 15” in the attached financial statements for a complete description of recent accounting standards which we have not yet been required to implement and may be applicable to our operation, as well as those significant accounting standards that have been adopted in 2012 and 2011.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITIATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company, as defined by Rule 229.10(f)(1) and are not required to provide the information required by this Item.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company’s financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles.
It is the opinion of management that the audited financial statements for the calendar year ended December 31, 2012, include all adjustments necessary in order to ensure that the audited financial statements are not misleading.
The following financial statements are filed as part of this annual report:
Please refer to “Part IV, Item 15” for the Company’s audited financial statements for the years ended December 31, 2012 and 2011.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures.
Our management, with the participation of our principal executive and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934 (“Exchange Act”) as of the end of the period covered by this report. Based on that evaluation, our principal executive and principal financial officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Internal Control over Financial Reporting.
a) Management’s Annual Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) for the Company. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Because of its inherent limitations, internal control over financial reporting may not prevent nor detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.
Our internal controls framework is based on the criteria set forth in the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and includes those policies and procedures that: (i) Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (ii) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Based on such criteria, our management, with the participation of our principal executive and principal financial officer, evaluated the effectiveness of the Company’s internal control over financial reporting as of December 31, 2012 and 2011, and concluded that, as of December 31, 2012 and 2011, our internal control over financial reporting was effective.
Management's assessment report was not subject to attestation by the Company's independent registered public accounting firm and as such, no attestation was performed pursuant to SEC Final Rule Release Nos. 33-8934; 34-58028 that permit the Company to provide only management's assessment report for the year ended December 31, 2012 and 2011.
b) Changes in Internal Control over Financial Reporting. There has been no change in our internal control over financial reporting that occurred in our fiscal year ended December 31, 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers, Promoters and Control Persons
All directors of our company hold office until the next annual meeting of our shareholders and until such director’s successor is elected and has been qualified, or until such director’s earlier death, resignation or removal. The following table sets forth the names, positions and ages of our executive officers and directors. Our board of directors elects officers and their terms of office are at the discretion of our board of directors.
Business Experience
The following is a brief account of the education and business experience during at least the past five years of our directors and executive officers, indicating their principal occupations during that period, and the name and principal business of the organizations in which such occupation and employment were carried out.
James Boyd, President and CEO, age 57. James E. Boyd, Jr. is a seasoned leader with extensive and diverse experience in enterprise strategic planning, leadership development, concept reengineering, restructuring alternatives, operations, franchise development, marketing strategy & tactics, acquisitions, “Buy-side” financial & operational due diligence, and systems implementation. He is recognized in the industry for his innovative approaches, financial and organizational results, the ability to build sustainable talent, and a commitment to impacting his industry and community.
In August 2007, James entered into an exclusive alliance with Goldman Sachs UIG/Merchant Banking Group to identify, perform due diligence and assist in negotiating terms for the purchase of food service companies.
James was previously:
·
President of Quizno’s Canada (600 units)
·
Quizno’s Vice President of Area Director Development, United States (2000 units)
·
Kmart, SVP, Restaurant Operations/U.S. , Puerto Rico and Guam (1700 units)
·
Popeye’s Franchisee, Atlanta, Georgia
·
Popeye’s Corporate- Chief Operating Officer, U.S.
·
Popeye’s Corporate-Vice President of Company & Franchise Operations (1400)
·
Popeye’s Corporate- Vice President of Franchise Operations (1200 units)
·
Brand Project Leader for Popeye’s Reengineering Project/Redesigned all Brand support functions. James has “hands-on” experience at designing and structuring organizations to improve quality, create powerful long-range strategies, tighten operations, and inspire team performance.
·
Developer of Popeye’s Business Support Center and Training Center
·
Popeye’s Corporate- Regional Director of Franchise Operations (All restaurants west of the Mississippi, 640 restaurants)
·
Popeye’s/AFC Corporate - Regional Director South Central Region, Alabama to Southern California. Responsible for Popeye’s and Church’s restaurants.
·
Popeye’s Corporate- Franchise District Consultant, Texas, Louisiana, Mississippi
James has hands-on experience and a successful track record of effectively implementing new strategic initiatives while balancing immediate financial results, with long term goals to deliver superior shareholder value.
Dr. Benjamin F. Chavis, Jr, age 65, Director, Dr. Benjamin F. Chavis Jr., educator, civil rights leader, author, entrepreneur and global business leader is the President of Education Online Services Corporation (EOServe Corp.), the world’s leading provider of online higher education for Historically Black Colleges and Universities (HBCUs) across America, as well as other academic institutions of higher learning throughout the world. Dr. Chavis is also the President, CEO and Co-Founder with Russell Simmons, of the Hip-Hop Summit Action Network (HSAN), the world’s largest coalition of hip-hop artists and recording industry executives. In addition, Dr. Chavis is a Co-founder, Senior Advisor and former President of the Diamond Empowerment Fund (DEF) that supports higher education academic scholarship programs in Africa. Dr. Chavis writes a syndicated column for the National Newspaper Publishers Association (NNPA) that reaches 20 million readers weekly throughout the United States and the Caribbean. Today, Dr. Chavis is also Chairman of Energy Edge Technologies Corporation (EEDG).
A native of Oxford, North Carolina, Dr. Chavis received the Bachelor of Arts, BA, in Chemistry from University of North Carolina; the Master of Divinity, M.Div., magna cum laude, from Duke University; and the Doctor of
Ministry, D.Min, from Howard University. Dr. Chavis has also completed course requirements for the Doctor of Philosophy, Ph.D., in systematic theology, from Union Theological Seminary.
Dr. Benjamin F. Chavis, Jr. began his career in 1963, as a statewide youth coordinator in NC for the Reverend Dr. Martin Luther King, Jr., and the Southern Christian Leadership Conference (SCLC). In 1970, Chavis was appointed Southern Regional Program Director of the 1.7 million member United Church of Christ Commission for Racial Justice (UCC-CRJ) and by 1985 was named the Executive Director and CEO of the UCC-CRJ. In 1988, Dr. Chavis was elected Vice President of the National Council of Churches of the USA. From 1985 to 1993, Dr. Chavis wrote and produced the national syndicated newspaper column and radio program, “Civil Rights Journal.” In 1993 and 1994 Dr. Chavis served as the Executive Director and CEO of the National Association for the Advancement of Colored People (NAACP) and remains a life-member of the NAACP. In 1995, Dr. Chavis was the National Director and organizer of the Million Man March. From 1995 to 1997 Chavis was the Executive Director and CEO of the National African American Leadership Summit (NAALS). In 2001, Dr. Chavis and Russell Simmons Co-founded the Hip-Hop Summit Action Network. In 2009, Dr. Chavis joined with Ezell Brown to establish the Education Online Services Corporation. The 2010 theatrical release of the full length movie “Blood Done Sign My Name” distributed by Paladin, directed by Jeb Stuart, starring Ricky Schroder, Nate Parker, and Lela Rochon depicts a true story from Dr. Chavis’ early days in the Civil Rights Movement during the 1960’s and 1970’s in his hometown of Oxford, NC.
Dr Chavis has authored books and other publications including: An American Political Prisoner Appeals for Human Rights, Psalms from Prison, Toxic Waste and Race in the United States of America: A National Report on the Racial and Socioeconomic Characteristics of Communities with Hazardous Waste Sites, Report of Fact Finding Mission of African American Church and Community Leaders to the Republic of Angola, Pastoral Letter on Contemporary Racism and the Role of the Church, and The National Agenda: Public Policy Issues, Analyses, And Programmatic Plans of Action (2000-2008).
Joe Ragosta (resigned), age 54, is now the Chief Executive Officer of the Company. Dr. Ragosta is a visionary business leader and senior executive with a long track record of building highly successful, global enterprises. He has an unwavering commitment to delivering world class service to our customers and believes that the only way to be successful is by exceeding expectations.
Prior to joining EEDG, Dr. Ragosta was CEO of Ely Energy, a Tulsa, OK based design and fabrication company serving global markets with products applied downstream in a variety of energy and environmental markets. Prior to Ely Energy, Dr. Ragosta served as President of Oseco, a manufacturer of rupture disks, explosion panels, and other pressure relief products. Dr. Ragosta also previously served as President of Ionex in Tully, NY and General Manager of Graver Tech in Glasgow, DE.
Dr. Ragosta is an accomplished author with over 50 technical publications. He has been certified as an ISO 9001 Lead Auditor and holds 8 patents and patents pending. He received his bachelor’s degree from The Pennsylvania State University and his master’s degree and doctorate from Cornell University.
Robert Holdsworth (resigned), 42, Director, has a 17 year proven track record of success partnering with Fortune 500 companies, global enterprises and medium businesses. His experience covers a depth of senior level operations management, inside and outside sales, large scale project management and Six Sigma deployment. He has successfully managed large, multi-hundred member departments and key contracts that generated revenues of up to $40M annually. Mr. Holdsworth has had great success in strategically growing organizations, managing highly complex projects, and cutting waste while increasing revenues. Mr. Holdsworth successfully integrated three distinct outsourcing businesses and created ways to decrease cost, correctly apply assets and significantly impact the top and bottom lines. In Management’s view, Mr. Holdsworth possesses the well rounded skill set necessary to lead a company today, as an effective communicator, strategic leader, poised presenter, skilled salesperson, with astute financial capabilities. Mr. Holdsworth has worked in Senior Management positions for such companies as Mellon Financial Corporation (Vice President from 2002 to 2004), Gretco, Inc. (Public Relations Director from 1992 to 1994), Price Waterhouse Coopers (Managing Director from 1996 to 2002), and Merrill Lynch & Co (Manager from
1994 to 1996). Mr. Holdsworth received a Bachelor Degree from Rider University, Lawrenceville, NJ. He holds certifications as a Certified Energy Manager, a Six Sigma Master Black Belt, and a Total Quality Management (TQM) Practitioner and formerly held NASD Series 7 and Series 63 licenses.
John Gerace (resigned), 66, Ph.D., P.E. Director, has been a consultant for EEDG for 6 years and engages in the various aspects of EEDG sales, project design and installations. He oversees client projects including sales, endto end engineering, project management and financial accountability. Dr. Gerace offers excellent expertise in the field of engineering and business development. His engineering knowledge encompasses environmental, industrial and facilities engineering, power plant engineering, cogeneration and of course energy engineering. Dr. Gerace has held several management positions in the environmental industry for such companies as The Kuljian Corporation as the Vice President, Business Development from 1997 to 1999 and again from 2001to 2003, Client Services Director at Buchart-Horn/BASCO Associates from 1999 to 2001, Business Development Manager for L. Robert Kimball & Associates from 1996 to 1997, Manager of Business Development, IT Corporation from 1994 to 1996, and Vice President and NYC Regional Branch Manager at Certified Engineering and Testing Co. from 1993 to 1994. Dr. Gerace has overseen projects spanning power plants, boiler plants, chiller plants, pharmaceutical firms, schools, Department of Defense, chemical plants, hospitals, food processing plants, and many other facilities. Dr. Gerace is a published author and a Registered Professional Engineer. He holds a Bachelor of Engineering, an MBA in Finance and a Doctor of Philosophy with Honors in Economics. He holds Full Membership in the National Society of Professional Engineers, the Association for the Advancement of Cost Engineering International and sits on the Philadelphia Council on Business Economics. Dr. Gerace has also fulfilled US Navy Active Duty obligations as a Lt. in the US Naval Reserve.
Family Relationships
None.
Involvement in Certain Legal Proceedings
Our directors, executive officers and control persons have not been involved in any of the following events during the past five years:
1.
any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
2.
any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
3.
being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
4.
being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
Section 16(a) Beneficial Ownership Compliance
Section 16(a) of the Securities Exchange Act requires our executive officers and directors, and persons who own more than 10% of our common stock, to file reports regarding ownership of, and transactions in, our securities with the Securities and Exchange Commission and to provide us with copies of those filings. Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during fiscal year ended December 31, 2012, all filing requirements applicable to our officers, directors and greater than 10% percent beneficial owners were complied with.
Code of Ethics
Our company’s board of directors established a written code of ethics that applies to the Company’s Chief Executive Officer and Chief Financial Officer. As adopted, our code of ethics sets forth written standards that are designed to deter wrongdoing and to promote:
1.
honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
2.
full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the Securities and Exchange Commission and in other public communications made by us;
3.
compliance with applicable governmental laws, rules and regulations;
4.
the prompt internal reporting of violations of the Code of Business Conduct and Ethics to an appropriate person or persons identified in the Code of Business Conduct and Ethics; and
5.
accountability for adherence to the Code of Business Conduct and Ethics
Our code of ethics was filed as an exhibit with our Registration Statement on Form S-1 filed with the Securities and Exchange Commission on June 29, 2010. We will provide a copy of the code of ethics to any person without charge, upon request. Requests can be sent to the Company address listed above.
Nomination Process
As of December 31, 2012, the Company did not effect any material changes to the procedures by which shareholders may recommend nominees to the board of directors. The board does not have any defined policy or procedure requirements for shareholders to submit recommendations or nominations for directors. The board of directors believes that, given the early stages of the Company’s development, a specific nominating policy would be premature and of little assistance until the Company’s operations develop to a more advanced level. The board does not currently have any specific or minimum criteria for the election of nominees to the board of directors and there is no specific process or procedure for evaluating such nominees. The board of directors assesses all candidates, whether submitted by management or shareholders, and makes recommendations for election or appointment.
A shareholder who wishes to communicate with the board of directors may do so by directing a written request addressed to our Chief Executive Officer or the Chief Financial Officer at the address appearing on the face page of this Annual Report.
Committees of the Board
All proceedings of the board of directors were conducted by resolutions consented to in writing by all the directors and filed with the minutes of the proceedings of the directors. Such resolutions consented to in writing by the directors entitled to vote on that resolution at a meeting of the directors are, according to the corporate laws of the State of New Jersey and the bylaws of our company, as valid and effective as if they had been passed at a meeting of the directors duly called and held.
The company currently does not have nominating, compensation or committees performing similar functions nor does the Company have a written nominating, compensation charter. The board of directors does not believe that it is necessary to have such committees because it believes that the functions of such committees can be adequately performed by the board of directors.
The Company does not have any defined policy or procedure requirements for shareholders to submit recommendations or nominations for directors. The board of directors believes that, given the early stage of the Company’s development, a specific nominating policy would be premature and of little assistance until the Company’s operations develop to a more advanced level. The Company does not currently have any specific or minimum criteria for the election of nominees to the board of directors and the board does not have any specific process or procedure for evaluating such nominees. The board of directors assesses all candidates, whether submitted by management or shareholders, and makes recommendations for election or appointment.
Audit Committee Financial Expert
Our board of directors has determined that we do not need a board member that qualifies as an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-B.
The Company’s Board of Director believes that the current board members are capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. The board also believes that it is necessary to have an audit committee because by performing these functions the board will gain a better understanding of all financial reporting requirements of a publicly traded company. In addition, the board believes that retaining an independent director who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted in our circumstances given the early stages of the Company’s development.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Executive Compensation
Summary Table. The following table sets forth information concerning the annual and long-term compensation awarded to, earned by, or paid to the named executive officer for all services rendered in all capacities to our company, or any of its subsidiaries, for the years ended December 31, 2011 and December 31, 2012:
Compensation Table for Executives
Employment Agreements
The Company has no formal employment agreements.
Equity Compensation Plan Information and Stock Options
The Company does not currently have any equity compensation plans or any outstanding stock options.
Compensation of Directors
Summary Table. The following table sets forth information concerning the annual and long-term compensation awarded to, earned by, or paid to the named Director for all services rendered in all capacities to our company, or any of its subsidiaries, for the years ended December 31, 2009, 2010, 2011 and December 31, 2012:
Compensation Table for Directors
Directors receive fixed fees and other compensation for their services as directors. The Board of Directors are compensated for attending five board meetings per year, and for assisting in raising funds for the company, joint ventures and strategic alliance facilitation, advisory with respect to services relating to the Company, road shows and corporate equity/debt issuance and follow on financing in addition to other responsibilities. The Board of Directors has the authority to fix the compensation of directors. The table below represents the standard compensation for members of the Board of Directors:
Pension, Retirement or Similar Benefit Plans
There are no arrangements or plans in which the Company provides pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the board of directors or a committee thereof.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth information with respect to the beneficial ownership of our Common Stock as of December 31, 2012, for:
· each of our executive officers and directors;
· all of our executive officers and directors as a group; and
· any other beneficial owner of more than 5% of our outstanding Common Stock.
(1)
Based on 78,567,872 shares as of December 31, 2012.
Beneficial ownership is determined in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities and include ordinary shares issuable upon the exercise of stock options that are immediately exercisable or exercisable within 60 days. Except as otherwise indicated, all persons listed below have sole voting and investment power with respect to the shares beneficially owned by them, subject to applicable community property laws. The information is not necessarily indicative of beneficial ownership for any other purpose.
Change in Control
The Company’s management is not aware of any arrangement that might result in a change in control of our company in the future.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, AND DIRECTOR INDEPENDENCE
No director, executive officer, principal shareholder holding at least 5% of our common shares, or any family member thereof, had any material interest, direct or indirect, in any transaction, or proposed transaction, during the year ended December 31, 2012, in which the amount involved in the transaction exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at the year end for the last three completed fiscal years.
Corporate Governance
We currently act with two directors consisting of James Boyd and Benjamin Chavis.
The Company’s Board of Directors do not have a standing, compensation or nominating committee, as the entire board of directors acts in such capacities and as mentioned above, the board adopted a resolution that it would act as the audit committee. The board believes that its members are capable of analyzing and evaluating the Company’s financial statements and understanding internal controls and procedures for financial reporting. The board of directors believes it is not necessary to have a standing audit, compensation, or nominating committee, and they believe that the functions of such committees can be adequately performed by the board, consisting of James Boyd and Benjamin Chavis. In addition, the board believes that retaining one or more additional directors who would qualify as independent as defined in Rule 4200(a)(15) of the Rules of Nasdaq Marketplace Rules would be overly costly and burdensome and is not warranted in the circumstances given the early stages of the Company’s development.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The following table represents a summary of fees billed to the Company from its principal independent accounts for professional services rendered for the years ended December 31, 2012 and 2011.
Audit Fees
Audit fees expensed for Silberstein Ungar, PLLC, for professional services rendered for the audit of our annual financial statements included in our annual report on Form 10-K for the years ended December 31, 2012 and 2011 and the quarterly 10-Q reviews during those years, was $25,900 and $21,900, respectively.
Audit Related Fees
For the years ended December 31, 2012 and 2011, the aggregate fees expenses for assurance and related services relating to the performance of the audit of our financial statements which are not reported under the caption “Audit Fees” above, was$0 and $0, respectively.
Tax Fees
For the years ended December 31, 2012 and 2011, the aggregate fees expensed for tax fees was $0 and $0, respectively.
All Other Fees
Fees billed by Silberstein Ungar, PLLC, not related to audit as described above, during the years ended December 31, 2012 and 2011, were $0 and $2,300, respectively, and these fees are related to the Company’s SEC fillings on FORM S-1.
Our board of directors, who acts as our audit committee, has adopted a policy governing the pre-approval by the board of directors of all services, audit and non-audit, to be provided to our company by our independent auditors. Under the policy, the board or directors has pre-approved the provision by our independent auditors of specific audit, audit related, tax and other non-audit services as being consistent with auditor independence. Requests or applications to provide services that require the specific pre-approval of the board of directors must be submitted to the board of directors by the independent auditors, and the independent auditors must advise the board of directors as to whether, in the independent auditor’s view, the request or application is consistent with the Securities and Exchange Commission’s rules on auditor independence.
The board of directors has considered the nature and amount of the fees billed by Silberstein Ungar, PLLC and believes that the provision of the services for activities unrelated to the audit is compatible with maintaining the independence of Silberstein Ungar, PLLC.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULE
ENERGY EDGE TECHNOLOGIES CORPORATION
DECEMBER 31, 2012
Silberstein Ungar, PLLC CPAs and Business Advisors
Phone (248) 203-0080
Fax (248) 281-0940
30600 Telegraph Road, Suite 2175
Bingham Farms, MI 48025-4586
www.sucpas.com
Report of Independent Registered Public Accounting Firm
To the Board of Directors of
Energy Edge Technologies Corporation
Boca Raton, Florida
We have audited the accompanying balance sheets of Energy Edge Technologies Corporation (the “Company”) as of December 31, 2012 and 2011, and the related statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Energy Edge Technologies Corporation as of December 31, 2012and 2011 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 11 to the financial statements, the Company haslimited working capital, and has incurred a significant loss from operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans with regard to these matters are described in Note 11. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Silberstein Ungar, PLLC
Bingham Farms, Michigan
April 14, 2013
ENERGY EDGE TECHNOLOGIES CORPORATION
BALANCE SHEETS
AS OF DECEMBER 31, 2012 AND 2011
The accompanying notes are an integral part of these financial statements.
ENERGY EDGE TECHNOLOGIES CORPORATION
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
The accompanying notes are an integral part of these financial statements.
ENERGY EDGE TECHNOLOGIES CORPORATION
STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
AS OF DECEMBER 31, 2012
The accompanying notes are an integral part of these financial statements.
ENERGY EDGE TECHNOLOGIES CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
The accompanying notes are an integral part of these financial statements
ENERGY EDGE TECHNOLOGIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2012
NOTE 1 - NATURE OF OPERATIONS
Energy Edge Technologies Corporation (“Energy Edge” and the “Company”) was incorporated in New Jersey in January, 2004 and was in the development stage until January 1, 2008 when the assets, liabilities, and operations of a sole proprietorship controlled by the Company’s sole stockholder were transferred in. The Company provides energy engineering and other services specializing in the development and implementation of advanced, turnkey projects to reduce energy losses and increase the efficiency of new and existing buildings. The Company is comprised of professional and industrial engineers, Leadership in Energy and Environmental Design (“LEED”) Accredited Professionals, and Green Building Coalition Certifying Agents. Energy Edge is a Clean Energy Pay for Performance Partner and a Smart Start Building Trade Ally. The Company’s custom designed projects are developed using proprietary methods and maximize energy savings by treating an entire facility based on its unique features and electricity and gas usage.
The Company applies a whole facility approach to energy cost reduction by applying different technologies and engineering approaches to treat most of the various electrical and gas consuming loads across facilities such as lighting, HVAC, refrigeration and production equipment. The energy projects developed and implemented by the Company are ideal for virtually any type of facility and have successfully resulted in tremendous savings in manufacturing plants, hospitals, entertainment venues, office buildings, restaurants, warehouses, etc.
Revenues come primarily from engineering survey work and turnkey energy projects where the Company takes responsibility for equipment procurement, installation labor, utility rebates, tax incentives, pre and post survey work, waste removal, certifications, and ongoing measurement and verification of results.
During the year, the Company acquired a fifty-one percent (51%) interest in a newly formed corporation called Energy Edge Solutions, Inc. (“EES”). EES was not an operating company at any time during the year and reported no revenues and expenses consisting of only nominal bank fees.
During the year, the Company acquired a sixty-five percent (65%) interest in a Florida based corporation called Dry Fried Wing Company (“DFWC”) whose business activities include offering chicken wing and related menu products to the public under licensing and franchising arrangements with existing restaurants. DFWC began business in November putting in place several licensing agreements with restaurants in Florida, New York, New Jersey, and Maryland. DFWC expects to achieve significant expansion of its licensing and franchising placements in 2013 and thereafter.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The consolidated financial statements include the accounts of Energy Edge Technologies Corporation, Dry Fried Wing Company, and Energy Edge Solutions, Inc.(collectively, the “Company”). All material intercompany transactions have been eliminated.
Basis of Accounting
Energy Edge uses the accrual basis of accounting for financial statement reporting. Accordingly, revenues are recognized when products are delivered and services are rendered, and expenses are recognized when the obligation is incurred. The Company recognizes revenues from contracts on the percentage-of-completion method, measured by the percentage of cost incurred to date to estimated total cost for each contract. The Company has selected a December 31 year end.
ENERGY EDGE TECHNOLOGIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2012
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basis of Presentation
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars.
Fair Value of Financial Instruments
The Company's financial instruments consist of cash and cash equivalents, receivables, costs and estimated earnings in excess of billings on uncompleted contracts, prepaid consulting fees, accounts payable, accrued expenses and other current liabilities, loan payable - shareholder, loans between related entities, and billings in excess of costs and estimated earnings on uncompleted contracts. The carrying amounts of these financial instruments approximate fair value due either to length of maturity or interest rates that approximate prevailing rates unless otherwise disclosed in these financial statements.
Contract Receivables
Contract receivables are recorded when invoices are issued and are presented in the balance sheet net of the allowance for doubtful accounts. The Company extends credit to customers in the normal course of business. The Company continually monitors contract receivables. When we are aware of circumstances that may impair a specific customer’s ability to meet its financial obligations, we record a specific allowance to reduce the net recognized receivable to the amount we believe will be collected. We write off uncollectible amounts against the allowance when we have exhausted our collection efforts.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles of the United States 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 revenues and expenses during the year. Management bases its estimates on historical experience and on other assumptions considered to be reasonable under the circumstances. However, actual results may differ from the estimates.
Concentrations of Credit Risk
The Company maintains its cash in bank deposit accounts, the balances of which at times may exceed federally insured limits. The Company continually monitors its banking relationships and consequently has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents.
Income Taxes
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. It is the Company’s policy to classify interest and penalties on income taxes as interest expense or penalties expense. As of December 31, 2012, there have been no interest or penalties incurred on income taxes.
Research and Development
The Company has not incurred any research and development costs to date.
Non-Controlling Interests
As of December 31, 2012, the non-controlling interests balance was ($39,965), due to minority ownership of 35% in Dry Fried Wing Company, and 49% in Energy Edge Solutions, Inc.
ENERGY EDGE TECHNOLOGIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2012
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition
The Company recognizes revenues from contracts on the percentage-of-completion method, measured by the percentage of cost incurred to date to estimated total cost for each contract. That method is used because management considers total cost to be the best available measure of progress on contracts. Because of inherent uncertainties in estimating costs, it is at least reasonably possible that the estimates used will change within the near term.
Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation. Selling, general, and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability may result in revisions to costs and income, which are recognized in the period in which the revisions are determined. Changes in estimated job profitability resulting from job performance, job conditions, contract penalty provisions, claims, change orders, and settlements, are accounted for as changes in estimates in the current period. No profit is recognized on change orders until they have been approved by the customer.
The asset, “Costs and estimated earnings in excess of billings on uncompleted contracts,” represents revenues recognized in excess of amounts billed. The liability, “Billings in excess of costs and estimated earnings on uncompleted contracts,” represents billings in excess of revenues recognized.
Stock-Based Compensation
The Company accounts for employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718, Compensation - Stock Compensation which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. The fair value of the equity instrument is charged directly to compensation expense and credited to additional paid-in capital over the period during which services are rendered.
The Company follows ASC Topic 505-50, formerly EITF 96-18, “Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling Goods and Services,” for stock options and warrants issued to consultants and other non-employees. In accordance with ASC Topic 505-50, these stock options and warrants issued as compensation for services provided to the Company are accounted for based upon the fair value of the services provided or the estimated fair market value of the option or warrant, whichever can be more clearly determined.
Basic Income (Loss) Per Share
Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There are no such common stock equivalents outstanding as of December 31, 2012.
Recent Accounting Pronouncements
Energy Edge does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position, or cash flows.
Reclassifications
Certain accounts and financial statement captions in the prior periods have been reclassified to conform to the current period financial statements.
ENERGY EDGE TECHNOLOGIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2012
NOTE 3 - CONTRACT RECEIVABLES
The Company grants customers credit terms as governed by the terms specified in their contracts. Contracts are typically structured with progress payments. The Company’s major customers receive payment credit terms of 30 days.
The Company evaluates the need for an allowance for doubtful accounts based on specifically identified amounts that management believes to be uncollectible. If actual collection experience changes, revisions to the allowance may be required. Based on management review of outstanding balances, an allowance of $95,411 was recorded at December 31, 2012 relating to one customer.
Contract receivables consisted of the following at December 31, 2012 and 2011:
Bad debt expense was $95,411 and $0 for the years ended December 31, 2012 and 2011, respectively.
NOTE 4 - PREPAID EXPENSES
Prepaid expenses consisted of the following at December 31:
Prepaid Project Expenses
Prepaid project expenses consist of monies expended for project equipment for a project temporarily put on hold.
Prepaid Consulting
The Company has retained a number of consultants. These consultants are paid in cash and/or issuance of Company stock. Consultants were issued 16,000,000 shares of stock valued at $668,375 in 2012, and 1,000,000 shares of stock valued at $48,200 in 2011. The consulting fees are being amortized over the terms of the contracts. As of December 31, 2012, and 2011, $270,492and $28,895, respectively, remained in prepaid consulting.
NOTE 5 - PROPERTY AND EQUIPMENT
The Company’s policy is to depreciate the cost of property and equipment over the estimated useful lives of the assets by use of the straight-line method. The office equipment presently owned by the Company is being depreciated over an estimated useful life of five years. Depreciation expense for years ended 2012 and 2011 was $1,717 and $1,716, respectively.
ENERGY EDGE TECHNOLOGIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2012
NOTE 6 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consisted of the following at December 31:
NOTE 7 - RELATED PARTY TRANSACTIONS
Related party loans totaling $30,696 and $3,138 at December 31, 2012 and 2011, respectively, are owed to various related parties of the Company for reimbursement of expenses incurred on behalf of the Company.
Related party loans are unsecured, non-interest bearing and have no specific terms of repayment unless otherwise noted.
NOTE 8 - CAPITAL STOCK
On March 26, 2010, the Company amended its Articles of Incorporation to increase the number of authorized shares to 100,000,000 with a par value of $.00001. On November 14, 2012, the Company amended its Articles of Incorporation to increase the number of authorized shares to 250,000,000 with a par value of $.00001.
During 2011, the Company sold 30,000 shares of common stock at $.10 per share under a private placement to an unrelated third party for total proceeds of $3,000.
During 2011, the Company issued 28,270,000 shares of stock valued at $48,200 to consultants. The shares were valued at prices ranging from $.0015 to $.10 per share.
During 2011, the Company issued 3,974,380 shares of stock valued at $138,838 for legal services. The shares were valued based on the value of the legal services provided.
On January 23, 2012, the Company issued 1,500,000 shares of stock valued at $15,000 for business consulting services.
On May 3, 2012, the Company issued 2,500,000 shares of stock valued at $39,375 for legal services.
On May 7, 2012, the Company issued 3,000,000 shares of stock valued at $105,000 for business consulting services.
On May 14, 2012, the Company issued 2,000,000 shares of stock valued at $52,500 for business consulting services.
On May 17, 2012, the Company sold 1,000,000 shares of common stock at $.01 per share under a private placement to an unrelated third party for total proceeds of $10,000.
On May 25, 2012, 10,000 shares of stock issued for consulting services in 2011 were returned to the Company.
ENERGY EDGE TECHNOLOGIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2012
NOTE 8 - CAPITAL STOCK (CONTINUED)
On June 5, 2012, the Company sold 500,000 shares of common stock at $.01 per share under a private placement to an unrelated third party for total proceeds of $5,000.
On June 6, 2012, the Company sold 1,666,667 shares of common stock at $.0075 per share under a private placement to an unrelated third party for total proceeds of $12,500.
On June 6, 2012, the Company issued 500,000 shares of stock valued at $50,000 for business consulting services
On June 6, 2012, the Company sold 2,000,000 shares of common stock at $.015 per share under a private placement to an unrelated third party for total proceeds of $30,000.
On June 17, 2012, the Company issued 200,000 shares of stock valued at $9,000 for business consulting services.
On July 20, 2012, the Company issued 500,000 shares of stock valued at $65,000 for business consulting services.
On August 8, 2012, the Company issued 500,000 shares of stock valued at $50,000 for business consulting services.
On August 9, 2012, the Company issued 1,000,000 shares of stock valued at $90,000 for business consulting services.
On August 14, 2012, the Company issued 1,000,000 shares of stock valued at $67,500 for legal services.
On August 28, 2012, 2,000,000 shares of stock issued for consulting services in 2011 were returned to the Company.
On October 26, 2012, the Company sold 750,000 shares of common stock at $.0073 per share under a private placement to an unrelated third party for total proceeds of $5,500.
On November 21, 2012, 28,000,000 shares of stock previously held by former officers of the Company were surrendered.
On November 29, 2012, the Company sold 1,500,000 shares of common stock at $.0167 per share under a private placement to an unrelated third party for total proceeds of $25,000.
On November 29, 2012, the Company issued 2,000,000 shares of stock valued at $80,000 for business consulting services.
On December 10, 2012, the Company issued 300,000 shares of stock valued at $15,000 for business consulting services.
On December 12, 2012, the Company issued 1,000,000 shares of stock valued at $30,000 for business consulting services.
ENERGY EDGE TECHNOLOGIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2012
NOTE 8 - CAPITAL STOCK (CONTINUED)
On December 21, 2012, the Company sold 2,000,000 shares of common stock at $.005 per share under a private placement to an unrelated third party for total proceeds of $10,000.
On December 27, 2012, the Company sold 1,500,000 shares of common stock at $.0167 per share under a private placement to an unrelated third party for total proceeds of $25,000.
As of December 31, 2012, the Company had no warrants or options outstanding.
NOTE 9 - INCOME TAXES
For the periods ended December 31, 2012 and 2011, the Company has incurred a net loss and, therefore, has no tax liability. The net deferred tax asset was generated by the loss carry-forward of approximately $2,787,800 at December 31, 2012, and will expire beginning in 2030.
The provision for federal income tax consists of the following at December 31:
The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:
As of December 31, 2012, the Company had net operating loss carry forwards of approximately $2,787,800 that may be available to reduce future years’ taxable income through 2032. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards.
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards of $2,787,800for federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may be limited as to use in future years.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
The Company neither owns nor leases any real property as of December 31, 2012. An officer has provided office services without charge. There is no obligation for the officer to continue this arrangement. Such costs are immaterial to the financial statements and accordingly are not reflected herein.
ENERGY EDGE TECHNOLOGIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2012
NOTE 11 - GOING CONCERN
The Company has limited working capital, and has suffered significant losses from operations. These factors create substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.
The ability of Energy Edge Technologies Corporation to continue as a going concern is dependent on the Company generating cash from the sale of its common stock, obtaining debt financing, attaining future profitable operations, acquiring or merging with a profitable company, and/or developing successful business operations in other industries through investment in related party ventures. Management’s plans include selling its equity securities and obtaining debt financing to fund its capital requirements; however, there can be no assurance the Company will be successful in these efforts.
NOTE 12 - RESTATEMENT
The Company has restated its ending balances for 2010, as well as its beginning and ending balance sheets for 2011, and beginning balance sheet for 2012. The Company filed amended payroll tax returns to correct withholding amounts reported in 2010. The effect was to reduce the Company’s payroll tax liability balance by $74,200 at December 31, 2010, 2011, and 2012.
The December 31, 2010 and 2011 accumulated deficit balances in the statement of stockholders’ equity (deficit) have been restated to reflect the above changes.
The following are the previous and corrected balances for the years ended December 31, 2010 and 2011:
NOTE 13 - SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to December 31, 2012 to the date these financial statements were issued, and reports the following:
During the fiscal year ended December 31, 2012, the Company acquired sixty-five percent (65%) of the capital stock of The Dry Fried Wing Company. On March 31, 2013, the Company acquired the remaining thirty-five percent (35%) of such stock. On April 5, 2013 the Company officially changed the name of The Dry Fried Wing Company to The Gourmet Wing Company, Inc. The Gourmet Wing Company is primarily engaged in the business of licensing, operating, developing and franchising a system of distinctive quick-service and fast casual restaurants in the chicken wing segment. The Company has supplied a significant amount of capital to The Gourmet Wing Company and expects to continue to do so in the future in addition to supplying capital to Energy Edge Solutions.
Item 6. Exhibits and Reports of Form 8-K.
During the year ending December 31, 2012, the Company filed the following Form 8-Ks.
On June 11, 2012 the Company filed an 8-K under Item 1.01 Entry Into a Material Definitive Agreement announcing a merger agreement on June 1, 2012 with Trillacope Construction, LLC, a Michigan limited liability Company.
On August 2, 2012, the Company filed an 8-K under Item 1.01 Entry into a Material Definitive Agreement announcing the consummation of a Stock Purchase Agreement on July 30, 2012 between the Company and Dutchess Private Equities Fund, Ltd.
On November 14, 2012, The Company filed a Form 8-K under Item 5.03 Amendments to Articles of Incorporation or Bylaws:Change in Fiscal Year announcing the Amendment of the Company's Articles on November 14, 2012. The 8-K also included Item 5:07 Submission of Matters to A Vote of Security Holders announcing A Proxy Statement sent to shareholders on September 26, 2012.
On November 27, 2012, the Company reported on Form 8-K under Item 1.01 Entry into a Material Definitive Agreement that on November 21, 2012 the Company entered into an Agreement to merge with the Dry Fried Wing Company, a Florida corporation. The report also included Item 2.01 Completion of Acquisition or Disposition of Assets which announced the Company's closed transaction on November 21, 2012 and included under Item 9.01 Financial Statements and Exhibits a copy of the Agreement to Merge.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ENERGY EDGE TECHNOLOGIES CORPORATION
By: /s/ James Boyd
James Boyd
President and Chief Executive Officer
Date: April 15, 2013
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: /s/ Benjamin Chavis
Benjamin Chavis
Director
Date: April 15, 2013