NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013
Energy Edge Technologies Corporation (“Energy Edge”, “EEDG”, “Energy Edge Solutions”, “EES”, The Gourmet Wing Company, Inc.”, “The Gourmet Wing Company”, “TGWC” and the “Company”) was incorporated in New Jersey in January, 2004. Energy Edge Technologies Corporation is comprised of two subsidiaries; Energy Edge Solutions and The Gourmet Wing Company, Inc
Energy Edge Solutions (EES) provides energy engineering and 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. EES’ 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.
EES 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 facility such as lighting, HVAC, refrigeration, and production equipment. The energy projects developed and implemented by EES 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.
EES’ revenues come primarily from engineering survey work and turnkey energy projects where EES 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.
The Gourmet Wing Company, Inc. (TGWC) is a newly formed combined fast casual restaurant company in the chicken wing segment and restaurant management company. TGWC is primarily engaged in the business of developing and subsequently managing, licensing, operating, developing and franchising a broad portfolio of restaurant and food concepts.
TGWC revenues will primarily be derived from management fees, royalty fees, licensing fees and franchise fees. TGWC will also sell food, sauces, mixes and other supplies to its franchisees/licensees.
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 THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basis of Presentation
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Form 10-K filed with the SEC as of and for the year ended December 31, 2012. In the opinion of management, all adjustments necessary for the financial statements to be not misleading for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.
Fair Value of Financial Instruments
The Company's financial instruments consist of cash and cash equivalents, receivables, prepaid consulting fees, accounts payable, accrued expenses and other current liabilities, and loans payable –related parties. 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 March 31, 2013, 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 balances were ($39,965), due to minority ownership of 35% in Gourmet Wing Company, and 49% in Energy Edge Solutions, Inc. As of March 31, 2013, the non-controlling interest balance was $393 due to the minority ownership of 49% in Energy Edge Solutions, Inc. On March 31, 2013, the Company acquired the minority interest in Gourmet Wing Company, bringing their ownership of Gourmet to 100%.
ENERGY EDGE TECHNOLOGIES CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013
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 March 31, 2013.
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.
NOTE 3 -- ACCOUNTS RECEIVABLE
Accounts receivable other consists of $200 from current period sales of Gourmet Wings Company plus $348 from Gourmet Wings Company sales in a prior period. $200 of such receivables are considered uncollectible and were written off in the current period.
ENERGY EDGE TECHNOLOGIES CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013
NOTE 4 -- OTHER ASSETS
Other assets represents the aggregate costs of $3,566 incurred by Gourmet Wings Company in the current period related to the development of sauce recipes. As the asset will be useful for a period of indeterminant length in the future, no amortization has been recognized.
NOTE 5 – PREPAID EXPENSES
Prepaid expenses consisted of the following at March 31, 2013 December 31, 2012:
|
|
March 31, 2013
|
|
|
December 31, 2012
|
|
Prepaid project expenses
|
|
$
|
29,950
|
|
|
$
|
29,950
|
|
Prepaid consulting expense
|
|
|
265,283
|
|
|
|
270,492
|
|
Total prepaid expenses
|
|
$
|
295,233
|
|
|
$
|
300,442
|
|
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 1,700,000 shares of stock valued at $81,000 for the three months ended March 31, 2013. The consulting fees are being amortized over the terms of the contracts. As of March 31, 2013, and December 31, 2012, $265,283 and $270,492 respectively, remained in prepaid consulting.
NOTE 6 – 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 the three months ended March 31, 2013 and 2012 was $429 and $430, respectively.
NOTE 7 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consisted of the following at March 31, 2013 and December 31, 2012:
|
|
March 31, 2013
|
|
|
December 31, 2012
|
|
Credit card balances
|
|
$
|
29,003
|
|
|
$
|
28,596
|
|
Accrue professional fees
|
|
|
4,500
|
|
|
|
13,500
|
|
Accrued payroll
|
|
|
-
|
|
|
|
20,000
|
|
Payroll taxes payable
|
|
|
48,652
|
|
|
|
48,652
|
|
Sales tax payable
|
|
|
15,082
|
|
|
|
15,082
|
|
Total accrued expenses and other current liabilities
|
|
$
|
97,237
|
|
|
$
|
125,830
|
|
NOTE 8 – RELATED PARTY TRANSACTIONS
Related party loans totaling $15,615 and $30,696 at March 31, 2013 and December 31, 2012, 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.
ENERGY EDGE TECHNOLOGIES CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013
NOTE 9 -- BUSINESS SEGMENTS
The Company is made up of three entities in which Energy Edge Technologies Corporation is the parent entity. The Company owned a sixty-five percent interest in Gourmet Wings Company during the current quarter, but acquired the remaining thirty-five percent of the stock of Gourmet Wings Company as of March 31, 2013. Fifty-one percent of the outstanding stock of Energy Edge Solutions, Inc. is owned by the Company. Energy Edge Solutions, Inc. had virtually no operating activity during the current quarter.
The balance sheet and income statement information of each entity for the current quarter is presented in US Dollars as follows:
|
|
EEDG
|
|
|
TGWC
|
|
|
EES
|
|
|
Total
|
|
Current Assets
|
|
|
290,233
|
|
|
|
30,074
|
|
|
|
11
|
|
|
|
320,318
|
|
Fixed Assets
|
|
|
4,616
|
|
|
|
0
|
|
|
|
0
|
|
|
|
4,616
|
|
Intangibles
|
|
|
0
|
|
|
|
3,566
|
|
|
|
0
|
|
|
|
3,566
|
|
Total Assets
|
|
|
294,849
|
|
|
|
33,640
|
|
|
|
11
|
|
|
|
328,500
|
|
Current Liabilities
|
|
|
276,936
|
|
|
|
1,600
|
|
|
|
114
|
|
|
|
278,650
|
|
Intercompany
|
|
|
(308,093
|
)
|
|
|
307,678
|
|
|
|
415
|
|
|
|
0
|
|
Shareholders' Equity
|
|
|
326,006
|
|
|
|
(275,638
|
)
|
|
|
(518
|
)
|
|
|
49,850
|
|
Total Liabilities and Shareholders' Equity
|
|
|
294,849
|
|
|
|
33,640
|
|
|
|
11
|
|
|
|
328,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
2,040
|
|
|
|
200
|
|
|
|
0
|
|
|
|
2,240
|
|
Costs of Sales
|
|
|
(2,471
|
)
|
|
|
(50
|
)
|
|
|
0
|
|
|
|
(2,521
|
)
|
Gross Profit
|
|
|
(431
|
)
|
|
|
150
|
|
|
|
0
|
|
|
|
(281
|
)
|
Operating Expenses
|
|
|
(114,821
|
)
|
|
|
(144,173
|
)
|
|
|
0
|
|
|
|
(258,994
|
)
|
Other Expenses
|
|
|
(950
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
(950
|
)
|
Net (loss) before non-controlling interest
|
|
|
(116,202
|
)
|
|
|
(144,023
|
)
|
|
|
0
|
|
|
|
(260,225
|
)
|
Non-controlling interest
|
|
|
50,408
|
|
|
|
0
|
|
|
|
0
|
|
|
|
50,408
|
|
Net (loss) from operations
|
|
|
(65,794
|
)
|
|
|
(144,023
|
)
|
|
|
0
|
|
|
|
(209,817
|
)
|
NOTE 10 – 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.
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.
ENERGY EDGE TECHNOLOGIES CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013
NOTE 10 – CAPITAL STOCK (continued)
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.
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.
On January 8, 2013, the Company sold 2,500,000 shares of common stock at $.03 per share under a private placement to an unrelated third party for total proceeds of $75,000.
On January 11, 2013, 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 January 16, 2013, the Company sold 3,500,000 shares of common stock at $.0167 per share under a private placement to an unrelated third party for total proceeds of $58,113.
On January 23, 2013, the Company issued 1,455,820 shares of common stock at $.08 per share in cancellation of debt in the amount of $116,134.
On January 29, 2013, the Company sold 10,000,000 shares of common stock at $.01 per share under a private placement to an unrelated third party for total proceeds of $100,000.
On January 30, 2013, the Company issued 200,000 shares of common stock valued at $6,000 for business consulting services.
On January 30, 2013, the Company sold 200,000 shares of common stock at $.03 per share under a private placement to an unrelated third party for total proceeds of $6,000.
On January 31, 2013, the Company sold 833,334 shares of common stock at $.03 per share under a private placement to an unrelated third party for total proceeds of $25,000.
On February 26, 2013, the Company issued 1,500,000 shares of common stock valued at $75,000 for prepaid legal services.
ENERGY EDGE TECHNOLOGIES CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013
NOTE 11 – INCOME TAXES
For the three month periods ended March 31, 2013 and 2012, 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 $3,050,400 and will expire beginning in 2030.
The provision for federal income tax consists of the following at March 31:
|
|
March 31,
2013
|
|
|
March 31,
2012
|
|
Federal income tax benefit attributable to:
|
|
|
|
|
|
|
Current operations
|
|
$
|
89,700
|
|
|
$
|
152,000
|
|
Less: valuation allowance
|
|
|
(89,700
|
)
|
|
|
(152,000
|
)
|
Net provision for Federal income taxes
|
|
$
|
0
|
|
|
$
|
0
|
|
The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:
|
|
March 31, 2013
|
|
|
December 31, 2012
|
|
Deferred tax asset attributable to:
|
|
|
|
|
|
|
Net operating loss carryover
|
|
$
|
1,030,300
|
|
|
$
|
940,600
|
|
Less: valuation allowance
|
|
|
(1,030,300
|
)
|
|
|
(940,600
|
)
|
Net deferred tax asset
|
|
$
|
0
|
|
|
$
|
0
|
|
As of March 31, 2013, the Company had net operating loss carry forwards of approximately $3,050,400 that may be available to reduce future years’ taxable income through 2033. 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 $3,050,400 for 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 12 – COMMITMENTS AND CONTINGENCIES
The Company neither owns nor leases any real property as of March 31, 2013. 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 THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013
NOTE 13 – 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 14 – SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to March 31, 2013 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.
In May 2013, we entered into an exclusive agreement with CRISP Watermelon Drink, LLC for the wholesale distribution of Cu'i (pronounced "swee") a 100% all natural water melon drink throughout the United States.