The accompanying notes are an integral
part of these consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – NATURE OF OPERATIONS
Energy Edge Technologies Corporation (the
“Company” or “EEDG”) was incorporated in New Jersey in January 2004. Energy Edge Technologies
Corporation is comprised of two subsidiaries: Energy Edge Solutions (“EES”) and The Gourmet Chicken Company, Inc.
(“TGCC”).
The Company acquired a 51% interest in
EES in 2012. 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. EES 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.
During 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
Chicken Company, Inc.
TGCC is a newly formed combined fast casual
restaurant company in the chicken wing segment and restaurant management company. TGCC is primarily engaged in the business of
managing, licensing, operating, developing and franchising a system of distinctive quick-service and fast casual restaurants in
the chicken wing segment.
TGCC revenues will primarily be derived from
management fees, royalty fees, licensing fees and franchise fees. TGCC will also sell food, sauces, mixes and other
supplies to its franchisees/licensees.
NOTE 2 – BASIS OF PRESENTATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited interim consolidated
financial statements of the Company 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 Annual Report filed with the SEC on Form
10-K for the year ended December 31, 2013. In the opinion of management, all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of the necessary of the financial position and the results of operations 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. Notes to the financial statements which substantially duplicate the disclosure contained in the
audited financial statements for fiscal 2013 as reported in the Form 10-K have been omitted.
Reclassifications
Certain accounts and financial statement captions
in the prior periods have been reclassified to conform to the current period financial statements.
Recent Accounting Pronouncements
The Company 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.
NOTE 3 –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.
ENERGY EDGE TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 4 –PREPAID EXPENSES
Prepaid expenses consisted of the following at March 31, 2014
and December 31, 2013:
|
|
March 31, 2014
|
|
December 31, 2013
|
Prepaid project expenses
|
|
$
|
29,950
|
|
|
$
|
29,950
|
|
Prepaid consulting expense
|
|
|
187,299
|
|
|
|
225,033
|
|
Total prepaid expenses
|
|
$
|
217,249
|
|
|
$
|
254,983
|
|
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 3,000,000 shares of stock valued at
$30,000 for the three months ended March 31, 2014. The consulting fees are being amortized over the terms of the
contracts.
NOTE 5 – RELATED PARTY TRANSACTIONS
Related party payables and loans totaling
$345,576 and $354,641 at March 31, 2014 and December 31, 2013, 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.
NOTE 6 – CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITIES
On May 13, 2013, the Company issued a convertible promissory note
to a third party, with a principal amount of $50,000. This note is due and payable in full on May 14, 2015, and bears
interest at 6% per annum. At any time prior to the payment in full of the entire balance of the note, the creditor has
the option of converting all or any portion of the unpaid balance of the note into shares of common stock at a conversion price
equal to seventy percent of the lowest closing bid price of the common stock for any of the five trading days prior to and including
the conversion date.
The Company evaluated the terms of the note and concluded that since
the conversion price was not fixed, and the number of shares of the Company’s common stock that are issuable upon the conversion
of the convertible promissory note is indeterminable until such time as the Creditor elects to convert to common stock, the Company
concluded that the embedded conversion option created a derivative liability. The Company measured the derivative liability using
the input attributes disclosed below and recorded a derivative liability of $53,348 as of May 13, 2013.
During the three months ended March 31, 2014, the Creditor
elected to convert $5,335 of the outstanding balance into 2,530,612 shares of the Company’s common stock. As of
December 31, 2013, the Creditor elected to convert $8,400 of the outstanding balance into 6,369,314 shares of the
Company’s common stock.
On March 31, 2014, the Company re-measured the derivative liability
using the input attributes below and determined the derivative liability value to be $47,650. Change in fair value of derivative
of $9,789 was recorded as of March 31, 2014 and included in the statement of operations in order to adjust the derivative liability
to the re-measured value.
ENERGY EDGE TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
May 13, 2013
|
|
December 31, 2013
|
|
March 31, 2014
|
Stock price
|
|
$
|
0.0099
|
|
|
$
|
0.0077
|
|
|
$
|
0.0037
|
|
Exercise price
|
|
$
|
0.009044
|
|
|
$
|
0.005530
|
|
|
$
|
0.002786
|
|
Shares issuable upon conversion
|
|
|
5,528,527
|
|
|
|
7,522,604
|
|
|
|
13,016,870
|
|
Expected dividend yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Expected life (years)
|
|
|
2.00
|
|
|
|
1.37
|
|
|
|
1.12
|
|
Risk-free interest rate
|
|
|
0.24
|
%
|
|
|
0.38
|
%
|
|
|
0.44
|
%
|
Expected volatility
|
|
|
313.50
|
%
|
|
|
441.00
|
%
|
|
|
473.00
|
%
|
A debt discount of $50,000 related to the embedded conversion option
was recorded at date of note issuance, and is being expensed over the life of the loan. For the three months ended March 31, 2014,
amortization of $6,250 has been recorded, resulting in a remaining unamortized discount of $28,125 at March 31, 2014.
On September 30, 2013, the Company issued a convertible promissory
note to a third party, with a principal amount of $53,000. This note is due and payable in full on June 24, 2014, and
bears interest at 8% per annum. At any time beginning on the date that is 180 days after the note date and until the
maturity date, the creditor has the option of converting all or any portion of the unpaid balance of the note into shares of common
stock at a conversion price equal to fifty eight percent of the average of the three lowest closing bid price of the common stock
for any of the ten trading days prior to the conversion date.
The Company evaluated the terms of the note and concluded that since
the conversion price was not fixed, and the number of shares of the Company’s common stock that are issuable upon the conversion
of the convertible promissory note is indeterminable until such time as the Creditor elects to convert to common stock, the Company
concluded that the embedded conversion option created a derivative liability. The Company measured the derivative liability using
the input attributes disclosed below and recorded a derivative liability of $88,930 as of September 30, 2013.
On March 31, 2014, the Company re-measured the derivative liability
using the input attributes below and determined the derivative liability value to be $74,351. Change in fair value of derivative
of $11,465 was recorded as of March 31, 2014 and included in the statement of operations in order to adjust the derivative liability
to the re-measured value.
|
|
September 30, 2013
|
|
December 31, 2013
|
|
March 31, 2014
|
Stock price
|
|
$
|
0.0124
|
|
|
$
|
0.0077
|
|
|
$
|
0.0037
|
|
Exercise price
|
|
$
|
0.007057
|
|
|
$
|
0.004331
|
|
|
$
|
0.002165
|
|
Shares issuable upon conversion
|
|
|
7,510,628
|
|
|
|
12,237,754
|
|
|
|
24,478,787
|
|
Expected dividend yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Expected life (years)
|
|
|
0.75
|
|
|
|
0.50
|
|
|
|
0.25
|
|
Risk-free interest rate
|
|
|
0.07
|
%
|
|
|
0.10
|
%
|
|
|
0.05
|
%
|
Expected volatility
|
|
|
434.42
|
%
|
|
|
441.00
|
%
|
|
|
473.00
|
%
|
A debt discount of $53,000 related to the embedded conversion option
was recorded at date of note issuance, and is being expensed over the life of the loan. For the three months ended March 31, 2014,
amortization of $17,667 has been recorded, resulting in a remaining unamortized discount of $17,667 at March 31, 2014.
On December 31, 2013, the Company issued a convertible promissory
note to a third party, with a principal amount of $42,500. This note is due and payable in full on October 3, 2014, and bears interest
at 8% per annum. At any time beginning on the date that is 180 days after the note date and until the maturity date, the creditor
has the option of converting all or any portion of the unpaid balance of the note into shares of common stock at a conversion price
equal to fifty eight percent of the average of the three lowest closing bid price of the common stock for any of the ten trading
days prior to the conversion date.
The Company evaluated the term of the note and concluded that since
the conversion price was not fixed, and the number of share of the Company’s common stock that are issuable upon the conversion
of the convertible promissory note is indeterminable until such time as the Creditor elects to convert to common stock, the Company
concluded that the embedded conversion option created a derivative liability. The Company measured the derivative liability using
the input attributes disclosed below and recorded a derivative liability of $72,462 as of December 31, 2013.
On March 31, 2014, the Company re-measured the derivative liability
using the input attributes below and determined the derivative liability value to be $67,597. Change in fair value of derivative
of $4,865 was recorded as of March 31, 2014 and included in the statement of operations in order to adjust the derivative liability
to the re-measured value.
ENERGY EDGE TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
December 31, 2013
|
|
March 31, 2014
|
Stock price
|
|
$
|
0.0077
|
|
|
$
|
0.0037
|
|
Exercise price
|
|
$
|
0.004331
|
|
|
$
|
0.002165
|
|
Shares issuable upon conversion
|
|
|
9,813,293
|
|
|
|
24,478,787
|
|
Expected dividend yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Expected life (years)
|
|
|
0.76
|
|
|
|
0.25
|
|
Risk-free interest rate
|
|
|
0.10
|
%
|
|
|
0.05
|
%
|
Expected volatility
|
|
|
441.00
|
%
|
|
|
473.00
|
%
|
A debt discount of $42,500 related to the embedded conversion option
was recorded at date of note issuance, and is being expensed over the life of the loan. For the three months ended March 31, 2014,
amortization of $14,167 has been recorded, resulting in a remaining unamortized discount of $28,333 at March 31, 2014.
On March 24, 2014, the Company issued a convertible promissory note
to a third party, with a principal amount of $53,750. This note is due and payable in full on June 5, 2015, and bears
interest at 6% per annum. At any time prior to the payment in full of the entire balance of the note, the creditor has
the option of converting all or any portion of the unpaid balance of the note into shares of common stock at a conversion price
equal to seventy percent of the lowest closing bid price of the common stock of the last five trading days prior to and including
the conversion date.
The Company evaluated the terms of the note and concluded that since
the conversion price was not fixed, and the number of shares of the Company’s common stock that are issuable upon the conversion
of the convertible promissory note is indeterminable until such time as the Creditor elects to convert to common stock, the Company
concluded that the embedded conversion option created a derivative liability. The Company measured the derivative liability using
the input attributes disclosed below and recorded a derivative liability of $97,425 as of March 24, 2014.
On March 31, 2014, the Company re-measured the derivative liability
using the input attributes below and determined the derivative liability value to be $76,135. Change in fair value of the derivative
of $21,290 was recorded as of March 31, 2014 and included in the statement of operations in order to adjust the derivative liability
to the re-measured value.
|
|
March 24, 2014
|
|
March 31, 2014
|
Stock price
|
|
$
|
0.0046
|
|
|
$
|
0.0037
|
|
Exercise price
|
|
$
|
0.002520
|
|
|
$
|
0.002590
|
|
Shares issuable upon conversion
|
|
|
21,329,365
|
|
|
|
20,752,896
|
|
Expected dividend yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Expected life (years)
|
|
|
1.2
|
|
|
|
1.18
|
|
Risk-free interest rate
|
|
|
.44
|
%
|
|
|
0.44
|
%
|
Expected volatility
|
|
|
473
|
.%
|
|
|
473.00
|
%
|
A debt discount of $53,750 related to the embedded conversion option
was recorded at date of note issuance, and is being expensed over the life of the loan. For the three months ended March 31, 2014,
amortization of $3,583 has been recorded, resulting in a remaining unamortized discount of $50,167 at March 31, 2014.
NOTE 7– BUSINESS SEGMENTS
The Company is made up of three entities
in which Energy Edge Technologies Corporation is the parent entity. The Gourmet Chicken Company is a wholly owned subsidiary
of the Company. Fifty-one percent of the outstanding stock of Energy Edge Solutions, Inc. is owned by the Company. Energy
Edge Solutions, Inc. had no operating activity during the current quarter.
The balance sheet as of March 31, 2014 and December 31, 2013
and the income statement information for the three months ended March 31, 2014 and 2013 of each entity is presented in
US Dollars as follows:
ENERGY EDGE TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
March 31, 2014
|
|
December 31, 2013
|
|
|
EEDG
|
|
TGWC
|
|
EES
|
|
Total
|
|
EEDG
|
|
TGCC
|
|
EES
|
|
Total
|
Current Assets
|
|
$
|
252,485
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
252,485
|
|
|
$
|
300,147
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
300,147
|
|
Fixed Assets
|
|
|
2,901
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,900
|
|
|
|
3,329
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,329
|
|
Other Assets
|
|
|
26,350
|
|
|
|
4,194
|
|
|
|
—
|
|
|
|
30,544
|
|
|
|
9,897
|
|
|
|
4,194
|
|
|
|
—
|
|
|
|
14,091
|
|
Total Assets
|
|
$
|
281,735
|
|
|
$
|
4,194
|
|
|
$
|
—
|
|
|
$
|
285,929
|
|
|
$
|
313,373
|
|
|
$
|
4,194
|
|
|
$
|
—
|
|
|
$
|
317,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
$
|
,246,410
|
|
|
$
|
1,600
|
|
|
$
|
114
|
|
|
$
|
1,248,124
|
|
|
$
|
824,143
|
|
|
$
|
1,600
|
|
|
$
|
114
|
|
|
$
|
825,857
|
|
Long Term Liabilities
|
|
|
135,508
|
|
|
|
—
|
|
|
|
—
|
|
|
|
135,508
|
|
|
|
64,664
|
|
|
|
—
|
|
|
|
—
|
|
|
|
64,664
|
|
Intercompany
|
|
|
(383,167
|
)
|
|
|
383,072
|
|
|
|
95
|
|
|
|
—
|
|
|
|
(379,770
|
)
|
|
|
379,675
|
|
|
|
95
|
|
|
|
—
|
|
Stockholders’ Deficit
|
|
|
(717,016
|
)
|
|
|
(380,478
|
)
|
|
|
(209
|
)
|
|
|
(1,097,703
|
)
|
|
|
(195,667
|
)
|
|
|
(377,078
|
)
|
|
|
(209
|
)
|
|
|
(572,954
|
)
|
Total
Liabilities and Stockholder's Deficit
|
|
$
|
281,735
|
|
|
$
|
4,194
|
|
|
$
|
—
|
|
|
$
|
285,929
|
|
|
$
|
313,370
|
|
|
$
|
4,197
|
|
|
$
|
—
|
|
|
$
|
317,567
|
|
|
|
For the Three Months Ended March 31, 2014
|
|
For the Three Months Ended March 31, 2013
|
|
|
EEDG
|
|
TGWC
|
|
EES
|
|
Total
|
|
EEDG
|
|
TGCC
|
|
EES
|
|
Total
|
Revenues
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,040
|
|
|
$
|
200
|
|
|
$
|
—
|
|
|
$
|
2,240
|
|
Costs of Revenues
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,471
|
)
|
|
|
(50
|
)
|
|
|
—
|
|
|
|
(2,521
|
)
|
Gross Profit (Loss)
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(431
|
)
|
|
|
150
|
|
|
|
—
|
|
|
|
(281
|
)
|
Operating Expenses
|
|
|
(158,682
|
)
|
|
|
(3,397
|
)
|
|
|
—
|
|
|
|
(162,079
|
)
|
|
|
(114,821
|
)
|
|
|
(144,173
|
)
|
|
|
—
|
|
|
|
(258,994
|
)
|
Other Expenses
|
|
|
(40,618
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(40,618
|
)
|
|
|
(950
|
)
|
|
|
|
|
|
|
—
|
|
|
|
(950
|
)
|
Net Loss before Non-controlling Interest
|
|
|
(199,300
|
)
|
|
|
(3,397
|
)
|
|
|
—
|
|
|
|
(202,697
|
)
|
|
|
(116,202
|
)
|
|
|
(144,023
|
)
|
|
|
—
|
|
|
|
(260,225
|
)
|
Non-controlling interest
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
50,408
|
|
|
|
|
|
|
|
—
|
|
|
|
50,408
|
|
Net Loss
|
|
$
|
(199,300
|
)
|
|
$
|
(3,397
|
)
|
|
$
|
—
|
|
|
$
|
(202,697
|
)
|
|
$
|
65,794
|
)
|
|
$
|
(144,023
|
)
|
|
$
|
—
|
|
|
$
|
(209,817
|
)
|
ENERGY EDGE TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 8 – CAPITAL STOCK
During the three months ended March 31, 2014,
the Company:
|
-
|
issued 3,000,000 shares of common stock for services. These shares have a fair value of
$30,000;
|
|
-
|
issued 1,400,000 shares of common stock for settlement of payables of $21,558;
|
|
-
|
issued 11,317,392 shares of common stock for the conversion of debt of $5,558; and
|
|
-
|
retired 32,800,888 shares of common stock previously issued to officers for compensation. The Company
remains liable for these shares. As a result, the value of these shares is currently recorded as a stock payable.
|
NOTE 9 –SUBSEQUENT EVENTS
On February 21, 2014, the Company entered into
a 3-year real estate facility lease agreement for The Gourmet Chicken Company restaurant in College Park, GA. The lease commences
on April 1, 2014 and expires on April 1, 2017 with options to extend the lease for an additional 3-years.
The Company retired 44,735,294 shares of common
stock previously issued to officers for compensation that were originally valued at $516,245.
Holders of Company debt elected to convert
$58,452 of outstanding notes payable to 112,417,437 shares of common stock.