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EEDG > SEC Filings for EEDG > Form 10-Q on 14-Nov-2013All Recent SEC Filings

Show all filings for ENERGY EDGE TECHNOLOGIES CORP.

Form 10-Q for ENERGY EDGE TECHNOLOGIES CORP.


14-Nov-2013

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

In this report, unless the context indicates otherwise, the terms "Energy Edge," "Company," "we," "us," and "our" refer to Energy Edge Technologies Corporation, a New Jersey corporation, and its wholly-owned subsidiaries.

Note regarding forward-looking statements

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, or the "Securities Act," and Section 21E of the Securities Exchange Act of 1934 or the "Exchange Act." These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or anticipated results.

In some cases, you can identify forward looking statements by terms such as "may," "intend," "might," "will," "should," "could," "would," "expect," "believe," "anticipate," "estimate," "predict," "potential," or the negative of these terms. These terms and similar expressions are intended to identify forward-looking statements. The forward-looking statements in this report are based upon management's current expectations and belief, which management believes are reasonable. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor or combination of factors, or factors we are aware of, may cause actual results to differ materially from those contained in any forward looking statements. You are cautioned not to place undue reliance on any forward-looking statements. These statements represent our estimates and assumptions only as of the date of this report. Except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

You should be aware that our actual results could differ materially from those contained in the forward-looking statements due to a number of factors, including:

new competitors are likely to emerge and new technologies may further increase competition;

our operating costs may increase beyond our current expectations and we may be unable to fully implement our current business plan;

our ability to obtain future financing or funds when needed;

our ability to successfully obtain and maintain our diverse customer base;

our ability to protect our intellectual property through patents, trademarks, copyrights and confidentiality agreements;

our ability to attract and retain a qualified employee base;

our ability to respond to new developments in technology and new applications of existing technology before our competitors;

acquisitions, business combinations, strategic partnerships, divestures, and other significant transactions may involve additional uncertainties; and

our ability to maintain and execute a successful business strategy.

Other risks and uncertainties include such factors, among others, as market acceptance and market demand for our products and services, pricing, the changing regulatory environment, the effect of our accounting policies, potential seasonality, industry trends, adequacy of our financial resources to execute our business plan, our ability to attract, retain and motivate key technical, marketing and management personnel, and other risks described from time to time in periodic and current reports we file with the United States Securities and Exchange Commission, or the "SEC." You should consider carefully the statements under "Item 1A. Risk Factors" and other sections of this report, which address additional factors that could cause our actual results to differ from those set forth in the forward-looking statements and could materially and adversely affect our business, operating results and financial condition. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the applicable cautionary statements.

Critical Accounting Policies and Estimates

Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States ("US GAAP"). US GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expenses amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

We believe the following is among the most critical accounting policies that impact our consolidated financial statements. We suggest that our significant accounting policies, as described in our consolidated financial statements in the Summary of Significant Accounting Policies, be read in conjunction with this Management's Discussion and Analysis of Financial Condition and Results of Operations.

We recognize revenue in accordance with Staff Accounting Bulletin ("SAB") No.
104. All of the following criteria must exist in order for us to recognize revenue:

1. Persuasive evidence of an arrangement exists;

2. Delivery has occurred;

3. The seller's price to the buyer is fixed or determinable; and

4. Collectability is reasonably assured.

The majority of the Company's revenue results from sales contracts with direct customers and revenues are generated upon the shipment of goods and/or delivery of services. The Company's pricing structure is fixed and there are no rebate or discount programs. Management conducts credit background checks for new customers as a means to reduce the subjectivity of assuring collectability. Based on these factors, the Company believes that it can apply the provisions of SAB 104 with minimal subjectivity.

Recent Accounting Pronouncements

The Company does not expect that the adoption of any recent accounting pronouncements will have any material impact on its financial statements.

Results of Operations - Nine Months Ended September 30, 2013 as Compared to Nine Months Ended September 30, 2012 and Three Months Ended September 30, 2013 Compared to Three Months Ended September 30, 2012

The following tables summarize the results of our operations during the nine-month and three-month periods ended September 30, 2013 and 2012, and provides information regarding the dollar and percentage increase (or decrease) from the respective periods.

                                        Nine Months ended September 30,
                                                                                 Increase
                                           2013                  2012           (decrease)       % Change
Revenues                            $          2,040       $      447,947      $ (445,908 )          (100 )%
Cost of revenues                               2,471              301,484        (299,013 )           (99 )%
Gross profit (loss)                             (431 )            146,463        (146,894 )          (100 )%
General & Administrative &
Professional Fees                            190,534               93,068          97,466             105 %
Wages & Consulting Fees                      783,302               80,948         702,354             868 %
Income (Loss) from operations               (974,267 )            (26,264 )      (948,003 )       (36,095 )%
Other expense                                (47,176 )             (9,482 )       (37,694 )          (398 )%
Provision for taxation                            -                    -               -               -
Net loss                            $       (965,328 )     $      (35,746 )    $ (929,582 )        26,000 %

                                        Three Months ended September 30,
                                                                                  Increase
                                           2013                  2012            (decrease)         % Change
Revenues                            $             -        $        93,902      $   (93,902 )           (100 )%
Cost of revenues                                  -                 65,874          (65,874 )           (100 )%
Gross profit (loss)                               -                 28,028          (28,028 )           (100 )%
General & Administrative &
Professional Fees                             28,380                21,726            6,654               31 %
Wages & Consulting Fees                       74,409                16,248           58,161              358 %
Income (Loss) from operations               (102,789 )              (9,946 )        (92,843 )           (933 )%
Other expense                                    (50 )              (5,849 )          5,799               99 %
Provision for taxation                            -                     -                -                -

Net loss                            $       (102,839 )     $       (15,795 )    $   (87,044 )           (551 )%

Revenues

Sales revenue decreased from $447,947 in the nine months ended September 30, 2012 to $2,040 in the same period in 2013, representing a 100% decrease.

Sales revenue decreased from $93,902 in the three months ended September 30, 2012 to $-0- in the same period in 2013, representing a 100% decrease.

The decreases in revenue were mainly due to potential projects from the current sales pipeline not closing in the third quarter.

Cost of revenues

Cost of sales decreased from $301,484 in the nine months ended September 30, 2012 to $2,471 in the same period in 2013, representing a 100% decrease.

Cost of sales decreased from $65,874 in the three months ended September 30, 2012 to $-0- in the same period in 2013, representing a 100% decrease.

The decreases were mainly attributable to the absence of projects sold in the third quarter of 2013. The gross profit percent decreased from 32.7% in the nine months ended September 30, 2012 to (21.1)% in the same period in 2013.

Wages and consulting fees

Wages and consulting fees were $783,302 in the nine months ended September 30, 2013 as compared to $80,948 in the nine months ended September 30, 2012.

Wages and consulting fees were $74,409 in the three months ended September 30, 2013 as compared to $16,248 in the three months ended September 30, 2012.

The increases were due to the amortization of prepaid consulting fees for fiscal 2013 were higher.

General and administrative and professional fees

General and administrative and professional fees increased from $93,068 in the nine months ended September 30, 2012 to $190,534 for the same period in 2013, representing an increase of $97,466 or 105%.

General and administrative and professional fees increased from $21,726 in the three months ended September 30, 2012 to $28,380 for the same period in 2013, representing an increase of $6,654 or 31%.

The increases were mainly attributable to additional professional fees for the 2013 periods.

Net loss

Net loss for the nine months ended September 30, 2013 was $965,328 as compared to a net loss of $35,746 in the same period of 2012.

Net loss for the three months ended September 30, 2013 was $102,839 as compared to a net loss of $15,795 in the same period of 2012.

The increases in net loss were mainly attributable to increased professional fees and to the lack of revenue in 2013.

Liquidity and Capital Resources

For the nine months ended September 30, 2013, we used $329,452 in cash flows for operating activities compared to the use of $36,378 in cash flows for the nine months ended September 30, 2012. This increase in operating cash requirements occurred for a number of reasons. The Company recorded no change in contract receivables, in billings in excess of costs, or accounts receivable-other. The Company also recorded an increase of $14,150 in prepaid expenses, a decrease of $2,163 in accounts payable, and a decrease of $27,754 in other current liabilities, all of which impacted cash used by operating activities. Financing activities generated $92,500 from the proceeds from the promissory note, and $289,113 proceeds from the sale of common stock.

On May 13, 2013, the Company entered into a 6% convertible redeemable note payable of $50,000 with a maturity date of May 14, 2015. Loan costs associated with securing the loan were capitalized and amortized over the loan period.

On September 30, 2013, the Company entered into an 8% convertible redeemable note payable of $53,000 with a maturity date of June 24, 2014. Loan costs associated with securing the loan were capitalized and will be amortized over the loan period.

Cash and cash equivalents were $54,986 as of September 30, 2013 compared to $18,553 as of December 31, 2012.

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.

Off Balance Sheet Arrangements

We do not have any off balance sheet arrangements

Inflation

Inflation has not had a material impact on our business and we do not expect inflation to have an impact on our business in the near future

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