UNITED
STATES
  SECURITIES
AND EXCHANGE COMMISSION
  Washington,
D.C. 20549
  Form 10-Q
  (Mark
One)
  x
QUARTERLY REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 2009
 
  o
 TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
              to
  
  COMMISSION FILE NUMBER
333-151381
  IX
ENERGY HOLDINGS, INC.
 (Exact
Name of small business issuer as specified in its charter)
 
 
 Delaware
                
                36-4620445(State
      or other jurisdiction of
                
                (I.R.S.
      Employerincorporation
      or organization)
                
                Identification
      No.)711
      Third Avenue, Suite 1505, New York, New York 10017(Address
      of principal executive offices) (Zip
Code)
 
 Issuer’s
telephone Number: (212)
682-5068
  WITH
COPIES TO:
 Gregory
Sichenzia, Esq.
 Marcelle
S. Balcombe, Esq.
 Sichenzia
Ross Friedman Ference LLP
 61
Broadway, 32 nd
Flr.
 New York,
New York 10006
 (212)
930-9700
  Indicate
by check mark whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act 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). Yes o   No o
  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
definitions of “large accelerated filer,” “accelerated filer,” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
 
 Large
      accelerated filer o
                
                Accelerated
      filer  oNon-accelerated
      filer o
                
                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 o   No x
  As of
November 20, 2009, the issuer had 65,893,143 outstanding shares of Common
Stock.
  1
 
  TABLE OF
CONTENTS
 
 PagePART I- FINANCIAL
      INFORMATIONItem 1.
              Financial
      Statements
              3Item 2.
              Management’s Discussion and
      Analysis of Financial Condition and Results of
      Operation
              28Item 3.
              Quantitative and Qualitative
      Disclosures About Market Risk
              33Item 4T
              Controls and
      Procedures
              33PART II- OTHER
      INFORMATIONItem 1.
              Legal
      Proceedings
              34Item 1A.
              Risk
    Factors
              34Item 2.
              Unregistered Sales of Equity
      Securities and Use of Proceeds
              34Item 3.
              Defaults Upon Senior
      Securities
              35Item 4.
              Submission of Matters to a Vote
      of Security Holders
              35Item 5.
              Other
      Information
              35Item 6.
              Exhibits
              35
 SIGNATURES
              36
  2
 
  PART I-FINANCIAL
INFORMATION
  ITEM 1. FINANCIAL
STATEMENTS.
  INDEX
TO FINANCIAL STATEMENTS
  
 
 PageUnaudited Consolidated Balance Sheets as of
      September 30, 2009 and December 31, 2008
              4Unaudited Statements of Operations for the
      three and nine months ended September 30, 2009 and
    2008
              5Unaudited Statements of Cash Flows for the
      nine months ended September 30, 2009 and 2008
              6Notes
      to the Unaudited Consolidated Financial Statements
              7




3





IX Energy Holdings, Inc. and
Subsidiary


Consolidated Balance
Sheets




September
      30, 2009
              
              
              December
      31, 2008(Unaudited)
              
              
              (Audited)AssetsAssetsCash
      and cash equivalents
              
              $
              722,952
              
              
              $
              4,736,812Investment
      in joint venture
              
              
              17,238
              
              
              
              -Accounts
      receivable
              
              
              180,701
              
              
              
              84,420Costs
      and estimated earnings in excess of billings on uncompleted
      contracts
              
              
              22,095
              
              
              
              6,974Prepaid
      expenses
              
              
              115,809
              
              
              
              4,000Total
      Current Assets
              
              
              1,058,795
              
              
              
              4,832,206Property
      and equipment, net of accumulated depreciation of $6,411 and $2,505 in
      2009 and 2008
              
              
              1,570,550
              
              
              
              1,331,787Debt
      issue costs, net of accumulated amortization of $8,063 and $3,893 in 2009
      and 2008
              
              
              -
              
              
              
              4,170Total
      Assets
              
              $
              2,629,345
              
              
              $
              6,168,163Liabilities and Stockholders’ Equity
      (Deficit)LiabilitiesAccounts
      payable and accrued expenses
              
              $
              295,862
              
              
              $
              525,994Notes
      payable - related party
              
              
              400,000
              
              
              
              873,000Notes
      payable - other
              
              
              500,000
              
              
              
              500,000Accrued
      interest payable - related party
              
              
              124,047
              
              
              
              76,217Accrued
      interest payable - other
              
              
              30,701
              
              
              
              12,071Deferred
      revenue
              
              
              887,595
              
              
              
              2,683,833Derivative
      liability - warrants
              
              
              108,644
              
              
              
              -Registration
      rights liability
              
              
              347,500
              
              
              
              -Total
      Current Liabilities
              
              
              2,694,349
              
              
              
              4,671,115Stockholders’
      Equity (Deficit)Common
      stock, $0.0001 par value, 500,000,000 shares authorized,65,893,144
      and 58,528,285 shares issued and outstanding
              
              
              6,590
              
              
              
              5,853Additional
      paid in capital
              
              
              10,301,727
              
              
              
              2,962,960Accumulated
      deficit
              
              
              (10,373,321
              )
              
              
              (1,471,765
              )Total
      Stockholders’ Equity (Deficit)
              
              
              (65,004
              )
              
              
              1,497,048Total
      Liabilities and Stockholders’ Equity (Deficit)
              
              $
              2,629,345
              
              
              $
              6,168,163




See
accompanying notes to financial statements




4




IX
Energy Holdings, Inc. and Subsidiary


Statement of Operations


(Unaudited)




For
      the Three Months Ended
              
              
              For
      the Nine Months EndedSeptember
      30, 2009
              
              
              September
      30, 2008
              
              
              September
      30, 2009
              
              
              September
      30, 2008(Consolidated)
              
              
              
              
              
              (Consolidated)Revenues
      - solar panels
              
              $
              114,541
              
              
              $
              1,039,857
              
              
              $
              2,019,415
              
              
              $
              5,638,624Revenues
      - construction contracts
              
              
              -
              
              
              
              -
              
              
              
              53,660
              
              
              
              68,660Total
      revenues
              
              
              114,541
              
              
              
              1,039,857
              
              
              
              2,073,075
              
              
              
              5,707,284Cost
      of revenues - solar panels
              
              
              95,385
              
              
              
              1,037,267
              
              
              
              1,631,938
              
              
              
              5,525,472Cost
      of revenues - construction contracts
              
              
              -
              
              
              
              18,975
              
              
              
              53,232
              
              
              
              88,205Total
      cost of revenues
              
              
              95,385
              
              
              
              1,056,242
              
              
              
              1,685,170
              
              
              
              5,613,677Gross
      profit (loss)
              
              
              19,156
              
              
              
              (16,385
              )
              
              
              387,905
              
              
              
              93,607General
      and administrative expenses
              
              
              1,221,482
              
              
              
              618,595
              
              
              
              7,609,232
              
              
              
              1,003,131Loss
      from operations
              
              
              (1,202,326
              )
              
              
              (634,980
              )
              
              
              (7,221,327
              )
              
              
              (909,524
              )Other
      income (expense)Interest
      income
              
              
              2,614
              
              
              
              22,717
              
              
              
              26,852
              
              
              
              26,175Interest
      expense
              
              
              (28,565
              )
              
              
              (46,401
              )
              
              
              (135,257
              )
              
              
              (59,744
              )Change
      in fair value of derivative liability - warrants
              
              
              807,900
              
              
              
              -
              
              
              
              2,635,268
              
              
              
              -Derivative
      expense
              
              
              -
              
              
              
              -
              
              
              
              (1,422,917
              )
              
              
              -Translation
      loss due to foreign currency
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (36,505
              )Letter
      of credit fee loan fee
              
              
              -
              
              
              
              (63,285
              )
              
              
              -
              
              
              
              (1,535,996
              )Total
      other income (expense)
              
              
              781,949
              
              
              
              (86,969
              )
              
              
              1,103,946
              
              
              
              (1,606,070
              )Net
      loss
              
              $
              (420,377
              )
              
              $
              (721,949
              )
              
              $
              (6,117,381
              )
              
              $
              (2,515,594
              )Net
      Income (Loss) per Share - Basic
              
              $
              (0.01
              )
              
              $
              (0.02
              )
              
              $
              (0.10
              )
              
              $
              (0.06
              )Net
      Income (Loss) per Share - Diluted
              
              $
              (0.01
              )
              
              $
              (0.02
              )
              
              $
              (0.10
              )
              
              $
              (0.06
              )Weighted
      Average Number of Common Shares Outstanding - Basic and
      Diluted
              
              
              64,858,329
              
              
              
              46,036,659
              
              
              
              63,320,926
              
              
              
              43,877,514




See
accompanying notes to financial statements




5




IX
Energy Holdings, Inc. and Subsidiary


Statements of Cash Flows


(Unaudited)




For
      the Nine Months
              
              
              For
      the Nine MonthsEnded
      September 30, 2009
              
              
              Ended
      September 30, 2008(Consolidated)CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
              
              $
              (6,117,381
              )
              
              $
              (2,515,594
              )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
              
              
              6,411
              
              
              
              681Amortization
      of debt issue costs
              
              
              51,816
              
              
              
              1,861Amortization
      of prepaid future services
              
              
              23,500
              
              
              
              -Loss
      on issuance of common stockLoss
      on settlement of accounts payable
              
              
              5,412
              
              
              
              -Loss
      on sale of fixed asset
              
              
              10,493
              
              
              
              -Transaction
      loss due to foreign currency
              
              
              -
              
              
              
              36,505Derivative
      expense
              
              
              1,422,917
              
              
              
              -Change
      in fair value of derivative liability- warrants
              
              
              (2,635,268
              )
              
              
              -Stock
      issued for services - employee
              
              
              3,675,303
              
              
              
              -Stock
      issued for services - consultant
              
              
              864,837
              
              
              
              6,667Recognition
      of stock based compensation - employees
              
              
              603,846
              
              
              
              -Recognition
      of stock based compensation - consultants
              
              
              48,334
              
              
              
              -Stock
      issued for loan fee
              
              
              -
              
              
              
              120,946Stock
      issued for consulting services - related party
              
              
              -
              
              
              
              24,979Changes
      in operating assets and liabilities:(Increase)
      Decrease in:Accounts
      receivable
              
              
              (96,281
              )
              
              
              (21,110
              )Cost
      & estimated earnings in excess of billings on uncompleted
      contracts
              
              
              (15,121
              )
              
              
              57,340Prepaid
      expenses and deposits
              
              
              (88,309
              )
              
              
              (3,775,846
              )Increase
      (Decrease) in:Accounts
      payable and accrued expenses
              
              
              (169,411
              )
              
              
              184,580Accrued
      interest payable - related party
              
              
              47,830
              
              
              
              52,044Accrued
      interest payable - other
              
              
              18,630
              
              
              
              5,838Estimated
      losses on uncompleted contracts
              
              
              -
              
              
              
              (20,172
              )Deferred
      revenue
              
              
              (1,796,238
              )
              
              
              7,657,478Registrations
      rights liability
              
              
              347,500
              
              
              
              -Net
      Cash Provided by (Used in) Operating Activities
              
              
              (3,791,180
              )
              
              
              1,816,197CASH
      FLOWS FROM INVESTING ACTIVITIES:Investment
      in joint venture
              
              
              (17,238
              )
              
              
              -Due
      from related party
              
              
              -
              
              
              
              (44,526
              )Proceeds
      from sale of fixed asset
              
              
              13,000
              
              
              
              -Purchase
      of property and equipment
              
              
              (268,667
              )
              
              
              (26,999
              )Net
      Cash Used in Investing Activities
              
              
              (272,905
              )
              
              
              (71,525
              )CASH
      FLOWS FROM FINANCING ACTIVITIES:Repayment
      of notes payable - related party
              
              
              (473,000
              )
              
              
              -Proceeds
      from common stock issued for cash in private placement
              
              
              725,000
              
              
              
              -Cash
      paid as direct offering costs
              
              
              (201,775
              )
              
              
              -Proceeds
      from issuance of notes payable
              
              
              -
              
              
              
              1,438,252Net
      Cash Provided By Financing Activities
              
              
              50,225
              
              
              
              1,438,252Net
      Increase (Decrease) in Cash and Cash Equivalents
              
              
              (4,013,860
              )
              
              
              3,182,924Cash
      and Cash Equivalents - Beginning of Period
              
              
              4,736,812
              
              
              
              176,160Cash
      and Cash Equivalents - End of Period
              
              $
              722,952
              
              
              $
              3,359,084SUPPLEMENTARY CASH FLOW
      INFORMATION:Cash
      Paid During the Period for:Income
      taxes
              
              $
              -
              
              
              $
              -Interest
              
              $
              17,517
              
              
              $
              -SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
      FINANCING ACTIVITIES:Stock
      issued for future services
              
              $
              155,100
              
              
              $
              -Stock
      issued to settle accounts payable
              
              $
              66,133
              
              
              $
              -Catch
      up adjustment for derivative liabilities due to EITF 07-5
              
              $
              1,320,995
              
              
              $
              -Forgiveness
      of receivable due from affiliate
              
              $
              -
              
              
              $
              44,526Debt
      issue costs
              
              $
              -
              
              
              $
              8,063






See
accompanying notes to financial statements




6





IX Energy Holdings, Inc. and
Subsidiary


Notes to Consolidated Financial
Statements


September 30, 2009


(Unaudited)






Note 1. Basis of
Presentation





The
accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
and the rules and regulations of the United States Securities and Exchange
Commission for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the
information and footnotes necessary for a comprehensive presentation of
financial position, results of operations, or cash flows. It is management's
opinion, however, that all material adjustments (consisting of normal recurring
adjustments) have been made which are necessary for a fair financial statement
presentation. The results for the interim period are not necessarily indicative
of the results to be expected for the full year.





The
unaudited interim financial statements should be read in conjunction with the
Company’s Form 10-K, which contains the audited financial statements and notes
thereto, together with Management’s Discussion and Analysis, for the years ended
December 31, 2008 and 2007.  The interim results for the period ended
September 30, 2009 are not necessarily indicative of the results for the full
fiscal year.





On
December 30, 2008, the Company executed a reverse acquisition with a public
shell company (See Note 10).  The accompanying financial statements are
consolidated as of September 30, 2009.  The financial statements for the
three and nine months ended September 30, 2008, consist solely of IX Energy,
Inc., the accounting acquirer and are not consolidated.





Note 2. Organization, Nature
of Operations and Summary of Significant Accounting Policies





Nature
of operations





IX Energy
Holdings, Inc.  (“IX Energy” or the “Company”) was incorporated on March 3,
2006 under the laws of the State of Delaware. The Company is a renewable energy
company primarily focused on solar power project development and integration.
 In an effort to maximize opportunities in the alternative energy industry,
and in response to the rapid changes taking place within the industry, the
Company has been positioned to focus on alternative energy project development
and finance. This broadens the existing strategy of leveraging the relationship
with UNICOR to employ their panels in pursuit of Federal projects.





On March
25, 2009, the Company incorporated IX Geo, LLC (“IX Geo”) under the laws of
Delaware as a wholly owned subsidiary of IX Energy.





On March
25, 2009, the Company formed IX Legatus6, LLC under the laws of Delaware as a
wholly owned subsidiary of IX Energy.  On July 21, 2009, the Company
changed the name of IX Legatus6, LLC to IX Energy Solutions, LLC (“IX
Solutions”).





IX
Solutions became operational on August 26, 2009. Under the terms of the Joint
Venture agreement (“JV”), the company contributed $5,000 in cash; however,
Rooftop Energy, Inc. (“RTI”) has yet to contribute their $5,000. During 2009,
the Company advanced $12,238 for expenses that benefit the JV.  The JV
has no current operations as of September 30, 2009.  The Company and
RTI are intending to establish  a relationship whereby the Company can
provide consulting services related to manufacture and installation of rooftop
energy systems.




7





IX Energy Holdings, Inc. and
Subsidiary
 Notes to Consolidated Financial
Statements
 September 30, 2009
 (Unaudited)




Going
Concern





As
reflected in the accompanying financial statements, the Company has a net loss
of $6,117,381 and net cash used in operations of $3,791,180 for the nine months
ended September 30, 2009; and had a working capital deficit of $1,635,554 and an
accumulated deficit of $10,373,321 at September 30, 2009.





The
ability of the Company to continue its operations is dependent on management’s
plans, which include the raising of capital through debt and/or equity markets
with some additional funding from other traditional financing sources, including
term notes, until such time that funds provided by operations are sufficient to
fund working capital requirements.





The
Company believes its current available cash, along with anticipated revenues,
may be insufficient to meet its cash needs for the near future. There can be no
assurance that financing will be available in amounts or terms acceptable to the
Company, if at all. The Company may require additional funding to finance the
growth of its current and expected future operations, as well as to achieve its
strategic objectives. The Company believes that the further implementation of
its business plan will provide future positive cash flows.





Use
of estimates





The
preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period.





Making
estimates requires management to exercise significant judgment. It is at least
reasonably possible that the estimate of the effect of a condition, situation or
set of circumstances that existed at the date of the unaudited interim condensed
consolidated financial statements, which management considered in formulating
its estimate could change in the near term due to one or more future confirming
events. Accordingly, the actual results could differ significantly from our
estimates. Actual results could differ from those estimates.




Risks
and uncertainties





The
Company operates in an industry that is subject to intense competition and rapid
technological change.  The Company's operations are subject to
significant risk and uncertainties including financial, operational,
technological, and regulatory risks including the potential risk of business
failure.





The
recent global economic slowdown has caused a general tightening in the credit
markets, lower levels of liquidity, increases in the rates of default and
bankruptcy, and extreme volatility in credit, equity and fixed income markets.
These conditions not only limit our access to capital, but also make it
difficult for our customers, our vendors and us to accurately forecast and plan
future business activities.




8




IX Energy Holdings, Inc. and
Subsidiary
 Notes to Consolidated Financial
Statements
 September 30, 2009
 (Unaudited)





Principles
of consolidation





The
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiary. All significant intercompany balances and transactions
have been eliminated in consolidation.





Cash
and cash equivalents





For
purposes of the statement of cash flows, the Company considers all highly liquid
instruments purchased with a maturity of three months or less to be cash
equivalents.





The
Company minimizes its credit risk associated with cash by periodically
evaluating the credit quality of its primary financial institution. The balance
at times may exceed federally insured limits. At September 30, 2009 and December
31, 2008, the balance exceeded the federally insured limit by $420,642 and
$4,249,256, respectively.





Accounts
receivable and concentrations




Accounts
receivable represents trade obligations from customers that are subject to
normal trade collection terms, without discounts, however, in certain cases we
are entitled to rebates upon the completion of certain jobs post installation.
The Company periodically evaluates the collectability of its accounts receivable
and considers the need to adjust an allowance for doubtful accounts based upon
historical collection experience and specific customer information. Actual
amounts could vary from the recorded estimates. We have determined that as of
September 30, 2009 and December 31, 2008, respectively, no allowance was
required.





At
September 30, 2009 and December 31, 2008, respectively, the Company had a
concentration of accounts receivable from three customers totaling 52%, 24% and
24%, and one customer totaling 100%, respectively.





Long
lived assets





Long-lived
assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the
carrying amount of an asset to future undiscounted net cash flows expected to be
generated by the asset. If such assets are considered impaired, the impairment
to be recognized is measured by the amount by which the carrying amount of the
assets exceeds the fair value of the assets. There were no impairment charges
taken during the nine months ended September 30, 2009 and 2008,
respectively.





Property
and equipment





Property
and equipment are stated at cost. Maintenance and repairs are charged to
operations as incurred. Betterments or renewals are capitalized when incurred.
Depreciation is provided using the straight line method over the estimated
useful lives of the asset.





As a
result of the stock dividend and reverse acquisition and recapitalization (see
Notes 9 and 10), all share and per share amounts were retroactively
restated.




9




IX Energy Holdings, Inc. and
Subsidiary
 Notes to Consolidated Financial
Statements
 September 30, 2009
 (Unaudited)


Fair
value of financial instruments





We have
determined the estimated fair value amounts presented in these financial
statements using available market information and appropriate methodologies.
However, considerable judgment is required in interpreting market data to
develop the estimates of fair value. The estimates presented in the unaudited
interim financial statements are not necessarily indicative of the amounts that
we could realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts. We have based these fair value estimates on
pertinent information available as of September 30, 2009, and have
determined that, as of such date, the carrying value of all financial
instruments approximates fair value. For purpose of this disclosure, the fair
value of a financial instrument is the amount at which the instrument could be
exchanged in a current transaction between willing parties, other than in a
forced sale or liquidation.




The
carrying amount reported in the balance sheet for accounts receivable, costs and
estimated earnings in excess of billings on uncompleted contracts, prepaid
expenses, accounts payable and accrued expenses, notes payable – related party,
notes payable – other, accrued interest payable – related party and accrued
interest payable – other, deferred revenue, derivative liability – warrants and
registration rights liability, approximates its fair market value based on the
short-term maturity of these instruments.





Derivative
financial instruments





We review
any common stock purchase warrants and other freestanding derivative financial
instruments at each balance sheet date and classify them on our balance sheet
as:




a)
            Equity
      if they (i) require physical settlement or net-share settlement, or
      (ii) gives us a choice of net-cash settlement or settlement in our
      own shares (physical settlement or net-share settlement), or
      as




b)
            Assets
      or liabilities if they (i) require net-cash settlement (including a
      requirement to net cash settle the contract if an event occurs and if that
      event is outside our control), or (ii) give the counterparty a choice of
      net-cash settlement or settlement in shares (physical settlement or
      net-share settlement).




We assess
classification of our common stock purchase warrants and other freestanding
derivatives at each reporting date to determine whether a change in
classification between assets and liabilities is required.




In
determining the appropriate fair value, the Company uses the Black-Scholes
option-pricing model. Once determined, derivative liabilities are adjusted to
reflect fair value at each reporting period end, with any increase or decrease
in the fair value being recorded in results of operations as an adjustment to
fair value of derivatives. In addition, the fair value of freestanding
derivative instruments such as warrants, are also valued using the Black-Scholes
option-pricing model. Finally, the Company has applied the related guidance when
determining the existence of liquidated damage provisions. At September 30,
2009, the Company had recorded a liquidated damages provision due to the failure
to file and have declared effective a registration statement.




10




IX Energy Holdings, Inc. and
Subsidiary
 Notes to Consolidated Financial
Statements
 September 30, 2009
 (Unaudited)


Revenue
recognition





The
Company follows the guidance of the Securities and Exchange Commission’s Staff
Accounting Bulletin No. 104 for revenue recognition and records revenue when all
of the following have occurred: (1)
persuasive evidence of an arrangement exists, (2) the product is delivered and
installed, (3) the sales price to the customer is fixed or determinable, and (4)
collectability of the customer receivable is reasonably
assured.





The
Company has two methods of revenue recognition:





(1)
Energy product reseller




The
Company purchases product from suppliers and resells them to third parties.
 The Company records the revenue from the buyer and related cost paid to
the suppliers on these types of arrangements.




Periodically,
the Company enters into similar arrangements wherein the Company had no
installation responsibility and no further obligation after delivery was made to
the customers.  Payments from the customers are received in advance of
delivery of solar panels and are treated as deferred revenue.  Payments are
then made to the suppliers and cost of materials is recorded.  A pro-rata
portion of the deferred revenue from the customers is recognized as shipments
are made.





Revenues
from these arrangements are recognized upon shipment from the supplier to these
third parties.  In addition, the Company has reviewed the relevance of
gross versus net reporting. Upon the Company’s review of this guidance, as well
as SAB No. 104, the Company has determined that it is subject to gross reporting
as it bears the risk of physical loss of inventory in each of these
arrangements, takes title to the inventory, is the primary obligor in the
arrangements, establishes the pricing with customers, has discretion in the
selection of suppliers, determines product specifications with customers and
suppliers and it has credit risk on all sales.





For the
nine months ended September 30, 2009, the Company had a concentration of sales
with one customer totaling 87%. For the nine months ended September 30, 2008,
the Company had a concentration of sales with one customer of 81%.




(2)
Percentage of completion





Revenue
from construction contracts are reported under the percentage-of-completion
method for financial statement purposes.  The estimated revenue for each
contract reflected in the financial statements represent that percentage of
estimated total revenue that costs incurred to date bear to estimated total
costs, based on the Company’s current estimates.  With respect to contracts
that extend over one or more accounting periods, revisions in costs and revenue
estimates during the course of the work are reflected in the period the
revisions become known.  When current estimates of total contract costs
indicate a loss, provision is made for the entire estimated loss.





The
asset, “Costs and estimated
earnings in excess of billings on uncompleted contracts,”represents
revenues recognized in excess of amounts billed.  The liability, “Estimated earnings on uncompleted
contracts,”represents billings in excess of revenues
recognized.





Billing
practices for these projects are governed by the contract terms of each project
based upon actual costs incurred, achievement of milestones, or pre-agreed
schedules. Billings do not necessarily correlate with revenue recognized under
the percentage-of-completion method of accounting.  With the exception of
claims and change orders that are in the process of being negotiated with
customers, unbilled work is usually billed during normal billing processes
following achievement of the contractual requirements.




11




IX Energy Holdings, Inc. and
Subsidiary
 Notes to Consolidated Financial
Statements
 September 30, 2009
 (Unaudited)


Cost
of sales





Cost of
sales, including contract costs represents costs directly related to the
purchasing and installation of the Company’s solar panel products. Primary costs
include direct materials and labor costs and those indirect costs related to
contract performance, such as indirect labor, supplies, tools, repairs and
depreciation costs.





Shipping
and handling costs





Shipping
and handling costs associated with inbound freight are included in cost of
sales. Amounts billed to customers for shipping and handling is recorded as
revenue.  For the three and nine months ended September 30, 2009 and 2008,
respectively, the Company had no such revenues or expenses.





Share
based payment arrangements





Generally,
all forms of share-based payments, including stock option grants, restricted
stock grants and stock appreciation rights, are measured at their fair value on
the awards’ grant date, and based on the estimated number of awards that are
ultimately expected to vest. Share-based compensation awards issued to
non-employees for services rendered are recorded at either the fair value of the
services rendered or the fair value of the share-based payment, whichever is
more readily determinable. The expense resulting from share-based payments are
recorded in general and administrative expense.




Segment
information





During
2009 and 2008, the Company only operated in one segment; therefore, segment
information has not been presented.





Basic
and diluted loss per share





Basic
earnings per share (“EPS”) is computed by dividing net loss available to common
stockholders by the weighted average number of common shares outstanding during
the period, excluding the effects of any potentially dilutive securities.
Diluted EPS gives effect to all dilutive potential of shares of common stock
outstanding during the period including stock options or warrants, using the
treasury stock method (by using the average stock price for the period to
determine the number of shares assumed to be purchased from the exercise of
stock options or warrants), and convertible debt or convertible preferred stock,
using the if-converted method. Diluted EPS excludes all dilutive potential of
shares of common stock if their effect is anti-dilutive.






The
computation of basic and diluted loss per share for the three and nine months
ended September 30, 2009 and 2008 excludes the following potentially
dilutive securities because their inclusion would be anti-dilutive:




Stock
      options
            
            
            4,996,132Stock
      warrants
            
            
            9,377,500Total
      common stock equivalents
            
            
            14,373,632




12




IX Energy Holdings, Inc. and
Subsidiary
 Notes to Consolidated Financial
Statements
 September 30, 2009
 (Unaudited)


Since the
three months ending September 30, 2009 resulted in income, these potentially
dilutive shares, consisting of outstanding options and warrants, have been
included in the computation of diluted earnings per share and the weighted
average shares outstanding, except where the result would be anti-dilutive.
 The average market price for the three months ended September 30, 2009 was
less than the exercise price, so the basic and diluted earnings per share
computation was the same.  For the nine months ended September 30, 2009,
these common stock equivalents are not included in the diluted loss per share
computation since the inclusion of such common stock equivalents would be
anti-dilutive due to the Company’s net loss during the period.   There
were no outstanding common stock equivalents at September 30, 2008.





Recent
accounting pronouncements




Effective
July 1, 2009, the Company adopted The “FASB Accounting Standards
Codification” and the Hierarchy of Generally Accepted Accounting Principles (ASC
105). This standard establishes only two levels of U.S. generally accepted
accounting principles (“GAAP”), authoritative and nonauthoritative. The FASB
Accounting Standards Codification (the “Codification”) became the source of
authoritative, nongovernmental GAAP, except for rules and interpretive releases
of the SEC, which are sources of authoritative GAAP for SEC registrants. All
other non-grandfathered, non-SEC accounting literature not included in the
Codification became nonauthoritative. The Company began using the new guidelines
and numbering system prescribed by the Codification when referring to GAAP in
the third quarter of fiscal 2009. As the Codification was not intended to change
or alter existing GAAP, it did not have a material impact on the Company’s
financial statements.




Effective
September 30, 2009, the Company adopted three accounting standard updates which
were intended to provide additional application guidance and enhanced
disclosures regarding fair value measurements and impairments of securities.
They also provide additional guidelines for estimating fair value in accordance
with fair value accounting. The first update, as codified in ASC 820-10-65,
provides additional guidelines for estimating fair value in accordance with fair
value accounting. The second accounting update, as codified in ASC 320-10-65,
changes accounting requirements for other-than-temporary-impairment
(OTTI) for debt securities by replacing the current requirement that a
holder have the positive intent and ability to hold an impaired security to
recovery in order to conclude an impairment was temporary with a requirement
that an entity conclude it does not intend to sell an impaired security and it
will not be required to sell the security before the recovery of its amortized
cost basis. The third accounting update, as codified in ASC 825-10-65, increases
the frequency of fair value disclosures. These updates were effective for fiscal
years and interim periods ended after September15, 2009. The adoption of these
accounting updates did not have a material impact on the Company’s financial
statements.




Effective
September 30, 2009, the Company adopted a new accounting standard for subsequent
events, as codified in ASC 855-10. The update modifies the names of the two
types of subsequent events either as recognized subsequent events (previously
referred to in practice as Type I subsequent events) or non-recognized
subsequent events (previously referred to in practice as Type II subsequent
events). In addition, the standard modifies the definition of subsequent events
to refer to events or transactions that occur after the balance sheet date, but
before the financial statements are issued (for public entities) or available to
be issued (for nonpublic entities). It also requires the disclosure of the date
through which subsequent events have been evaluated. The update did not result
in significant changes in the practice of subsequent event disclosures, and
therefore the adoption did not have a material impact on the Company’s financial
statements.




Effective
January 1, 2009, the Company adopted an accounting standard update
regarding the determination of the useful life of intangible assets. As codified
in ASC 350-30-35, this update amends the factors considered in developing
renewal or extension assumptions used to determine the useful life of a
recognized intangible asset under intangibles accounting. It also requires a
consistent approach between the useful life of a recognized intangible asset
under prior business combination accounting and the period of expected cash
flows used to measure the fair value of an asset under the new business
combinations accounting (as currently codified under ASC 850). The update also
requires enhanced disclosures when an intangible asset’s expected future cash
flows are affected by an entity’s intent and/or ability to renew or extend the
arrangement. The adoption did not have a material impact on the Company’s
financial statements.




In
February 2008, the FASB issued an accounting standard update that delayed
the effective date of fair value measurements accounting for all non-financial
assets and non-financial liabilities, except for items that are recognized or
disclosed at fair value in the financial statements on a recurring basis (at
least annually), until the beginning of the first quarter of fiscal 2009. These
include goodwill and other non-amortizable intangible assets. The Company
adopted this accounting standard update effective January 1, 2009. The
adoption of this update to non-financial assets and liabilities, as codified in
ASC 820-10, did not have a material impact on the Company’s financial
statements.




Effective
January 1, 2009, the Company adopted a new accounting standard update
regarding business combinations. As codified under ASC 805, this update requires
an entity to recognize the assets acquired, liabilities assumed, contractual
contingencies, and contingent consideration at their fair value on the
acquisition date. It further requires that acquisition-related costs be
recognized separately from the acquisition and expensed as incurred; that
restructuring costs generally be expensed in periods subsequent to the
acquisition date; and that changes in accounting for deferred tax asset
valuation allowances and acquired income tax uncertainties after the measurement
period be recognized as a component of provision for taxes. The adoption did not
have a material impact on the Company’s financial statements.




In
September 2009, the FASB issued Update No. 2009-13,
“Multiple-Deliverable Revenue Arrangements—a consensus of the FASB Emerging
Issues Task Force” (ASU 2009-13). It updates the existing multiple-element
revenue arrangements guidance currently included under ASC 605-25, which
originated primarily from the guidance in EITF Issue No. 00-21, “Revenue
Arrangements with Multiple Deliverables” (EITF 00-21). The revised guidance
primarily provides two significant changes: 1) eliminates the need for objective
and reliable evidence of the fair value for the undelivered element in order for
a delivered item to be treated as a separate unit of accounting, and 2)
eliminates the residual method to allocate the arrangement consideration. In
addition, the guidance also expands the disclosure requirements for revenue
recognition. ASU 2009-13 will be effective for the first annual reporting period
beginning on or after September15, 2010, with early adoption permitted provided
that the revised guidance is retroactively applied to the beginning of the year
of adoption. The Company is currently assessing the future impact of this new
accounting pronouncement.




13




IX Energy Holdings, Inc. and
Subsidiary
 Notes to Consolidated Financial
Statements
 September 30, 2009
 (Unaudited)




Effective
July 1, 2009, the Company adopted the Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification (“ASC”) 105-10, Generally Accepted Accounting
Principles – Overall (“ASC 105-10”). ASC 105-10 establishes the FASB Accounting Standards
Codification(the “Codification”) as the source of authoritative
accounting principles recognized by the FASB to be applied by nongovernmental
entities in the preparation of financial statements in conformity with U.S.
GAAP. Rules and interpretive releases of the SEC under authority of federal
securities laws are also sources of authoritative U.S. GAAP for SEC registrants.
All guidance contained in the Codification carries an equal level of authority.
The Codification superseded all existing non-SEC accounting and reporting
standards. All other non-grandfathered, non-SEC accounting literature not
included in the Codification is non-authoritative. The FASB will not issue new
standards in the form of Statements, FASB Staff Positions or Emerging Issues
Task Force Abstracts. Instead, it will issue Accounting Standards Updates
(“ASUs”). The FASB will not consider ASUs as authoritative in their own right.
ASUs will serve only to update the Codification, provide background information
about the guidance and provide the bases for conclusions on the change(s) in the
Codification. References made to FASB guidance throughout this document have
been updated for the Codification.




Effective
July 1, 2009, the Company adopted FASB ASU No. 2009-05, Fair Value Measurements and
Disclosures (Topic 820) (“ASU 2009-05”). ASU 2009-05 provided amendments
to ASC 820-10, Fair Value
Measurements and Disclosures – Overall, for the fair value measurement of
liabilities. ASU 2009-05 provides clarification that in circumstances in which a
quoted price in an active market for the identical liability is not available, a
reporting entity is required to measure fair value using certain techniques. ASU
2009-05 also clarifies that when estimating the fair value of a liability, a
reporting entity is not required to include a separate input or adjustment to
other inputs relating to the existence of a restriction that prevents the
transfer of a liability. ASU 2009-05 also clarifies that both a quoted price in
an active market for the identical liability at the measurement date and the
quoted price for the identical liability when traded as an asset in an active
market when no adjustments to the quoted price of the asset are required are
Level 1 fair value measurements. Adoption of ASU 2009-05 did not have a material
impact on the Company’s results of operations or financial
condition.




Note 3. Fair
Value




We have
categorized our assets and liabilities recorded at fair value based upon the
fair value hierarchy specified by GAAP.





The
levels of fair value hierarchy are as follows:




·
            Level
      1 inputs utilize unadjusted quoted prices in active markets for identical
      assets or liabilities that we have the ability to
  access;




·
            Level
      2 inputs utilize other-than-quoted prices that are observable, either
      directly or indirectly. Level 2 inputs include quoted prices for similar
      assets and liabilities in active markets, and inputs such as interest
      rates and yield curves that are observable at commonly quoted intervals;
      and




·
            Level
      3 inputs are unobservable and are typically based on our own assumptions,
      including situations where there is little, if any, market
      activity.




In
certain cases, the inputs used to measure fair value may fall into different
levels of the fair value hierarchy. In such cases, we categorize such financial
asset or liability based on the lowest level input that is significant to the
fair value measurement in its entirety. Our assessment of the significance of a
particular input to the fair value measurement in its entirety requires judgment
and considers factors specific to the asset or liability.




Both
observable and unobservable inputs may be used to determine the fair value of
positions that are classified within the Level 3 category. As a result, the
unrealized gains and losses for assets within the Level 3 category
presented in the tables below may include changes in fair value that were
attributable to both observable and unobservable inputs.




14




IX Energy Holdings, Inc. and
Subsidiary
 Notes to Consolidated Financial
Statements
 September 30, 2009
 (Unaudited)




The  following
are the major categories of assets and liabilities measured at fair value on a
nonrecurring basis during the nine month period ended September 30, 2009,
using quoted prices in active markets for identical assets and
liabilities (Level 1); significant other observable inputs
(Level 2); and significant unobservable inputs (Level 3):




Level
      1:
            
            
            Level
      2:
            
            
            Level
      3:Quoted
      Prices in Active Markets for Identical Assets
            
            
            Significant
      Other Observable Inputs
            
            
            Significant
      Unobservable Inputs
            
            
            Total
      at September 30, 2009Derivative
      Liabilities
            
            $
            -
            
            
            $
            -
            
            
            $
            108,644
            
            
            $
            108,644Total
            
            $
            -
            
            
            $
            -
            
            
            $
            108,644
            
            
            $
            108,644





Note 4. Construction
Contracts




Information
with respect to uncompleted contracts is summarized below for the periods ended
September 30, 2009 and December 31, 2008:




September 30, 2009
            
            
            December 31, 2008Actual
      costs incurred on uncompleted contracts
            
            $
            139,088
            
            
            $
            415,320Estimated
      profit (losses)
            
            
            65,168
            
            
            
            ( 10,124
            )204,256
            
            
            
            405,196Less:
      progress billings to date
            
            
            182,161
            
            
            
            398,222$
            22,095
            
            
            $
            6,974These
      amounts are included in the accompanying balance sheets under the
      following captions:Costs
      and estimated earnings in excess of billings on uncompleted
      contracts
            
            $
            22,095
            
            
            $
            6,974Estimated
      losses on uncompleted contracts
            
            
            -
            
            
            
            -$
            22,095
            
            
            $
            6,974





15




IX Energy Holdings, Inc. and
Subsidiary
 Notes to Consolidated Financial
Statements
 September 30, 2009
 (Unaudited)





In
September 2008, the Company entered into an agreement with Federal Prison
Industries, Inc. ("UNICOR"), under which UNICOR provided the labor for assembly
and production of solar panels to the Company, and the Company sold the solar
panels to Federal, civilian and military government customers of both the
Company and this customer.  The agreement has a term of five years.





Under the
UNICOR contract, the Company is obligated to perform sales under two separate
sales and marketing programs:





●
 IX shall actively market to and solicit customers, prepare customer
proposals and aid customers in obtaining project financing while UNICOR
assembles and produces solar panels, fabricates and assembles the product.
 Pricing is $0.55 per watt for panel fabrication plus the price of
photovoltaic cells that will be added to the price per unit.


●
 IX may act as a sales agent for UNICOR.  UNICOR may identify
potential customers and refer them to IX.  In this program, IX and UNICOR
may work together to prepare customer proposals and to aid customers in
obtaining project financing.  Since UNICOR will sell directly to customers
in this program, pricing is such that UNICOR will pay a service fee of 25% of
the net earnings on the project to IX when payment is received from
customers.





In
September 2008, the Company received $6,800,000 from UNICOR for the supply of
solar cells.  This amount was initially recorded as deferred revenue.
 Shipment of these solar cells began in October 2008. For the nine months
ended September 30, 2009 and 2008, the Company has recognized revenue based on
completion of shipments under this agreement of $1,796,238 and $0, respectively.





In
September 2008, the Company entered into an agreement, under which a supplier
provides the labor for the assembly and production of solar panels to the
Company, and the Company sells the solar panels to a third party. The agreement
has a term of one year.  In July and September 2008, the Company received
$1,897,335 from this customer for the shipment of solar panels.  This
amount was initially recorded as deferred revenue. For the nine months ended
September 30, 2009 and 2008, the Company recognized $0 and $0 of revenue,
respectively





Note 5 Affiliate Charge to
Equity





For the
nine months ended September 30, 2009, a Company related to the Company’s Chief
Executive Officer collected certain funds on contracts entered into by the
Company.  The affiliated entity did not have the ability to repay these
funds that the Company was entitled to.  As a result, the Company recorded
a charge to additional paid in capital of $42,823 to reflect the uncollectible
receivable from this related party.





16




IX Energy Holdings, Inc. and
Subsidiary
 Notes to Consolidated Financial
Statements
 September 30, 2009
 (Unaudited)





Note 6. Property and
Equipment





At
September 30, 2009 and December 31, 2008, property and equipment consists of the
following:





September 30, 2009
            
            
            December 31, 2008
            
            Estimated Useful LivesSolar
      panel equipment
            
            $
            1,550,000
            
            
            $
            1,300,000
            
            20
      yearsAutomobiles
            
            
            -
            
            
            
            26,999
            
            5
      yearsComputers
      and equipment
            
            
            26,961
            
            
            
            7,293
            
            3
      years1,576,961
            
            
            
            1,334,292Less:
      accumulated depreciation
            
            
            ( 6,411
            )
            
            
            ( 2,505
            )Property
      and equipment - net
            
            $
            1,570,550
            
            
            $
            1,331,787





The solar
panel equipment, purchased for $1,550,000, was not in service at September 30,
2009 as the Company is currently looking for suitable manufacturing warehouse
space to install the equipment to manufacture its own solar panels.  The
Company expects to place this asset in service by the end of fiscal year 2009 or
seek a sale of this asset.





Note 7. Guarantee Letter of
Credit




On May
27, 2008 the Company entered in to a standby letter of credit with a bank for
$1,600,000.  The letter of credit acts as a performance bond, with a
customer being the beneficiary, if the Company defaults on their monthly
delivery agreement. The Company’s Chief Executive Officer has provided a
personal guarantee of $800,000 on behalf of the Company for the letter of
credit.  In exchange for the personal guarantee, the Company issued
2,031,030 shares of the Company’s common stock, having a fair value of $60,473
($0.03/share) based upon the then recent cash offering price.  The letter
of credit expired in August 2008.  However, the bank extended the letter of
credit until August 7, 2009.  The letter of credit was released in February
2009, as the Company fulfilled its obligation under the terms of its government
contract with UNICOR.





On
September 30, 2008, two third party shareholders also provided personal
guarantees, of $400,000 each, for the letter of credit.  In exchange for
the personal guarantee, the Company issued 1,015,494 shares of the Company’s
common stock to each stockholder, having a total fair value of $60,473
($0.03/share), based upon the recent cash offering price to third
parties.





Note 8.  Notes and
Accrued Interest Payable





(A) Notes
Payable & Accrued Interest Payable – Related Party





On
November 1, 2007 and December 30, 2007, respectively, the Company issued notes
payable of $3,000 and $220,000, respectively to the same stockholder. The notes
bear interest at 12%, are unsecured, have a default interest rate of 24% and are
due 3 business days after the Company receives the cash proceeds from certain
solar panel installation jobs.  The Company completed 2 of the 3 solar
panel installations in 2008.  However, the stockholder extended the
repayment date of the notes to March 31, 2009.  On April 1, 2009, the
Company repaid principal of $3,000 and $110,000 of notes payable due to this
related party stockholder.  On that date, the Company also repaid interest
of $16,500 related to the $3,000 and $110,000 notes on the same date in full
settlement of all interest amounts due on those notes.  On May 13, 2009,
the Company repaid principal of $55,000 on the remaining note payable due to
this related party stockholder.




17




IX Energy Holdings, Inc. and
Subsidiary
 Notes to Consolidated Financial
Statements
 September 30, 2009
 (Unaudited)





On July
21, 2008, the Company issued a note payable, of $900,000, to an affiliate of a
stockholder. The note bears interest at 18%, is unsecured, has a default
interest rate of 24% and is due 3 business days after the Company receives the
cash proceeds from a solar panel installation job that is expected to be
completed by the second quarter of 2009. In January 2009, the Company repaid an
additional $250,000 of principal.  The balance due on this note as of
September 30, 2009 is principal totaling $400,000 and accrued interest totaling
$103,523.





Total
principal due on these related party notes at September 30, 2009 is $455,000,
and related accrued interest was $124,047.





(B) 
Notes Payable - Other, Conversion to Equity & Accrued Interest Payable -
Other





In July
2008, the Company entered into eight promissory note agreements for aggregate
principal totaling $500,000 with various third parties. The notes bear interest
at 5%, and the principal and interest is due and payable on the earlier of July
1, 2009 or when the Company completes the sale of any debt securities, common
stock or common stock equivalents in a single transaction or series of related
transactions resulting in gross proceeds of $3,500,000.  As of August 12,
2009, the Company has not repaid the balance and the notes are in default and
are subject to a late fee of 18% per annum, accruing on a daily basis.  The
Company is currently in negotiation with the noteholder’s to cure the default or
to obtain an extension for repayment.





In July
2008, the Company entered into a Securities Purchase agreement with all eight of
the note holders listed above.  The Company issued a total of 270,800
shares to the note holders in connection with these promissory notes. The number
of shares each note holder received was in direct proportion to the amount of
their promissory notes.  The fair value of the common shares are valued at
$100,195 ($0.37/share) based upon the fair value of stock
issued to a third party for services rendered.  This amount is treated
as a debt issue cost and is being amortized to interest expense over the life of
the underlying promissory notes.





As of
September 30, 2009 and 2008, the Company recorded amortization of debt issue
costs to interest expense of $51,816 and $1,861, respectively.





Note 9. Stockholders’ Equity
(Deficit)





(A)
Share Issuances





On
February 5, 2009, the Company issued 2,646,310 shares of common stock to
employees for services rendered, having a fair value of $3,440,203
($1.30/share), based upon the quoted closing trading price.





On
February 5, 2009, the Company issued 26,738 shares of common stock to a
consultant for services rendered, having a fair value of $34,760 ($1.30/share),
based upon the quoted closing trading price.





On
February 12, 2009, the Company issued 150,000 shares of common stock to a now
former employee for services rendered, having a fair value of $225,000
($1.50/share), based upon the quoted closing trading price.





On
February 27, 2009, the Company issued 500,000 shares of common stock to a
consultant for services rendered, having a fair value of $505,000 ($1.01/share),
based upon the quoted closing trading price.




18




IX Energy Holdings, Inc. and
Subsidiary
 Notes to Consolidated Financial
Statements
 September 30, 2009
 (Unaudited)





On March
9, 2009, the Company issued 10,000 shares of common stock to an employee for
services rendered, having a fair value of $10,100 ($1.01/share), based upon the
quoted closing trading price.





On May
12, 2009, the Company issued 135,303 shares of common stock to a consultant for
services rendered in full settlement of amounts due of $54,121 ($0.44/share),
based upon the price per share paid by investors in the private placement as
agreed upon by the Company and the consultant (See Note 9(D)).  In
connection with this issuance, the Company recorded a loss on settlement of
accounts payable of $5,412.





On May
26, 2009, the Company issued 20,000 shares of common stock to a consultant for
services rendered as payment for past services due to this consultant.  The
shares have a fair value of $6,600 ($0.33/share), based upon the quoted closing
trading price.





On May
26, 2009, the Company issued 22,500 shares of common stock to a consultant for
services rendered pursuant to an agreement dated February 16, 2009.  The
shares have a fair value of $7,425 ($0.33/share), based upon the quoted closing
trading price.  In addition, the Company issued 3,000 shares of common
stock to this same consultant as payment towards unpaid amounts, having a fair
value of $990 ($0.33/share), based upon the quoted closing trading
price.





On May
26, 2009, the Company issued 470,000 shares of common stock to a consultant for
services rendered pursuant to an agreement dated April 1, 2009 in settlement of
$50,000.  The fair value of the stock issuance was $155,100 ($0.33/share),
based upon the quoted closing trading price.  The Company recorded an
additional expense for stock issued for services of $108,100. The balance of
$47,000 has been capitalized as a prepaid asset that is being amortized ratably
through March 31, 2010.  The
Company is also required to issue an additional 30,000 shares of common stock by
December 31, 2009 for services to be provided.





Pursuant
to an amended agreement dated May 26, 2009 with a consultant to provide legal
services, on May 26, 2009, the Company issued 100,000 shares of common stock,
having a fair value of $33,000 ($0.33/share), based upon the quoted closing
trading price.





On May
29, 2009, the Company issued 10,000 shares of common stock to a consultant for
services pursuant to an agreement on the same date, having a fair value of
$3,200 ($0.32/share), based upon the quoted closing trading price. On June 29,
2009, the Company issued an additional 50,000 shares of common stock, having a
fair value of $15,000 ($0.30/share), based upon the quoted closing trading
price.





On July
26, 2009 and September 26, 2009, the Company issued 8,333 and 8,333 shares of
common stock, respectively to a consultant for services rendered pursuant to an
agreement dated February 16, 2009.  The shares have a fair value of $917
and $750 ($0.11/share and $0.09/share), respectively, based upon the quoted
closing trading price.





On July
31, 2009, the Company issued 25,000 shares of common stock to a consultant for
services rendered pursuant to an agreement dated July 31, 2009.  The
shares have a fair value of $4,000 ($0.16/share) based upon the quoted closing
trading price.  In addition, the Company issued 105,682 and 112,500
shares of common stock on August 31, 2009 and September 30, 2009 to this same
consultant as a monthly payment pursuant to his consulting agreement, having a
fair value of $11,625 and $11,250 ($0.11/share and $0.10/share), respectively,
based upon the quoted closing trading price.




19




IX Energy Holdings, Inc. and
Subsidiary
 Notes to Consolidated Financial
Statements
 September 30, 2009
 (Unaudited)





On August
10, 2009 and September 30, 2009, the Company issued 200,000 and 150,000 shares
of common stock to a consultant for services rendered.  The shares
have a fair value of $26,000 and $15,000 ($0.13/share and $0.10/share), based
upon the quoted closing trading price.





On August
13, 2009 and September 27, 2009, the Company issued 334,000 and 333,000 shares
of common stock to a consultant for services rendered pursuant to an agreement
dated August 13, 2009.  The shares have a fair value of $43,420 and
$29,970 ($0.13/share and $0.09/share), respectively, based upon the quoted
closing trading price.





On August
27, 2009, the Company issued 55,000 shares of common stock to its Chief
Financial Officer for services rendered pursuant to an employment agreement
dated August 27, 2009.  The shares have a fair value of $6,765
($0.12/share), based upon the quoted closing trading price.  In
addition, the Company issued 76,660 shares of common stock on September 30, 2009
to this officer as a monthly payment pursuant to his employment agreement,
having a fair value of $7,666 ($0.10/share), respectively, based upon the quoted
closing trading price.





(B)
Stock Dividend





In
January 2009, the Company effected a stock dividend.  Each stockholder of
record as of January 12, 2009 received 1.75 shares of common stock for each
share of common stock they owned.





(C)
2009 Stock Option Plan





On
February 17, 2009, the Company adopted the 2009 Incentive Stock Plan (“the
Plan”). The total number of shares of stock which may be purchased or granted
directly by options, stock awards or restricted stock purchase offers, or
purchased indirectly through exercise of options granted under the Plan shall
not exceed 12,000,000.


The Plan
indicates that the exercise price of an award is equivalent to the market value
of the Company’s common stock on the grant date.





On March
23, 2009, the Company entered into a one-year agreement with a consultant to
provide services.  In addition to monthly fees of $5,000 (See Note 9(A)),
the Company will issue stock options in the amount of 5,000 per month, vesting
immediately upon the date of grant of each issuance.  On May 12, 2009, the
Company granted 15,000 options to this individual for April through September
2009, having a fair value of $4,295.  The Black-Scholes assumptions used
are as follows:





Exercise
      price
            
            $
            0.44Expected
      dividends
            
            
            0
            %Expected
      volatility
            
            
            82.16
            %Risk
      free interest rate
            
            
            1.03
            %Expected
      life of option
            
            5
      yearsExpected
      forfeitures
            
            
            0
            %





During
July through September 2009, the Company granted a total of 15,000 options to
this individual, having a  total fair value of $1,722.  The
Black-Scholes assumptions used are as follows:





Exercise
      price
            
            $
            0.10
      - $0.16Expected
      dividends
            
            
            0
            %Expected
      volatility
            
            
            152,24%
      - 169.77
            %Risk
      free interest rate
            
            
            2.31%
      - 2.53
            %Expected
      life of option
            
            5
      yearsExpected
      forfeitures
            
            
            0
            %





20





IX Energy Holdings, Inc. and
Subsidiary
 Notes to Consolidated Financial
Statements
 September 30, 2009
 (Unaudited)




On July
6, 2009, the Company granted 100,000 options due to an employee pursuant to an
employment agreement dated May 25, 2009, having a fair value of $15,136.
 The Black-Scholes assumptions used are as follows:


Exercise
      price
            
            $
            0.23Expected
      dividends
            
            
            0
            %Expected
      volatility
            
            
            83.21
            %Risk
      fee interest rate
            
            
            1.18
            %Expected
      life of option
            
            5
      yearsExpected
      forfeitures
            
            
            0
            %





On July
6, 2009, the Company also granted 100,000 options due to a consultant to provide
legal services pursuant to an amended consulting agreement dated May 26, 2009,
having a fair value of $15,136.  The Black-Scholes assumptions used are as
follows:


Exercise
      price
            
            $
            0.23Expected
      dividends
            
            
            0
            %Expected
      volatility
            
            
            83.21
            %Risk
      fee interest rate
            
            
            1.18
            %Expected
      life of option
            
            5
      yearsExpected
      forfeitures
            
            
            0
            %





The
following is a summary of the Company’s stock option activity:





Options
            
            
            Weighted Average Exercise
    PriceOutstanding
      – December 31, 2007
            
            
            -
            
            
            $Granted
            
            
            -
            
            
            $Exercised
            
            
            -
            
            
            $Forfeited
            
            
            -
            
            
            $Outstanding
      – December 31, 2008
            
            
            -
            
            
            $Granted
            
            
            5,116,132
            
            
            $
            0.45Exercised
            
            
            -
            
            
            $Forfeited
            
            
            (120,000
            )
            
            $
            0.44Outstanding
      – September 30, 2009
            
            
            4,996,132
            
            
            $
            0.45Exercisable
      – September 30, 2009
            
            
            1,993,510
            
            
            $
            0.47Weighted
      average fair value of options granted during the period ended September
      30, 2009
            
            
            1,416,158
            
            
            $
            0.28Weighted
      average fair value of options exercisable at September 30,
      2009
            
            
            548,987
            
            
            $
            0.28





21




IX Energy Holdings, Inc. and
Subsidiary
 Notes to Consolidated Financial
Statements
 September 30, 2009
 (Unaudited)





Options outstandingRange of exercise price
            
            
            Number outstanding
            
            Weighted
      average remaining contractual
      life
            
            Weighted
      average exercise
price$
            0.10
      - $0.50
            
            
            
            4,996,132
            
            4.72
      years
            
            $
            0.45








Options exercisableRange of exercise price
            
            
            Number exercisable
            
            Weighted
      average remaining contractual
      life
            
            Weighted
      averageexercise
price$
            0.10
      - $0.50
            
            
            
            1,993,510
            
            4.72
      years
            
            $
            0.47





At
September 30, 2009, the total intrinsic value of options outstanding and
exercisable was $0.





For the
three and nine months ended September 30, 2009, the Company recognized stock
based compensation of $149,723 and $615,214, respectively.





The
following summarizes the activity of the Company’s stock options that have not
vested for the nine months ended September 30, 2009:





Total
unrecognized share-based compensation expense from non-vested stock options at
September 30, 2009 was $832,807, which is expected to be recognized over a
weighted average period of approximately of 1.56 years.





(D)
Private Placement and Registration Rights Agreement





During
2009, the Company sold 7.25 units at $100,000 per unit.  Each unit
consisted of 250,000 shares of common stock and a detachable three-year warrant
to purchase 250,000 shares of common stock for an exercise price of $0.50 per
share.  Gross proceeds for these additional units were $725,000 and the
Company paid direct offering costs of $201,775.  As a result of the
offering, the Company issued an additional 1,812,500 shares of common stock and
1,952,500 warrants, inclusive of 140,000 warrants paid to a placement agent as a
direct offering cost.  The total warrants of 490,000 that were paid as a
direct offering cost have a net effect of zero on the statement of equity and
had a fair value of $48,975 (See Note 9(F) for additional detail).





The
Company also granted the investors registration rights for the common stock and
common stock underlying the warrants.  The Company can be assessed
liquidated damages, as defined in the agreement, for the failure to file a
registration statement within 180 days from the termination from the offering as
well as to have the registration statement declared effective. The termination
date was February 25, 2009. Penalties will be assessed at 1% per month, payable
in cash, for every 30 day period under which the Company is in default under the
terms of the registration rights agreement, up to a maximum of 10%. In assessing
the likelihood and amount of possible liability for liquidated damages, the
Company has passed the 180 day period and the registration statement has still
not gone effective.  As a result, the Company will accrue the maximum
10% liquidated damages which is equivalent to:




22




IX Energy Holdings, Inc. and
Subsidiary
 Notes to Consolidated Financial
Statements
 September 30, 2009
 (Unaudited)





Liquidated
damages are as follows:





Equity
      raised
            
            $
            3,475,000Maximum
      penalty
            
            
            10
            %$
            347,500





(E)
Consulting Agreements





On March
20, 2009, the Company entered into a one-year agreement with a consultant to
provide investor relation services.  In addition to monthly fees of $5,500,
the Company issued a five-year warrant to purchase 200,000 shares of common
stock, having a fair value of $69,708 ($0.35/share).





The
Black-Scholes assumptions used are as follows:





Exercise
      price
            
            $
            0.55Expected
      dividends
            
            
            0
            %Expected
      volatility
            
            
            78.88
            %Risk
      free interest rate
            
            
            1.23
            %Expected
      life of option
            
            5
      yearsExpected
      forfeitures
            
            
            0
            %






At
September 30, 2009, the Company had recognized $37,050 of expense related to
this agreement.





(F)
Warrants & Derivative Liability




The
following is a summary of the Company’s warrant activity:





Warrants
            
            
            Weighted Average Exercise
    PriceOutstanding
      – December 31, 2007
            
            
            -
            
            
            $Granted
            
            
            7,225,000
            
            
            $
            0.50Exercised
            
            
            -
            
            
            $Forfeited
            
            
            -
            
            
            $Outstanding
      – December 31, 2008
            
            
            7,225,000
            
            
            $
            0.50Granted
            
            
            2,152,500
            
            
            $
            0.50Exercised
            
            
            -
            
            
            $Forfeited
            
            
            -Outstanding
      – September 30, 2009
            
            
            9,377,500
            
            
            $
            0.50Exercisable
      – September 30, 2009
            
            
            9,377,500
            
            
            $
            0.50





23




IX Energy Holdings, Inc. and
Subsidiary
 Notes to Consolidated Financial
Statements
 September 30, 2009
 (Unaudited)





Warrants
      outstanding/exercisableRange of exercise price
            
            
            Number outstanding
            
            Weighted
      average remaining contractual
      life
            
            Weighted
      average exercise
price$
            0.50
            
            
            
            9,377,500
            
            2.44
      years
            
            $
            0.50





Fair
Value and Assessment of Derivative Financial Instruments under EITF
07-5





The
Company had two offerings of equity based financing.  The first was on
December 30, 2008, and the second was on February 25, 2009.





As a
result of the offering on December 30, 2008, the Company issued 7,225,000
warrants, inclusive of 350,000 warrants paid to a placement agent as a direct
offering cost.  The warrants have a 3 year term. The exercise price is
$0.50. The
warrants paid as a direct offering cost have a net effect of zero on the
statement of equity and had a fair value of $63,993 at December 31, 2008.





During 
the two year anniversary from the issuance date, if the Company issues or grants
any shares of common stock or any warrants or other convertible securities
pursuant to which shares of common stock may be acquired at a per share price
less than $0.50 (subject to certain customary exceptions, including where shares
are issued in connection with employment arrangements or business combinations
in which a portion of the consideration may be payable in shares or convertible
securities with a business in substantially the same line of business as the
Company), then the exercise price of the Warrants shall be reduced to the Lower
Price. Finally, should the Company fail to achieve at least $17.5 million of
consolidated gross revenue within one year of the final closing of the Private
Placement, the exercise price shall be reduced to $0.01 per share.  
The private placement closed on February 25, 2009.





If at any
time following the one year anniversary of the reverse merger (See Note 1) there
is no effective registration statement registering the resale of the shares of
common stock underlying the Warrants, the holders of the Warrants have the right
to exercise the Warrants by means of a cashless exercise.





On
January 1, 2009, the Company determined that the embedded conversion feature in
the warrants is not indexed to the Company’s own stock and, therefore, is an
embedded derivative financial liability (the “Embedded Derivative”), which
requires bifurcation and to be separately accounted for pursuant to Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. The Company, due to both provisions, concluded that
neither embedded feature (ratchet down of exercise price or contingent revenue)
is indexed to its own stock.




24




IX Energy Holdings, Inc. and
Subsidiary
 Notes to Consolidated Financial
Statements
 September 30, 2009
 (Unaudited)





The
Company measured the fair value of these warrants using a Black-Scholes
valuation model on January 1, 2009, since this represents the effective
commitment date since these warrants were not indexed to the Company’s own
stock. The fair
value of the 7,225,000 warrants was determined to be $1,320,995 based upon the
following management assumptions:





The
Black-Scholes assumptions used are as follows:





Exercise
      price
            
            $
            0.50Expected
      dividends
            
            
            0
            %Expected
      volatility
            
            
            78.88
            %Risk
      free interest rate
            
            
            0.94
            %Expected
      life of option
            
            3
      yearsExpected
      forfeitures
            
            
            0
            %





The fair
value of these warrants was charged to accumulated deficit on January 1, 2009,
as a cumulative adjustment due to a change in accounting principle.





On
February 25, 2009, the date of the closing of the second offering, the Company
granted 1,952,500 warrants, having a fair value of $1,422,917. The warrants have
a 3 year term. The exercise price is $0.50. These warrants were
inclusive of 140,000 warrants paid to a placement agent as a direct offering
cost.  The warrants paid as a direct offering cost have a net effect of
zero on the statement of equity and had a fair value of $102,027 at February 25,
2009.  As a result of the application of EITF 07-5, the fair value of these
warrants was determined to be $1,422,917 based upon the following management
assumptions:





The
Black-Scholes assumptions used are as follows:





Exercise
      price
            
            $
            0.50Expected
      dividends
            
            
            0
            %Expected
      volatility
            
            
            80.91
            %Risk
      free interest rate
            
            
            1.49
            %Expected
      life of option
            
            3
      yearsExpected
      forfeitures
            
            
            0
            %





The fair
value of these warrants was recorded on February 25, 2009 as derivative
expense.





Mark
to Market





At
September 30, 2009, the Company re-measured these warrants and recorded a fair
value of $108,644.  As a result of the remeasurement, the Company recorded
a change in fair value associated with these warrants as income totaling
$807,900 and $2,635,268 for the three and nine months ended September 30, 2009.
The following management assumptions were considered:




25




IX Energy Holdings, Inc. and
Subsidiary
 Notes to Consolidated Financial
Statements
 September 30, 2009
 (Unaudited)





The
Black-Scholes assumptions used are as follows:





Exercise
      price
            
            $
            0.50Expected
      dividends
            
            
            0
            %Expected
      volatility
            
            
            82.62
            %Risk
      free interest rate
            
            
            1.45
            %Expected
      life of option
            
            3
      yearsExpected
      forfeitures
            
            
            0
            %





Note 10. Reverse
Acquisition and Recapitalization




On
December 30, 2008, Yoo, Inc. (“Yoo”), a then shell corporation, merged with IX
Energy, and IX Energy became the surviving corporation. This transaction was
accounted for as a reverse acquisition. Yoo did not have any operations and
majority-voting control was transferred to IX Energy.  The transaction also
required a recapitalization of IX Energy. Since IX Energy acquired a controlling
voting interest, it was deemed the accounting acquirer, while Yoo was deemed the
legal acquirer. The historical financial statements of the Company are those of
IX Energy and of the consolidated entities from the date of merger and
subsequent.




Since the
transaction is considered a reverse acquisition and recapitalization, the
guidance in SFAS No. 141 did not apply for purposes of presenting pro-forma
financial information.





Pursuant
to the Merger, Yoo’s majority stockholders cancelled 4,000,000 shares of common
stock and the Company concurrently issued 46,153,284 shares of common stock to
IX Energy.  Upon the closing of the reverse acquisition, IX Energy
stockholders held 89% of the issued and outstanding shares of common stock at
the date of the transaction. Yoo retained 5,500,000 shares of common stock upon
the closing of the reverse acquisition.





Note 11. Commitments and
Contingencies





(A)
 Litigations, claims and assessments





From time
to time, the Company may become involved in various lawsuits and legal
proceedings, which arise in the ordinary course of business. However, litigation
is subject to inherent uncertainties, and an adverse result in these or other
matters may arise from time to time that may harm its business.





1.
            A
      complaint was filed in the Supreme Court of the State of New York by a
      vendor seeking to recover the sum of $101,820, plus costs and
      disbursements. The original complaint was divided into two pieces, with
      the first piece totaling $40,000 being submitted to arbitration before the
      Joint Committee on Fee Disputes and Conciliation in dispute of attorney’s
      fees against the above-referenced vendor to recover fees of $40,000.
       The arbitrators awarded a judgment of $33,000 in this portion of the
      case, and the Company had accrued this amount in full at September 30,
      2009. The remaining $61,820 remains in dispute, however, no estimate or
      range of loss can be estimated at this
time.





2.
            A
      complaint was filed in the Supreme Court of the State of New York by the
      holder of a promissory note issued by the Company, seeking summary
      judgment for repayment of the principal amount of the Note in the amount
      of $150,000 plus accrued interest.  The Company has recorded $10,643
      of interest on this note. while this case was in progress. On September
      30, 2009, the court awarded a judgment against the Company for a total
      amount of $177,846 inclusive of interest and legal
  fees.





3.
            In
      September 2009, the Company was served with a claim for breach of
      contract, breach of implied covenant of good faith and fair dealing and a
      breach of guarantee in the Superior Court of the State of California,
      County of San Diego.  The amount claimed in the complaint is
      $175,000. The Company cannot at this time estimate the amount or range of
      loss in connection with this
matter.





26




IX Energy Holdings, Inc. and
Subsidiary
 Notes to Consolidated Financial
Statements
 September 30, 2009
 (Unaudited)




(B)
 Employment agreements





(1)
Chief Executive Officer





On May 1,
2008, the Company entered into a two-year employment agreement with an
individual to serve as the Company’s CEO and Chairman of the Board. The
agreement provides for an annual salary of $225,000 and $80,000 to be paid as a
bonus for services rendered prior to this agreement.  The individual is
also eligible for a multi-year grant of the Company’s non-qualified options that
will be equal to 6% of the total common shares outstanding after the reverse
merger.





On March
19, 2009, the Company granted 1,033,066 stock options to this individual, having
a fair value of $284,259.  On May 12, 2009, the Company granted the 2nd
one-third of total options due to this individual in the amount of 1,033,066
options, having a fair value of $288,073.





These
options vested upon grant and were immediately expensed.  The Company
expensed the full amount of the fair value to stock option expense on the date
of grant.





The
Black-Scholes assumptions used are as follows:





Exercise
      price
            
            $
            0.48
      – $0.50Expected
      dividends
            
            
            0
            %Expected
      volatility
            
            
            78.88%
      - 82.16
            %Risk
      free interest rate
            
            
            0.98%
      - 1.03
            %Expected
      life of option
            
            5
      yearsExpected
      forfeitures
            
            
            0
            %





(2)
 Former President




February
12, 2009, the Company entered into a three-year employment agreement with Karen
Morgan to serve as President of the Company. Effective October 22, 2009, Karen
Morgan resigned as President of IX Energy Holdings, Inc.  In February
2009, the Company paid $25,000 as s sign-on bonus.  The Company agreed to
issue 150,000 shares of common stock as additional compensation, having a fair
value of $225,000 ($1.50/share) based upon the closing price on the date of the
employment agreement (See Note 9(A)).  Also, the Company granted 2,500,000
of the Company’s non-qualified options vesting quarterly.  Under the terms
of the plan, these stock options are subject to board approval.




On May
12, 2009, the Company granted 2,500,000 options to this individual, having a
fair value of $715,900.





The
Black-Scholes assumptions used are as follows:





Exercise
      price
            
            $
            0.44Expected
      dividends
            
            
            0
            %Expected
      volatility
            
            
            82.16
            %Risk
      free interest rate
            
            
            1.03
            %Expected
      life of option
            
            5
      yearsExpected
      forfeitures
            
            
            0
            %





(3)
 Chief Financial Officer





Effective
August 27, 2009, Michael Weinstein was retained as Chief Financial Officer of
the Company.  Pursuant to the terms of the Agreement, this agreement
is for an initial term of 90 days which commenced on August 27, 2009. The
agreement provides for a monthly compensation of $8,500 in cash and $7,666 in
shares of the Company’s common stock.




If the
Company shall consummate a bridge financing transaction during the term of the
employment agreement, base Salary shall be paid solely in cash. The Company
agreed to grant a signing bonus of 55,000 shares of common stock, having a fair
value of $6,765 ($0.12/share), based upon the quoted closing trading price; of
the Company’s common stock and a cash payment of $7,500





(4)
Others





In March
2009, the Company entered into two separate two-year employment agreements to
serve as executives. Annual salary ranged from $87,000 - $120,000 plus
entitlement to an annual bonus based upon the Company’s performance during each
year of employment.  The Company agreed to issue 10,000 shares of common
stock as additional compensation to one individual, having a fair value of
$10,100 ($1.01/share) based upon the closing price on the date of the employment
agreement.





On May
12, 2009, the Company granted 320,000 options to these individuals, having a
fair value of $91,635.





The
Black-Scholes assumptions used are as follows:





Exercise
      price
            
            $
            0.44Expected
      dividends
            
            
            0
            %Expected
      volatility
            
            
            82.16
            %Risk
      free interest rate
            
            
            1.03
            %Expected
      life of option
            
            5
      yearsExpected
      forfeitures
            
            
            0
            %





In July
2009, one individual, who was granted 120,000 options was terminated.  As
of September 30, 2009, none of the options were vested.




Note 11. Subsequent
Events





The
Company has evaluated for subsequent events between the balance sheet date of
September 30, 2009 and November 20, 2009, the date the financial statements were
issued.




27





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





Forward-Looking
Statements





The
information in this report contains forward-looking statements. All statements
other than statements of historical fact made in this report are
forward-looking. In particular, the statements herein regarding industry
prospects and future results of operations or financial position are
forward-looking statements. These forward-looking statements can be identified
by the use of words such as “believes,” “estimates,” “could,” “possibly,”
“probably,” “anticipates,” “projects,” “expects,” “may,” “will,” or “should” or
other variations or similar words. No assurances can be given that the future
results anticipated by the forward-looking statements will be achieved.
Forward-looking statements reflect management’s current expectations and are
inherently uncertain. Our actual results may differ significantly from
management’s expectations.





The
following discussion and analysis should be read in conjunction with our
financial statements, included herewith. This discussion should not be construed
to imply that the results discussed herein will necessarily continue into the
future, or that any conclusion reached herein will necessarily be indicative of
actual operating results in the future. Such discussion represents only the best
present assessment of our management.





Recent
Events





Prior to
December 30, 2008, we were a development stage company that sought to market and
sell a natural energy drink derived from coconut water to distributors of soft
drinks in Israel.  On December 30, 2008, we completed a reverse merger,
pursuant to which we merged with and into a private company, IX Energy, with IX
Energy being the surviving company. In connection with this reverse merger, we
discontinued our former business and succeeded to the business of IX Energy as
our sole line of business. Since IX Energy acquired a controlling voting
interest, it was deemed the accounting acquirer, while we were deemed the legal
acquirer. The historical financial statements of the Company are those of IX
Energy and of the consolidated entities from the date of merger and
subsequent.  All costs associated with the reverse merger were expensed as
incurred.





Overview





IX Energy
was incorporated in the State of Delaware on March 3, 2006 for the purpose of
designing, manufacturing and installing high-performance solar electric power
technologies. Historically, our operations have principally involved the
integration and installation of solar power systems manufactured by third
parties. However, in an effort to become a vertically integrated solar products
and services company that manufactures, designs, markets and installs its own
solar power systems, we have recently entered into an agreement to manufacture
solar modules that will be marketed primarily to federal, military and civilian
agencies.




28





Three
Months Ended September 30, 2009 Compared to Three Months Ended September 30,
2008





Revenues.
During the three months ended September
30, 2009, we recorded revenues of$114,541as
compared to$1,039,857for the
three months ended September 30, 2008, respectively.  This decrease of$925,316was
related to lower resale transactions for solar panels in the three months ended
September 30, 2009 that did not occur during the three months ended September
30, 2008, respectively..   Business activity and revenues were
significantly impacted by the recession and the lack of credit and bank lending
to fund solar projects.




Cost
of Sales. During the three months ended September 30, 2009, we recorded
cost of sales of $95,385as
compared to $1,056,242
for the three months ended September 30, 2008.  This decrease of $960,857was related to the purchasing of solar panels for resale in 2008 that did
not occur in 2009.




Our
margin on the resale of solar panels was approximately 17% for the three months
ended September 30, 2009 as compared to less than 1% for the three months ended
September 30, 2008, respectively.  Additionally, our margin on our
construction in progress contracts for the three months ended September 30, 2009
was approximately (82%) as
compared to 18% for the three months ended September 30, 2008,
respectively.




Operating
Expenses. During the three months ended September 30, 2009, we recorded
operating expenses of $1,221,482,
as compared to $618,595
for the three months ended September 30, 2008, respectively, representing an
increase of $602,887.
This increase in operating expenses was primarily made up of approximately
$163,000for increased hiring in 2009 for our management and administrative staff,
approximately $276,000related to legal, consulting and accounting services, approximately $181,000related to stock-based compensation, $108,000related to a loss on sale of a fixed asset, and approximately $70,000related to common stock issued for services.




Loss
from Operations. During the three months ended September 30, 2009, we
recorded an operating loss of $1,202,326,
as compared to loss of $634,980for the three months ended September 30, 2008, respectively, representing
an increase of $567,346.
This increase in loss from operations was primarily due to increased operational
expenses by $602,887that was partially offset by our gross profit in
2009.




Provision
for Income Taxes. We did not recognize any provision for income taxes
during the three months ended September 30, 2009 and 2008 due to our net losses
during these periods and the valuation allowances on the resulting deferred tax
assets.




Nine
Months Ended September 30, 2009 Compared to Nine Months Ended September 30,
2008




Revenues.
During the nine months ended September 30, 2009, we recorded revenues of $2,073,075as compared to $5,707,284revenue for the nine months ended September 30, 2008, respectivley.
 This decrease of $3,634,209was related to lower resale transactions for solar panels in the first
nine months of 2009 that did not occur in the first nine months of 2008 due to
the slowdown in the economy and general lack of availability of credit for solar
projects.




Cost
of Sales. During the nine months ended September 30, 2009, we recorded
cost of sales of $1,685,170
as compared to $5,613,677for the nine months ended September 30, 2008,
respectively.




Our
margin on the resale of solar panels was approximately 19%
for the nine months ended September 30, 2009 as compared to 2%
for the nine months ended September 30, 2008, respectively. We expect our
margins to sequentially increase going forward as we now have a more favorable
arrangement with our suppliers and vendors.




29





Our
margin on our construction in progress contracts for the nine months ended
September 30, 2009 was approximately 1%
as compared to (1%)for the nine months ended September 30, 2008, respectively. We believe
that our margin for the nine months ended September 30, 2009 is representative
of our contracts going forward.




Operating
Expenses. During the nine months ended September 30, 2009, we recorded
operating expenses of $7,609,232,
as compared to $1,003,131for the nine months ended September 30, 2008, representing an increase of
$6,606,101,
respectively. This increase in operating expenses was primarily comprised up
approximately $344,000
for increased hiring in 2009 for our management and administrative staff,
approximately $560,000related to legal, consulting and accounting services, approximately $465,000related to stock-based compensation , approximately $3,765,000related to common stock issued for employee compensation, and
approximately $610,000related to common stock issued for services and $108,000related to a loss on the sale of a fixed asset.




Loss
from Operations. During the nine months ended September 30, 2009, we
recorded an operating loss of $7,221,327,
as compared to a loss of $909,524for the nine months ended September 30, 2008, representing an increase of
$6,311,803,
respectively. This increase in loss from operations was primarily due to
increased operational expenses by $6,606,101that was partially offset by our gross profit in
2009.





Provision for Income Taxes.
We did not recognize any provision for income taxes during the nine months ended
September 30, 2009 or 2008 due to our net losses during these periods and the
valuation allowances on the resulting deferred tax assets.





Liquidity
and Capital Resources





We have
historically met our liquidity requirements from a variety of sources, including
the sale of equity and debt securities to related parties and institutional
investors. Based on our strategy and the anticipated growth in our business, we
believe that our liquidity needs will increase. The amount of such increase will
depend on many factors, including building out our management team, the costs
associated with the fulfillment of our projects, whether we upgrade our
technology, and the amount of inventory required for our expanding business.





Although
we recently raised an aggregate of $3.475 million in a private placement, our
ultimate success depends upon our ability to raise additional capital. There can
be no assurance that additional funds will be available when needed from any
source or, if available, will be available on terms that are
favorable  to us.





We will
need to raise a minimum of $3.0 million for us to execute our business plan in
the short term. If we do not raise this additional capital our business will be
substantially impaired.





We may be
required to pursue sources of additional capital through various means,
including joint venture projects and debt or equity financings. Future
financings through equity investments are likely to be dilutive to existing
stockholders.





Our
ability to obtain needed financing may be impaired by such factors as the
capital markets, both generally and specifically in the renewable energy
industry, and the fact that we are not profitable, which could impact the
availability or cost of future financings. If the amount of capital we are able
to raise from financing activities, together with our revenues from operations,
is not sufficient to satisfy our capital needs, even to the extent that we
reduce our operations accordingly, we may be required to cease
operations.





30





Cash and Cash
Equivalents.





As of
September 30, 2009, we had cash and cash equivalents of $722,952,
as compared to cash and cash equivalents of $4,736,812
as of December 31, 2008, respectively.




Net Cash Provided By
Operating Activities.


Net cash
used in operating activities totaled $3,791,180for the nine months ended September 30, 2009, as compared to cash
provided by of $1,816,197for the nine months ended September 30, 2008. This increase was primarily
due to a net loss of $6,117,381,
decreases in deferred revenue of $1,796,238(deferred revenue decreased as we received payment in the prior period
and shipped to the customer in the quarter ended March 31, 2009), a decrease in
accounts payable and accrued expenses of $169,411(as the company sought ways to cut expenses and pay off old unpaid
balances), a change in fair value of derivative liability based upon revaluation
at September 30, 2009 of $2,635,268,
an increase in accounts receivable of $96,281and an increase in prepaid expenses of $88,309,
respectively. This was partially offset by derivative expense related to
warrants issued on the private placement of $1,422,917,
issuance of common stock for consulting services of $864,837,
common stock issued to employees for services rendered of $3,675,303,
and employee stock-based compensation related to stock options of $603,846.
  Net Cash Used in Investing
Activities
 
 Net cash
used in investing activities totaled $272,905during the nine months ended September 30, 2009, as compared to net cash
used in investing activities of $71,525
during the nine months ended September 30, 2008, respectively. Cash used in
investing activities during the nine months ended September 30, 2009 was
comprised of purchases of property and equipment for $268,667and an investment in a joint venture of $17,238.
 
 Net Cash Provided By
Financing Activities
 
 Net cash
provided by financing activities totaled $50,225during the nine months ended September 30, 2009, as compared to net cash
provided by financing activities of $1,438,252during the nine months ended September 30, 2008, respectively. The
proceeds for the nine months ended September 30, 2009 were derived from common
stock for cash in a private placement totaling $725,000.
 This was partially offset by repayment of notes payable of $473,000to a related party and cash paid as direct offering costs of $201,775related to the proceeds raised in the private placement.
  Going
Concern
 As
reflected in the accompanying financial statements, the Company has a net loss
of $6,117,381and net cash used in operations of $3,791,180for the nine months ended September 30, 2009; and had a working capital
deficit of $1,635,554,
and an accumulated deficit of $10,373,321
at September 30, 2009, respectively.
  The
ability of the Company to continue its operations is dependent on management’s
plans, which include the raising of $3.0 million capital through debt and/or
equity markets with some additional funding from other traditional financing
sources, including term notes, until such time that funds provided by operations
are sufficient to fund working capital requirements.
 
 Critical Accounting Policies and
Estimates
 
 We have
identified the policies below as critical to our business operations and the
understanding of our results of operations. The impact and any associated risks
related to these policies on our business operations are disclosed throughout
this section where such policies affect our reported and expected financial
results. Our preparation of our financial statements requires us to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of our
financial statements, and the reported amounts of revenues and expenses during
the reporting period. There can be no assurance that actual results will not
differ from those estimates.
  31
 
 Management’s
discussion and analysis of our financial condition and results of operations are
based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. We review the accounting policies used by us in reporting our financial
results on a regular basis. The preparation of these 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. On an ongoing basis, we evaluate our estimates. 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 value of assets and liabilities
that are not readily apparent from other sources. Results may differ from these
estimates due to actual outcomes being different from those on which we based
our assumptions. These estimates and judgments are reviewed by management on an
ongoing basis and at the end of each quarter prior to the public release of our
financial results.  Please refer to “Management’s Discussion and
Analysis of Financial Condition and Results of Operations-Critical Accounting
Policies and Estimates” included in our Annual Report on Form 10-K for the year
ended December 31, 2009 for further information regarding our critical
accounting policies and estimates.
 
 Accounts Receivable.Accounts
receivable represents trade obligations from customers that are subject to
normal trade collection terms, without discounts. However, in certain cases we
are entitled to rebates upon the completion of certain jobs post installation.
For percentage of completion installation projects, the amounts are rebates and
they are factored into the total estimated contract price when doing percentage
of completion to recognize revenue on each project. At the completion of a solar
installation project we record a receivable from the electric company. The
Company periodically evaluates the collectability of its accounts receivable and
considers the need to adjust an allowance for doubtful accounts based upon
historical collection experience and specific customer information. Actual
amounts could vary from the recorded estimates. We have determined that as of
September 30, 2009 and December 31, 2008 no allowance was required.
 
 At
September 30, 2009 and December 31, 2008, the Company had a concentration of
accounts receivable from three customers totaling 100%.  For the
nine months ended September 30, 2009, the Company had a concentration of sales
with four customers totaling 100%. For the year ended December 31, 2008, the
Company had a concentration of sales with four customers totaling
100%.
 
 Revenue Recognition. We
follow the guidance of the Securities and Exchange Commission's Staff Accounting
Bulletin ("SAB") No. 104, "Revenue Recognition" ("SAB 104") for revenue
recognition and we record revenue when all of the following have occurred: (1)
persuasive evidence of an arrangement exists, (2) the product is delivered and
installed, (3) the sales price to the customer is fixed or determinable and (4)
collectability of the related customer receivable is reasonably assured. We have
two methods of revenue recognition. For our construction contracts, we record
revenues based upon the use of the percentage of completion method. For certain
energy products that we resell to third parties, we record revenue based upon
the shipment date. The Company has two methods of revenue
recognition:
 
 (1)
Energy product reseller
 
 The
Company purchases product from suppliers and resells them to third parties.
 The Company records the revenue from the buyer and related cost paid to
the suppliers on these types of arrangements.
 
 Periodically,
the Company enters into similar arrangements wherein the Company had no
installation responsibility and no further obligation after delivery was made to
the customers.  Payments from the customers are received in advance of
delivery of solar panels and are treated as deferred revenue.  Payments are
then made to the suppliers and cost of materials is recorded.  A pro-rata
portion of the deferred revenue from the customers is recognized as shipments
are made.
  32
 
 Revenues
from these arrangements are recognized upon shipment from the supplier to these
third parties.  In addition, the Company has reviewed the relevance of
gross versus net reporting. Upon the Company’s review of this guidance, as well
as SAB No. 104, the Company has determined that it is subject to gross reporting
as it bears the risk of physical loss of inventory in each of these
arrangements, takes title to the inventory, is the primary obligor in the
arrangements, establishes the pricing with customers, has discretion in the
selection of suppliers, determines product specifications with customers and
suppliers and it has credit risk on all sales.
 
 (2)
Percentage of completion
 
 Revenue
from construction contracts are reported under the percentage-of-completion
method for financial statement purposes. The estimated revenue for each contract
reflected in the financial statements represent that percentage of estimated
total revenue that costs incurred to date bear to estimated total costs, based
on the Company’s current estimates. With respect to contracts that extend over
one or more accounting periods, revisions in costs and revenue estimates during
the course of the work are reflected in the period the revisions become known.
When current estimates of total contract costs indicate a loss, provision is
made for the entire estimated loss.
 
 The
asset, “Costs and estimated
earnings in excess of billings on uncompleted contracts,”represents
revenues recognized in excess of amounts billed. The liability, “Estimated earnings on uncompleted
contracts,”represents billings in excess of revenues recognized. Billing
practices for these projects are governed by the contract terms of each project
based upon actual costs incurred, achievement of milestones, or pre-agreed
schedules. Billings do not necessarily correlate with revenue recognized under
the percentage-of-completion method of accounting. With the exception of claims
and change orders that are in the process of being negotiated with customers,
unbilled work is usually billed during normal billing processes following
achievement of the contractual requirements.
 
 Share
based payment arrangements
 
 Generally,
all forms of share-based payments, including stock option grants, restricted
stock grants and stock appreciation rights, are measured at their fair value on
the awards’ grant date, and based on the estimated number of awards that are
ultimately expected to vest. Share-based compensation awards issued to
non-employees for services rendered are recorded at either the fair value of the
services rendered or the fair value of the share-based payment, whichever is
more readily determinable. The expense resulting from share-based payments are
recorded in general and administrative expense.
  ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK.
  N/A
  ITEM 4T. CONTROLS AND
PROCEDURES.
 
 Evaluation of Disclosure Controls
and Procedures. As of the end of the period covered by this report, we
conducted an evaluation, under the supervision and with the participation of our
chief executive officer and chief financial officer of our disclosure controls
and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange
Act). Based upon this evaluation, our chief executive officer and chief
financial officer concluded that our disclosure controls and procedures are
effective to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is: (i) recorded,
processed, summarized and reported, within the time periods specified in the
Commission's rules and forms, and (ii) accumulated and communicated to our
management, including our chief executive officer and chief financial officer,
as appropriate to allow timely decisions regarding required
disclosure.
  Changes in Internal Control Over
Financial Reporting. During the most recent quarter ended September 30,
2009, there has been no change in our internal control over financial reporting
(as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange
Act) ) that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
  
 33
  PART II
  
  ITEM 1. LEGAL
PROCEEDINGS.
  From time
to time, the Company may become involved in various lawsuits and legal
proceedings, which arise in the ordinary course of business. However, litigation
is subject to inherent uncertainties, and an adverse result in these or other
matters may arise from time to time that may harm its business. The Company is a
party to the following actions:
  A
complaint was filed in the Supreme Court of the State of New York by a vendor
seeking to recover the sum of $101,820, plus costs and disbursements. The
original complaint was divided into two pieces, with the first piece totaling
$40,000 being submitted to arbitration before the Joint Committee on Fee
Disputes and Conciliation in dispute of attorney’s fees against the
above-referenced vendor to recover fees of $40,000.  The arbitrators
awarded a judgment of $33,000 in this portion of the case, and the Company had
accrued this amount in full at September 30, 2009. The remaining $61,820 remains
in dispute, however, no estimate or range of loss can be estimated at this
time.
 
 A
complaint was filed in the Supreme Court of the State of New York by the holder
of a promissory note issued by the Company, seeking summary judgment for
repayment of the principal amount of the Note in the amount of $150,000 plus
accrued interest.  The Company has recorded $10,643 of interest on this
note. while this case was in progress. On September 30, 2009, the court awarded
a judgment against the Company for a total amount of $177,846 inclusive of
interest and legal fees.
 
 In
September 2009, the Company was served with a claim for breach of contract,
breach of implied covenant of good faith and fair dealing and a breach of
guarantee in the Superior Court of the State of California, County of San
Diego.  The amount claimed in the complaint is $175,000. The Company
cannot at this time estimate the amount or range of loss in connection with this
matter.
 
 ITEM 1A. RISK
FACTORS.
  There
have been no material changes to the Risk Factors described in our 2008 Annual
Report on Form 10-K.
  ITEM 2. UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS.
 
 During
the quarter ended September 30, 2009, the Company’s Board of Directors approved
the following issuances:
  ·
                An
      aggregate of 926,848 shares valued at $101,932 for consulting
      services
  ·
                An
      aggregate of 482,760 shares valued at $55,541 for
  services
  In
connection with the issuance of such shares, we relied on the exemption from
registration provided by Rule 506 of Regulation D and/or Section 4(2) of the
Securities Act of 1933, as amended.
  34
 
 ITEM 3. DEFAULTS UPON SENIOR
SECURITIES.
  None
 
 ITEM 4. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS.
  None
 
 ITEM 5. OTHER
INFORMATION.
  None
 
 ITEM 6. EXHIBITS.
 
 Exhibit
                  Number
                
                Description
      of Exhibit31.1
                
                Certification
      of Principal Executive Officer required by Rule 13a-14, as adopted
      pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.31.2
                
                Certifications
      required of Principal Financial and Accounting Officer required by
      Rule 13a-14, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1
                
                Certification
      of Principal Executive Officer pursuant to 18 U.S.C.§ 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.32.2
                
                Certification
      of Principal Financial and Accounting Officer pursuant to 18 U.S.C.§ 1350,
      as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.
  35
 
  SIGNATURES
  
  Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
  IX
      Energy Holdings, Inc.Date:
      November
      23, 2009
                  By:
                  /s/ Steven
      HoffmanName:
      Steven HoffmanTitle:
      Chief Executive Officer and Director (Principal Executive
      Officer)
 IX
      Energy Holdings, Inc.Date:
      November
      23, 2009
                  By:
                  /s/ Michael
      WeinsteinName:
      Michael WeinsteinTitle:
      Chief Financial Officer (Principal Accounting Officer and Principal
      Financial Officer)