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, 2013

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)

 

(281) 752-7314

(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  x 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  x 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  x   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  x 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. x

 

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  x

 

Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). o Yes  x 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:  $906,360.

 

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:  38,956,006 shares as of October 10, 2013.

 

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	17
Item 8. Financial Statements and Supplementary Data	17
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	36
Item 9A. Controls and Procedures	36
Item 9B. Other Information	38
PART III	39
Item 10. Directors, Executive Officers and Corporate Governance	39
Item 11. Executive Compensation	42
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	43
Item 13. Certain Relationships and Related Transactions, and Director Independence	43
Item 14. Principal Accounting Fees and Services	43
Item 15. Exhibits and Financial Statement Schedules	44
Signatures	45

 

 

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.  

 

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.

 

 

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.

  

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.

 

 

We have had a history of net losses.

 

We incurred a net consolidated loss of $1,379,517 for the year ended June 30, 2013, and have had accumulated total losses of $5,536,705 through June 30, 2013. Through June of 2013, 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 our operation through the sale of our securities and loans from directors and shareholders.  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, 2013, we had unrestricted cash of $1,590.  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.

 

 

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 million shares of common stock, of which 38,956,006 shares were issued and outstanding as of October 10, 2013.  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.

 

 

 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. 

 

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 effect on January 1, 2010 and is for a period of five years. Our rent is $4,091.50 per month.

 

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, 2013 and expires February 18, 2014 while the apartment lease began March 8, 2013 and expires March 7, 2014. The apartment lease is in the name of Jalal Alghani, our Chief Financial Officer.

 

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

 

 

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, 2013
Q1 - Quarter Ended September 30, 2012	$	0.01			$	0.07
Q2 - Quarter Ended December 31, 2012		0.05				0.07
Q3 - Quarter Ended March 31, 2013		0.06				0.06
Q4 - Quarter Ended June 30, 2013		0.06				0.10
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, 2013, our stock has experienced only 17 trading days with 440,900 shares traded on those days.

 

We currently have no outstanding stock options on our common stock or other equity compensation plans. However, as noted in Note 7 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, 2013, there were approximately 218 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

 

 

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.

 

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 (281) 752-7314. You can locate us on the web at http://www.energyhii.com.

 

Results of Operations

Year Ended June 30, 2013 versus 2012

 

We incurred a net loss $1,379,517 for the year ended June 30, 2013, (or $0.04 per share), versus a net loss of $1,260,614 in the same period in 2012 ($0.04 per share).

 

Revenues - We had no revenue for the twelve months ended June 30, 2013 and 2012.

 

 

General and Administrative Expenses -  We incurred general and administrative expenses of $1,354,100 for the year ended June 30, 2013, compared to $1,513,714 for the same period in 2012, an 11% decrease, owing mostly to our reduction of personnel costs.

 

Depreciation – depreciation expense was unchanged from the previous year. All of the assets are being depreciated using the straight line method. Therefore, the amount of expense does not change from period to period.

 

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, 2013, we had unrestricted cash and cash equivalents totaling $1,590.

 

Net cash used in operating activities was $787,597 for the twelve months ended June 30, 2013 compared to net cash used of $1,039,066 for the same period in 2012. The difference (and increase of $251,469) is mostly due to changes in operating assets and liabilities.

 

Cash flows provided by financing activities was $778,673 for the twelve months ended June 30, 2013 compared to $998,616 for the same period in 2012.  Most of our financing in the current year is from common stock or common stock commitments whereas in 2012, we raised $998,616 via a sale of equity in our subsidiary.

 

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 three 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, there is a corporate apartment lease under the name of our Chief Financial Officer, Jalal Alghani, which runs until March, 2014 and is approximately $32,000 per year. Our office space in Dubai runs until February 18, 2014, and is approximately $68,000 per year.

 

The obligations above are operating leases and, as such, are not recorded as liabilities on our balance sheet. See Note 10 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.

 

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.

 

Recently Issued Accounting Pronouncements

 

In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. The amendments in the ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP. The new amendments will require an organization to:

 

 

·

Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income - but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period; and

·

Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense.

 

The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual). The amendments are effective for reporting periods beginning after December 15, 2012, for public companies. Early adoption is permitted. The adoption of ASU No. 2013-02 is not expected to have a material impact on our financial position or results of operations.

 

In January 2013, the FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which clarifies which instruments and transactions are subject to the offsetting disclosure requirements originally established by ASU 2011-11. The new ASU addresses preparer concerns that the scope of the disclosure requirements under ASU 2011-11 was overly broad and imposed unintended costs that were not commensurate with estimated benefits to financial statement users. In choosing to narrow the scope of the offsetting disclosures, the Board determined that it could make them more operable and cost effective for preparers while still giving financial statement users sufficient information to analyze the most significant presentation differences between financial statements prepared in accordance with U.S. GAAP and those prepared under IFRSs. Like ASU 2011-11, the amendments in this update will be effective for fiscal periods beginning on, or after January 1, 2013. The adoption of ASU 2013-01 is not expected to have a material impact on our financial position or results of operations.

 

In October 2012, the FASB issued Accounting Standards Update ASU 2012-04, “Technical Corrections and Improvements” in Accounting Standards Update No. 2012-04. The amendments in this update cover a wide range of Topics in the Accounting Standards Codification. These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04 is not expected to have a material impact on our financial position or results of operations.

 

In August 2012, the FASB issued ASU 2012-03, “Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22 (SEC Update)” in Accounting Standards Update No. 2012-03. This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114. The adoption of ASU 2012-03 is not expected to have a material impact on our financial position or results of operations.

 

In July 2012, the FASB issued ASU 2012-02, “Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment” in Accounting Standards Update No. 2012-02. This update amends ASU 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment and permits an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30, Intangibles - Goodwill and Other - General Intangibles Other than Goodwill. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. The adoption of ASU 2012-02 has not had a material impact on our financial position or results of operations.

 

 

In December 2011, the FASB issued ASU 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. This update defers the requirement to present items that are reclassified from accumulated other comprehensive income to net income in both the statement of income where net income is presented and the statement where other comprehensive income is presented. The adoption of ASU 2011-12 has not had a material impact on our financial position or results of operations.

 

In December 2011, the FASB issued ASU No. 2011-11 “Balance Sheet: Disclosures about Offsetting Assets and Liabilities” (“ASU 2011-11”). This Update requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The objective of this disclosure is to facilitate comparison between those entities that prepare their financial statements on the basis of U.S. GAAP and those entities that prepare their financial statements on the basis of IFRS. The amended guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Company is currently evaluating the impact, if any, that the adoption of this pronouncement may have on its results of operations or financial position.

 

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.

 

 

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, 2013 and 2012 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, 2013.   These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with 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, 2013 and 2012 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 consolidated 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 consolidated 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 15, 2013

 

 

ENERGY HOLDINGS INTERNATIONAL, INC.

(A Development Stage Enterprise)

CONSOLIDATED BALANCE SHEETS

 

		June 30,
		2013				2012
ASSETS
Cash and equivalents - unrestricted		$	1,590			$	10,514
Cash and equivalents - restricted			—				40,068
Prepaid expenses and advances to employees			34,683				22,684
Total current assets			36,273				73,266
Property, plant and equipment, net			16,221				24,673
Deposits			8,181				8,181
Total non-current assets			24,402				32,854
TOTAL ASSETS		$	60,675			$	106,120
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Accounts payable and accrued liabilities		$	125,630			$	127,511
Accounts payable - related party			1,024,294				585,149
Convertible short-term notes payable			—				42,639
Short-term notes payable			100,000				—
Derivative liability			—				22,371
Total current liabilities			1,249,924				777,670
TOTAL LIABILITIES			1,249,924				777,670
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock - $0.10 par value: 50,000,000 shares authorized; none issued and outstanding at June 30, 2013 and 2012			—				—
Common stock, $0.001 par value; 100 million shares authorized, 36,656,006 and 35,154,006 shares issued and outstanding at June 30, 2013 and 2012, respectively			36,656				35,154
Additional paid in capital			3,897,989				3,400,484
Common stock committed			412,811				50,000
Deficit accumulated before re-entry to the development stage			(4,089,763	)			(4,089,763	)
Accumulated deficit after re-entry to the development stage			(1,446,942	)			(67,425	)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)			(1,189,249	)			(671,550	)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)		$	60,675			$	106,120

 

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

 

 

ENERGY HOLDINGS INTERNATIONAL, INC.

(A Development Stage Enterprise)

CONSOLIDATED STATEMENTS OF OPERATIONS

 

		Year Ended June 30,								From Re-Entry to the Development Stage
		2013				2012				(04/01/12) to 6/30/13
REVENUES
Consulting revenues		$	—			$	—			$	—
TOTAL REVENUES			—				—				—
OPERATING EXPENSES
General and administrative expenses			1,354,100				1,513,714				1,416,020
Depreciation			8,451				8,451				10,564
Total operating expenses			1,362,551				1,522,165				1,426,584
NET LOSS FROM OPERATIONS			(1,362,551	)			(1,522,165	)			(1,426,584	)
OTHER INCOME/(EXPENSE)
Change in fair value of derivative liability			(1,476	)			91,320				(1,298	)
Gain (loss) on debt extinguishment			(7,447	)			194,000				(7,447	)
Interest expense			(8,060	)			(23,806	)			(11,640	)
Interest income			17				37				27
Total other income/(expense)			(16,966	)			261,551				(20,358	)
Net loss		$	(1,379,517	)		$	(1,260,614	)		$	(1,446,942	)
Net loss per share - basic and diluted		$	(0.04	)		$	(0.04	)
Weighted average number of shares outstanding			35,765,107				33,740,949

 

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

 

 

ENERGY HOLDINGS INTERNATIONAL, INC.

(A Development Stage Enterprise)

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (DEFICIT)

 

 

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

 

 

ENERGY HOLDINGS INTERNATIONAL, INC.

(A Development Stage Enterprise)

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		Year Ended June 30,								From Re-Entry to the Development Stage (04/01/12)
		2013				2012				to 6/30/13
CASH FLOWS FROM OPERATING ACTIVITIES
Net income / (loss)		$	(1,379,517	)		$	(1,260,614	)		$	(1,446,942	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense			8,451				8,451				10,564
Amortization discount on note payable			—				15,620				—
Change in fair value of derivative			1,476				(91,320	)			23,847
Gain on debt and deferred revenues extinguishment			—				(194,000	)			—
Stock-based compensation			152,660				177,000				63,160
											—
Change in operating assets and liabilities:											—
Deposits, prepaid expenses and other current assets			(11,999	)			(18,601	)			(8,992	)
Accounts payable and accrued liabilities			(8,021	)			(1,642	)			68,398
Deferred revenues			—								—
Related party payables			409,285				326,078				291,599
Compensating balance restriction			40,068				(38	)			40,057
Net cash provided by / (used in) operations			(787,597	)			(1,039,066	)			(958,309	)

 

 

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 (04/01/12)
		2013				2012				to 6/30/13
CASH FLOWS FROM FINANCING ACTIVITIES
Related party cash contributions			29,862				—				29,862
Proceeds from notes payable			100,000				—				100,000
Sales of common stock			427,000				—				427,000
Common stock committed for cash			258,311				—				258,311
Principal payments on convertible notes payable			(36,500	)			—				(36,500	)
Sale of equity interest in subsidiary			—				998,616				—
Reclassification of derivative liability to equity			—				—				5,952
Net cash provided by/(used in) financing activities			778,673				998,616				784,625
Net change in cash and equivalents			(8,924	)			(40,450	)			(173,684	)
Cash and equivalents, beginning of period			10,514				50,964				175,274
Cash and equivalents, end of period		$	1,590			$	10,514			$	1,590
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest			—				—				—
Cash paid for income taxes			—				—				—

 

 

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 (04/01/12)
		2013				2012				to 6/30/13
SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITIES
Common stock issued for conversion of convertible note			—				6,000				6,000
Common stock issued for outstanding stock commitment			—				140,000				—
Adjustment to derivative liability due to debt conversion			23,847				5,952				29,799
Reduction in common stock payable due to issuance of shares			—								140,000
Common stock issued for settlement of debt and deferred revenue balance			—				120,975				120,975

 

 

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

 

Term of Office

 

Our Company’s directors are appointed for one-year term to hold office until the next annual general meeting of the Company’s stockholders or until removed from office according to our bylaws and the provisions of the Nevada Revised Statutes.

 

The Company’s officers are appointed by the Company’s Board of Directors and hold office until they resign or are removed.

 

Legal Proceedings Involving Directors, Executive Officers and Certain Beneficial Owners.

 

The Company is not aware of any executive officer or director having been convicted in any criminal proceeding (excluding traffic violations) or is the subject of a criminal proceeding which is currently pending.  Additionally, the Company is not aware of any pending legal proceedings in which any of its executive officers or directors is a party

 

Family Relationships

 

There are no family relationships between our officers and directors.  Each director is elected at our annual meeting of stockholders and holds office until the next annual meeting of stockholders, or until his successor is elected and qualified.

 

Compliance with Section 16(a) of the Exchange Act

 

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers and directors, and persons who beneficially own more than 10% of a registered class of our equity securities to file with the Securities and Exchange Commission initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common shares and other equity securities, on Forms 3, 4 and 5 respectively.  Executive officers, directors and greater than 10% stockholders are required by the Securities and Exchange Commission regulations to furnish us with copies of all Section 16(a) reports they file.  Based on our review of the copies of such forms received by us, and to the best of our knowledge, all executive officers, directors and persons holding greater than 10% of our issued and outstanding stock have filed the required reports in a timely manner during fiscal year ended June 30, 2013.

 

Code of Ethics and Business Conduct

 

EHII has not yet adopted a code of ethics applicable to our chief executive officer, who is our principal executive officer, our chief financial officer, principal accounting officer or controller or persons performing similar functions.  The Board of Directors intends to adopt a Code of Ethics in the near future, which will be filed with the Securities and Exchange Commission.

 

Directors Independence

 

The Company’s common stock is quoted on the OTC Bulletin Board inter-dealer quotation system, which does not have director independence requirements. Under NASDAQ Rule 4200(a)(15), a director is not considered to be independent if he or she is also or has been an executive officer or employee of the corporation. As such, currently none of the Company’s directors are classified as independent directors under this definition.

 

Committees of the Company’s Board of Directors.

 

We currently do not have standing audit, nominating or compensation committees of its Board of Directors. Currently our entire Board performs these functions. The Company does not have charters for any of the above committees.

 

 

Meetings of Directors

 

There were no meetings of the Board of Directors during the last full fiscal year and all actions taken by the Board of Directors were taken by consent resolution. The Company did not hold an annual meeting of the Company’s security holders during the prior fiscal year and does not have a policy requiring attendance by members of the Board of Directors.

 

Item 11. Executive Compensation

 

Summary Compensation

 

The following table shows the compensation paid or accrued during the fiscal years ended June 30, 2012 and 2011, to our corporate officers.

 

SUMMARY COMPENSATION TABLE
			Year Ended June 30,				Base Compensation				Stock Awards				Total Compensation
John Adair			2012			$	240,000			$	—			$	240,000
Chairman and CEO			2011				240,000				—				240,000
Jalal Alghani			2012			$	240,000			$	—			$	240,000
Chief Financial Officer			2011				240,000				—				240,000

 

The above compensation amounts include amounts paid and accrued. However, not all compensation amounts have been paid at June 30, 2013 or 2012. On those dates, Messrs. Adair and Alghani are collectively owed $740,000 and $393,000 in unpaid salaries, respectively.

 

Outstanding Equity Awards at Fiscal Year-End

 

There were no outstanding equity awards at June 30, 2013.

 

Employment Contracts

 

On January 1, 2011, the Company entered into consulting agreements with our Chief Executive Officer, and with Jalal Alghani, Our Chief Financial Officer, to formalize the Company’s arrangement. The term of the contract is four years unless terminated by either party. Compensation for both Messrs. Adair and Alghani are set at $20,000 per month and can be paid either in cash or restricted stock at the option of Messrs. Adair and Alghani.

 

Director Compensation

 

We currently have no formal plan for compensating our directors for their services in their capacity as directors. However, we compensated a director for services for the year ended June 30, 2012 by issuing 100,000 shares. We valued the shares at the grant date fair value and recorded $40,000 of administrative costs.

 

For the year ended June 30, 2013, we compensated the same director by granting 200,000 shares. We valued the shares at the grant date fair value and recorded $12,000 of administrative costs.

 

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

At October 15, 2013 we had 38,956,006 shares of our common stock issued and outstanding, of which 20,077,000 we owned by beneficial owners. The following table sets forth information regarding the beneficial ownership of our common stock as of October 15, 2013, by:

 

·	each person known by us to be the beneficial owner of more than 5% of our common stock;

 

·	each of our directors;

 

·	each of our named executive officers; and

 

·	our named executive officers, directors and director nominees as a group.

 

Unless otherwise indicated, the business address of each person listed is 12012 Wickchester Lane, Suite 130, Houston, Texas 77079.  The percentages in the table have been calculated on the basis of treating as outstanding for a particular person, all shares of our common stock outstanding on that date and all shares of our common stock issuable to that holder in the event of exercise of outstanding options, warrants, rights or conversion privileges owned by that person at that date which are exercisable within 60 days of that date. Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our common stock owned by them, except to the extent that power may be shared with a spouse.

 

Name		Position		Shares Beneficially Owned				Percent of Class
John Adair		Chairman, CEO			3,900,000				10.0	%
Jalal Al Ghani1		CFO, Vice Chairman			5,600,000				14.4	%
Khalid Al Sunaid2		Director			3,900,000				10.0	%
Fahad Bu-Nuhayah3		Director			3,177,000				8.2	%
HH Prince Bader Al Saud		Director			1,500,000				3.9	%
HRH Prince Abdullah Bin A. Al Saud		Director			2,000,000				5.1	%
All officers and directors as a group					20,077,000				51.5	%

 

(1)	Mr. Alghani’s shareholdings include (a) 3.2 million shares held individually; and (b) 1.0 million shares held each by (A) MENA Investment Trust and (B) GCC Trust.  Mr. Alghani is the principal of these two trusts.  It also includes 300,000 shares held by his wife.
(2)	Mr. Sunaid’s address is P.O. Box 17605, Riyadh, Kingdom of Saudi Arabia 114934.

(3)	Mr. Bu-Nuhayah’s address is P.O. Box 86602, Riyadh, Kingdom of Saudi Arabia 11632

 

Item 13. Certain Relationships and Related Transactions, and Director Independence

 

None.

 

Item 14. Principal Accounting Fees and Services

 

Audit Fees

 

The aggregate fees billed by our principal accountant for the audit of our annual financial statements, review of financial statements included in the quarterly reports and other fees that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal years ended June 30, 2013 and 2012 were $24,650 and $19,000, respectively.

 

 

		2012				2012
Audit Related Fees		$	24,650			$	19,000
Tax Fees		$	—			$	—
All Other Fees		$	—			$	—
Out-of-Pocket Expenses		$	—			$	—
Total		$	24,650			$	19,000

 

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors

 

The Company currently does not have a designated Audit Committee, and accordingly, the Company’s Board of Directors’ policy is to pre-approve all audit and permissible non-audit services provided by the independent auditors. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent auditors and management are required to periodically report to the Company’s Board of Directors regarding the extent of services provided by the independent auditors in accordance with this pre-approval, and the fees for the services performed to date. The Board of Directors may also pre-approve particular services on a case-by-case basis.

 

Item 15. Exhibits and Financial Statement Schedules

 

(a)           Documents filed as part of this report:

 

(1)      Financial Statements

 

Reference is made to the Index to Consolidated Financial Statements of Energy Holdings International, Inc. under Item 8 of Part II hereof.

 

(2)      Consolidated Financial Statement Schedules

 

(i)        Report Of Independent Registered Public Accounting Firm on Financial Statement Schedule:

 

M&K CPAS, PLLC, as of June 30, 2013 and the year then ended.

 

(3)      Exhibits

 

Exhibit Number	Description
3.1	Articles of Incorporation, filed as an exhibit to the Company’s periodic filing on Form SB-2, filed with the Securities and Exchange Commission on February 27, 2007.
3.1.1	Articles of Amendment filed as an exhibit to the Company’s periodic filing on Form SB-2, filed with the Securities and Exchange Commission on March 18, 2009.
3.2	Bylaws, filed as an exhibit to the Company’s periodic filing on Form SB-2, filed with the Securities and Exchange Commission on February 27, 2007.
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15(d)-14(a)*
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15(d)-14(a)*
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

 

 

Signatures

 

In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the Company caused this Registration Statement to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

/s/ John Adair
John Adair, Principal Executive Officer	October 15, 2013
/s/ Jalal Alghani
Jalal Alghani, Principal Financial Officer	October 15, 2013

 

 

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