UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-Q

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
 
For the quarterly period ended June 30, 2014
   
[   ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the transition period from __________ to __________

000-53669
Commission File Number
 
EPOXY, INC.
(Exact name of registrant as specified in its charter)
   
Nevada
N/A
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
   
500N. Rainbow Blvd. Suite 300, Las Vegas, Nevada
89107
(Address of principal executive offices)
(Zip Code)
 
702-350-2449
(Registrant’s  telephone number, including area code)
 
NEOHYDRO TECHNOLOGIES CORP
(Former name, former address and former fiscal year, if changed since last report)

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 [  ]

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).

 
Yes [  ]   No [ X ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer
[  ]
Accelerated filer
[  ]
       
Non-accelerated filer
[  ]
Smaller reporting company
[X]
(Do not check if a smaller reporting company)
     

  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 
Yes [  ]   No [X ]
 
 
 

 
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

 
Yes [  ]  No [  ]

APPLICABLE ONLY TO CORPORATE ISSUERS

169,758,040 shares of common stock outstanding as of August 14, 2014
(Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.)

 
2

 
EPOXY, INC.
TABLE OF CONTENTS

   
Page
 
PART I – FINANCIAL INFORMATION
 
     
Financial Statements
  4
     
Management’s Discussion and Analysis of Financial Condition and Results of Operations
  5
     
Quantitative and Qualitative Disclosures About Market Risk
  10
     
Controls and Procedures
  10
     
 
PART II – OTHER INFORMATION
 
     
Legal Proceedings
  11
     
Risk Factors
  11
     
Unregistered Sales of Equity Securities and Use of Proceeds
  11
     
Defaults Upon Senior Securities
  11
     
Mine Safety Disclosures
  11
     
Other Information
  11
     
Exhibits
  12
     
    13

 
3

 

EPOXY, INC.
(FORMERLY NEOHYDRO TECHNOLOGIES CORP.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
PART I -- FINANCIAL INFORMATION
 
ITEM 1.  FINANCIAL STATEMENTS

 
Page
Unaudited Consolidated Balance Sheets as of June 30, 2014 and December 31,2013
F-1
Unaudited Consolidated Statements of Operations for the three and six months ended June 30, 2014 and 2013
F-2
Unaudited Consolidated Statement of Cash Flows for the six months ended June 30, 2014 and 2013
F-3
F-4 to F-9
 
 
4

 
EPOXY , INC.
(FORMERLY NEOHYDRO TECHNOLOGIES CORP.)
CONSOLIDATED BALANCE SHEETS
(Unaudited)

   
June 30,
2014
   
December 31,
2013
 
  ASSETS
           
Current
           
Cash
 
$
544
   
$
30,467
 
Accounts receivable
   
1,080
     
2,330
 
Total Current Assets
   
1,624
     
32,797
 
                 
Trademark and Patent, net
   
7,695
     
7,695
 
                 
Total Assets
 
$
9,319
   
$
40,492
 
                 
LIABILITIES
               
Current
               
Accounts payable and accrued liabilities
   
88,117
     
64,401
 
Loan payable
   
63,085
     
63,573
 
Derivative liabilities
   
51,708
     
23,790
 
Total Current Liabilities
   
202,910
     
151,764
 
                 
Convertible notes, net of unamortized discount
   
33,863
     
19,190
 
                 
Total Liabilities
   
236,773
     
170,954
 
                 
STOCKHOLDERS’ DEFICIT
               
Preferred Stock, $0.00001 par value;
               
authorized: 35,000,000 Series A Preferred shares, 25,080,985 issued and outstanding as of June 30, 2014 and December 31, 2013
   
251
     
251
 
authorized: 15,000,000 Series B Preferred shares, no shares issued and outstanding as of June 30, 2014 and December 31, 2013
   
-
     
-
 
Common Stock, $0.00001 par value;
               
authorized: 480,000,000 shares, 169,758 ,040 and 168,824,707 shares issued and outstanding as of June 30, 2014 and December 31, 2013, respectively
   
1,697
     
1,688
 
Additional Paid-in Capital
   
172,475
     
152,689
 
Accumulated deficit
   
(401,877)
     
(285,090)
 
Total Stockholders’ Deficit
   
(227,454)
     
(130,462)
 
Total Liabilities and Stockholders’ Deficit
 
$
9,319
   
$
40,492
 

The accompanying notes are an integral part of these unaudited consolidated financial statements
 
F-1

 
EPOXY , INC.
(FORMERLY NEOHYDRO TECHNOLOGIES CORP.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
   
Three month ended
   
Six months ended
 
   
June 30,
   
June 30,
 
   
2014
   
2013
   
2014
   
2013
 
                         
Revenue
  $ 3,349     $ 2,916     $ 7,734     $ 5,290  
                                 
Operating Expenses
                               
Professional fees
    19,128       522       27,964       828  
Software development expenses
    6,461       6,204       14,176       28,738  
Consulting fee
    14,973       6,058       22,955       10,448  
General and administrative expenses
    11,131       19,221       18,592       38,316  
Total operating expenses
    51,693       32,005       83,687       78,330  
Loss from operations
    (48,344 )     (29,089 )     (75,953 )     (73,040 )
                                 
Other Income (Expenses):
                               
Loss on change in fair value of derivative liabilities
    (19,701 )     -       (16,727 )     -  
Interest expenses
    (4,735 )     -       (9,435 )     -  
Accretion of discount on convertible notes
    (7,940 )     -       (14,672 )     -  
Total other expenses
    (32,376 )     -       (40,834 )     -  
                                 
Net loss
  $ (80,720 )     (29,089 )   $ (116,787 )   $ (73,040 )
                                 
Net loss per share – basic and diluted
  $ (0.00 )     (0.00 )   $ (0.00 )   $ (0.00 )
                                 
Weighted average shares outstanding – basic and diluted
    169,450,348       24,514,319       169,139,256       24,514,319  

The accompanying notes are an integral part of these unaudited consolidated financial statements
 
F-2

 
(FORMERLY NEOHYDRO TECHNOLOGIES CORP.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
   
Six Month ended
 
   
June 30,
 
   
2014
   
2013
 
Cash flows from Operating Activities
           
Net loss
 
$
(116,787)
   
$
(73,040)
 
Adjustments to reconcile net loss to net cash used in operations:
               
Amortization of trademark and patent
   
-
     
689
 
Loss on change in fair value of derivative liabilities
   
16,727
        -  
Accretion of discounts on convertible notes
   
14,672
     
-
 
Imputed interest
   
2,986
     
-
 
Foreign exchange in loan payable
   
(488)
        -  
                 
Changes in operating assets and liabilities:
               
Accounts receivables
   
1,250
     
(1,250)
 
Accrued expenses
   
16,583
     
-
 
Accounts payable
   
7,134
     
(7,572)
 
Net cash used in operating activities
   
(57,923)
     
(81,173)
 
                 
                 
Cash flows from Financing Activities
               
Proceeds from sale of common stock
   
28,000
        -  
Proceeds from loan payable
   
-
     
83,198
 
Net cash provided by financing activities
   
28,000
     
83,198
 
                 
Increase (decrease) in cash during the period
   
(29,923)
     
2,025
 
Cash, beginning of period
   
30,467
     
492
 
Cash, end of period
 
$
544
   
$
2,517
 
                 
Supplemental disclosure of cash flow information:
               
Cash paid for:
               
    Interest
 
$
2,986
   
$
-
 
    Income taxes
 
$
-
   
$
-
 
                 
Non-Cash Transactions
               
Shares and warrants reclassified as derivative liability
 
$
11,191
   
$
 
-

The accompanying notes are an integral part of these unaudited consolidated financial statements
 
F-3

EPOXY , INC.
(FORMERLY NEOHYDRO TECHNOLOGIES CORP.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1 – Description of business and basis of presentation

Organization and nature of business

Neohydro Technologies Corp. (the “Company”) was incorporated in the State of Nevada on November 13, 2007 as Rioridge Resources Corp. On July 22, 2008, the Company changed its name to Neohydro Technologies Corp.

On August 1, 2014, the Company’s name changed from NeoHydro Technologies Corp. to Epoxy, Inc.  in regard to actions taken on May 23, 2014, when the Board of Directors of the Company (the “ Board ”) approved, and recommended to the Majority Stockholders that they approve the Name Change. On May 27, 2014, the Majority Stockholders approved the Name Change by written consent in lieu of a meeting, in accordance with Nevada law. On August 4, 2014, the Company submitted the Name Change to FINRA for their review and approval, as well as the approval of a symbol change from NHYT to EPXY.   The Company filed an amendment to our Articles of Incorporation with the Secretary of State of Nevada changing our name to Epoxy, Inc. effective on August 1, 2014.

The Company, through its wholly owned subsidiary, Couponz, Inc.,  is the developer of Epoxy app, an application or "app" for iPhone iOS and Android operating systems. Epoxy is an innovative smart phone application designed and created to conveniently connect business owners and consumers in order to ease marketing frustrations. The mobile app gives loyal customers the ease of keeping track of rewards and punch cards all in one place while also giving opportunities to review and share businesses with friends. In turn, Epoxy provides businesses the ability to reward customers, share offers, and deliver information about special events with their customers.

Financial Statements Presented

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 210 8-03 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments considered necessary for a fair presentation have been included.  All such adjustments are of a normal recurring nature.  Operating results for the six month period ended June 30, 2014, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2014.  For further information refer to the financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 as filed with the Securities and Exchange Commission on April 15, 2014.

Certain reclassifications have been made to the prior period’s financial statements to conform to the current period’s presentation.

Note 2 – Going Concern
 
At June 30, 2014 and 2013, the Company had net losses of $116,787 and $73,040, respectively. The Company believes that its existing capital resources may not be adequate to enable it to execute its business plan. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern. The Company estimates that it will require additional cash resources during 2014 based on its current operating plan and condition. The Company expects cash flows from operating activities to improve, primarily as a result of an increase in revenue and a decrease in certain operating expenses, although there can be no assurance thereof. The accompanying consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern. If we fail to generate positive cash flow or obtain additional financing, when required, we may have to modify, delay, or abandon some or all of our business and expansion plans.
 
F-4

EPOXY, INC.
(FORMERLY NEOHYDRO TECHNOLOGIES CORP.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 3 – Correction of an error

During the preparation of the quarterly report for the period ended March 31, 2014, the Company discovered an immaterial error related to its December 31, 2013 balance sheet. The error related to the valuation of an embedded derivative liability, in which the derivative liability was calculated using the wrong number of shares exceeding our authorized (see Note 7). The resulting error totaled $13,824. Pursuant to the Securities and Exchange Commission’s SAB Topic 108, the company has corrected this error in the accompanying December 31, 2013 balance sheet.

The following table reflects the amounts originally reported and as adjusted for each major caption of the balance sheet:

   
December 31, 2013
(As Adjusted)
   
December 31, 2013
(Original)
 
Consolidated Balance Sheets:
           
Derivative liabilities
 
$
23,790
   
$
37,614
 
Total Liabilities
 
$
170,954
   
$
184,778
 
Additional paid in capital
 
$
152,689
   
$
138,865
 
Total stockholders' deficit
 
$
(130,462
)
 
$
(144,286
)
Total liabilities and stockholders' deficit
 
$
40,492
   
$
40,492
 

Note 4- Fair Value Measurements

FASB ASC 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. FASB ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. FASB ASC 820 describes three levels of inputs that may be used to measure fair value:

Level 1 – Quoted prices in active markets for identical assets or liabilities.
 
Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
 
Level 3 – Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level of input that is significant to the fair value measurement of the instrument.

The following table provides a summary of the fair value of our derivative liabilities as of June 30, 2014 and December 31, 2013:
   
Fair value measurements
on a recurring basis
 
   
Level 1
   
Level 2
   
Level 3
 
As of June 30, 2014:
                       
Liabilities
                       
Embedded derivative
 
$
-
   
$
-
   
$
51,708
 
                         
As of December 31, 2013:
                       
Liabilities
                       
Embedded derivative
 
$
-
   
$
-
   
$
23,790
 
 
 
F-5

 
EPOXY, INC.
(FORMERLY NEOHYDRO TECHNOLOGIES CORP.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
Note 5- Loans Payable

At June 30, 2014, the Company is indebted to unrelated third parties for $63,085 (December 31, 2013 - $63,573). The loan is non-interest bearing and is due on demand. During the six months ended June 30, 2014, the Company recorded imputed interest of $2,986.

Note 6- Convertible Notes
 
a)
On November 27, 2012, the Company entered into a convertible loan agreement. The Company received $25,000 which bears interest at 10% per annum and is due on November 27, 2015. Interest shall accrue from the advancement date and shall be payable quarterly. Any portion of the loan and unpaid interest are convertible at any time at the option of the lender into shares of common stock of the Company at a conversion price of $0.0005 per share. The Company recognized the intrinsic value of the embedded beneficial conversion feature of $25,000 as additional paid-in capital and reduced the carrying value of the convertible debenture to $nil. The carrying value will be accreted over the term of the convertible debenture up to its face value of $25,000. At June 30, 2014, the carrying values of the convertible debenture and accrued convertible interest thereon were $7,057 and $3,973, respectively.

b)
On November 27, 2012, the Company entered into a convertible loan agreement. The Company received $25,000 which bears interest at 10% per annum and is due on November 27, 2015. Interest shall accrue from the advancement date and shall be payable quarterly. Any portion of the loan and unpaid interest are convertible at any time at the option of the lender into shares of common stock of the Company at a conversion price of $0.0005 per share. The Company recognized the intrinsic value of the embedded beneficial conversion feature of $25,000 as additional paid-in capital and reduced the carrying value of the convertible debenture to $nil. The carrying value will be accreted over the term of the convertible debenture up to its face value of $25,000. As at June 30, 2014, the carrying values of the convertible debenture and accrued convertible interest thereon were $7,057 and $3,973, respectively.

c)
On November 27, 2012, the Company entered into a convertible loan agreement. The Company received $40,000 which bears interest at 10% per annum and is due on November 27, 2015. Interest shall accrue from the advancement date and shall be payable quarterly. Any portion of the loan and unpaid interest are convertible at any time at the option of the lender into shares of common stock of the Company at a conversion price of $0.0005 per share. The Company recognized the intrinsic value of the embedded beneficial conversion feature of $40,000 as additional paid-in capital and reduced the carrying value of the convertible debenture to $nil. The carrying value will be accreted over the term of the convertible debenture up to its face value of $40,000. As at June 30, 2014, the carrying values of the convertible debenture and accrued convertible interest thereon were $11,292 and $5,337, respectively.

d)
On November 27, 2012, the Company entered into a convertible loan agreement. The Company received $35,000 which bears interest at 10% per annum and is due on November 27, 2015. Interest shall accrue from the advancement date and shall be payable quarterly. Any portion of the loan and unpaid interest are convertible at any time at the option of the lender into shares of common stock of the Company at a conversion price of $0.0005 per share. The Company recognized the intrinsic value of the embedded beneficial conversion feature of $35,000 as additional paid-in capital and reduced the carrying value of the convertible debenture to $nil. The carrying value will be accreted over the term of the convertible debenture up to its face value of $35,000. As at June 30, 2014, the carrying values of the convertible debenture and accrued convertible interest thereon were $8,457 and $5,562, respectively.
 
The Company analyzed the conversion feature of above Convertible Notes for derivative accounting consideration under FASB ASC 470 and determined that the conversion feature did not create embedded derivatives.
 
F-6

 
EPOXY, INC.
(FORMERLY NEOHYDRO TECHNOLOGIES CORP.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 7 – Common stock

On April 30, 2014, the Company the Company received the final $28,000 installment in respect of a funding agreement entered into on June 17, 2013 (ref: Note 10) for a total of $100,000.  The Company accepted a subscription for 933,333 shares of common stock at $0.03 per share for cash proceeds of $28,000 and the Company also agreed to issue a 2-year warrant entitling the holder to acquire an additional 93,333 and shares of common stock at an exercise price of $0.30 per share.

Note 8 - Share Purchase Warrants

During the six month period ended June 30, 2014 the Company issued a 2-year warrant entitling the holders to acquire an additional 93,333 shares of common stock at an exercise price of $0.30 per share as part of Funding Agreement described below in Note 10.

As June 30, 2014, the following share purchase warrants were outstanding:
 
   
Warrants
   
Weighted Average Exercise Price
 
Outstanding - December 31, 2013
    856,667       0.12  
Granted
    93,333       0.30  
Forfeited/Canceled
    -       -  
Exercised
    -       -  
Outstanding – June 30, 2014
    950,000       0.14  
Exercisable – June 30, 2014
    950,000       0.14  

The intrinsic value of these warrants was $0 at June 30, 2014.

Note 9- Derivative Liabilities

As of June 30, 2014, we have determined that we currently have (i) the following shares of common stock issued, and (ii) outstanding instruments which are convertible into the shares of common stock indicated below in connection with warrants, convertible notes and preferred shares previously issued by the Company or agreements with the Company:
 
  169,758,040  
Common Stock Issued and Outstanding
       
  950,000  
Common Shares exercised from warrants (950,000 warrants outstanding)
  250,000,000  
Common Shares convertible from convertible notes ($125,000 converted at $0.0005 per share )
  62,702,463  
Common Shares convertible from Preferred Series A (25,080,985 shares outstanding)
  1,333,333  
Common Shares convertible from Preferred Series A warrants (533,333 warrants outstanding)
  484,743,836  
Total Common Shares Outstanding and Accounted For/Reserved

Accordingly, given the fact that the Company currently has 480,000,000 shares of common stock authorized, the Company could exceed its authorized shares of common stock by approximately 4,743,836 shares (December 31, 2013 – 3,717,168 shares) if all of the financial instruments described in the table above were exercised or converted into shares of common stock. At June 30, 2014, 4,743,836 of these shares were in excess of the authorized shares and were accounted for as a derivative liability. The fair value of these 4,743,836 common shares was determined to be $51,708 ($23,790 as to 3,717,168 shares as of December 31, 2013) using the closing price of Epoxy’s common stock.
 
 
F-7

 
EPOXY, INC.
(FORMERLY NEOHYDRO TECHNOLOGIES CORP.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 9- Derivative Liabilities (continued)

   
Exceed number of authorized shares
   
Derivate Liabilities
 
             
Balance, December 31, 2013
    3,717,169     $ 23,790  
Add:  Common shares issued
    933,334       10,174  
 Common shares for exercise underlying warrants
    93,333       1,017  
Change in fair value of derivative liabilities
    -       16,727  
Balance: June 30, 2014
    4,743,836     $ 51,708  
                 
We have evaluated our convertible cumulative preferred stock under the guidance set out in FASB ASC 470-20 and have accordingly classified these shares as equity in the consolidated balance sheets.

Note 10 - Commitments

On June 17, 2013, the Company entered into a Funding Agreement whereby an investor agreed to purchase $100,000 worth of shares of common stock of the Company at $0.03 per share within 90 days (which may be extended by consent of both parties to 120 days) and receive a 2-year warrant for an additional $100,000 worth of shares at $0.30 per share. As of June 30, 2014, the Company has received a total of $100,000 under the Funding Agreement towards the committed purchase value, but not yet issued the shares.

On July 16, 2013 the Company entered into a second Funding Agreement whereby an investor agreed to purchase $17,000 worth of shares of common stock of the Company at $0.03 per share and receive a 2-year warrant for an additional $17,000 worth of shares at $0.03 per share. As of June 30, 2014, the Company had received $17,000 under the Funding Agreement but has not yet issued the shares.

Note 11 – Subsequent events

During the month of July 2014 the Company entered into 5% one-year promissory notes for a total of $20,000 with arm’s length third parties.

On August 1, 2014 the Company successfully amended the terms of certain convertible loan agreements with four (4) investors for a total of $125,000 due and payable on November 27, 2015 (ref: Note 6).  Under the amended terms, a total of $125,000 originally available for conversion into a total of 250,000,000 shares of common stock at $0.0005 per share has been amended to reflect a price of $0.005 per share for a total of 25,000,000 shares of common stock, if converted.

On August 8, 2014 the Company entered into an Agency Agreement (the “Agreement”) with Carter, Terry & Company (“C&T”) where under C&T will act as the Company’s exclusive Financial Advisor, Investment Bank and Placement Agent, on a "best efforts" basis for an initial period of 30 days, and then reverting to a non-exclusive financial advisor for the next twelve consecutive (12) months.  Under the terms of the Agreement, C&T will receive 500,000, fully paid for and earned, restricted shares of the Compnay’s common stock.  In addition, in respect of any introductions that result in financing for the Company C&T shall receive fees as follows:

 
 
F-8

 
EPOXY, INC.
(FORMERLY NEOHYDRO TECHNOLOGIES CORP.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
Note 11 – Subsequent events (continued)

 
 
a.
10% of the amount for any equity or hybrid equity capital raised up to $2,000,000
 
 
b.
8% of the amount for any equity or hybrid equity capital raised up to $5,000,000
 
 
c.
6% of the amount for any equity or hybrid equity capital raised over $5,000,000

And;

    an amount of restricted shares equal to 4% of capital raised divided by the closing price of the stock on the date of close.
 
 
 
F-9

 
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

This current report contains forward-looking statements relating to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "intends", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential", or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors which may cause our or our industry's actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance. You should not place undue reliance on these statements, which speak only as of the date that they were made. These cautionary statements should be considered with any written or oral forward-looking statements that we may issue in the future. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results, later events or circumstances or to reflect the occurrence of unanticipated events.

In this report unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares of our capital stock.

The management’s discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").

The following discussion of our financial condition and results of operations should be read in conjunction with our audited financial statements for the fiscal year ended December 31, 2013, as filed with the Securities and Exchange Commission on April 15, 2014, along with the accompanying notes.  As used in this quarterly report, the terms "we", "us", "our", and the "Company" means Epoxy, Inc. (formerly Neohydro Technologies Corp.) and its wholly owned subsidiary Couponz, Inc.

Current Business

On July 19, 2013, the Company entered into an agreement to purchase Couponz, Inc. (“Couponz”), a company incorporated in the State of Nevada.  Under the agreement, the Company had the right to acquire 100% of the ownership of Couponz, Inc. in exchange for the issuance of 24,514,319 shares of preferred stock of the Company and $100,000. The agreement provided for the preferred shares issued to be designated as 1 share of preferred to carry 15 shares of common voting rights and to be convertible into common  shares on the basis of 2.5 shares of common for each 1 share of preferred. Mr. David Gasparine, the sole director of Epoxy Inc. (formerly NeoHydro Technologies Corp.), is also the controlling shareholder of Couponz, Inc., and, as such, the transaction is considered to be non-arm’s length.  Mr. Gasparine became the controlling shareholder of the Company concurrent with the completion of the transaction.
 
On November 1, 2013, the Company completed the aforementioned transaction and Couponz, Inc. became a wholly owned subsidiary of the Company.

Couponz Inc. is the developer of Epoxy app, an application or "app" for iPhone iOS and Android operating systems. Epoxy is an innovative smart phone application designed and created to conveniently connect business owners and consumers in order to ease marketing frustrations. The mobile app gives loyal customers the ease of keeping track of rewards and punch cards all in one place while also giving opportunities to review and share businesses with friends. In turn, Epoxy provides businesses the ability to reward customers, share offers, and deliver information about special events with their customers. Epoxy designers are dedicated to providing a superior and easy-to-use product for business owners to reward loyal customers.

Our goal is to provide a simple and easy to use platform for consumers to find business information, including but not limited to product and service descriptions, promotions, loyalty programs, and customer reviews, as well as to provide business owners a simple and easy to use platform to promote their businesses to mobile app users. Through the use of research and development we will be able to continue evolving our platform and features provided for our users.
 
5

 
Epoxy, Couponz’s mobile app, is a “two-part” system that has a server that both a website and a mobile application access. The mobile app allows users to find local businesses that have an Epoxy membership. An app user can navigate to an individual business several ways. App users can find a specific business by searching for the specific name of the business, the category of the business or by the App users location and listed results on a Map View. App users can then filter the results of the businesses in the Map View by category. Once a business is chosen the app user is presented with a Business Landing Page or “BLP”. The BLP displays information about that specific business that the business owner has input including operating hours, locations, menus, phone numbers as well as marketing such as digital loyalty cards and coupons. Within the BLP app users can also create reviews or “Sticky Notes” about that individual business and review other Sticky Notes that have been previously created. When an app user opens a loyalty card or offer the app has a built in scanner that allows the staff to “punch” or “redeem” either offer. A loyalty card is scanned multiple times and once completely filled is valid for a specified offer from the business owner. The app user can collect or “save” filled loyalty cards to redeem at a later time. A coupon is a one-time use offer that once redeemed will disappear from the device and become de-active. A business needs no equipment as the scanner is built into the Epoxy application that is required to scan each unique QR code. Epoxy provides each business with their own unique code that is used to track each loyalty card and offer. Each time an app user redeems an offer or digitally receives a punch the system tracks that information and displays it on a website administration panel for the business owner to track.
 
The website serves as a   merchant login where merchants can access an administration panel that allows them to create their BLP and add digital punch cards, offers, events a and send out direct messages to individuals or groups in real-time. The admin panel also will provide the merchants with analytics such as the number of recipients for these direct messages, the number of punch cards and offers that have been used as well as the individual customers who are recommending that particular business (the referral system is a pending patent). This will allow the merchant to distinguish between different levels of consumers and compensate accordingly. This also adds a level of security and accuracy to the loyalty and coupon program that is not practical with a paper system.
 
Our pricing for merchants is a simple flat membership fee of $99 a month, without any contracts. The mobile app is free for consumers to download, and is available on both Android and Apple platform.
 
We plan to expand geographically in stages. By the close of December 2015, we expect to grow beyond the Las Vegas market into the rest of the Southwestern United States. We have already begun this process with expansion into Southern California. Within two to three years (December 2016), we plan to expand into the Midwest, and within five years (December 2019) we plan to expand nationally. As we experience each stage of growth, we plan to increase our staff primarily through commission-based sales people, as opposed to salaried or hourly wage employees, thus minimizing the financial burden of each stage of expansion. We believe that this plan for expansion will also minimize the need for additional outside financing, as we plan to fund our growth primarily through the growth of our paying customer base.
 
Our primary philosophy is to provide excellent customer service to both app users and merchants, while utilizing feedback through our events, website and mobile app. The mobile application platform gives us an opportunity to seamlessly receive feedback while providing a service. Once feedback has been provided we can then study and then apply this to the system. We believe if you keep the marketing simple, to the point and clean people will be willing to listen and convert. Once a customer is willing to listen, they can be turned into more valuable, loyal customers.
 
Couponz’s product is marketed to Mobile App Users as well as Business owners.
 
RESULTS OF OPERATIONS

The aforementioned business combination was accounted for as a reverse acquisition and recapitalization using accounting principles applicable to reverse acquisitions whereby the financial statements subsequent to the date of the transaction are presented as a continuation of Couponz.  Under reverse acquisition accounting Couponz (subsidiary) is treated as the accounting parent (acquirer) and the Company (parent) is treated as the accounting subsidiary (acquiree). All outstanding shares have been restated to reflect the effect of the business combination.   The historical financial statements (prior to November 1, 2013) in the consolidated financial statements are those of Couponz.
 
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Three Months Ended June 30, 2014 Compared to the Three Months Ended June 30, 2013.
 
Our net loss for the three-month period ended June 30, 2014 and June 30, 2013 is as follows:

   
Three months ended
 
   
June 30,
 
   
2014
   
2013
 
             
Revenue
  $ 3,349     $ 2,916  
                 
Operating Expenses
               
Professional fees
    19,128       522  
Software development expenses
    6,461       6,204  
Consulting fee
    14,973       6,058  
General and administrative expenses
    11,131       19,221  
Total operating expenses
    51,693       32,005  
Loss from operations
    (48,344 )     (29,089 )
                 
Other Income (Expenses):
               
Loss on change in fair value of derivative liabilities
    (19,701 )     -  
Interest expenses
    (4,735 )     -  
Accretion of discount on convertible notes
    (7,940 )     -  
Total other expenses
    (32,376 )     -  
                 
Net loss
  $ (80,720 )     (29,089 )

 
During the comparative three month periods ended June 30, 2014 and 2013 the Company reported revenues of $3,349 and $2,916 respectively.  The Company experienced an increase to professional fees and consulting fees during the most recent three months ended June 30, 2014 as we expanded our customer identification and cultivation plans to include increased marketing and advertising efforts, requiring more time from our key management and consultants.  We also undertook a name change to better reflect our current business operation. In addition, we experienced a decrease period over period in general and administrative fees as a result of a reduction in fees paid for investor relations activities.
 
Six Months Ended June 30, 2014 Compared to the Six Months Ended June 30, 2013.
 
Our net loss for the six-month periods ended June 30, 2014 and June 30, 2013 is as follows:

 
   
Six months ended
 
   
June 30,
 
   
2014
   
2013
 
             
Revenue
  $ 7,734     $ 5,290  
                 
Operating Expenses
               
Professional fees
    27,964       828  
Software development expenses
    14,176       28,738  
Consulting fee
    22,955       10,448  
General and administrative expenses
    18,592       38,316  
Total operating expenses
    83,687       78,330  
Loss from operations
    (75,953 )     (73,040 )
                 
Other Income (Expenses):
               
Loss on change in fair value of derivative liabilities
    (16,727 )     -  
Interest expenses
    (9,435 )     -  
Accretion of discount on convertible notes
    (14,672 )     -  
Total other expenses
    (40,834 )     -  
                 
Net loss
  $ (116,787 )   $ (73,040 )

 
7

 
During the comparative six month periods ended June 30, 2014 and 2013 the Company reported revenues of $7,734 and $5,290 respectively.  The Company experienced a substantial increase to professional fees and consulting fees during the most recent six months ended June 30, 2014 as we expanded our customer identification and cultivation plans to include increased marketing and advertising efforts, requiring more time from our key management and consultants.  We also undertook a name change to better reflect our current business operation. In addition, we experienced a decrease period over period in software development expenses as our application platform is now fully developed and requires only updates and maintenance.  Our general and administrative fees were also substantially reduced as a result of a reduction in fees paid for investor relations activities
 
Liquidity and Financial Condition

Working Capital
   
At June 30,
2014
   
At December 31,
2013
 
Current Assets
  $ 1,624     $ 32,797  
Current Liabilities
  $ 202,910     $ 151,764  
Working Capital (Deficit)
  $ (201,286 )   $ (118,967 )
 
Cash Flows
 
Cash Flows
         
   
Six Month Periods Ended
 
   
June 30,
 2014
   
June 30,
 2013
 
Net cash used in operating activities
  $ (57,923 )   $ (81,173 )
Net cash provided by financing activities
  $ 28,000     $ 83,198  
Net increase (decrease) in cash during period
  $ (29,923 )   $ 2,025  
 
Operating Activities
 
Net cash used in operating activities was $57,923 for the six month period ended June 30, 2014 compared with cash used in operating activities of $81,173 in the same period in 2013. The decrease in cash used in operating activities is predominantly attributable to various non-cash reconciliation adjustments including accretion of debt discount on convertible notes and the change in the fair value of our derivative liabilities, as well as increases to accounts payable and accrued expenses period over period as we were not able to retire our obligations as they became due.
 
Investing Activities
 
There were no investing activities during the six months ended June 30, 2014 and 2013.
 
Financing Activities
 
Net cash provided by financing activities was $28,000 for the six month period ended June 30, 2014 compared to $83,198 of cash provided in the same period in 2013.
 
 
8

Going Concern
 
We do not have sufficient funds to operate. Future operating activities are expected to be funded by loans from our officers and directors, the exercise of outstanding warrants or new loans and equity financing opportunities. We have no assurance that future financing will be available to us in the future on satisfactory terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our activities. Equity financing could result in additional dilution to existing shareholders.
 
Our Company has generated $7,734 (2014) and $5,290 (2013) in revenue in the respective six month periods ended June 30, which amounts are not sufficient to cover our ongoing quarterly operating expenses. We have never paid dividends and it is unlikely we will generate sufficient earnings in the immediate or foreseeable future to meet our operational overhead. The continuation of our Company as a going concern is dependent upon the continued financial support from our shareholders, the ability of our Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. As at June 30, 2014, we had a working capital deficit of $201,286 and have accumulated losses of $401,877 since inception. These factors raise substantial doubt regarding our company’s ability to continue as a going concern. The financial statements included herein do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should our Company be unable to continue as a going concern.
 
We estimate that in the next twelve months we will require a minimum of $100,000 of which we will expend approximately $50,000 for operations of the Company in regard to the filing of reports with the requisite regulatory authorities and $50,000 as required with respect the operations of our recently acquired wholly-owned subsidiary, Couponz, Inc., including salaries and any ongoing software development expenses. 

We will require working capital, as we currently have inadequate capital to fund our business strategies, which could severely limit our operations.    We currently have limited cash with which to continue operations and are dependent on debt and equity investments. There can be no assurance that any additional financing will be available or accessible on reasonable terms, either by way of an equity financing or debt. If we cannot raise any additional funding we may either have to suspend operations until we do raise the cash, or cease operations entirely.

Off-Balance Sheet Arrangements

We have no material off-balance sheet arrangements that will have a current or future effect on our financial condition and changes in financial condition.

Critical Accounting Policies and Estimates

The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the 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. On an on-going basis, management evaluates its estimates and judgments which are based on historical experience and on various other factors that are believed to be reasonable under the circumstances. The results of their evaluation form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions and circumstances. Our significant accounting policies are more fully discussed in the Notes to our Financial Statements.

 
9

 
Recent Accounting Pronouncements

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements will have a material impact on its financial condition or the results of its operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company and are not required to provide this information.
 
ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures
 
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the  Securities Exchange Act of 1934 , as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our president (our principal executive officer, principal financial officer and principal accounting officer) to allow for timely decisions regarding required disclosure.
 
As of the end of our quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our president (our principal executive officer, principal financial officer and principal accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president (our principal executive officer, principal financial officer and principal accounting officer) concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this quarterly report.
 
Changes in Internal Control over Financial Reporting
 
During the period covered by this report, there were no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
 
10

 
 
ITEM 1. LEGAL PROCEEDINGS

The Company is not a party to any legal proceedings and is not aware of any pending legal proceedings as of the date of this Form 10-Q.

ITEM 1A. RISK FACTORS

The Company is a smaller reporting company and is not required to provide this information.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On April 30, 2014, the Company the Company received the final $28,000 installment in respect of a funding agreement entered into on June 17, 2013 (ref: Note 10 of the financial statements contained herein) for a total of $100,000.  The Company accepted a subscription for 933,333 shares of common stock at $0.03 per share for cash proceeds of $28,000 and the Company also agreed to issue a 2-year warrant entitling the holder to acquire an additional 93,333 and shares of common stock at an exercise price of $0.30 per share. As at the date of this report the shares have not yet been issued.

The shares of Common Stock referenced above will be issued in reliance upon the exemption from securities registration afforded by the provisions of Regulation S of the Securities Act of 1933, as amended, (“Securities Act”), as promulgated by the U.S. Securities and Exchange Commission under the Securities Act. Our reliance upon the exemption under Rule 903 of Regulation S of the Securities Act was based on the fact that the sales of the securities were completed in an "offshore transaction", as defined in Rule 902(h) of Regulation S. We did not engage in any directed selling efforts, as defined in Regulation S, in the United States in connection with the sale of the securities. The investor was not a US person, as defined in Regulation S, and was not acquiring the securities for the account or benefit of a US person.

On August 8, 2014 the Company entered into an Agency Agreement with Carter, Terry & Company where under the Company is required to issue 500,000 shares of restricted stock.  As at the date of this report the shares have not yet been issued.

The Company will claim an exemption from the registration requirements of the Securities Act of 1933, as amended, for the issuance of shares to Carter, Terry & Company pursuant to Section 4(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transaction does not involve a public offering, the purchasers are “accredited investors” and/or qualified institutional buyers, the purchasers have access to information about the Company and its purchase, the purchasers will take the securities for investment and not resale.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

The Company does not have any senior securities as of the date of this Form 10-Q.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable

ITEM 5. OTHER INFORMATION

On August 8, 2014 the Company entered into an Agency Agreement (the “Agreement”) with Carter, Terry & Company (“C&T”) where under C&T will act as the Company’s exclusive Financial Advisor, Investment Bank and Placement Agent, on a "best efforts" basis for an initial period of 30 days, and then reverting to a non-exclusive financial advisor for the next twelve consecutive (12) months.  Under the terms of the Agreement, C&T will receive 500,000, fully paid for and earned, restricted shares of the Compnay’s common stock.  In addition, in respect of any introductions that result in financing for the Company C&T shall receive fees as follows:

a.  
10% of the amount for any equity or hybrid equity capital raised up to $2,000,000
 
b.  
8% of the amount for any equity or hybrid equity capital raised up to $5,000,000
 
c.  
6% of the amount for any equity or hybrid equity capital raised over $5,000,000
  
And;
 
       an amount of restricted shares equal to 4% of capital raised divided by the closing price of the stock on the date of close.
 
 
11

ITEM 6. EXHIBITS

     
Incorporated by reference
 
Exhibit
Exhibit Description
Filed herewith
Form
Exhibit
Filing Date
 
3.1
Articles of Incorporation
 
S-1
3.1
03/18/08
 
3.2
By-laws as currently in effect
 
S-1
3.2
03/18/08
 
10.1
Agency Agreement with Carter, Terry & Company executed August 8, 2014
X
       
31.1
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
X
       
31.2
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
X
       
32.1
Certification of Principal Executive and Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act
 X 
       
 
 
12

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.

 
EPOXY, INC.
(FORMERLY NEOHYRDO TECHNOLOGIES CORP.)
 
       
Date: August 14, 2014
By:
/s/ David Gasparine
 
  Name:
David Gasparine
 
  Title:
Chief Executive Officer (Principal Executive Officer), Treasurer, (Principal Financial Officer) Secretary, and Director
 
       
 
 
13