XOTC:EGYH Energy Holdings International Inc Annual Report 10-K Filing - 6/30/2012

Effective Date 6/30/2012

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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Year Ended June 30, 2012
 
Commission File No. 000-52631

ENERGY HOLDINGS INTERNATIONAL, INC.
 (Exact name of registrant as specified in its charter)

NEVADA
 
26-4574476
(State or other jurisdiction of incorporation or organization
 
(I.R.S. Employer Identification Number)
 
12012 Wickchester Lane, Suite 130
Houston, Texas 77079
 (Address of principal executive offices)(zip code)
 
(832) 230-1490
(Registrant’s telephone number, including area code)
 
Securities registered under Section 12(b) of the Exchange Act: None
 
Title of Each Class
 
Name of Each Exchange on Which Registered
NONE
 
NONE
 
Securities registered under Section 12(g) of the Exchange Act:
 
Common Stock, $.001 par value
 
(Title of Class)
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes  þ No
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes  þ No
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports, and (2) has been subject to such filing requirements for the past 90 days.  Yes  þ   No  o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T ('232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yes  þ No
 
Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ
 
Indicate by a check mark whether the registrant is a large accelerated filer, an accelerated filer, or non-accelerated filer.
 
Large accelerated filer   o
Accelerated filer   o
Non-accelerated filer  o
Smaller reporting company þ
 
Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). o Yes  þ No
 
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked prices of such common equity, as of the last business day of the registrants most recently completed second fiscal quarter:  $1,264,638.
 
APPLICABLE ONLY TO CORPORATE REGISTRANTS
 
Indicate the number of shares outstanding of each of the registrant’s classes of common equity, as of the latest practicable date:  35,154,006 shares as of August 30, 2012.
 
DOCUMENTS INCORPORATED BY REFERENCE - None
 


 
 

 
 
Table of Contents
 
PART I     3  
           
Item 1.
Description of Business
    3  
Item 1A.
Risk Factors
    6  
Item 1B.
Unresolved Staff Comments
    10  
Item 2.
Properties
    10  
Item 3.
Legal Proceedings
    10  
Item 4.  
Mine Safety Disclosures
    10  
           
PART II     11  
           
Item 5.
Market Price For Registrant’s Common Equity And Related Stockholder Matters
    11  
Item 6.
Selected Financial Data
    11  
Item 7.
Management’s Discussions and Analysis of Financial Condition and Results of Operations
    12  
Item 7A.  
Quantitative and Qualitative Disclosure About Market Risk
    16  
Item 8.
Financial Statements and Supplementary Data
    16  
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    47  
Item 9A.
Controls and Procedures
    47  
Item 9B.
Other Information
    48  
           
PART III     49  
           
Item 10.
Directors, Executive Officers and Corporate Governance
    49  
Item 11.
Executive Compensation
    52  
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
    52  
Item 13.
Certain Relationships and Related Transactions, and Director Independence
    53  
Item 14.
Principal Accounting Fees and Services
    53  
Item 15.
Exhibits and Financial Statement Schedules
    53  
           
Signatures     54  
 
 
2

 
 
PART I
 
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

Statements made in this Annual Report are “forward-looking statements” and are not historical facts. For example, statements regarding our financial position, business strategy and other plans and objectives for future operations, and assumptions and predictions about future demand for our services and products, supply, costs, marketing and pricing factors are all forward-looking statements. When we use words like “intend,” “would”, “anticipate,” “believe,” “estimate,” “plan” or “expect” or the negative of these terms and similar expressions we are making forward- looking statements. You should be aware that these forward-looking statements are subject to risks and uncertainties. Additionally, our forward-looking statements speak only as of the date of this report. Other than as required by law, we undertake no obligation to update or revise these statements, whether because of new information, future events or otherwise. New factors emerge from time to time that may cause our business not to develop as we expect, and it is not possible for us to predict all of them. Factors that may cause our actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements include, among other things:
 
Our ability to successfully implement our business plans, including expanding our markets, developing oil & gas and power generation assets as well as alternative energy ventures, both domestically and in targeted areas in the Middle East and other international locations;
Continuing and cultivating our relationships with current and new joint ventures;
Funding our growth in a manner that is beneficial to our stockholders;
Trends affecting our financial condition or results of operations, the impact of competition, the start-up of certain operations, and services and acquisition opportunities;
Depending on third party suppliers outside the United States;
Trade and political relations with countries where we expect to do business; and
Other risks referenced from time to time in our SEC filings.
 
ITEM 1. DESCRIPTION OF BUSINESS
 
Executive Summary
 
Energy Holdings International, Inc. (“EHII”) is focused on acquiring, developing and managing energy assets across in the Middle East, Asia and the Americas. The Company is led by a group of executive officers and directors with extensive experience in sourcing, acquiring and managing assets across the globe.  EHII is dedicated to finding new, long-term energy solutions that are safe, economically viable and environmentally friendly to enhance the future of countries and economies worldwide. It is responding to international, political, environmental and free market demands for investments in the Independent Power Project (IPP) market with safer, cleaner and more technologically advanced energy sources. The Company is dedicated to the task of providing the best management and advisory services available in the complex arena of international business and project development in oil and gas production and power generation.  EHII’s management has been in active discussions with several potential companies, either to acquire, manage, or joint venture with these entities.  
 
 
3

 
 
Background
 
The Company’s predecessor, Green Energy Corp. was originally organized as a Colorado corporation, referred to in this document as “Old Green Energy”, commenced operations in 2003 as a marketer of a specific gasification technology for commercial applications to produce fuels and chemicals.   In December 2006, Old Green Energy reincorporated as a Nevada corporation and changed its name to Green Energy Holding Corp (“GEHC”).

On December 28, 2008, GEHC entered into a stock purchase agreement to issue 14,370,300 shares to accredited investors for $175,000, giving those outside investors approximately 96.5% controlling interest in the Company.   An additional $325,000 was used for legal and accounting fees and expenses, as well as administrative fees and costs.  The aggregate cost of the change in control totaled $500,000.

Following the sale of 96.5% of the Company’s capital stock at the end of calendar 2008, the Company decided to modify its focus, concentrating on acquiring, developing and managing cash producing oil and gas properties in the Middle East, Asia and the Americas, particularly in the middle region of the United States.  It aspires to find new, long-term energy solutions that are safe, economically viable and environmentally friendly to enhance the future of countries and economies worldwide. It is responding to international, political, environmental and free market demands for investments in the Independent Power Project (IPP) market with safer, cleaner and more technologically advanced energy sources. The Company is dedicated to the task of providing the best management and advisory services available in the complex arena of international business and project development in oil and gas production and power generation.

On March 10, 2009, the Company amended the Articles of Incorporation to change its name from Green Energy Holding Corp. to Energy Holdings International, Inc.

EHII’S Business Strategy and Objectives
 
Oil & Gas Exploration
 
EHII’s acquisition and management strategy is focused on accumulating a portfolio of high cash generation producing assets across the oil and gas exploration and power generation sectors. Management has developed a pipeline of assets and secured preliminary terms for bank financing of potential acquisitions.
 
The Company’s specific strategies for value enhancement in the Power Generation sector are tailored to local requirements, but the company seeks to achieve the following:
 
Optimize the operations of acquired power plants, which includes maintaining our assets to high standards of safety and operating performance, managing our assets on a portfolio basis, particularly with regard to contingency and strategic spare parts planning so as to minimize the loss of generation during planned and forced outages, and closely co-coordinating our plant operation with trading activity to maximize the value of un-contracted output;  and standardizing management reporting for all investments;
   
Leverage operational assets to enhance earnings in several ways, including financing at a variety of corporate, project and intermediate corporate levels, capturing operational, trading, and administrative economies of scale in asset aggregation; capitalizing on market knowledge derived through asset ownership, and leveraging off the skills, expertise and ideas of the management team;
   
Grow trade assets to maximize value over time, and to seek to maximize the value of investments through dispositions if this generates a higher return, or if the management team determines, a comparable return can be obtained with lower risk elsewhere; and
   
Seek effective routes to market in those geographical areas where it is appropriate.
 
Power generation demand will be driven by the growth in demand from emerging markets, redevelopment of aged assets in the developed world and finally incremental demand. The Company intends to acquire and build out power generation plants across the Middle East, North Africa, South America and Southeast Asian regions.  However, EHII has not entered into any definitive agreements with any persons to acquire or build out such plants nor does it assure anyone that it will be able to do so.
 
 
4

 
 
The Oil & Gas and Power Generation Industry
 
The Independent Power Industry
 
Power generation is a strong and attractive global sector due to the significant demand growth in developing economies, replacement capacity required in many developed countries and tightening reserve requirements. EHII intends to focus power generation efforts in the Middle East and Africa regions.
 
The Middle East region offers stable governments, low country risk ratings and good credit ratings, which allows for the availability of long-term PWPAs (Power and Water Purchase Agreements) with attractive return on investment and the availability of capital needed for development and acquisitions. GDP growth rates average 5-8% per annum with power growth rates averaging 6-10% per annum.
 
There is pressure on development plans throughout the industry due to the global liquidity crisis. This creates a unique opportunity for firms that are well capitalized.
 
Revenue Source
 
EHII expects that it may derive revenues from equity positions in oil and gas and power projects and consulting engagements performed for external groups. It also anticipates that additional revenue could be in the form of development fees from Farm-In Agreements with new partners in EHII projects, carried and royalty interest from projects revenue, and when appropriate, in the form of capital gains from the sale of all or a portion of EHII ownership interest in a project.
 
Regulatory Approvals and Environmental Laws
 
EHII is subject to various federal, state and local environmental laws and regulations, including those relating to the discharge of materials into the air, water and ground; the generation, storage, handling, use, transportation and disposal of hazardous materials; and the health and safety of our employees. These laws, regulations and permits also can require expensive pollution control equipment or operational changes to limit actual or potential impacts to the environment. A violation of these laws and regulations or permit conditions can result in substantial fines, natural resource damage, criminal sanctions, permit revocations and/or facility shutdowns. We do not anticipate a material adverse effect on our business or financial condition as a result of our efforts to comply with these requirements. We also do not expect to incur material capital expenditures for environmental controls in this or the succeeding fiscal year.
 
There is a risk of liability for the investigation and cleanup of environmental contamination at each of the properties that we may own or operate and at off-site locations where we may have arranged for the disposal of hazardous substances. If these substances have been or are disposed of or released at sites that undergo investigation and/or remediation by regulatory agencies, we may be responsible under CERCLA or other environmental laws for all or part of the costs of investigation and/or remediation and for damage to natural resources. We may also be subject to related claims by private parties alleging property damage and personal injury due to exposure to hazardous or other materials at or from these properties. Some of these matters may require us to expend significant amounts for investigation and/or cleanup or other costs. We do not have material environmental liabilities relating to contamination at or from our facilities or at off-site locations where we have transported or arranged for the disposal of hazardous substances.
  
 
5

 
 
In addition, new laws, new interpretations of existing laws, increased governmental enforcement of environmental laws or other developments could require us to make additional significant expenditures. Continued government and public emphasis on environmental issues can be expected to result in increased future investments for environmental controls at our ongoing operations. Present and future environmental laws and regulations (and related interpretations) applicable to our operations, more vigorous enforcement policies and discovery of currently unknown conditions may require substantial capital and other expenditures. Our air emissions are subject to the federal Clean Air Act, the federal Clean Air Act Amendments of 1990 and similar state and local laws and associated regulations. The U.S. EPA has promulgated National Emissions Standards for Hazardous Air Pollutants, or NESHAP, under the federal Clean Air Act that could apply to facilities that we own or operate if the emissions of hazardous air pollutants exceed certain thresholds. If a facility we operate is authorized to emit hazardous air pollutants above the threshold level, then we are required to comply with the NESHAP related to our manufacturing process and would be required to come into compliance with another NESHAP applicable to boilers and process heaters by September 13, 2007. New or expanded facilities would be required to comply with both standards upon startup if they exceed the hazardous air pollutant threshold. In addition to costs for achieving and maintaining compliance with these laws, more stringent standards may also limit our operating flexibility. Because other domestic syngas manufacturers will have similar restrictions, however, we believe that compliance with more stringent air emission control or other environmental laws and regulations is not likely to materially affect our competitive position.
 
The hazards and risks associated with producing and transporting our products, such as fires, natural disasters, explosions, abnormal pressures, blowouts and pipeline ruptures also may result in personal injury claims or damage to property and third parties. As protection against operating hazards, we maintain insurance coverage against some, but not all, potential losses. Our coverage includes physical damage to assets, employer’s liability, comprehensive general liability, automobile liability and workers’ compensation. We believe that our insurance is currently adequate, but losses could occur for uninsurable or uninsured risks or in amounts in excess of existing insurance coverage. We do not currently have pending material claims for damages or liability to third parties relating to the hazards or risks of our business.
 
The international, federal and state rules and regulations are constantly changing.  There may be additional restrictions or requirements in the future to which EHII will be subject, which may adversely affect the business, as well as its revenues and profitability.
 
Employees
 
The Company currently has engaged a Chief Executive Officer, and a Chief Financial Officer and two part-time employee/contractors.  To date, these individuals are consultants, but EHII anticipates that in the near future, it will enter into employment agreements with these individuals.
 
ITEM 1A. RISK FACTORS
 
Important Risk Factors Concerning our Business.
 
You should carefully consider the following risk factors and all other information contained in this Annual Report in evaluating our business and prospects. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties other than those we described below that are not presently known to us or that we believe are immaterial may also impair our business operations. If any of the following risks occur, our business and financial results could be harmed. You should also refer to the other information contained in this Annual Report, including our consolidated financial statements and the related notes.
 
Risks Related to Our Business and Industry

We have a limited operating history.

Since the inception of our current business operations, we have been engaged in organizational activities, including developing a strategic operating plan, entering into contracts, hiring personnel, developing processing technology, raising private capital and seeking acquisitions. Accordingly, we have a limited relevant operating history upon which an evaluation of our performance and future prospects can be made.
 
 
6

 
 
We have had a history of net losses.

We incurred a net loss of $1,260,614for the year ended June 30, 2012, and have had accumulated total losses of $4,157,188 through June 30, 2012. Through June of 2012, we have been funding our operations primarily through our consulting contracts with trading partners in the Middle East, and sales of equity interests in our subsidiaries,but have also financed a portion of out operation through the sale of our securities and loans from our major shareholder.  We expect to continue to incur net losses for the foreseeable future as focus on seeking potential joint venture partners and acquisitions in the area of oil, gas, and alternative energy.  Our ability to generate and sustain significant additional revenues or achieve profitability will depend upon the factors discussed elsewhere in this “Risk Factors” section. We cannot assure you that we will achieve or sustain profitability or that our operating losses will not increase in the future. If we do achieve profitability, we cannot be certain that we can sustain or increase profitability on a quarterly or annual basis in the future.

We will be forced to continue to seek financing partners, either through debt or equity, to achieve our business objectives.
 
As of June 30, 2012, we had unrestricted cash of$10,514.  We will need significant capital expenditures and investments over the next twelve months related to our growth program.  We are also currently evaluating potential joint venture partners.  We do not plan to use a portion of our current cash to fund these site acquisitions or provide seed equity for the projects while we analyze financing options.
 
We are currently in discussions with several intermediaries, advisors and investors to structure and raise the funds to optimally finance potential projects. We are evaluating debt and equity placements at the corporate level as well as project specific capital opportunities. We have no commitments for any additional financing, and there can be no assurance that, if needed, additional capital will be available to use on commercially acceptable terms or at all. Our failure to raise capital as needed would significantly restrict our growth and hinder out ability to compete. We may need to curtail expenses, reduce planned investments in technology and research and development and forgo business opportunities. Additional equity financings are likely to be dilutive to holders of our common stock and debt financing, if available, may involve significant payment obligations and covenants that restrict how we operate our business.

Strategic acquisitions could have a dilutive effect on your investment. Failure to make accretive acquisitions and successfully integrate them could adversely affect our future financial results

As part of our growth strategy, we will seek to acquire or invest in complementary (including competitive) businesses, facilities or technologies and enter into co-location joint ventures in the oil & gas and power generation industries. Our goal is to make such acquisitions, integrate these acquired assets into our operations and reduce operating expenses. The process of integrating these acquired assets into our operations may result in unforeseen operating difficulties and expenditures, and may absorb significant management attention that would otherwise be available for the ongoing development of our business. We cannot assure you that the anticipated benefits of any acquisitions will be realized. In addition, future acquisitions by us could result in potentially dilutive issuances of equity securities, the incurrence of debt and contingent liabilities and amortization expenses related to goodwill and other intangible assets, any of which can materially and adversely affect our operating results and financial position.
 
We depend on our officers and key personnel and the loss of any of these persons could adversely affect our operations and results.
 
We believe that implementing our proposed expansion strategy and execution of our business plan to acquire, manage and develop power generation and oil & gas assets will depend to a significant extent upon the efforts and abilities of our officers and key personnel. Because the oil, gas and alternative energy industries are highly competitive, we believe that the personal contacts of our officers and key personnel within the industry and within the scientific community engaged in related businesses are a significant factor in our continued success. Our failure to retain our officers or key personnel, or to attract and retain additional qualified personnel, could adversely affect our operations and results. We do not currently carry key-man life insurance on any of our officers.

 
7

 
 
Because we are smaller and have fewer financial and other resources than energy focused companies, we may not be able to successfully compete in the very competitive industry.

There are significant competition among existing oil, gas, and alternative energy companies.  Our business faces competition from a number of entities that have the financial and other resources that would enable them to expand their businesses.  Even if we are able to enter into joint venture agreements, our competitors may be more profitable than us, which may make it more difficult for us to raise any financing necessary for us to achieve our business plan and may have a materially adverse effect on the market price of our common stock.

Risks Related to an Investment in Our Common Stock
 
Our common stock price has fluctuated considerably and stockholders may not be able to resell their shares at or above the price at which such shares were purchased.

The market price of our common stock has fluctuated in the past, and may continue to fluctuate significantly in response to factors, some of which are beyond our control.  The stock market in general has experienced extreme price and volume fluctuations. The market prices of securities of fuel-related companies have experienced fluctuations that often have been unrelated or disproportionate to the operating results of these companies. Continued market fluctuations could result in extreme volatility in the price of our common stock, which could cause a decline in the value of our common stock. Price volatility might be intensified under circumstances where the trading volume of our common stock is low.
 
We may not be able to attract the attention of major brokerage firms for research and support which may adversely affect the market price of our common stock.
 
Securities analysts of major brokerage firms may not publish research on our common stock. The number of securities competing for the attention of such analysts is large and growing. Coverage of a security by analysts at major brokerage firms increases the investing public’s knowledge of and interest in the issuer, which may stimulate demand for and support the market price of the issuer’s securities. The failure of major brokerage firms to cover our common stock may adversely affect the market price of our common stock.
 
Future sales of common stock or other dilutive events may adversely affect prevailing market prices for our common stock.

We are currently authorized to issue up to 100.0 million shares of common stock, of which 36,305,607 shares were issued and outstanding as of October 2, 2012.  Our board of directors and/or our executive management has the authority, without further action or vote of our stockholders, to issue any or all of the remaining authorized shares of our common stock that are not reserved for issuance and to grant options or other awards to purchase any or all of the shares remaining authorized. The board may issue shares or grant options or awards relating to shares at a price that reflects a discount from the then-current market price of our common stock. The options and awards referred to above can be expected to include provisions requiring us to issue increased numbers of shares of common stock upon exercise or conversion in the event of stock splits, redemptions, mergers or other transactions. If any of these events occur, the exercise of any of the options or warrants described above and any other issuance of shares of common stock will dilute the percentage ownership interests of our current stockholders and may adversely affect the prevailing market price of our common stock.

 
8

 
 
 A significant number of our shares will be eligible for sale, and their sale could depress the market price of our common stock.

Sales of a significant number of shares of our common stock in the public market could harm the market price of our common stock. Virtually all shares of our common stock may be offered from time to time in the open market, including the shares offered pursuant to this filing. These sales may have a depressive effect on the market for the shares of our common stock. Moreover, additional shares of our common stock, including shares that have been issued in private placements, may be sold from time to time in the open market pursuant to Rule 144. In general, a person who has held restricted shares for a period of one year may, upon filing with the SEC a notification on Form 144, sell into the market common stock in an amount equal to the greater of 1% of the outstanding shares or the average weekly number of shares sold in the last four weeks prior to such sale. Such sales may be repeated at specified intervals.  Subject to satisfaction of a two-year holding requirement, non-affiliates of an issuer may make sales under Rule 144 without regard to the volume limitations and any of the restricted shares may be sold by a non-affiliate after they have been held two years. Sales of our common stock by our affiliates are subject to Rule 144.
 
Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could have a material adverse effect on our business and operating results. In addition, as a consequence of such failure, current and potential stockholders could lose confidence in our financial reporting, which could have an adverse effect on our stock price.

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we could be subject to regulatory action or other litigation and our operating results could be harmed.
 
During the course of our testing, we may identify deficiencies which we may not be able to remediate in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance with the requirements of Section 404. In addition, if we fail to maintain the adequacy of our internal accounting controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404. Failure to achieve and maintain an effective internal control environment could cause us to face regulatory action and also cause investors to lose confidence in our reported financial information, either of which could have an adverse effect on our stock price.
 
Investors should not anticipate receiving cash dividends on our common stock.
 
We have never declared or paid any cash dividends or distributions on our capital stock. We currently intend to retain our future earnings to support operations and to finance expansion and, therefore, we do not anticipate paying any cash dividends on our common stock in the foreseeable future.

We may issue shares of preferred stock without stockholder approval that may adversely affect your rights as a holder of our common stock.

Upon our amending our certificate of incorporation authorizes us to issue up to 50 million shares of “blank check” preferred stock with such designations, rights and preferences as may be determined from time to time by our board of directors. Accordingly, our board of directors is empowered, without stockholder approval, to issue a series of preferred stock with rights to receive dividends and distributions upon liquidation in preference to any dividends or distributions upon liquidation to holders of our common stock and with conversion, redemption, voting or other rights which could dilute the economic interest and voting rights of our common stockholders. The issuance of preferred stock could also be used as a method of discouraging, delaying or preventing a change in control of our company or making removal of our management more difficult, which may not be in your interest as holders of common stock.

Provisions in our articles of incorporation and bylaws and under Nevada law could inhibit a takeover at a premium price.

Our bylaws limit who may call a special meeting of stockholders and establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon at stockholder meetings. Each of these provisions may have the effect to discouraging, delaying or preventing a change in control of our company or making removal of our management more difficult, which may not be in your interest as holders of common stock. 
 
 
9

 
 
ITEM 1B. UNRESOLVED STAFF COMMENTS
 
None.
 
ITEM 2. PROPERTIES
 
We lease approximately 2,338 square feet of office space in Houston, Texas as our corporate headquarters.   This agreement went into affect on January 1, 2010 and is for a period of five years.

In addition to our office in Houston, Texas, we lease office and apartment space in Dubai, United Arab Emirates.  The office lease began February 19, 2011 and expires February 20, 2013 while the apartment lease began May 16, 2012 and expires May 16, 2013
 
ITEM 3. LEGAL PROCEEDINGS
 
We are not a party to any material pending legal proceedings and, to the best of our knowledge; no such action by or against us is contemplated, threatened or expected.
 
ITEM 4.MINE SAFETY DISCLOSURES
 
Not applicable

 
10

 
  
PART II
 
ITEM 5. MARKET PRICE FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
(a)    Market Information
 
EHII Common Stock trades on the OTC Markets under the symbol: EGYH.  The following sets forth the range of high and low trades for the periods indicated.  

   
Low
   
High
 
Year Ended June 30, 2011
           
Q1 - Quarter Ended September 30, 2010
  $ 0.70     $ 1.01  
Q2 - Quarter Ended December 31, 2010
    0.20       0.75  
Q3 - Quarter Ended March 31, 2011
    0.04       0.55  
Q4 - Quarter Ended June 30, 2011
    0.20       1.01  
                 
Year Ended June 30, 2012
               
Q1 - Quarter Ended September 30, 2011
  $ 0.07     $ 1.00  
Q2 - Quarter Ended December 31, 2011
    0.05       1.00  
Q3 - Quarter Ended March 31, 2012
    0.05       0.10  
Q4 - Quarter Ended June 30, 2012
    0.03       0.06  
 
Our stock has traded thinly for the periods represented.  For example, for the year ended June 30, 2012, our stock has experienced only 30 trading days with 269,175 shares traded on those days for an average daily volume of 737 shares per day.
 
We currently have no outstanding stock options on our common stock or other equity compensation plans.  However, as noted in Note 8 to the financial statements, we granted an investor an option to purchase 10% of our subsidiary which will own and operate the power plant in Bangladesh.

(b)   Our Stockholders

As of June 30, 2012, there were approximately 203 holders of record of EHII common stock.

(c)   Our Dividend Policy

We have never paid, and do not intend to pay, any cash dividends on our common stock for the foreseeable future.  Therefore in all likelihood, an investor in this offering will only realize a profit on his investment, in the short term, if the market price of our common stock increases in value.

(d)   Securities Authorized to be Issued Under our Equity Compensation Plans

We currently do not have any equity compensation plans.
 
ITEM 6. SELECTED FINANCIAL DATA
 
Not applicable

 
11

 
 
ITEM 7. MANAGEMENT’S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes included in this report.

Overview and History

The Company’s predecessor, Green Energy Corp. was originally organized as a Colorado corporation, referred to in this document as “Old Green Energy”, commenced operations in 2003 as a marketer of a specific gasification technology for commercial applications to produce fuels and chemicals.  In December 2006, Old Green Energy reincorporated as a Nevada corporation and changed its name to Green Energy Holding Corp.

On December 28, 2008, GEHC entered into a stock purchase agreement to issue 14,370,300 shares to accredited investors for $175,000, giving those outside investors approximately 96.5% controlling interest in the Company.   An additional $325,000 was used for legal and accounting fees and expenses, as well as administrative fees and costs.  The aggregate cost of the change in control totaled $500,000.

On March 10, 2009, the Company amended the Articles of Incorporation to change its name from Green Energy Holding Corp. to Energy Holdings International, Inc.

Our Business
 
The Company was originally organized in October 2003 to capitalize on the growing market for alternative fuels and its co-products.  The Company acquired a non-exclusive license to a specific technology for the conversion of biomass to synthesis gas (“syngas”). The technology includes the ability to produce a consistent, high-quality syngas product that can be used for energy production or as a building block for other chemical manufacturing processes.

Through the end of calendar 2008, our growth strategy has encompassed a multi-pronged approach which is geared at ultimately developing production levels and lowering production costs, thereby driving profitability.

Following the sale of 96.5% of the Company’s capital stock at the end of calendar 2008, the Company decided to modify its focus, concentrating on acquiring, developing and managing cash producing oil and gas properties in the Middle East, Asia and the Americas, particularly in the middle region of the United States.  It aspires to find new, long-term energy solutions that are safe, economically viable and environmentally friendly to enhance the future of countries and economies worldwide. It is responding to international, political, environmental and free market demands for investments in the Independent Power Project (IPP) market with safer, cleaner and more technologically advanced energy sources. The Company is dedicated to the task of providing the best management and advisory services available in the complex arena of international business and project development in oil and gas production and power generation.
 
Our corporate headquarters is located at 12012 Wickchester Lane, Suite 130, Houston, Texas 77079, and our telephone number is (832) 230-1490.  You can locate us on the web at http://www.energyhii.com.
 
Results of Operations
 
Year Ended June 30, 2012 versus 2011
 
We incurred a net loss$1,260,614 for the year ended June 30, 2012, ($0.04 per share), versus a net loss of $1,773,222in the same period in 2011 ($0.06per share).

 
12

 
 
Revenues - We had no revenue for the twelve months ended June 30, 2012 versus $166,667 for the same period ended June 30, 2011.  All revenues resulted fromconsulting services performed in the Middle East in connection with several power generation projects located in the Middle East, North Africa and Asia.  These revenues have decreased as a result of our changed focus on completing our Power Purchase Agreement (“PPA”) in Bangladesh.  During the current year, we have focused on consummating our project in Bangladesh.

General and Administrative Expenses -  We incurred general and administrative expenses of $1,513,714 for the year ended June 30, 2012, compared to $1,800,932 for the same period in 2011, a 16% decrease, owing mostly to our reduced payroll in Dubai.

Depreciation – depreciation expense decreasedfor the year ended June 30, 2012 versus the same period in 2011 ($8,451 and $34,182, respectively).  Many of our assets have become fully depreciated and no longer result in depreciation charges.

Our ability to achieve profitable operations depends on developing revenue through additional consulting contracts and from the operation of oil & gas and power generation facilities both domestically and abroad. We do not expect to be profitable until we acquire our first oil and gas property.  However, given the uncertainties surrounding the timing and nature of such acquisitions, we cannot assure you that we will show profitable results at any time.

Liquidity and Capital Resources
 
As of June 30, 2012, we had unrestricted cash and cash equivalents totaling $10,514.

Net cash used in operating activities was $1,039,066 for the twelve months ended June 30, 2012 compared to net cash used of $695,974for the same period in 2011. This change is a result of a shifting of focus from providing consulting services to completing the PPA on our Bangladesh project.

Cash flows provided by financing activities was $998,616for the twelve months ended June 30, 2012 compared to$387,859 for the same period in 2011.  During the current fiscal year, we financed most of our operation by selling stock and options to purchase equity in our Bangladesh project for cash.  This cash influx is depicted in this section.

We anticipate funding any capital expenditures over the next 12 months through the issuance of equity or debt. We are continuing to evaluate both oil & gas and power generation assets.
 
We are currently in discussions with several intermediaries, advisors and investors to structure and raise the funds to optimally finance various potential projects. We are evaluating debt and equity placements at the corporate level as well as project specific capital opportunities. At the present time, we have no commitments for any additional financing, and there can be no assurance that, if needed, additional capital will be available to use on commercially acceptable terms or at all. Our failure to raise capital as needed would significantly restrict our growth and hinder out ability to compete. We may need to curtail expenses, and forgo business opportunities. Additional equity financings are likely to be dilutive to holders of our common stock and debt financing, if available, may involve significant payment obligation and covenants that restrict how we operate our business.

If we are unable to secure funds to finance various potential projects, we may examine other possibilities, including, but not limited to, mergers or acquisitions.
 
Off-Balance Sheet Arrangements
 
We currently have four leases for office space and corporate apartments in Dubai and in Houston.   Our office lease in Houston runs until December 31, 2015 and is approximately $4,000 per month.  In Dubai, we have a corporate apartment lease which runs until May, 2013 and is approximately $34,000 per year.   Our office space in Dubai runs until February 18, 2013 and is approximately $68,000 per year.

 
13

 
 
The obligations above are operating leases and, as such, are not recorded as liabilities on our balance sheet.  See Note 11 for a summary of these payouts over the next four years.

We have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivative instruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest in an unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.
 
Critical Accounting Policies

Our discussion and analysis of results of operations and financial condition are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis, including those related to provisions for uncollectible accounts receivable, inventories, valuation of intangible assets and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The accounting policies that we follow are set forth in Note 1 to our financial statements as included in this filing.  These accounting policies conform to accounting principles generally accepted in the United States, and have been consistently applied in the preparation of the financial statements.

Fair Value Measurements

On July 1, 2010, the Company adopted guidance which defines fair value, establishes a framework for using fair value to measure financial assets and liabilities on a recurring basis, and expands disclosures about fair value measurements. Beginning on July 1, 2010, the Company also applied the guidance to non-financial assets and liabilities measured at fair value on a non-recurring basis, which includes goodwill and intangible assets. The guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of the inputs as follows:

Level 1 - Valuation is based upon unadjusted quoted market prices for identical assets or liabilities in active markets that the Company has the ability to access.

Level 2 -Valuation is based upon quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; or valuations based on models where the significant inputs are observable in the market.

Level 3 - Valuation is based on models where significant inputs are not observable. The unobservable inputs reflect the Company's own assumptions about the inputs that market participants would use.

 
14

 
 
Derivative Financial Instruments

The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks.
 
The Company reviews the terms of the common stock, warrants and convertible debt it issues to determine whether there are embedded derivative instruments, including embedded conversion options, which are required to be bifurcated and accounted for separately as derivative financial instruments.  In circumstances where the host instrument contains more than one embedded derivative instrument, including the conversion option, that is required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.
 
Bifurcated embedded derivatives are initially recorded at fair value and are then revalued at each reporting date with changes in the fair value reported as non-operating income or expense. When the equity or convertible debt instruments contain embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds received are first allocated to the fair value of all the bifurcated derivative instruments.  The remaining proceeds, if any, are then allocated to the host instruments themselves, usually resulting in those instruments being recorded at a discount from their face value.

The discount from the face value of the convertible debt is amortized over the life of the instrument through periodic charges to interest expense, using the effective interest method.

The fair value of the derivatives is estimated using a lattice-binomial option pricing model and the Black-Scholes option pricing model.  These models utilize a series of inputs and assumptions to arrive at a fair value at the date of inception and each reporting period.  An option-pricing model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the Company’s expected stock price volatility over the term of the warrant and discount rates.

Revenue recognition

Revenue is comprised principally of service and consulting revenue from work performed for customers under master service arrangements. Revenue is recognized over the period of the agreement as it is earned as such policy complies with the following criteria: (i) persuasive evidence of an arrangement exists; (ii) the services have been provided; (iii) the fee is fixed and determinable, (iv) collectability is reasonably assured.   In the event that a customer pays up front, deferred revenue is recognized for the amount of the payment in excess of the revenue earned.

Stock-Based Compensation

The Company is required to recognize expense of options or similar equity instruments issued to employees using the fair-value-based method of accounting for stock-based payments in compliance with ASC 718 – Compensation – Stock Compensation and ASC 505-50 – Equity Based Payments to Non-Employees.  ASC 718 covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance –based awards, share appreciation rights, and employee share purchase plans.  Application of this pronouncement requires significant judgment regarding the assumptions used in the selected option pricing model, including stock price volatility and employee exercise behavior.  Most of these inputs are either highly dependent on the current economic environment at the date of grant or forward-looking over the expected term of the award.  The Company typically uses the lattice model to value options and similar equity instruments.
 
 
15

 
 
Recently Issued Accounting Pronouncements
 
In June 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income”, which is effective for annual reporting periods beginning after December 15, 2011. ASU 2011-05 will become effective for the Company on December 1, 2012. This guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. In addition, items of other comprehensive income that are reclassified to profit or loss are required to be presented separately on the face of the financial statements. This guidance is intended to increase the prominence of other comprehensive income in financial statements by requiring that such amounts be presented either in a single continuous statement of income and comprehensive income or separately in consecutive statements of income and comprehensive income. The adoption of ASU 2011-05 is not expected to have a material impact on our financial position or results of operations.

In May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”, which is effective for annual reporting periods beginning after December 15, 2011. This guidance amends certain accounting and disclosure requirements related to fair value measurements. Additional disclosure requirements in the update include: (1) for Level 3 fair value measurements, quantitative information about unobservable inputs used, a description of the valuation processes used by the entity, and a qualitative discussion about the sensitivity of the measurements to changes in the unobservable inputs; (2) for an entity’s use of a nonfinancial asset that is different from the asset’s highest and best use, the reason for the difference; (3) for financial instruments not measured at fair value but for which disclosure of fair value is required, the fair value hierarchy level in which the fair value measurements were determined; and (4) the disclosure of all transfers between Level 1 and Level 2 of the fair value hierarchy. ASU 2011-04 will become effective for the Company on December 1, 2012. We are currently evaluating ASU 2011-04 and have not yet determined the impact that adoption will have on our financial statements.
 
ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
 
As a "smaller reporting company" as defined by Item 10 of Regulation S-K, EHII is not required to provide this information.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
The financial statements and supplemental data required by this Item 8 follow the index of financial statements that appears at the end of Part I of this Form 10-K.
 
 
16

 
 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors
Energy Holdings International, Inc.
12012 Wickchester Lane, Suite 130
Houston, Texas 77079

We have audited the accompanying consolidated balance sheets of Energy Holdings International, Inc. (A Development Stage Enterprise) (the “Company”) as of June 30, 2012 and 2011 and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows for each of the twelve month periods then ended, and for the period from re-entry to the development stage (April 1, 2012) until June 30, 2012.   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 audit.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit 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 audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Energy Holdings International, Inc. as of June 30, 2012 and 2011 and the results of its operations and cash flows for the periods described above in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company suffered net losses from operations, which raises substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters also are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ M&K CPAS, PLLC

www.mkacpas.com
Houston, Texas

October 12, 2012
 
 
17

 

ENERGY HOLDINGS INTERNATIONAL, INC.
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS

   
Year Ended June 30,
 
   
2012
   
2011
 
             
ASSETS
           
Cash and equivalents – unrestricted
  $ 10,514     $ 50,964  
Cash and equivalents – restricted
    40,068       40,030  
Prepaid expenses and advances to employees
    22,684       4,083  
Total current assets
    73,266       95,077  
                 
Property, Plant and Equipment, net
    24,673       33,123  
Deposits
    8,181       8,181  
Total non-current assets
    32,854       41,304  
                 
TOTAL ASSETS
  $ 106,120     $ 136,381  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
         
Accounts payable and accrued liabilities
  $ 127,511     $ 167,452  
Accounts payable - related party
    585,149       241,128  
Short-term convertible notes payable, net of discount of $0 and $15,620
    42,639       27,662  
Derivative liability
    22,371       119,643  
Deferred revenue
    -       299,975  
Total current liabilities
    777,670       855,860  
                 
TOTAL LIABILITIES
    777,670       855,860  
                 
STOCKHOLDERS' EQUITY (DEFICIT)
               
Preferred stock  - $0.10 par value: 25,000,000 shares authorized; none issued and outstanding at June 30, 2012 or 2011.
    -       -  
Common stock, $0.001 par value; 100 million shares authorized, 35,154,006 and 31,612,109 shares issued and outstanding at June 30, 2012 and 2011, respectively
    35,154       31,612  
Additional paid in capital
    3,400,484       1,955,483  
Common stock committed
    50,000       190,000  
Deficit accumulated before re-entry to the development stage
    (4,089,763 )     (2,896,574 )
Accumulated deficit after re-entry to the development stage
    (67,425 )     -  
                 
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)
    (671,550 )     (719,479 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
  $ 106,120     $ 136,381  
 
The accompanying notes are an integral part of the consolidated financial statements.

 
18

 

ENERGY HOLDINGS INTERNATIONAL, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS

   
Year Ended June 30,
    From Re-Entry to the Development Stage (April 1, 2012) to  
   
2012
   
2011
   
June 30, 2012
 
REVENUES
                 
Consulting revenues
  $ -     $ 166,667     $ -  
TOTAL REVENUES
    -       166,667       -  
                         
OPERATING EXPENSES
                       
General and administrative expenses
    1,513,714       1,800,932       61,920  
Depreciation
    8,451       34,182       2,113  
Total operating expenses
    1,522,165       1,835,114       64,033  
                         
NET LOSS FROM OPERATIONS
    (1,522,165 )     (1,668,447 )     (64,033 )
                         
OTHER INCOME/(EXPENSE)
                       
Change in fair value of derivative liability
    91,320       (97,294 )     178  
Gain (loss) on debt extinguishment
    194,000       -       -  
Interest expense
    (23,806 )     (7,511 )     (3,580 )
Interest income
    37       30       10  
Total other income/(expense)
    261,551       (104,775 )     (3,392 )
Net loss
  $ (1,260,614 )   $ (1,773,222 )   $ (67,425 )
                         
Net loss per share - basic and diluted
  $ (0.04 )   $ (0.06 )        
Weighted average number of shares outstanding
    33,740,949       30,405,671          

The accompanying notes are an integral part of the consolidated financial statements.

 
19

 

ENERGY HOLDINGS INTERNATIONAL, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (DEFICIT)
 
   
Common Stock
   
 Additional
Paid In
Capital
   
 Common
Stock
Committed
   
 Accumulated
Deficit After
Re-entry
to the
 Development
Stage
   
 Accumulated
Deficit Before
Re-entry
to the
Development
 Stage
   
 Total
Stockholders'
Equity
(Deficit)
 
   
Shares
   
Par Value
                     
                                           
Balance at July 1, 2010
    29,662,109     $ 29,662     $ 1,303,743     $ 50,000     $ -     $ (1,123,352 )   $ 260,053  
                                                         
Shares issued for:
                                                       
Services
    1,650,000       1,650       422,850                               424,500  
Cash
    300,000       300       199,700                               200,000  
                                                         
Grant of warrants for services
                    23,831                               23,831  
Stock commitment for cash
                            140,000                       140,000  
Related party cash contribution
                    5,359                               5,359  
Net loss
                                            (1,773,222 )     (1,773,222 )
Balance at June 30, 2011
    31,612,109     $ 31,612     $ 1,955,483     $ 190,000     $ -     $ (2,896,574 )   $ (719,479 )
 
The accompanying notes are an integral part of the consolidated financial statements.

 
20

 
 
ENERGY HOLDINGS INTERNATIONAL, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (DEFICIT)
(Continued)

   
Common Stock
   
 Additional
Paid In
Capital
   
 Common
Stock
Committed
   
 Accumulated
Deficit After
Re-entry
to the
 Development
 Stage
   
 Accumulated
Deficit Before
Re-entry
to the
Development
Stage
   
 Total
Stockholders'
 Equity
(Deficit)
 
   
Shares
   
Par Value
                     
                                                         
Shares issued for:
                                                       
Services
    1,020,000       1,020       175,980                               177,000  
Settlement of
debt and deferred
revenue balances
    315,000       315       120,660                               120,975  
Cash
    1,000,000       1,000       139,000       (140,000 )                     -  
Conversion of convertible note
    206,897       207       5,793                               6,000  
Cash and option to purchase equity in subsidiary
    1,000,000       1,000       997,616                               998,616  
Adjustment to derivative liability due to debt conversion
                    5,952                               5,952  
                                                         
Net loss prior  to re-entry to the development stage
                                            (1,193,189 )     (1,193,189
Net loss after re-entry to the development stage
                                    (67,425 )     -       (67,425 )
Balance at June 30, 2012
    35,154,006     $ 35,154     $ 3,400,484     $ 50,000     $ (67,425 )   $ (4,089,763 )   $ (671,550
 
The accompanying notes are an integral part of the consolidated financial statements.

 
21

 

ENERGY HOLDINGS INTERNATIONAL, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
   
Year Ended June 30,
   
 From Re-Entry
to the
Development
Stage (April 1,
2012) to
 
   
2012
   
2011
   
June 30, 2012
 
                   
CASH FLOWS FROM OPERATING ACTIVITIES
                 
Net income / (loss)
  $ (1,260,614 )   $ (1,773,222 )   $ (67,425 )
Adjustments to reconcile net loss to net cash used in operating activities:
                       
Depreciation expense
    8,451       34,182       2,113  
Amortization of debt discount
    15,620       6,729       -  
Change in fair value of derivative
    (91,320 )     97,294       22,371  
Gain on debt extinguishment
    (194,000 )             -  
Stock-based compensation
    177,000       448,331       (89,500 )
                         
Change in operating assets and liabilities:
                       
Deposits, prepaid expenses and other current assets
    (18,601 )     13,340       3,007  
Accounts payable and accrued liabilities
    (1,642 )     142,966       76,419  
Deferred revenues
    -       133,308       -  
Related party payables
    326,078       241,128       (117,686 )
Compensating balance restriction
    (38 )     (40,030 )     (11 )
Net cash used in operations
    (1,039,066 )     (695,974 )     (170,712 )
                         
CASH FLOWS FROM INVESTING ACTIVITIES
                       
                         
Net cash used in investing activities
    -       -       -  
 
The accompanying notes are an integral part of the consolidated financial statements.
 
 
22

 
 
ENERGY HOLDINGS INTERNATIONAL, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)

   
Year Ended June 30,
     From Re-Entry to the Development Stage (April 1, 2012) to  
   
2012
   
2011
   
June 30, 2012
 
CASH FLOWS FROM FINANCING ACTIVITIES
                 
Proceeds from notes payable
    -       42,500       -  
Sales of common stock
    -       200,000       -  
Common stock committed for cash
    -       140,000       -  
Related-party cash contributions
    -       5,359       -  
Stock issued for cash and option to purchase equity in subsidiary
    998,616       -       -  
                         
Net cash provided by/(used in) financing activities
    998,616       387,859       -  
                         
Net change in cash and equivalents
    (40,450 )     (308,115 )     (164,760 )
Cash and equivalents, beginning of period
    50,964       359,079       175,274  
Cash and equivalents, end of period
  $ 10,514     $ 50,964     $ 10,514  
 
The accompanying notes are an integral part of the consolidated financial statements.

 
23

 
 
ENERGY HOLDINGS INTERNATIONAL, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)

   
Year Ended June 30,
     From Re-Entry to the Development Stage (April 1, 2012) to  
   
2012
   
2011
   
June 30, 2012
 
                   
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
             
Cash paid for interest
    -       -       -  
Cash paid for income taxes
    -       -       -  
                         
SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITIES
         
Common stock issued for conversion of convertible note
    6,000       -       -  
Adjustment to derivative liability due to debt conversion
    5,952       -       -  
Reduction in common stock payable due to issuance of shares
    140,000       -       -  
Common stock issued for settlement of deferred revenue balance
    120,000       -       -  
Common stock issued for settlement of debt
    975       -       -  
 
The accompanying notes are an integral part of the consolidated financial statements.

 
24

 

ENERGY HOLDINGS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Energy Holdings International, Inc. (the “Company”), was incorporated in the State of Nevada on November 30, 2006 as a successor corporation to Green Energy Corp. which was incorporated in the State of Colorado on October 14, 2003. Green Energy Corp. acquired Green Energy Holding Corp. on December 18, 2006.

On March 10, 2009, the Company amended the Articles of Incorporation to change its name from Green Energy Holding Corp. to Energy Holdings International, Inc.

The Company is a holding company that also provides consulting services and is currently exploring various opportunities in the energy area.  EHII’s management has been in active discussions with several potential companies, either to acquire, manage, or joint venture with these entities.  However, as of the date of this filing, no definitive agreements or arrangements have been finalized.

The Company has consolidated the accounts of Energy Holdings International – Middle East/North Africa DMCC (“EHII – MENA”), formerly Advance Energy DMCC, a firm in Dubai, United Arab Emirates, into its financial statements.

On July 21, 2011, we signed an agreement with PriSe Power and Energy Limited (“PriSe”), a local Bangladesh company, to sell 25% of our yet-to-be-formed subsidiary which will own the rights to the two 225 MW combined-cycle power plants in Bangladesh (the “Bangladesh subsidiary”)  in exchange for $4 million upon obtaining the Power Purchase Agreement (“PPA”).  The PPA has not been obtained as of the date of this filing and no cash has been funded to the company out of the total $4 million that is promised.  In addition, PriSe has agreed to complete the PPA and Implementation Agreement for the project and obtain all necessary approvals with the controlling authorities within the government of Bangladesh as partial EHII compensation for the 25% interest in the project.

On January 18, 2012, we entered into an agreement with an accredited investor in Saudi Arabia to provide $1 million in cash for operating capital.  As part of that agreement, we agreed to issue the investor 1 million common shares.  In addition to these shares, we agreed to provide an option to acquire 10% of the equity of our subsidiary that will be formed to own and operate the two 225 megawatt power plants in Bangladesh.  The option is exercisable only upon financial close of the Bangladesh project (defined as the point in time when the financial commitments needed to fund the project are placed into escrow and the project is considered fully funded).  Once the option becomes exercisable, the option holder has 60 days to exercise the option by rendering 10% of the cash equity requirements.  For example, if the project requires a total of $40 million to fund the power plants, and we are successful at raising 75% (or $30 million) through debt offerings, then this option holder may acquire a 10% interest in the subsidiary by rendering $1 million ($40 million times  (100% minus 75%, or 25%) times 10% equity requirement.  Since this option is not exercisable until financial close, we deemed it to have no value as the contingency has not been resolved.

Fiscal year

The Company employs a fiscal year ending June 30.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
 
 
25

 

Cash and cash equivalents

The Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents.  There are no cash equivalents at June 30, 2012 or 2011.  At June 30, 2012, we had $40,068 on deposit with a financial institution as a compensating balance to cover our usage of credit cards for travel.  We are prohibited from using these funds until such time as the institution releases us from the obligation to retain these funds at their bank.

At June 30, 2012, we had the U.S. Dollar equivalent of $9,783 on deposit at Emirates Bank in Dubai, United Arab Emirates (the “UAE”).  At this time, the UAE does not provide deposit coverage equivalent to that provided by the Federal Deposit Insurance Corporation (“FDIC”).

Foreign currencies

The Company maintains bank accounts in Dubai whose balances and transactions are denominated in Dirhams of the United Arab Emirates (AED).  The AED is tied to the US Dollar and, as such, there are no foreign currency gains or losses.

The Company’s functional currency is the US Dollar.

Concentration of Credit Risk

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk are cash and cash equivalents. The Company places its cash and temporary cash investments with credit quality institutions. At times, such investments may be in excess of FDIC insurance limits.

Net income (loss) per share

The net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common outstanding. Warrants, stock options, and common stock issuable upon the conversion of the Company's preferred stock  (if any), are not included in the computation if the effect would be anti-dilutive and would increase the earnings or decrease loss per share.  The weighted average shares outstanding for the year ended June 30, 2012 and 2011 were 33,740,949 and 30,405,671, respectively.  The earnings per share on a basic and diluted basis for the year ended June 30, 2012 and 2011 were $(0.04) and $(0.06), respectively.

In presenting net income (loss) per share, we segregate net income or loss as resulting from normal operations, extraordinary items and discontinued operations.

Fair Value Measurements

On July 1, 2010, the Company adopted guidance which defines fair value, establishes a framework for using fair value to measure financial assets and liabilities on a recurring basis, and expands disclosures about fair value measurements. Beginning on July 1, 2010, the Company also applied the guidance to non-financial assets and liabilities measured at fair value on a non-recurring basis, which includes goodwill and intangible assets. The guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of the inputs as follows:
 
 
26

 

Level 1 - Valuation is based upon unadjusted quoted market prices for identical assets or liabilities in active markets that the Company has the ability to access.

Level 2 -Valuation is based upon quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; or valuations based on models where the significant inputs are observable in the market.

Level 3 - Valuation is based on models where significant inputs are not observable. The unobservable inputs reflect the Company's own assumptions about the inputs that market participants would use.

The following table presents assets and liabilities that are measured and recognized at fair value as of June 30, 2012 on a recurring and non-recurring basis:
 
Description
 
Level 1
   
Level 2
   
Level 3
   
Gains
(Losses)
 
Derivatives (recurring)
  $ -     $ -     $ 22,371     $ 91,320  
 
The following table presents assets and liabilities that are measured and recognized at fair value as of June 30, , 2011 on a recurring and non-recurring basis:
 
                     
Gains
 
Description
 
Level 1
   
Level 2
   
Level 3
   
(Losses)
 
Derivatives (recurring)
  $ -     $ -     $ 119,643     $ (97,294 )
 
The Company has derivative liabilities as a result of a 2011 convertible promissory note that includes embedded derivatives.  These liabilities were valued with the assistance of a valuation consultant and consisted of level 3 valuation techniques.
 
The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and long-term debt. The estimated fair value of cash, accounts receivable, accounts payable and accrued liabilities approximate their carrying amounts due to the short-term nature of these instruments. The carrying value of long-term debt also approximates fair value since their terms are similar to those in the lending market for comparable loans with comparable risks.

Derivative Financial Instruments

The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks.
 
The Company reviews the terms of the common stock, warrants and convertible debt it issues to determine whether there are embedded derivative instruments, including embedded conversion options, which are required to be bifurcated and accounted for separately as derivative financial instruments.  In circumstances where the host instrument contains more than one embedded derivative instrument, including the conversion option, that is required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.
 
 
27

 
 
Bifurcated embedded derivatives are initially recorded at fair value and are then revalued at each reporting date with changes in the fair value reported as non-operating income or expense. When the equity or convertible debt instruments contain embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds received are first allocated to the fair value of all the bifurcated derivative instruments.  The remaining proceeds, if any, are then allocated to the host instruments themselves, usually resulting in those instruments being recorded at a discount from their face value.

The discount from the face value of the convertible debt is amortized over the life of the instrument through periodic charges to interest expense, using the effective interest method.

The fair value of the derivatives is estimated using a Monte Carlo simulation model, lattice-binomial option pricing model and the Black-Scholes option pricing model.  These models utilize a series of inputs and assumptions to arrive at a fair value at the date of inception and each reporting period.  An option-pricing model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the Company’s expected stock price volatility over the term of the warrant and discount rates.

Revenue recognition

Revenue is comprised principally of service and consulting revenue from work performed for customers under master service arrangements. Revenue is recognized over the period of the agreement as it is earned as such policy complies with the following criteria: (i) persuasive evidence of an arrangement exists; (ii) the services have been provided; (iii) the fee is fixed and determinable, (iv) collectability is reasonably assured.   In the event that a customer pays up front, deferred revenue is recognized for the amount of the payment in excess of the revenue earned.
 
Financial instruments

The carrying amounts of the Company’s financial instruments as of June 30, 2012 and 2011 approximate their respective fair values because of the short-term nature of these instruments. Such instruments consist of cash, accounts payable and accrued expenses.

Stock-Based Compensation

The Company is required to recognize expense of options or similar equity instruments issued to employees using the fair-value-based method of accounting for stock-based payments in compliance with ASC 718 – Compensation – Stock Compensation and ASC 505-50 – Equity Based Payments to Non-Employees.  ASC 718 covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance –based awards, share appreciation rights, and employee share purchase plans.  Application of this pronouncement requires significant judgment regarding the assumptions used in the selected option pricing model, including stock price volatility and employee exercise behavior.  Most of these inputs are either highly dependent on the current economic environment at the date of grant or forward-looking over the expected term of the award.   The Company typically uses the lattice model to value options and similar equity instruments.

Property and equipment

Property and equipment are recorded at cost and depreciated under the straight line method over each item's estimated useful life.
 
 
28

 

Income tax

The Company accounts for income taxes under ASC 740 – Income Taxes. Under ASC 740 deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Development Stage Enterprise

As of April 1, 2012, the Company re-entered the development stage.  The financial statements have been updated to reflect this change as of this date.

Reclassifications

Certain information reported for previous periods has been reclassified for consistency with current financial information.

Recently Issued Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income”, which is effective for annual reporting periods beginning after December 15, 2011. ASU 2011-05 will become effective for the Company on July 1, 2012. This guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. In addition, items of other comprehensive income that are reclassified to profit or loss are required to be presented separately on the face of the financial statements. This guidance is intended to increase the prominence of other comprehensive income in financial statements by requiring that such amounts be presented either in a single continuous statement of income and comprehensive income or separately in consecutive statements of income and comprehensive income. The adoption of ASU 2011-05 is not expected to have a material impact on our financial position or results of operations.

In May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”, which is effective for annual reporting periods beginning after December 15, 2011. This guidance amends certain accounting and disclosure requirements related to fair value measurements. Additional disclosure requirements in the update include: (1) for Level 3 fair value measurements, quantitative information about unobservable inputs used, a description of the valuation processes used by the entity, and a qualitative discussion about the sensitivity of the measurements to changes in the unobservable inputs; (2) for an entity’s use of a nonfinancial asset that is different from the asset’s highest and best use, the reason for the difference; (3) for financial instruments not measured at fair value but for which disclosure of fair value is required, the fair value hierarchy level in which the fair value measurements were determined; and (4) the disclosure of all transfers between Level 1 and Level 2 of the fair value hierarchy. ASU 2011-04 will become effective for the Company on July 1, 2012. We are currently evaluating ASU 2011-04 and have not yet determined the impact that adoption will have on our financial statements.
 
 
29

 

NOTE 2. GOING CONCERN

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As shown in the accompanying financial statements, we had losses of $1,260,614 and $1,773,222, respectively, in 2012 and 2011 and had accumulated deficits of $4,157,188 as of June 30, 2012.

These conditions raise substantial doubt as to our ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

Management plans to finance our continuing operations by selling equity in our Bangladesh project, additional sales of common stock or issuance of debt.

NOTE 3. QUARTERLY RESTATEMENTS

On April 27, 2011, we issued a convertible promissory note in the amount of $42,500 in exchange for cash (see Note 9 for a full discussion of the derivatives).  The note contained a debt discount  which we valued at $22,459 at June 30, 2011.

In addition to the effect of the beneficial conversion feature, their variability tainted the 500,000 warrants issued on March 1, 2011 (“the March 1 Warrants”).  We valued the 500,000 warrants at $97,184 at June 30, 2011.

On October 24, 2011, we amended that convertible promissory note to contain a minimum conversion price below which our creditor could not seek additional shares (the “Floor Price”).  We believed that this Floor Price was sufficient to preclude us from having to account for the note’s beneficial conversion feature and the tainted nature of the March 1 Warrants as derivatives.  As such we did not account for these outstanding instruments as derivatives.

Upon recalculation, management has determined that the Floor Price was not sufficient to preclude derivative treatment.  The financial statements contained in this explanatory note restates those from the periods ended September 30, 2011, December 31, 2011 and March 31, 2012 to include treatment of the above-mentioned instruments as derivatives.

The following balance sheets, statements of operations and statements of cash flows as of and for the periods ended September 30, 2011, December 31, 2011 and March 31, 2012 reflect the adjustments to the accounts as a result of this oversight.

 
30

 
 
ENERGY HOLDINGS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
September 30, 2011

   
As Originally Reported
(Unaudited)
   
Adjustments
   
Restated
(Unaudited)
 
ASSETS
                 
Cash and equivalents - unrestricted
  $ 93,891     $       $ 93,891  
Cash and equivalents - restricted
    40,046               40,046  
Prepaid expenses and advances to employees
    14,135               14,135  
Total current assets
    148,072       -       148,072  
                         
Property, Plant and Equipment, net of accumulated depreciation of $13,732 and $11,620 at September 30, 2011
    31,011               31,011  
Deposits
    8,181               8,181  
Total non-current assets
    39,192       -       39,192  
                         
TOTAL ASSETS
  $ 187,264     $ -     $ 187,264  
                         
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                 
Accounts payable and accrued liabilities
  $ 108,811     $       $ 108,811  
Accounts payable - related party
    328,425               328,425  
Short-term note payable, net of discount of $8,251
    35,888               35,888  
Derivative liability
    -       59,854       59,854  
Deferred Revenue
    299,975               299,975  
Total current liabilities
    773,099       59,854       832,953  
                         
TOTAL LIABILITIES
    773,099       59,854       832,953  
                         
STOCKHOLDERS' EQUITY (DEFICIT)
                       
Preferred Stock - $0.10 par value: 25,000,000 shares authorized; none issued and outstanding at September 30, 2011
    -               -  
Common stock, $0.001 par value; 100 million shares authorized, 31,862,109 shares issued and outstanding at September 30, 2011
    31,862               31,862  
Additional paid in capital
    2,267,293               2,386,936  
Common stock committed
    190,000               190,000  
Accumulated deficit
    (3,074,990 )     (59,854 ) A     (3,254,487 )
TOTAL STOCKHOLDERS' EQUITY
    (585,835 )     (59,854 )     (645,689 )
                         
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
  $ 187,264     $ -     $ 187,264  

Adjustments:
A – The derivative liability at June 30, 2011 was originally removed and recorded as a gain due to the amendment of the promissory note.  This amount is the effect of reestablishing the derivative liability as of June 30, 2011 and recognizing the change in fair value of the derivative liability for the three months ended September 30, 2011.

 
31

 
 
ENERGY HOLDINGS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended September 30, 2011

   
Three Months Ended 9/30/11
 
   
As Originally Reported
(Unaudited)
   
Adjustments
   
Restated
(Unaudited)
 
REVENUES
                 
Consulting revenues
  $ -     $ -     $ -  
TOTAL REVENUES
    -       -       -  
                         
OPERATING EXPENSES
                       
General and administrative expenses
    285,451       -       285,451  
Depreciation
    2,112       -       2,112  
Total operating expenses
    287,563       -       287,563  
                         
NET LOSS FROM OPERATIONS
    (287,563 )     -       (287,563 )
                         
OTHER INCOME/(EXPENSE)
                       
Change in fair value of derivative liability
    119,643       (59,854 ) A     59,789  
Interest expense
    (10,511 )     -       (10,511 )
Interest income
    15       -       15  
Total other income/(expense)
    109,147       (59,854 )     49,293  
                         
Net loss
  $ (178,416 )   $ (59,854 )   $ (238,270 )
                         
Net loss per share - basic and diluted
  $ (0.01 )             (0.01 )
                         
Weighted average number of shares outstanding
    31,813,196               31,813,196  

Adjustment reasons:
A - This amount is the combined effect of restating the June 30, 2011 derivative balance of $119,643 from income to equity and the September 30, 2011 derivative valuation.

 
32

 
 
ENERGY HOLDINGS INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended September 30, 2011

    Three Months Ended 9/30/11  
   
As Originally Reported
(Unaudited)
   
Adjustments
   
Restated
(Unaudited)
 
CASH FLOWS FROM OPERATING ACTIVITIES
                 
Net income / (loss)
  $ (178,416 )   $ (59,854 ) A   $ (238,270 )
Net loss, non-controlling interest
                       
Adjustments to reconcile net loss to net cash used in operating activities:
                       
Depreciation expense
    2,112       -       2,112  
Amortization of discount on note payable
    7,369       -       7,369  
Change in fair value of derivative
    (119,643 )     59,854  A     (59,789 )
Gain on debt extinguishment
    -       -       -  
Stock-based compensation
    12,500       -       12,500  
                         
Change in operating assets and liabilities:
                       
Restricted cash
    (16 )     -       (16 )
Deposits, prepaid expenses and other current assets
    (10,052 )     -       (10,052 )
Accounts payable and accrued liabilities
    (39,841 )     -       (39,841 )
Related party payables
    69,354       -       69,354  
                         
Net cash provided by / (used in) operations
    (256,633 )     -       (256,633 )
                         
CASH FLOWS FROM INVESTING ACTIVITIES
                       
Sale of equity interest in subsidiary
    299,560       -       299,560  
Net cash used in investing activities
    299,560       -       299,560  
                         
CASH FLOWS FROM FINANCING ACTIVITIES
                       
                         
Net cash provided by/(used in) financing activities
    -       -       -  
                         
Net change in cash and equivalents
    42,927       -       42,927  
Cash and equivalents, beginning of period
    50,964               50,964  
Cash and equivalents, end of period
  $ 93,891     $ -     $ 93,891  
                         
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
                 
Cash paid for interest
    -                  
Cash paid for income taxes
    -                  

Adjustments:
A -  – This amount is the effect of reestablishing the derivative liability as of June 30, 2011 and recognizing the change in fair value of the derivative liability for the three months ended September 30, 2011.

 
33

 
 
ENERGY HOLDINGS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
December 31, 2011

   
As Originally Reported (Unaudited)
   
Adjustments
   
Restated
(Unaudited)
 
ASSETS
                 
Cash and equivalents - unrestricted
  $ 488,318       -       488,318  
Cash and equivalents - restricted
    40,046       -       40,046  
Prepaid expenses and advances to employees
    22,583       -       22,583  
Total current assets
    550,947       -       550,947  
                         
Property, Plant and Equipment, net of accumulated depreciation of $15,845 and $11,620 at December 31, 2011.
    28,898       -       28,898  
Deposits
    8,181       -       8,181  
Total non-current assets
    37,079       -       37,079  
                         
TOTAL ASSETS
  $ 588,026     $ -     $ 588,026  
                         
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                       
Accounts payable and accrued liabilities
  $ 56,161       -       56,161  
Accounts payable - related party
    523,042       -       523,042  
Short-term note payable, net of discount of $210 and $15,620
    38,704       -       38,704  
Derivative liability
    -       52,059  A, B     52,059  
Deferred Revenue
    -       -       -  
Total current liabilities
    617,907       52,059       669,966  
                         
TOTAL LIABILITIES
    617,907       52,059       669,966  
                         
STOCKHOLDERS' EQUITY (DEFICIT)
                       
Preferred Stock - $0.10 par value: 25,000,000 shares authorized; none issued and outstanding at December 31, 2011 and June 30, 2010
    -       -       -  
Common stock, $0.001 par value; 100 million shares authorized, 33,684,006 and 31,612,109 shares issued and outstanding at December 31, 2011
    33,684       -       33,684  
Additional paid in capital
    3,471,145       (113,691 ) A, B     3,357,454  
Common stock committed
    50,000       -       50,000  
Accumulated deficit
    (3,584,710 )     61,632  B     (3,523,078 )
TOTAL STOCKHOLDERS' EQUITY
    (29,881 )     (52,059 )     (81,940 )
                         
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
  $ 588,026     $ -     $ 588,026  

Adjustments:
A – The derivative liability at June 30, 2011 was originally removed and recorded as a gain due to the amendment of the promissory note.  This entry reclassifies this amount as a decrease in Additional Paid in Capital and an increase in the derivative liability totaling $119,643.  In addition, a note payable was converted during the three months ended December 31, 2011 which resulted in an increase of additional paid in capital and a decrease of the derivative liability totaling  $5,952.
 
B – This amount is the effect of the change in fair value totaling  $59,789 for the three months ended September 30 2011, and a change in fair value of the derivative liability totaling $1,843 for the three months ended December 31, 2011.

 
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ENERGY HOLDINGS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Six Months Ended December 31, 2011

   
Six Months Ended 12/31/11
   
Three Months Ended 12/31/11
 
   
As Originally Reported
(Unaudited)
   
Adjustments
   
Restated
(Unaudited)
   
As Originally Reported
(Unaudited)
   
Adjustments
   
Restated
(Unaudited)
 
                                     
REVENUES
                                   
Consulting revenues
  $ -       -       -     $ -       -       -  
TOTAL REVENUES
    -       -       -       -       -       -  
                                                 
OPERATING EXPENSES
                                               
General and administrative expenses
    858,598       -       858,598       573,147       -       573,147  
Depreciation
    4,226       -       4,226       2,114       -       2,114  
Total operating expenses
    862,824       -       862,824       575,261       -       575,261  
                                                 
NET LOSS FROM OPERATIONS
    (862,824 )     -       (862,824 )     (575,261 )     -       (575,261 )
                                                 
OTHER INCOME/(EXPENSE)
                                               
Change in fair value of derivative liability
    -       61,632A,B       61,632       -       61,697  A,B     1,843  
Gain (loss) on debt extinguishment
    194,000       -       194,000       194,000       -       194,000  
Interest expense
    (19,327 )     -       (19,327 )     (8,816 )     -       (8,816 )
Interest income
    15       -       15       -       -       -  
Total other income/(expense)
    174,688       61,632       236,320       185,184       181,340       187.027  
                                                 
Net loss
  $ (688,136 )   $ 61,632     $ (626,504 )   $ (390,077 )   $ 181,340     $ (388,234 )
                                                 
Net loss per share - basic and diluted
  $ (0.02 )             (0.02 )   $ (0.01 )             (0.01 )
                                                 
Weighted average number of shares outstanding
    32,571,458               32,571,458       33,345,847               33,345,847  

Adjustments:
A – The derivative liability at June 30, 2011 was originally removed and recorded as a gain due to the amendment of the promissory note.  This entry reclassifies this amount as a decrease in Additional Paid in Capital and an increase in the derivative liability totaling $119,643.  In addition, a note payable was converted during the three months ended December 31, 2011 which resulted in an increase of additional paid in capital and a decrease of the derivative liability totaling $5,952
 
B – This amount is the effect of the change in fair value totaling $59,789 for the three months ended September 30 2011, and a change in fair value of the derivative liability totaling $1,843 for the three months ended December 31, 2011.

 
35

 
 
ENERGY HOLDINGS INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Three and Six Months Ended December 31, 2011

   
As Originally Reported
(Unaudited)
   
Adjustments
   
Restated
(Unaudited)
 
                   
CASH FLOWS FROM OPERATING ACTIVITIES
                 
Net income / (loss)
  $ (688,136 )   $ 61,632  A   $ (626,504 )
Net loss, non-controlling interest
                       
Adjustments to reconcile net loss to net cash used in operating activities:
                       
Depreciation expense
    4,226       -       4,226  
Amortization of discount on note payable
    15,410       -       15,410  
Change in fair value of derivative
    -       (61,632 ) A     (61,632 )
Gain on debt extinguishment
    (194,000 )     -       (194,000 )
Common stock issued for services
    132,500       -       132,500  
                         
Change in operating assets and liabilities:
                       
Restricted cash
    (16 )     -       (16 )
Deposits, prepaid expenses and other current assets
    (18,500 )     -       (18,500 )
Accounts payable and accrued liabilities
    (94,660 )     -       (94,660 )
Related party payables
    281,914