Item 1. Business
We are a Nevada corporation, formed May 1, 2007. We are currently developing a new business which will provide a comprehensive solution for the disposition and recycling of scrap tires through tire re-manufacturing and carbonization of scrap tire components. Tire re-manufacturing is a process that takes high quality used tires, removes the old tread and sidewall markings, and then applies new rubber to the tread and sidewall. The used casing along with the new rubber is vulcanized under high pressure and heat to produce a new tire. This is the same process used by new tire manufacturers except that they make the casing (the most costly part of the tire). Carbonization is a technology that heats tires in an oxygen free environment and turns spent tire casings into diesel fuel, carbon black, steel, and syn-gas.
On March 14, 2012, we entered into a License Purchase Agreement (the “Agreement”) with Kouei International, Inc. (“Kouei International”). Under the Agreement, we have acquired the exclusive rights in North America and Europe to use the Tyrolysis™ technology owned by Kouei Industries Co., Ltd. of Japan (“Kouei Industries”). Kouei International holds these rights under license from Kouei Industries and, pursuant to the Agreement, has assigned them to us. The Tyrolysis™ technology is a comprehensive ‘closed-loop’ solution for the management of scrap tires, which allows for all scrap tires to be either re-manufactured into new tires or reduced, through a carbonization process, into marketable chemical products such as diesel fuel, and steel. The carbon char material will be upgraded to produce a general purpose carbon black that can be used again in the rubber, plastic and asphalt industries. Syn-gas is used for process heat within the system.
Under the Agreement, as currently extended, we have agreed to pay Kouei International a total purchase price of $525,000 as follows:
$175,000 - due within ninety (90) days of closing (which has been paid)
$175,000 - due on or before June 30, 2013
$175,000 - due on or before September 30, 2013
On June 18, 2013, we entered into a settlement agreement under which our obligation to make the second and third payments set forth above was forgiven.
The Agreement also calls for Kouei International to be paid ongoing royalties for the next five (5) years as follows:
3% of gross sales
$2.50 per remanufactured passenger tire
$3.50 per remanufactured light truck and truck tire
The Agreement provides us with full access to Kouei International’s properties, books, records, information, technical drawings, contacts and equipment supplied by Kouei Industries. In addition, Kouei International will be contracted for a two year period to help with the transaction and successful implementation of the technology transfer. During this term, Kouei International may be required to provide its engineering expertise and/or participate in industry technology presentations.
Management is currently evaluating facilities locations in Europe and North America. We plan for our facilities to receive scrap tires and produce both re-manufactured tires and commodity chemicals produced through the Tyrolysis™ carbonization technology. We hope to have 6 to 10 plants operational in Europe and North America within the next 5 years.
Our planned facilities will need to be located near suitable sources of scrap tires and other scrap rubber materials. In preparation for a potential recycling plant to be located in Michigan, we entered into a Tire Feedstock Agreement (the “Agreement”) with Enertech R.D., LLC (“Enertech”) on April 11, 2012. Under the Agreement, we have agreed to purchase all of Enertech’s output of scrap tires and other low-value rubber-based materials (referred to as “Feedstock”) for a term of ten (10) years. We intend to use the Feedstock to supply a planned tire recycling facility. Enertech’s estimated daily output of Feedstock is approximately 200 tons per day, though actual output will fluctuate in response to Enertech’s flow of business operations. The maximum daily output that we are required to accept under the Agreement is 300 tons. If Enertech’s output diminishes to less than 100 tons on each of five successive days, we may rescind the Agreement on 20 days written notice.
The Agreement requires us to pay Enertech a fee of $30 per ton for chipped, two-inch-minus scrap tires which are 90% to 95% steel free. The price per ton will be adjusted annually in accordance with future negotiations between the parties. The Feedstock will be delivered to us at a distance of up to 2 miles from Enertech’s facility in Michigan. We will be required to pay for delivery costs for distances beyond two miles.
The Agreement is conditional upon:
Our building and operating a tire recycling facility, located within 2 miles of Enertech’s facility in Michigan, that is capable of processing Enertech’s total Feedstock output, and
Our registering with the Michigan Environmental Protection Agency and complying with all permit and license requirements for the tire recycling facility which will accept Enertech’s output of Feedstock.
On February 19, 2013, we entered into a Purchase Order (the “Agreement”) with Carbon Black Sales (“CBS”). Under the Agreement, we have agreed to sell to CBS, and CBS has agreed to purchase from us, a minimum of 30,000 tons per year of refined carbon black made from tires during the term of the agreement. The Agreement is conditioned upon our having a tire recycling facility in commercial operation within the next three (3) years. The term of the Agreement is ten years from the date of our initial delivery of product to CBS. The carbon black to be supplied by us under the agreement must meet certain quality standards. The price per-ton for all carbon black sold to CBS under the Agreement will be 60% below the prices established by the Sid Richardson Carbon Ltd. price list for N660 carbon black. The site and specific facility from which the carbon black will be supplied to CBS will be confirmed in the future and prior to our first delivery of product. The Agreement calls for us to supply carbon black from the designated facility exclusively to CBS. CBS has agreed to purchase its carbon black exclusively from our designated facility and may not purchase from another supplier except upon our written consent, which will not be unreasonably withheld. CBS may terminate the Agreement if, for any period of forty-five (45) days after our initial delivery of product, we are unable to produce any additional product. We may terminate the Agreement if CBS is unable to take delivery of product for a period of ten (10) consecutive days.
Management estimates that approximately $50 million in new equity will be required in order to procure the necessary equipment, facilities, and supplies for our planned business and to commence our planned tire recycling operations. We currently do not have any firm arrangements for equity or debt financing and we may not be able to obtain financing when required, in the amount necessary to commence our planned operations, or on terms which are feasible in the opinion of management.
Employees
We do not currently have any employees. At this time, we rely on outside consultants and third party vendors for the ongoing development of our planned operations.
Research and Development Expenditures
We have not incurred any research or development expenditures since our incorporation.
Patents and Trademarks
We do not own, either legally or beneficially, any patent or trademark.
Item 1A.
Item 1A. Risk Factors
A smaller reporting company is not required to provide the information required by this Item.
Item 2.
Item 2. Properties
We do not currently own any real property.
Item 3.
Item 3. Legal Proceedings
We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.
Item 4.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock is quoted under the symbol “ASUV” on the OTCQB market tier of the electronic quotation system operated by OTC Markets Group, Inc. Our common stock was formerly quoted on the OTCBB operated by the Financial Industry Regulatory Authority, Inc. (“FINRA”). Few market makers continue to participate in the OTCBB system, however, because of high fees charged by FINRA. Consequently, market makers that once quoted our shares on the OTCBB system may no longer be posting a quotation for our shares. As of the date of this report, however, our shares are quoted by several market makers on the OTCQB. The criteria for listing on either the OTCBB or OTCQB are similar and include that we remain current in our SEC reporting.
The following tables set forth the range of high and low prices for our common stock for the each of the periods indicated as reported by the OTCQB. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
Penny Stock
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market 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 such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer's account.
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those 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 acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities.
Holders of Our Common Stock
As of June 2, 2014, we had 74,037,262 shares of our common stock issued and outstanding, held by three (3) shareholders of record. 43,750,110 of our shares of common stock are held in street name.
Recent Sales of Unregistered Securities
1. 	On June 1, 2012, we closed a private offering made under Rule 506 of Regulation D. A total of $500,000 was raised in the offering, which consisted of Units priced at $0.75 per Unit. Each Unit consisted of one share of common stock and one warrant to purchase one share of common stock at a price of $1.12 per share for a period of up to forty-eight (48) months. The offering was made exclusively to accredited investors, and the company did not engage in any general solicitation or advertising regarding the offering.
Securities Authorized for Issuance under Equity Compensation Plans
On May 28, 2013, our board of directors and majority of our shareholders approved our 2013 Stock Option Plan. Under our 2013 Stock Option Plan, the maximum aggregate number of shares of our common stock that may be optioned and sold under the Plan is equal to ten percent (10%) of our issued and outstanding common stock.
Capital Stock
We have 10,000,000 preferred shares with a par value of $0.001 per share of preferred stock authorized, of which no shares were outstanding as of June 3, 2014.
We have 90,000,000 common shares with a par value of $0.001 per share of common stock authorized, of which 74,037,262 shares were outstanding as of June 2, 2014.
Voting Rights
Holders of common stock have the right to cast one vote for each share of stock in his or her own name on the books of the corporation, whether represented in person or by proxy, on all matters submitted to a vote of holders of common stock, including the election of directors. There is no right to cumulative voting in the election of directors. Except where a greater requirement is provided by statute or by the Articles of Incorporation, or by the Bylaws, the presence, in person or by proxy duly authorized, of the holder or holders of a majority of the outstanding shares of the our common voting stock shall constitute a quorum for the transaction of business. The vote by the holders of a majority of such outstanding shares is also required to effect certain fundamental corporate changes such as liquidation, merger or amendment of the Company's Articles of Incorporation.
Dividends
There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where after giving effect to the distribution of the dividend:
1. we would not be able to pay our debts as they become due in the usual course of business, or;
2. our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.
We have not declared any dividends and we do not plan to declare any dividends in the foreseeable future.
Pre-emptive Rights
Holders of common stock are not entitled to pre-emptive or subscription or conversion rights, and there are no redemption or sinking fund provisions applicable to the Common Stock. All outstanding shares of common stock are, and the shares of common stock offered hereby will be when issued, fully paid and non-assessable.
Share Purchase Warrants
We currently have warrants to purchase 616,667 shares of common stock at a price of $1.12 per share issued and outstanding. These warrants expire on August 1, 2014.
Options
We have not issued and do not have outstanding any options to purchase shares of our common stock.
Convertible Securities
We have not issued and do not have outstanding any securities convertible into shares of our common stock or any rights convertible or exchangeable into shares of our common stock.
Nevada Anti-Takeover Laws
Nevada Revised Statutes sections 78.378 to 78.379 provide state regulation over the acquisition of a controlling interest in certain Nevada corporations unless the articles of incorporation or bylaws of the corporation provide that the provisions of these sections do not apply. Our articles of incorporation and bylaws do not state that these provisions do not apply. The statute creates a number of restrictions on the ability of a person or entity to acquire control of a Nevada company by setting down certain rules of conduct and voting restrictions in any acquisition attempt, among other things. The statute is limited to corporations that are organized in the state of Nevada and that have 200 or more stockholders, at least 100 of whom are stockholders of record and residents of the State of Nevada; and does business in the State of Nevada directly or through an affiliated corporation. Because of these conditions, the statute currently does not apply to our company.
Item 6.
Item 6. Selected Financial Data
A smaller reporting company is not required to provide the information required by this Item.
Item 7.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.” These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.
Results of Operations for the Years Ended July 31, 2013 and 2012.
We have not earned significant revenues since the inception of our business and we earned no revenues during the fiscal years ended July 31, 2013 and 2012. We are presently in the development stage of our business and we can provide no assurance that we will produce significant revenues or, if revenues are earned, that we will be profitable.
We have incurred net losses in the amount of $1,522,049 from our inception on May 1, 2007 through the fiscal year ending July 31, 2013. During the fiscal year ended July 31, 2013, we incurred expenses and a net loss of $1,133,126. These consisted of consulting fees in the amount of $277,167, professional fees in the amount of $67,796, general and administrative expenses of $19,736, interest expense to a related party of $2,082, financing costs of $2,917, amortization of debt discount in the amount of $3,403, a loss on issuance of stock in the amount of $760,000, and a change in the market value of a derivative liability in the amount of $25. By comparison, we incurred expenses and a net loss of $241,552 for the fiscal year ended July 31, 2012. Our losses are attributable to our operating expenses combined with a lack of significant revenues during our current stage of development. Prior to the generation of revenues, we expect that our expenses will continue to increase significantly as we prepare to undertake our planned tire recycling operations.
Liquidity and Capital Resources
As of July 31, 2013, we had current assets of $17,767, consisting of cash in the amount of $15,200, prepaid expenses in the amount of $484, and deferred financing costs of $2,083. As of July 31, 2013, we had current liabilities of $145,714, consisting of accrued expenses of $65,204, accrued interest of $2,082, a note payable of $50,000, a convertible note payable, net of discount, in the amount of $7,983, and a derivative liability of $20,445. Thus, we had a working capital deficit of $127,947 as of July 31, 2013.
On January 9, 2013, we received financing in the amount of $50,000 under a Note issued to Legacy Global Markets. The Note bears interest at a rate of eight percent (8%) per year, with all principal and interest coming due on January 9, 2014. On January 9, 2014, the Note was acquired by Seahorse Investments, Ltd. and the maturity date was extended to January 9, 2015. All other loan terms remained the same.
On May 22, 2013, we issued a convertible note payable in the amount of $62,440 to Seahorse Investments, Ltd. Initially, we received $25,000 in funding under the note. The note bears interest at 7% per annum and was due on May 22, 2014. The due date of the note has been extended for one year on the same terms. The note is convertible into shares of our common stock at a price equal to 90% of the current market price of the shares on the date of conversion. The balance of the note was $25,000 as of July 31, 2013. Subsequent to July 31, 2013, we received the balance of $37,440.
We have not established profitable operations and will be dependent upon obtaining financing to pursue a long-term business plan. As discussed above, we will also require substantial new equity financing in the approximate amount of $50 million to successfully pursue the full scope of our planned tire recycling operations. We currently do not have any arrangements for financing and we may not be able to obtain financing when required. For these reasons our auditors stated in their report that they have substantial doubt we will be able to continue as a going concern.
Off Balance Sheet Arrangements
As of July 31, 2013, there were no off balance sheet arrangements.
Going Concern
We have negative working capital, have incurred losses since inception, and not yet established a source of revenues. These factors create substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustment that might be necessary if we are unable to continue as a going concern.
Our ability to continue as a going concern is dependent on generating cash from the sale of our common stock and/or obtaining debt financing and attaining future profitable operations. Management’s plans include selling our equity securities and obtaining debt financing to fund our capital requirement and ongoing operations; however, there can be no assurance we will be successful in these efforts.
Critical Accounting Policies
In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. As of June 30, 2012, we do not believe that any of our accounting policies fit this definition.
Recently Issued Accounting Pronouncements
None.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
A smaller reporting company is not required to provide the information required by this Item.
Item 8.
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements Required by Article 8 of Regulation S-X:
Audited Financial Statements:
Report of Independent Registered Public Accounting Firm
Balance Sheets as of July 31, 2013 and 2012;
Statements of Operations for the years ended July 31, 2013 and 2012, and from Inception on May 1, 2007 to July 31, 2013;
Statement of Stockholders’ Deficit from Inception on May 1, 2007 to July 31, 2013;
Statements of Cash Flows for the years ended July 31, 2013 and 2012, and from Inception on May 1, 2007 to July 31, 2013;
Notes to Financial Statements
Silberstein Ungar, PLLC CPAs and Business Advisors
Phone (248) 203-0080
Fax (248) 281-0940
Telegraph Road, Suite 2175
Bingham Farms, MI 48025-4586
www.sucpas.com
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Boards of Directors
Harmonic Energy, Inc.
London, United Kingdom
We have audited the accompanying balance sheets of Harmonic Energy, Inc., as of July 31, 2013 and 2012, and the related statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended and the period from May 1, 2007 (date of inception) to July 31, 2013. 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 has determined that it 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 includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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 Harmonic Energy, Inc., as of July 31, 2013 and 2012 and the results of their operations and cash flows for the years then ended and the period from May 1, 2007 (date of inception) to July 31, 2013, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that Harmonic Energy, Inc. will continue as a going concern. As discussed in Note 9 to the financial statements, the Company has incurred losses from operations, has negative working capital and is in need of additional capital to grow its operations so that it can become profitable. 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 9. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Silberstein Ungar, PLLC
Silberstein Ungar, PLLC
Bingham Farms, Michigan
May 4, 2014
HARMONIC ENERGY, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
AS OF JULY 31, 2013 AND 2012
See accompanying notes to financial statements.
HARMONIC ENERGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JULY 31, 2013 AND 2012
FOR THE PERIOD FROM MAY 1, 2007 (INCEPTION) TO JULY 31, 2013
See accompanying notes to financial statements.
HARMONIC ENERGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE PERIOD FROM MAY 1, 2007 (INCEPTION) TO JULY 31, 2013
See accompanying notes to financial statements.
HARMONIC ENERGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JULY 31, 2013 AND 2012
FOR THE PERIOD FROM MAY 1, 2007 (INCEPTION) TO JULY 31, 2013
See accompanying notes to financial statements.
HARMONIC ENERGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
JULY 31, 2013
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Harmonic Energy, Inc. (the Company), formerly known as Aviation Surveillance Systems, Inc. and Fairytale Ventures, Inc., was incorporated in the State of Nevada on May 1, 2007. The Company is currently developing a new business focused on the disposition and recycling of scrap tires through tire re-manufacturing and carbonization of scrap tire components. The Company has not realized significant revenues to date and therefore is classified as a development stage company.
Development Stage Company
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles related to development-stage companies. A development-stage company is one in which planned principal operations have not commenced or if its operations have commenced, there has been no significant revenues there from.
Basis of Presentation
The accompanying rim 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”). The Company has adopted a July 31 fiscal year end.
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, prepaid expenses, deferred financing costs, license agreement, accrued expenses, accrued interest, note payable, convertible note payable, and license fees payable. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Basic (Loss) per Common Share
Basic (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 666,667 common stock warrants outstanding as of July 31, 2013.
Revenue Recognition
The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.
Advertising Costs
The Company’s policy regarding advertising is to expense advertising when incurred. The Company has not incurred any advertising expense as of July 31, 2013 and 2012.
HARMONIC ENERGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
JULY 31, 2013
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes.
Long-Lived Assets
In accordance with ASC 350, the Company regularly reviews the carrying value of intangible and other long-lived assets for the existence of facts or circumstances, both internally and externally, that may suggest impairment. If impairment testing indicates a lack of recoverability, an impairment loss is recognized by the Company if the carrying amount of a long-lived asset exceeds its fair value.
Reclassifications
Certain accounts and financial statement captions in the prior periods have been reclassified to conform to the current period financial statements.
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.
Stock-Based Compensation
Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718. To date, the Company has not adopted a stock option plan and has not granted any stock options. As of July 31, 2013, the Company has not issued any stock-based payments to its employees.
Recent Accounting Pronouncements
Harmonic Energy 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 flow.
NOTE 2 - LICENSE AGREEMENT
On March 14, 2012, the Company entered into a License Purchase Agreement with Kouei International, Inc. The Company acquired the exclusive rights in North America and Europe to use the Tyrolysis™ technology owned by Kouei Industries Co., Ltd. of Japan. Kouei International holds these rights under license from Kouei Industries and, pursuant to the agreement, has assigned them to the Company. The Tyrolysis™ technology is a comprehensive ‘closed-loop’ solution for the management of scrap tires, which allows for all scrap tires to be either re-manufactured into new tires or reduced, through a carbonization process, into marketable chemical products such as diesel fuel, carbon black and syn-gas.
Under the terms of the agreement, the Company was required to pay a total of $525,000 of which $175,000 was due within 90 days of the closing of the agreement (which has been paid), as well as $175,000 due 90 days after the first payment and $175,000 due 90 days after the second payment has been made.
On May 30, 2012, Kouei Industries agreed to extend the second payment due date to June 30, 2013 and the third payment due date to September 30, 2013. All other terms of the agreement remained the same.
HARMONIC ENERGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
JULY 31, 2013
NOTE 2 - LICENSE AGREEMENT (CONTINUED)
On June 18, 2013, the Company entered into a settlement agreement with Kouei Industries forgiving the second and third payments discussed above totaling $350,000. The forgiveness of this debt was offset by the reduction of the value of the intangible asset recorded as part of this agreement. As of July 31, 2013, the carrying value of the license agreement is $175,000 and the license fee payable is $0.
In addition, the Company is to pay a royalty of 3% of all revenues in respect of gross sales for a period of 5 years, and a royalty of $2.50 per remanufactured passenger tire and a royalty of $3.00 per remanufactured light truck and truck tire at the end of each month for a period of 5 years. There have been no revenues generated from the license agreement as of July 31, 2013.
NOTE 3 - ACCRUED EXPENSES
Accrued expenses consisted of the following as of July 31, 2013 and 2012:
NOTE 4 - LOAN PAYABLE - RELATED PARTY
On June 14, 2010, the Company signed a promissory note for $20,000 with an officer. The loan was due on June 14, 2011, bore 6% interest and was unsecured. The terms of the notes were revised to adjust maturity to due on demand during the year ended July 31, 2011. Interest expense on this loan was $1,200 for the years ended July 31, 2012 and 2011. During the year ended July 31, 2012, the shareholder forgave the balance of the loan and all accrued interest. The forgiveness of debt of $22,554 was recorded as contributed capital.
In association with the change in control during the year ended July 31, 2012, the selling shareholders paid certain legal and accounting expenses on behalf of the company. A total of $58,437 was paid by the shareholder and has been recorded as contributed capital.
NOTE 5 - NOTE PAYABLE
On January 9, 2013, the Company signed a promissory note for $50,000. The loan was due on January 9, 2014, bears interest at 8% and is unsecured. Finance costs related to the issuance of the note in the amount of $5,000 have been deferred and are being amortized over the term of the note payable. Amortization of the financing costs of $2,917 was recorded during the year ended July 31, 2013.
On January 9, 2014, the promissory note was acquired by a non-related lender and the maturity date was extended to January 9, 2015. All other loan terms remained the same.
HARMONIC ENERGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
JULY 31, 2013
NOTE 6 - CONVERTIBLE NOTE PAYABLE
On May 22, 2013, the Company issued a convertible note payable in the amount of $62,440. Initially, the Company received $25,000. The note bears interest at 7% per annum and is due on May 22, 2014. The note is convertible into shares of common stock of the Company at a price equal to 90% of the current market price of the shares on the date of conversion. The balance of the note was $25,000 as of July 31, 2013. Subsequent to July 31, 2013, the Company received the balance of $37,440.
The Company applied ASC subtopic 815-40 in the valuation of the beneficial conversion feature related to the convertible note payable. The Company has a derivative liability resulting from the issuance of the convertible note valued initially at $20,420 using the Black-Scholes option pricing model. The derivative liability was revalued at July 31, 2013 per the guidance in ASC 815-40. Consequently, the Company has adjusted the fair value of the derivative liability at July 31, 2013 and recorded a loss related to the change in the value of the derivative liability of $25 in the statement of operations. The Company used the following assumptions to value the derivative liability.
NOTE 7 - CAPITAL STOCK
The Company has 90,000,000 shares of $0.001 par value common stock and 10,000,000 shares of $0.001 par value preferred stock authorized.
On May 14, 2007, the Company received $4,000 from its founders for 58,994,015 shares of its common stock. On June 22, 2007, the Company completed an unregistered private offering under the Securities Act of 1933, as amended, relying upon the exemption from registration afforded by Rule 504 of Regulation D promulgated there under. The Company sold 23,450,110 shares of its $0.001 par value common stock at a price of $0.004 per share for $11,925 in cash.
On July 21, 2008, the Company effect a forward split on the basis of 1.84356289 shares for 1.
On May 1, 2009, the Company effected a forward split on the basis of 1.6 shares for 1.
On March 15, 2010, the Company sold 191,176,470 shares of common stock for total cash proceeds of $65,000.
On November 3, 2011, a shareholder of the company voluntarily returned 1,250,000 shares of common stock to treasury for cancellation.
On February 22, 2012, a shareholder of the company voluntarily returned 210,000,000 shares of common stock to treasury for cancellation
HARMONIC ENERGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
JULY 31, 2013
NOTE 7 - CAPITAL STOCK (CONTINUED)
On March 12, 2012, the Company the Company effected a forward split on the basis of 5 shares for 1.
All share and per share data in the accompanying financial statements and footnotes has been adjusted retrospectively for the effects of the stock split.
On March 27, 2012, the Company received subscription proceeds of $500,000 related to a subscription agreement for 666,667 shares of common stock and common stock warrants $0.75 per unit. The common stock warrants were valued using the Black-Scholes valuation method. The valuation was made using the following assumptions and the proceeds were allocated based on the fair value of the common stock and common stock warrants:
During the year ended July 31, 2013, the Company issued 11,000,000 shares of common stock to two consultants for services rendered and future services. The stock was valued at the fair market value on the date of the agreements which totaled $1,430,000. A loss on the issuance of the stock of $760,000 was recorded for the difference in the value of the services and the fair market value of the stock. As of July 31, 2013, $455,833 has been recorded as deferred stock-based compensation for future services.
As of July 31, 2013 and 2012, the Company had 74,037,262 and 63,037,262 shares of common stock issued and outstanding, respectively. There were no shares of preferred stock issued and outstanding as of July 31, 2013 and 2012.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Harmonic Energy neither owns nor leases any real or personal property. An officer has provided office services without charge. There is no obligation for this arrangement to continue. Such costs are immaterial to the financial statements and accordingly are not reflected herein. The officers and directors are involved in other business activities and most likely will become involved in other business activities in the future.
NOTE 9 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with generally accepted accounting principle, which contemplate continuation of the Company as a going concern. However, the Company has an accumulated deficit of $1,522,049 as of July 31, 2013. The Company currently has a working capital deficit, and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time.
Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses The Company intends to position itself so that it may be able to raise additional funds through the capital markets. In light of management’s efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.
HARMONIC ENERGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
JULY 31, 2013
NOTE 10 - INCOME TAXES
As of July 31, 2013, the Company had net operating loss carry forwards of approximately $1,522,049 that may be available to reduce future years’ taxable income in various amounts 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.
The provision for Federal income tax consists of the following for the years ended July 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 July 31:
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards of $1,522,049 for Federal income tax reporting purposes are subject to annual limitations. Should another change in ownership occur net operating loss carry forwards may be further limited as to use in future years.
NOTE 11 - SUBSEQUENT EVENTS
On August 27, 2013, the Company entered into an agreement with an investor relations group to provide marketing and investor relation services. The agreement required an initial payment of $30,000 (paid) and 2,000,000 shares of common stock (issued). Additional payments of $22,500 were due on September 30, 2013 and October 30, 2013. Those payments have not yet been made.
On January 9, 2014, a non-related lender acquired a loan that was due on that date. The lender extended the maturity date to January 9, 2015 and all other terms of the promissory note remained the same.
In accordance with ASC Topic 855-10, the Company has analyzed its operations subsequent to July 31, 2013 to the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements other than the events described above.
Item 9.
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
No events occurred requiring disclosure under Item 307 and 308 of Regulation S-K during the fiscal year ending July 31, 2013.
Item 9A(T).
Item 9A(T). Controls and Procedures
As required by Rule 13a-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report, being July 31, 2013. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Based upon that evaluation, including our Chief Executive Officer and Chief Financial Officer, we have concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this annual report.
Management’s 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 Securities Exchange Act of 1934). Management has assessed the effectiveness of our internal control over financial reporting as of July 31, 2013 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As a result of this assessment, management concluded that, as of July 31, 2013, our internal control over financial reporting was not effective. Our management identified the following material weaknesses in our internal control over financial reporting, which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.
We plan to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered by this annual report on Form 10-K, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we hope to implement the following changes during our fiscal year ending July 31, 2014: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out in (i) and (ii) are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to an exemption for non-accelerated filers set forth in Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Item 9B.
Item 9B. Other Information
None.
PART III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance
The following information sets forth the names, ages, and positions of our current directors and executive officers as of June 2, 2014.
Adrian J.R. Smith is our Chairman of the Board and a Director. He is the Chief Executive Officer of The Woolton Group LLC, an international advisory group with offices in Florida and London. He also serves on the board of RTI Biologics, Inc. (NASDAQ:RTIX) and formerly served on the board of Byotrol Plc. (UK AIM:BYOT). He is also the chairman of Premier Credit Ltd. and Third Eye Technologies, Ltd. Prior board experience includes service as the non-executive chairman of Gaming VC S.A. and also the Carter & Carter Group Plc. As the non-executive chairman of Carter and Carter from 2003 -2005, he led the board through two acquisitions and a flotation on the London Stock Exchange. Current advisory projects include renewable energy, clean technology, the global telematics industry, and the development of qualitative consumer research in the BRICM countries (Brazil, Russia, India, China and Mexico). Mr. Smith retired from Deloitte Touche Tohmatsu in 2004, after serving as the managing partner for global marketing and communication. Before joining Deloitte in 2000, he had held the CEO position at Grant Thornton LLP in the US, and was a worldwide managing partner at Arthur Andersen LLP from 1991 to 1997. Mr. Smith also serves on the board of a non-profit business in Florida -- the Education Foundation of Indian River County.
Mr. Smith spent 13 years with Procter and Gamble in the United Kingdom beginning 1966, before joining Ecolab Inc. in 1979 as a vice president for consumer marketing operations in Europe. He relocated with Ecolab to the USA in 1981 as the senior vice president responsible for international marketing, research and development. He also managed the Asia Pacific subsidiary operations before relocating to Toronto in 1988 as president of Ecolab Canada. He was an interim managing director at Datacard, in the UK from 1990 to 1991.
Jamie Mann is our Chief Executive Officer, Chief Financial Officer, President, Secretary, Treasurer, and a Director. He has been working in the waste conversion sector since the establishment of Kouei Industries in 2004 and was part of the team that formed Klean Industries Inc. in 2005. Mr. Mann has since brought together a team of tire management specialists, waste processing experts, and a network of contacts in the waste and recycling industry. Focusing on developing the markets for carbonization recyclate, he has been working with companies such as BP and Ford. Prior to joining Klean, Mr. Mann ran ProSource International; a UK based trading company which he established in 1993. He has over a decade of experience in textile engineering and manufacturing of polymer based products. ProSource traded with some of the largest blue chip companies in its sector, such as Wal-Mart, Coca Cola & H&M Hennes & Mauritz AB.
Hiro Tanaka is our Vice President and a Director. He is a key contributor to establishing tire re-treading and energy recovery technologies and has been involved in sales for over 20 years. Mr. Tanaka was previously a senior sales executive for Kyocera Japan and was their sales leader. Mr. Tanaka is also the founder and publisher of the Planet Newspaper in Tokyo and has dedicated the vast majority of his time over the past 10 years to developing sustainability and environmental stewardship programs both in Japan and throughout Southeast Asia. Mr. Tanaka believes in continuing education and has helped develop a form of free media in Japan that targets Japanese youth as a means of educating them in English about the environmental concerns facing not only Japan but the world today. Mr. Tanaka also has many charitable achievements.
Term of Office
Our Directors are appointed for a one year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board.
Family Relationships
There are no family relationships between or among the directors, executive officers or persons nominated or chosen by us to become directors or executive officers.
Involvement in Certain Legal Proceedings
To the best of our knowledge, during the past ten years, none of the following occurred with respect to a present or former director, executive officer, or employee: (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 vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
Committees of the Board
We do not currently have a compensation committee, executive committee, or stock plan committee.
Audit Committee
We do not have a separately-designated standing audit committee. The entire Board of Directors performs the functions of an audit committee, but no written charter governs the actions of the Board when performing the functions of what would generally be performed by an audit committee. The Board approves the selection of our independent accountants and meets and interacts with the independent accountants to discuss issues related to financial reporting. In addition, the Board reviews the scope and results of the audit with the independent accountants, reviews with management and the independent accountants our annual operating results, considers the adequacy of our internal accounting procedures and considers other auditing and accounting matters including fees to be paid to the independent auditor and the performance of the independent auditor. Our Board of Directors, which performs the functions of an audit committee, does not have a member who would qualify as an “audit committee financial expert” within the definition of Item 407(d)(5)(ii) of Regulation S-K. We believe that, at our current size and stage of development, the addition of a special audit committee financial expert to the Board is not necessary.
Nomination Committee
Our Board of Directors does not maintain a nominating committee. As a result, no written charter governs the director nomination process. Our size and the size of our Board, at this time, do not require a separate nominating committee.
When evaluating director nominees, our directors consider the following factors:
- The appropriate size of our Board of Directors;
- Our needs with respect to the particular talents and experience of our directors;
- The knowledge, skills and experience of nominees, including experience in finance, administration or public service, in light of prevailing business conditions and the knowledge, skills and experience already possessed by other members of the Board;
- Experience in political affairs;
- Experience with accounting rules and practices; and
- The desire to balance the benefit of continuity with the periodic injection of the fresh perspective provided by new Board members.
Our goal is to assemble a Board that brings together a variety of perspectives and skills derived from high quality business and professional experience. In doing so, the Board will also consider candidates with appropriate non-business backgrounds.
Other than the foregoing, there are no stated minimum criteria for director nominees, although the Board may also consider such other factors as it may deem are in our best interests as well as our stockholders. In addition, the Board identifies nominees by first evaluating the current members of the Board willing to continue in service. Current members of the Board with skills and experience that are relevant to our business and who are willing to continue in service are considered for re-nomination. If any member of the Board does not wish to continue in service or if the Board decides not to re-nominate a member for re-election, the Board then identifies the desired skills and experience of a new nominee in light of the criteria above. Current members of the Board are polled for suggestions as to individuals meeting the criteria described above. The Board may also engage in research to identify qualified individuals. To date, we have not engaged third parties to identify or evaluate or assist in identifying potential nominees, although we reserve the right in the future to retain a third party search firm, if necessary. The Board does not typically consider shareholder nominees because it believes that its current nomination process is sufficient to identify directors who serve our best interests.
Code of Ethics
As of July 31, 2013, we had not adopted a Code of Ethics for Financial Executives, which would include our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.
Item 11.
Item 11. Executive Compensation
Compensation Discussion and Analysis
The services rendered by our President and CEO, Jamie Mann, are governed by a Consulting Agreement with his consultancy firm, JM Trading Co., Ltd. The current Consulting Agreement, dated December 20, 2013, is for a term of two (2) years. Mr. Mann is paid a consulting fee of $65,000 per year to be paid in equal monthly installments of $5,416.66 per month. In addition, Mr. Mann is to be provided a company car and reimbursement of all expenses incurred in the course of his duties. The Agreement includes a non-solicitation clause which is in effect until one year after the expiration of the Agreement.
Currently, the objective of the cash compensation paid by the company to its chief executive is to provide fair reimbursement for the time spent by our executive officer to the extent feasible within the financial constraints faced by our developing business.
We have agreed to pay our Chairman, Adrian J.R. Smith, cash compensation of $1,500 per month beginning August 1, 2012. Our Vice President, Hiro Tanaka, does not receive compensation at this time.
Summary Compensation Table
The table below summarizes all compensation awarded to, earned by, or paid to our former or current executive officers for the fiscal years ended July 30, 2013 and 2012.
Narrative Disclosure to the Summary Compensation Table
During the fiscal year ended July 31, 2013, we paid our President and CEO, Jamie Mann, $60,000 in consulting fees. Our Chairman, Adrian J.R. Smith, was paid $18,000 in compensation.
Outstanding Equity Awards at Fiscal Year-End
The table below summarizes all unexercised options, stock that has not vested, and equity incentive plan awards for each named executive officer as of July 31, 2013.
Director Compensation
The table below summarizes all compensation of our directors as of July 31, 2012.
Narrative Disclosure to the Director Compensation Table
We do not compensate our directors for their service as directors at this time.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth, as of June 2, 2013, the beneficial ownership of our common stock by each executive officer and director, by each person known by us to beneficially own more than 5% of the our common stock and by the executive officers and directors as a group:
(1) As used in this table, "beneficial ownership" means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security). In addition, for purposes of this table, a person is deemed, as of any date, to have "beneficial ownership" of any security that such person has the right to acquire within 60 days after such date.
Disclosure of Commission Position of Indemnification for Securities Act Liabilities
In accordance with the provisions in our articles of incorporation, we will indemnify an officer, director, or former officer or director, to the full extent permitted by law.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person of us in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Except as set forth below, none of our directors or executive officers, nor any proposed nominee for election as a director, nor any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to all of our outstanding shares, nor any members of the immediate family (including spouse, parents, children, siblings, and in-laws) of any of the foregoing persons has any material interest, direct or indirect, in any transaction since our incorporation or in any presently proposed transaction which, in either case, has or will materially affect us:
1.	The services rendered by our President and CEO, Jamie Mann, are governed by a Consulting Agreement with his consultancy firm, JM Trading Co., Ltd. The current Consulting Agreement, dated December 20, 2013, is for a term of two (2) years. Mr. Mann is paid a consulting fee of $65,000 per year to be paid in equal monthly installments of $5,416.66 per month. In addition, Mr. Mann is to be provided a company car and reimbursement of all expenses incurred in the course of his duties. The Agreement includes a non-solicitation clause which is in effect until one year after the expiration of the Agreement.
Director Independence
We are not a “listed issuer” within the meaning of Item 407 of Regulation S-K and there are no applicable listing standards for determining the independence of our directors. Applying the definition of independence set forth in Rule 4200(a)(15) of The Nasdaq Stock Market, Inc., we do not have any independent directors.
Item 14.
Item 14. Principal Accounting Fees and Services
Below is the table of Audit Fees (amounts in US$) billed by our auditor in connection with the audit of the Company’s annual financial statements for the years ended:
PART IV
Item 15.
Item 15. Exhibits, Financial Statements Schedules
(a) Financial Statements and Schedules
The following financial statements and schedules listed below are included in this Form 10-K.
Financial Statements (See Item 8)
(b) Exhibits
Exhibit Number Description
3.1 Articles of Incorporation(1)
3.2 Bylaws(1)
4.1 2013 Stock Option Plan(6)
10.1 License Purchase Agreement with Kouei International, Inc.(2)
10.2 Letter extending payment terms under License Purchase Agreement with Kouei International, Inc.(5)
10.3** Settlement and Consultant Agreement with Kouei International, Inc.
10.4 Tire Feedstock Agreement with Enertech R.D. LLC(3)
10.5 Consulting Agreement with Rene Berlinger(6)
10.6** Consulting Agreement with JM Trading Co., Ltd.
10.7 Consulting Agreement with Empire Relations Group, Inc.(7)
10.8 Purchase Order with Carbon Black Sales(8)
10.9 Note issued to Legacy Global Markets(9)
10.10** Agreement to Extend Debt Payment with Seahorse Investments, Ltd.
10.11** Convertible Promissory Note to Seahorse Investments, Ltd. issued May 22, 2013
31.1 Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101** The following materials from the Company’s Annual Report on Form 10-K for the year ended June 30, 2012 formatted in Extensible Business Reporting Language (XBRL).
(1) Incorporated by reference to Registration Statement on Form SB-2 filed August 30, 2007
(2) Incorporated by reference to Current Report on Form 8-K filed April 6, 2012
(3) Incorporated by reference to Current Report on Form 8-K filed April 27, 2012
(4) Incorporated by reference to Current Report on Form 8-K filed May 23, 2012
(5) Incorporated by reference to Current Report on Form 8-K filed November 30, 2012
(6) Incorporated by reference to Quarterly Report on Form 10-Q filed June 11, 2013
(7) Incorporated by reference to Current Report on Form 8-K filed September 27, 2013
(8) Incorporated by reference to Current Report on Form 8-K filed February 25, 2013
(9) Incorporated by reference to Quarterly Report on Form 10-Q filed March 21, 2013
** Filed herewith
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
HARMONIC ENERGY, INC.
By: /s/ Jamie Mann
Jamie Mann
Title: Chief Executive Officer, Chief Financial Officer and Director
Date: June 9, 2014
In accordance with Section 13 or 15(d) of the Exchange Act, 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/ Jamie Mann
Jamie Mann
Title: Chief Executive Officer, Chief Financial Officer and Director
Date: June 9, 2014
By: /s/ Adrian J.R. Smith
Adrian J.R. Smith
Title: Chairman of the Board and Director
Date: June 9, 2014
By: /s/ Hiro Tanaka
Hiro Tanaka
Title: Vice President and Director
Date: June 9, 2014