NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company was an active business from 2005 through 2006 and was involved in the artificial sport surface. From 2007 through September 2010, the Company was looking for new business and commenced the Carbon Credits (CER'S) business. In the 2009, the Company acquired a participation in Micro Bubble Technologies Inc. and became
an integrated and complementary network of environmentally focused technology company. The Company
currently has operations but limited revenues.
EcoloCap Solutions Inc. is an integrated and complementary network of environmentally focused technology companies that utilize advanced nanotechnology to design, develop and sell cleaner alternative energy products. We bring together the technology, engineering, and operational management for the successful development of environmentally significant products and projects. Our business approach combines science, innovation, and market-ready solutions to achieve environmentally sustainable and economically advantageous, power and energy management practices in the following areas:
M-Fuel
EcoloCap Solutions Inc., through its subsidiary Micro Bubble Technologies Inc. (MBT), developed M-Fuel, an innovative suspension fuel that far exceeds all conventional fuels' costs and efficiencies. This environmentally-friendly and economical product is designed to offer fully scalable and customizable fuel solutions that will increase efficiency, lower operating costs, and reduce emissions. M -Fuel is a suspension mixture of 60% heavy oil, 40% H plus O2 molecules, and a 0.3% stabilizing additive. The production of M-Fuel takes place in our Nano Processing Units (NPU), a self-contained device that is sized for output. The NPU's can be configured to operate in conjunction with an engine or burner to sully M-Fuel on demand, or pre-manufactured for delivery. M-Fuels unique burning process facilitates increased efficiency, resulting in reduced emissions by 60%, reduced fuel consumption by 40%, and cut costs by up to 25%.
ECOS/BIO-ART
ECOS/Bio-ART is a patented air injected high-speed aerobic biological fermentation technology, utilizing uniquely cultured Bacillus, and incorporated into a specifically designed in-vessel unit. The remediation process takes seven days and reduces moisture content to an average between 12%-25% on an output equal to 1/3 the input. The output can be used as organic fertilizer, animal feed, animal bedding or biomass. The computer controlled process monitors the temperature on 3 different levels. The technology reduces the costs associated with food waste disposal and in the process reduces the environmental impact or methane greenhouse gas production, provide a healthier life for all and create viable organic byproducts.
NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited interim financial statements of
EcoloCap Solutions Inc
. have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), and rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company's annual report on Form 10-K for the year ended December 31, 2014 as filed with the SEC. In the opinion of management, all adjustments, consisting of recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements as reported in the annual report on Form 10-K have been omitted.
Going Concern
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. The Company has had recurring losses, large accumulated deficits, is dependent on the shareholder to provide additional funding for operating expenses and has no recurring revenues. These items raise substantial doubts about the Company's ability to continue as a going concern.
NOTE 3
–
ACCRUED EXPENSES AND SUNDRY CURRENT LIABILITIES
Accrued expenses consisted of the following at:
|
|
June 30, 2015
|
|
|
December 31, 2014
|
|
Accrued interest
|
|
$
|
209,600
|
|
|
$
|
111,436
|
|
Accrued interest-related party
|
|
|
107,351
|
|
|
|
86,117
|
|
Accrued compensation
|
|
|
490,616
|
|
|
|
425,517
|
|
Accounts payable
|
|
|
240,000
|
|
|
|
240,000
|
|
Accrued operating expenses
|
|
|
469,297
|
|
|
|
445,042
|
|
|
|
$
|
1,516,864
|
|
|
$
|
1,308,112
|
|
NOTE 4
– CONVERTIBLE
NOTES PAYABLE
During the six month period ended June 30, 2015, the Company did not receive any proceeds of loans and for the year ended December 31, 2014, the Company received the proceeds of various loans which are convertible at amounts ranging from 40% to 60% of the market price of the common shares of the Company at the time of conversion and bear interest at rates ranging from 8% to 22% per annum. The amounts received during the year ended December 31, 2014 are $86,500 in cash, $140,000 in non-cash borrowings related to the default on Tonaquint loans in 2014, respectively.
The convertible feature of these loans, due to their potential settlement in an indeterminable number of shares of the Company's common stock has been identified as a derivative. The derivative component is fair value at the date of issuance of the obligation and this amount is allocated between the derivative and the underlying obligation. The difference is recorded as a debt discount and amortized over the life of the debt. The Redwood Management, LLC and Tonaquint notes are in default as of June 30, 2015.
During the six month period ended June 30, 2015 and the year ended December 31, 2014 other convertible debts were converted into common shares of the Company. During the six month period ended June 30, 2015 and the year ended December 31, 2014, total loan conversions of $1,973 were made into 393,000 shares respectively and total loan conversions of $186,312 plus accrued interests of $28,547 were made into 1,841,012 shares respectively.
A summary of the amounts outstanding as of June 30, 2015 and December 31, 2014 are as follows:
|
|
Loans
2015
|
|
|
Debt discount
2015
|
|
|
Balance
June 30, 2015
|
|
|
Balance
December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tonaquint
|
|
$
|
552,693
|
|
|
$
|
8,360
|
|
|
$
|
544,333
|
|
|
$
|
521,640
|
|
Redwood Management, LLC
|
|
|
372,992
|
|
|
|
-
|
|
|
|
372,992
|
|
|
|
372,992
|
|
LG Capital
|
|
|
19,500
|
|
|
|
-
|
|
|
|
19,500
|
|
|
|
19,500
|
|
Proteus Capital
|
|
|
32,500
|
|
|
|
-
|
|
|
|
32,500
|
|
|
|
-
|
|
Asher Enterprises Inc
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
32,500
|
|
GSM Capital Group LLC
|
|
|
30,000
|
|
|
|
-
|
|
|
|
30,000
|
|
|
|
26,574
|
|
|
|
$
|
1,007,685
|
|
|
$
|
8,360
|
|
|
$
|
999,325
|
|
|
$
|
973,206
|
|
NOTE 5 – NOTE PAYABLE – STOCKHOLDERS
The stockholders increase of $179,999, are additions for accrued salaries. These were not actual cash proceeds. The amount owed to stockholders at June 30, 2015 is $1,491,179. These loans are non interest bearing but interest is being imputed at 5.00% per annum and are payable on demand. An amount of $34,214 has been imputed in 2015 and $56,589 was imputed in 2014.
During the six month period ended June 30, 2015, the Company received $135,377 in loans from Hanscom Inc. The amount owed to Hanscom K. Inc. at June 30, 2015 is $166,457. These loans are non-interest bearing and are payable on demand.
The amount owed to RCO Group Inc. at June 30, 2015 is $28,500. These loans are non-interest bearing and are payable on demand. These loans bear at 8.00% per annum and are payable on demand.
During the six month period ended June 30, 2015 and the year ended December 31, 2014, the Company received the proceeds of various loans which are convertible at amounts of 50% of the market price of the common shares of the Company at the time of conversion and bear interest at 8% per annum. The amounts received during period ended June 30, 2015 and the year ended December 31, 2014 are $0 and $23,528, respectively.
The convertible feature of these loans, due to their potential settlement in an indeterminable number of shares of the Company's common stock has been identified as a derivative. The derivative component is fair valued at the date of issuance of the obligation and this amount is allocated between the derivative and the underlying obligation. The difference is recorded as a debt discount and amortized over the life of the debt.
During the six month period ended June 30, 2015 and the year ended December 31, 2014 other convertible debts were converted into common shares of the Company. During the period ended June 30, 2015 and the year ended December 31, 2014, total loan conversions of $0 plus accrued interests of $0 and $48,616 plus accrued interests of $4,927 were made into 0 and 655,621 shares respectively.
A summary of the amounts outstanding as of June 30, 2015 and December 31, 2014 are as follows:
|
|
Loans
2015
|
|
|
Debt discount
2015
|
|
|
Balance
June 30, 2015
|
|
|
Balance
December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders
|
|
$
|
1,491,179
|
|
|
$
|
-
|
|
|
$
|
1,491,179
|
|
|
$
|
1,311,180
|
|
Hanscom K. Inc.
|
|
|
166,457
|
|
|
|
-
|
|
|
|
166,457
|
|
|
|
31,080
|
|
RCO Group Inc.
|
|
|
28,500
|
|
|
|
-
|
|
|
|
28,500
|
|
|
|
28,500
|
|
|
|
$
|
1,686,136
|
|
|
$
|
-
|
|
|
$
|
1,686,136
|
|
|
$
|
1,370,760
|
|
NOTE 6 – DERIVATIVE LIABILITIES
During the six month period ended June 30, 2015, the Company recorded various derivative liabilities associated with the convertible debts discussed in Notes 4 and 5. The Company computes the value of the derivative liability at the issuance of the related obligation using the Black Scholes Method using a risk free rate of 0.14%, volatility rates ranging between 814.00% and 1306.00% and a forfeiture rate of 0.00%. The derivative liability at June 30, 2015 and December 31, 2014 are as follows:
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
Asher Enterprises Inc
|
|
$
|
-
|
|
|
$
|
72,222
|
|
Tonaquint
|
|
|
785,347
|
|
|
|
924,437
|
|
Proteus Capital Group LLC
|
|
|
86,319
|
|
|
|
-
|
|
LG Capital
|
|
|
58,500
|
|
|
|
46,887
|
|
GSM Fund
|
|
|
79,991
|
|
|
|
66,665
|
|
Redwood Management, LLC
|
|
|
372,994
|
|
|
|
372,994
|
|
Total
|
|
$
|
1,383,151
|
|
|
$
|
1,483,205
|
|
Financial assets and liabilities recorded at fair value in our balance sheets are categorized based upon a fair value hierarchy established by GAAP, which prioritizes the inputs used to measure fair value into the following levels:
Fair Value of Financial Instruments
Level 1— Quoted market prices in active markets for identical assets or liabilities at the measurement date.
Level 2— Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable and can be corroborated by observable market data.
Level 3— Inputs reflecting management's best estimates and assumptions of what market participants would use in pricing assets or liabilities at the measurement date. The inputs are unobservable in the market and significant to the valuation of the instruments.
A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Financial assets and liabilities measured at fair value on a recurring basis are summarized below for the period ended June 30, 2015.
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Financial Instruments
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,383,151
|
|
|
$
|
1,383,151
|
|
Financial assets and liabilities measured at fair value on a recurring basis are summarized below for the year ended December 31, 2014.
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Financial Instruments
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,483,205
|
|
|
$
|
1,483,205
|
|
The following table summarizes the derivatives liability from January 1
st
through June 30, 2015:
|
|
Derivative liabilities
|
|
|
|
|
|
Balance December 31, 2014
|
|
$
|
1,483,205
|
|
Addition of new derivative
|
|
|
-
|
|
Day one loss due to derivative
|
|
|
-
|
|
Loss on change in fair value of the derivative
|
|
|
(98,097
|
)
|
Settled upon conversion of debt
|
|
|
(1,957
|
)
|
Balance June 30, 2015
|
|
$
|
1,383,151
|
|
NOTE 7 – CAPITAL STOCK
The Company is authorized to issue 10,000,000,000 shares of common stock (par value $0.00001) of which 4,327,026 were issued and outstanding as of June 30, 2015 and 3,934,026 shares of common stock issued and outstanding as of December 31, 2014.
FINRA advised us that 1-for-2,000 reverse-stock split would be announced on February 17, 2015 on FINRA's daily list and the reverse split would take effect at the opening of business on February 18, 2015. The new symbol will be ECOSD. The D will be removed in 20 business days.
Accordingly, the market price of our common stock now reflects the 1-for-2,000 share reverse-stock split. The reverse-stock split has been retroactively applied to all shares amount in this filing.
During 2015, the following convertible debt owners converted loans plus accrued interests into common shares of the Company.
|
|
Loans
|
|
|
Interest
|
|
|
Common shares
|
|
|
|
converted
|
|
|
converted
|
|
|
Of the Company
|
|
|
|
|
|
|
|
|
|
|
|
Tonaquint (note 4)
|
|
$
|
1,973
|
|
|
$
|
-
|
|
|
$
|
393,000
|
|
Total
|
|
$
|
1,973
|
|
|
$
|
-
|
|
|
$
|
393,000
|
|
During 2014, the following convertible debt owners converted loans plus accrued interests into common shares of the Company.
|
|
Loans
|
|
|
Interests
|
|
|
Common shares
|
|
|
|
converted
|
|
|
converted
|
|
|
Of the Company
|
|
|
|
|
|
|
|
|
|
|
|
Asher Enterprises Inc (note 4)
|
|
$
|
34,900
|
|
|
$
|
2,200
|
|
|
$
|
371,000
|
|
Tonaquint (note 4)
|
|
|
102,396
|
|
|
|
15,302
|
|
|
|
853,563
|
|
AES Capital Corp. (note 4)
|
|
|
24,016
|
|
|
|
5,949
|
|
|
|
299,646
|
|
AGS Capital Group LLC (note 5)
|
|
|
42,323
|
|
|
|
3,827
|
|
|
|
573,528
|
|
JMJ Financial (note 4)
|
|
|
25,000
|
|
|
|
5,096
|
|
|
|
316,803
|
|
Panache Capital LLC (note 5)
|
|
|
6,293
|
|
|
|
1,100
|
|
|
|
82,093
|
|
Total
|
|
$
|
234,928
|
|
|
$
|
33,474
|
|
|
$
|
2,496,633
|
|
NOTE 8
–
RELATED PARTY TRANSACTIONS
The stockholders increase of $179,999, are additions for accrued salaries. These were not actual cash proceeds.
These loans carry an interest of 5.00% and are payable on demand.
For the periods ended June 30, 2015 and 2014, interest paid to related party totaled $28,541 and $21,886.
NOTE 9 – SUBSEQUENT EVENTS
On December 19, 2016, we entered into a Supply Agreement (the "Supply Agreement") with Lakeshore Recycling Systems LLC wherein we agreed to manufacture and supply equipment and products to LLC for resale or lease to Lakeshore and LLC's customers.
In March 2017, the Company signed a common stock purchase agreement where a purchaser will purchase restricted stock of the Company for an aggregate purchase price of $50,000.