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TMCNet:  HALEX ENERGY CORP. - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

[August 19, 2014]

HALEX ENERGY CORP. - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Edgar Glimpses Via Acquire Media NewsEdge) THIS FILING CONTAINS FORWARD-LOOKING STATEMENTS. THE WORDS "ANTICIPATED," "BELIEVE," "EXPECT," "PLAN," "INTEND," "SEEK," "ESTIMATE," "PROJECT," "WILL," "COULD," "MAY," AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS INCLUDE, AMONG OTHERS, INFORMATION REGARDING FUTURE OPERATIONS, FUTURE CAPITAL EXPENDITURES, AND FUTURE NET CASH FLOW. SUCH STATEMENTS REFLECT THE COMPANY'S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, INCLUDING, WITHOUT LIMITATION, GENERAL ECONOMIC AND BUSINESS CONDITIONS, CHANGES IN FOREIGN, POLITICAL, SOCIAL, AND ECONOMIC CONDITIONS, REGULATORY INITIATIVES AND COMPLIANCE WITH GOVERNMENTAL REGULATIONS, THE ABILITY TO ACHIEVE FURTHER MARKET PENETRATION AND ADDITIONAL CUSTOMERS, AND VARIOUS OTHER MATTERS, MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES OCCUR, OR SHOULD UNDERLYING ASSUMPTIONS PROVE TO BE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY AND ADVERSELY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, OR OTHERWISE INDICATED. CONSEQUENTLY, ALL OF THE FORWARD-LOOKING STATEMENTS MADE IN THIS FILING ARE QUALIFIED BY THESE CAUTIONARY STATEMENTS AND THERE CAN BE NO ASSURANCE OF THE ACTUAL RESULTS OR DEVELOPMENTS.


The following discussion and analysis of our financial condition and plan of operations should be read in conjunction with our financial statements and related notes appearing elsewhere herein. This discussion and analysis contains forward-looking statements including information about possible or assumed results of our financial conditions, operations, plans, objectives and performance that involve risk, uncertainties and assumptions. The actual results may differ materially from those anticipated in such forward-looking statements.

For example, when we indicate that we expect to increase our product sales and potentially establish additional license relationships, these are forward-looking statements. The words expect, anticipate, estimate or similar expressions are also used to indicate forward-looking statements.

OVERVIEW OF THE COMPANY Halex Energy Corp. ("Halex") was incorporated on January 20, 2011 under the laws of the State of Nevada. Our fiscal year end is December 31. Our principal office is located at 9190 Double Diamond Parkway, Reno, NV 89521. Our telephone number is 916.293.6337 and our e-mail is info@halexenergy.com.

Since becoming incorporated, Halex has not made any significant purchases or sale of assets, nor have we been involved in any mergers, acquisitions or consolidations. Halex has never declared bankruptcy, never been in receivership, and never been involved in any legal actions or proceedings.

Halex owns exclusive licenses from K'Air Energy ("K'Air") for distribution, installation and operation of a renewable energy system in the state of California. K'Air is currently developing a prototype of this renewable energy system known as a Hybrid Renewable Energy System ("HRES"). We do not own any interest in any property. We have no rights, title, interest or other intellectual property rights in the HRES system. Currently, we have no further business planned if K'Air is unable to develop the proposed HRES and commercialize its use.

As of June 30, 2014, the date of company's last financial statements, Halex has raised $2,457 through the sale of common stock and has received $46,000 in cash to purchase of 92,000 shares common stock that were not yet issued. The sale was a purchase of 24,570,000 shares by the Company's officer and director Jeff Lamberson and by the other founding shareholders. Halex also has raised $210,777 through the issuance of promissory notes to some of the founding shareholders.

As of June 30, 2013, we had $4,826 of cash on hand and had general and administrative expenses for the six months ended June 30, 2014 of $94,085, which was related to accrued payroll and professional fees. As of the date of this quarterly report, we have not yet generated or realized any revenues from our business operations. The Company believes that we will need a minimum $20,000 to maintain the corporate entity, accounting and filings over the next 12 months and a minimum of $300,000 to carry out our operations and marketing preparation for the next 12 months.

17 --------------------------------------------------------------------------------For the three months ended June 30, 2014 compared to the three months ended June 30, 2013 We have not earned any revenues from our incorporation on January 20, 2011 to June 30, 2014. We do not anticipate earning revenues until we have completed Phase 3, where we have established a fixed site, and are in the process of scaling to a 3MW facility. We have not completed development of a commercially-viable HRES unit, and can provide no assurance that we will be successful in developing it in the future.

We incurred operating expenses in the amount of $41,266 for the three months ended June 30, 2014compared to $25,817 for the three months ended June 30, 2013.

The increase in operating expenses is primarily due to the increase in professional fees related to the Form S1 Registration Statement.

For the six months ended June 30, 2014 compared to the three months ended June 30, 2013 We have not earned any revenues from our incorporation on January 20, 2011 to June 30, 2014. We do not anticipate earning revenues until we have completed Phase 3, where we have established a fixed site, and are in the process of scaling to a 3MW facility. We have not completed development of a commercially-viable HRES unit, and can provide no assurance that we will be successful in developing it in the future.

We incurred operating expenses in the amount of $94,085 for the three months ended June 30, 2014 compared to $52,347 for the six months ended June 30, 2013.

The increase in operating expenses was primarily due to the increase in professional fees related to the Form S1 Registration Statement.

As of June 30, 2014, the Company has issued promissory notes for funds received from its founding shareholders of $212,842 with $119,088 coming due within a year. The Company plans to use a portion of the proceeds from this offering to repay the notes but we cannot be certain if the offering will be successful. If we are not successful, the company may face a default on the notes and could put any assets of the company at risk.

We have significant licensing payments due in the near future and we will need to secure more funding if we are to pursue our business model. Our agreement with K'Air is exclusive until December 31, 2014 (extended from December 31, 2013) the Company will pay an initial license fee of $50,000 by March 31, 2014.

As of June 30, 2014, we had loaned K'Air a total of $59,716 which we may convert at our discretion to a payment for the initial distributor agreement. If we choose to, the Company may execute an extension of our exclusive License agreement until December 31, 2015 for a payment of $500,000 due on June 30, 2014. We believe the Company would need to raise at least $2,000,000 from this offering to maintain our exclusive status in our license agreement.

We are dependent upon obtaining financing to begin the development of our proposed business. For these reasons our auditors believe that there is substantial doubt that we will be able to continue as a going concern in the very near future.

18 --------------------------------------------------------------------------------Liquidity and Capital Resources Limited Operating History; Need for Additional Capital There is no historical financial information about us upon which to base an evaluation of our performance. Halex was incorporated in the State of Nevada on January 20, 2011 and have not generated any revenues from operations. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, and implementation of our business strategies. (See "Risk Factors" beginning on page 8).

We are seeking equity financing through this offering to provide for the capital required to fully realize our business plan. Equity financing could result in additional dilution to existing shareholders. There is no assurance that we will receive the required financing to completely realize our business plan.

Even if we are successful in raising proceeds from this offering we have no assurance that future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations.

At the present time, Halex has sufficient funds to address the administrative costs of this offering only. This assumption is based on the fact that, as of June 30, 2014, we had cash on hand of $4,826 with $440,788 in liabilities. If we are unable to raise additional capital we would likely have to cease operations.

Our current available cash is insufficient, under limited activities, to sustain operations beyond one month. We are dependent on our majority shareholder to fund our current obligations; however there is no guarantee of continued funding.

Management estimates that if the Company is successful in selling 10% or more of the common stock it will be able to conduct operations for up to 12 months and continue the development of the HRES prototype, however the likelihood of beginning revenue generating operations if less than 50% of the shares are sold would be very minimal. Management believes if 50% or more of the common stock is sold through this offering, we will be able to develop the commercial HRES system and begin to deploy distributed power generation stations and start revenue flow. Investors must be aware that this is a best efforts offering and we may not be successful in selling even 10% of the common stock.

Our liquidity may be negatively impacted by the significant costs associated with our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission.

We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly.

19 --------------------------------------------------------------------------------Critical Accounting Policies See "Footnotes" section to the financial statements for a complete summary of the significant accounting policies used in the presentation of our financial statements. The summary is presented to assist the reader in understanding the financial statements. The accounting policies used conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements. Because of our election to not opt out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act, our financial statements may not be comparable to companies that comply with public company effective dates.

Concentrations, Risks, and Uncertainties The Company did not have a concentration of business with suppliers or customers constituting greater than 10% of the Company's gross sales during the reporting period Stock Based Compensation For purposes of determining the variables used in the calculation of stock compensation expense under the provisions of FASB ASC Topic 505, "Equity" and FASB ASC Topic 718, "Compensation - Stock Compensation," management would perform an analysis of current market data and historical company data to calculate an estimate of implied volatility, the expected term of the option and the expected forfeiture rate. With the exception of the expected forfeiture rate, which is not an input, management uses these estimates as variables in the Black-Scholes option pricing model. Depending upon the number of stock options granted, any fluctuations in these calculations could have a material effect on the results presented in the Company's statement of operations and other comprehensive income. In addition, any differences between estimated forfeitures and actual forfeitures could also have a material impact on the Company's financial statements.

Recently Issued Accounting Standards: In June 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-10, "Development Stage Entities (Topic 915) Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation". This ASU does the following among other things: a) eliminates the requirement to present inception-to-date information on the statements of income, cash flows, and shareholders' equity, b) eliminates the need to label the financial statements as those of a development stage entity, c) eliminates the need to disclose a description of the development stage activities in which the entity is engaged, and d) amends FASB ASC 275, Risks and Uncertainties, to clarify that information on risks and uncertainties for entities that have not commenced planned principal operations is required.

The amendments in ASU No. 2014-10 related to the elimination of Topic 915 disclosures and the additional disclosure for Topic 275 are effective for public companies for annual and interim reporting periods beginning after December 15, 2014. Early adoption is permitted. The Company has evaluated this ASU and determined that it will early adopt beginning with the quarterly period ended June 30, 2014.

We have reviewed the FASB issued Accounting Standards Update ("ASU") accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation's reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.

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