Attached files
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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x
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QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
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ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2010.
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Commission file number 000-31165
ECOLOCAP SOLUTIONS INC.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation or organization)
1250 S. Grove Ave
Suite 308
Barrington, Illinois, 60010
(Address of principal executive offices, including zip code.)
866-479-7041
(telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 last 90 days. YES x NO ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (SS 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES ¨ NO x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer, “accelerated filer,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Large Accelerated Filer
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¨
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Accelerated Filer
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¨
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Non-accelerated Filer
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¨
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Smaller Reporting Company
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x
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES ¨ NO x
The Issuer had 106,950,132 shares of Common Stock, par value $.001, outstanding on November 14, 2010.
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Page No.
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PART I
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Item 1.
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Financial Statements
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3
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Balance Sheet
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3
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Statements of Operations
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4
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Statements of Cash Flows
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5
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Notes to Financial Statements
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6
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Item 2.
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Management’s Discussion and Analysis of Financial Condition and Plan of Operations
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17
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Item 4.
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Controls and Procedures
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21
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PART II
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||
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Item 6.
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Exhibits
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21
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SIGNATURES
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22
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EXHIBIT INDEX
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23
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-2-
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PART I: FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
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ECOLOCAP SOLUTIONS INC.
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|||||
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(A Development Stage Company)
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|||||
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CONSOLIDATED BALANCE SHEETS
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|||||
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September 30,
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December 31,
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||||
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2010
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2009
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||||
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(unaudited)
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(audited)
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||||
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ASSETS
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|||||
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CURRENT ASSETS:
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|||||
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Cash
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$
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3,343
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$
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1,944
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Taxes receivable
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730
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730
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|||
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Deposit on machinery
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175,000
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609,823
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Prepaid expenses and sundry current assets
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457
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14,578
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TOTAL CURRENT ASSETS
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179,530
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627,075
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INTANGIBLE ASSETS (note 2 and 5)
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2,665,381
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6,056,252
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GOODWILL (note 2)
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3,233,928
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7,008,721
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PROPERTY AND EQUIPMENT, AT COST,
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|||||
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LESS ACCUMULATED DEPRECIATION
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486,694
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13,227
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TOTAL ASSETS
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$
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6,565,533
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$
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13,705,275
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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CURRENT LIABILITIES:
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|||||
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Customer deposits
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175,000
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454,940
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Note payable (note 7)
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116,886
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47,386
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Note payable-stockholders (note 8)
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807,060
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1,402,055
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Accrued expenses and sundry current
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|||||
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Liabilities (note 6)
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1,379,088
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391,177
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TOTAL CURRENT LIABILITIES
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$
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2,478,034
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$
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2,295,558
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STOCKHOLDERS' (DEFICIENCY) EQUITY
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Common stock
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$
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165,538
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$
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162,848
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Additional paid in capital
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31,332,818
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30,271,856
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Accumulated Deficit
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(32,821,467)
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(25,059,593)
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Earnings accumulated during development stage
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197,422
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460,412
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TOTAL STOCKHOLDERS' (DEFICIENCY) EQUITY
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$
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(1,125,689)
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$
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5,835,523
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Non-controlling interest
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5,213,188
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5,574,194
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4,087,499
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11,409,717
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TOTAL LIABILITIES AND STOCKHOLDERS’
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EQUITY
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$
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6,565,533
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$
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13,705,275
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-3-
ECOLOCAP SOLUTIONS INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
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Nine Months
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Nine Months
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Three Months
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Three Months
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Beginning of
development
stage, January
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||||||
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ended
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ended
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ended
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ended
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1, 2007,
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||||||
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September 30,
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September 30,
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September 30,
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September 30,
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through
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||||||
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2010
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2009
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2010
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2009
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September 2010
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||||||
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SALES
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$
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469,840
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$
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765,000
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$
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-
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$
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765,000
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$
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1,234,840
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Cost of sales
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452,000
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406,000
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-
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406,000
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858,000
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Gross Profit
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17,840
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359,000
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-
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359,000
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376,840
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COSTS AND EXPENSES:
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-
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-
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-
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-
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Selling, general and administrative
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642,907
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342,651
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280,276
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208,904
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2,390,414
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Depreciation and amortization (note 5)
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336,057
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26,667
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68,217
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26,667
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510,932
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Research and Development
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427,923
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427,923
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427,923
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Gain on settlement of debts-foreign Subsidiary
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-
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-
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-
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-
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(8,013,125)
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Impairment Loss Intangible Assets
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3,077,347
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3,077,347
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3,077,347
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Impairment Loss Goodwill
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3,774,793
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3,774,793
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3,774,793
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Compensation expense
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109,178
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109,178
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5,579,075
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Interest
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35,280
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35,494
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8,023
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915
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430,605
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Foreign exchange loss (gain)
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225
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7,030
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(73)
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(5,665)
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(165,860)
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TOTAL COSTS AND EXPENSES
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8,403,710
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411,842
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7,745,684
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230,821
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8,012,104
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NET(LOSS)
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$
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(8,385,870)
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$
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(52,842)
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$
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(7,745,684
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$
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128,179
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(7,635,264)
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Attributable to :
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||||||||||
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Ecolocap Solutions Inc.
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$
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(8,024,864)
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$
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(52,842)
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$
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(7,482,665)
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$
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(93,657)
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(7,052,422)
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Non-controlling interest
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$
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(361,006)
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$
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(221,836)
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$
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(263,019)
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$
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(221,836)
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(582,842)
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Net Loss Per Share
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$
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(0.08)
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$
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(0.00)
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$
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(0.07
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$
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(0.00)
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N/A
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Average weighted Number of Shares
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,105,640,302
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43,938,739
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105,869,337
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43,938,739
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N/A
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-4-
ECOLOCAP SOLUTIONS INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended September 30, 2010 and 2009
(unaudited)
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September 30
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September 30
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Beginning of
development
stage, January 1,
2007, through
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||||
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2010
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2009
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September 2010
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Net loss
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$
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(8,024,864)
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$
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(274,678)
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$
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(7,784,915)
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Adjustment to reconcile net income to net cash used
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||||||
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in operating activities
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||||||
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Depreciation and amortization
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336,057
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31,485
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510,932
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Imputed interests of shareholders loans
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3,483
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-
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3,483
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Impairment Loss Intangible Assets
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3,077,347
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3,077,347
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Impairment Loss Goodwill
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3,774,793
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3,774,793
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Compensation expense
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109,178
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109,178
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Issuance of common stock for services
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-
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3,269,600
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Accrued interests-stockholder
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-
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34,324
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-
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Issuance of common stock
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54,000
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|||||
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Premium on issuance of common stock
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7,118,000
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|||||
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Stock based compensation
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5,211,897
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|||||
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Intangible assets
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(5,490,000)
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|||||
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Goodwill
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(7,425,000)
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|||||
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Minority interest
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5,833,433
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|||||
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Non cash adjustment
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||||||
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Non-controlling interest
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(361,006)
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-
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(429,812)
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Changes in operating assets and liabilities:
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||||||
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Accounts receivable
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(370,060)
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|||||
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Taxes receivable
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-
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23,340
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(730)
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|||
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Prepaid expenses and sundry current assets
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14,121
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(139,400)
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40,888
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|||
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Deposit on machinery
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434,823
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-
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370,400
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|||
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Customer deposits
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(279,940)
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-
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(279,940)
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|||
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Accrued expenses and sundry current liabilities
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1,064,902
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512,011
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(1,905,285)
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|||
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Net cash provided (used) by operating activities
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$
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148,894
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$
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(92,545)
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$
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5,967,836
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Investing activities
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||||||
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Cash acquired during acquisition
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-
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-
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38,115
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|||
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Acquisitions of property and equipment
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(496,000)
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-
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(491,003)
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|||
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Net cash used in investing activities
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$
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(496,000)
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$
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-
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$
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(452,888)
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Financing activities
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||||||
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Stock payable
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-
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-
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(1,000,000)
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|||
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Issuance of common stock
|
110,000
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325,250
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||||
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Sale of common stock
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1,003,400
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|||||
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Proceeds (Repayment) of loans payable
|
69,500
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69,500
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||||
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Proceeds of loans payable stockholders
|
169,005
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97,887
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(6,038,362)
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|||
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Net cash provided by financing activities
|
$
|
348,505
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$
|
97,887
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$
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(5,640,212)
|
|
Increase (decrease) in cash
|
1,399
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5,342
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(125,264)
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|||
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Cash-beginning of period
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1,944
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23,787
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128,607
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|||
|
Cash-end of period
|
$
|
3,343
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$
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29,129
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$
|
3,343
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-5-
ECOLOCAP SOLUTIONS INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1-NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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:
MBT 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%.
MBT -Batteries
EcoloCap Solutions Inc., through its subsidiary Micro Bubble Technologies Inc. (MBT), developed the Carbon Nano Tube Battery (CNT-Battery), a fully recyclable, rechargeable battery that far exceeds the performance capabilities of any existing battery on the market at this time. This environmentally-friendly and economical product is designed to offer fully scalable and customizable power solutions that will increase efficiency, lower operating costs, and reduce emissions. Our proprietary technology modifies the fabrication of lead acid batteries by applying a highly-conductive carbon nano tube coating to the anode and cathode cells. As a result, conductive surface area is increased by a factor of billions and electricity is carried out more efficiently. The CNT-Battery’s advanced technology demonstrates eight times the reserve capacity of traditional lead acid batteries, two and a half times the energy density of lithium-ion batteries, and a recharge time of just five minutes; all at a fraction of the cost of lithium-ion batteries.
CER
Recognizing the opportunities created by the Kyoto Protocol Exchange Mechanisms, EcoloCap Solutions Inc. (hereinafter ‘EcoloCap’ or the ‘Company’) has developed an integrated development approach that focuses upon both existing and needed infrastructure facilities to produce substantial new value in the form of tradable CERs. EcoloCap brings together the know-how and technology.
EcoloCap has the expertise necessary for the creation of CERs traded in the new Carbon Market. The Company brings together the know-how, capital, technology, engineering, and on-the-ground operators for the successful development of Greenhouse Gases capture and utilization projects under the Clean Development Mechanism. The Carbon Credits (CERs) so created are then sold through established international markets.
EcoloCap has developed an integrated development approach that focuses on generating the Carbon Credits in developing countries to produce substantial new value in the form of tradable CERs while at the same time maximizing alternative energy generation co-products for additional revenues.
-6-
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals considered necessary for a fair presentation, have been included, Operating results for the nine months ended September 30, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010. For further information, refer to the financial statements and footnotes thereto for the year ended December 31, 2009.
DEVELOPMENT STAGE COMPANY
The Company was an active business from 2005 through 2006 and was involved in the manufacture and sales of an artificial sport surface. Commencing 2007, the Company was looking for new business and commenced the Carbon Credits (CER’S) business. The Company currently has operations but no revenues and, in accordance with the relevant authoritive guidance is considered a Development Stage Enterprise. As a development stage enterprise, the Company discloses the deficit accumulated during the development stage and the cumulative statements of operations and cash flows from January 1, 2007 to the current balance sheet date.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and its subsidiaries EcoloCap Solutions Canada Inc. and Micro Bubble Technologies Inc. (see Note 2) after the elimination of inter-company accounts and transactions.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with original maturities not exceeding three months to be cash equivalents.
The Company maintains cash balances at various financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000. The Company’s accounts at these institutions may, at times, exceed the federally insured limits. The Company has not experienced any losses in such accounts.
INCOME TAXES
The asset and liability approach is used to account for income taxes by recognizing deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. The Company records a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not to be realized.
USE OF ESTIMATES
In preparing financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenue and expenses in the income statement. Actual results could differ from those estimates.
LOSS PER COMMON SHARE
The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding.
-7-
Diluted net loss per common share is computed by dividing the net loss, adjusted on an "as if converted" basis, by the weighted average number of common shares outstanding plus potential dilutive securities.
STOCK BASED COMPENSATION
The Company accounts for stock options and similar equity instruments issued in accordance with SFAS No. 123(revised), " Share-Based Payment". Accordingly, compensation costs attributable to stock options or similar equity instruments granted are measured at the fair value at the grant date, and expensed over the expected vesting period. Transactions in which goods or services are received in exchange for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. SFAS No. 123(revised) requires excess tax benefits be reported as a financing cash inflow rather than as a reduction of taxes paid.
GOODWILL, OTHER INTANGIBLES AND LONG-LIVED ASSETS
The Company records as goodwill the excess of purchase price over the fair value of the tangible and identifiable intangible assets acquired. Current authoritative guidance requires that goodwill not being amortized, but be tested for impairment annually as well as when an event or change in circumstance indicates an impairment may have occurred. Goodwill is tested for impairment by comparing the fair value of the Company’s individual reporting units to their carrying amount to determine if there is potential goodwill impairment. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the implied fair value of the goodwill of the reporting unit is less than its carrying value.
Long-lived assets, including fixed assets and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In reviewing for impairment, the carrying value of such assets is compared to the estimated undiscounted future cash flows expected from the use of the assets and their eventual disposition. If such cash flows are not sufficient to support the asset’s recorded value, an impairment charge is recognized to reduce the carrying value of the long-lived asset to its estimated fair value. The determination of future cash flows, as well as the estimated fair value of long-lived assets, involves significant estimates on the part of management. In order to estimate the fair value of a long-lived asset, the Company may engage a third-party to assist with the valuation. If there is a material change in economic conditions or other circumstances influencing the estimate of future cash flows or fair value, the Company could be required to recognize impairment charges in the future.
Impairment:
At each reporting date, the Company assesses whether there is any indication that its intangible assets, or property, plant and equipment are impaired. If any such indication exists, the Group estimates the recoverable amount of the asset and the impairment loss if any. Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired. If an asset does not generate cash flows that are independent from those of other assets or groups of assets, recoverable amount is determined for the cash-generating unit to which the asset belongs. The recoverable amount of an asset is the higher of its fair value less cost to sell and its value in use. Value in use is the present value of future cash flows from the asset or cash-generating unit discounted at a rate that reflects market interest rates adjusted for risks specific to the asset or cash- generating unit that have not been reflected in the estimation of future cash flows. If the recoverable amount of an intangible or tangible asset is less than its carrying value, an impairment loss is recognised immediately in profit or loss and the carrying value of the asset reduced by the amount of the loss. A reversal of an impairment loss on intangible assets (excluding goodwill) or property, plant and equipment is recognised as it arises provided the increased carrying value does not exceed that which it would have been had no impairment loss been recognised. Impairment losses on goodwill are not reversed.
-8-
RESEARCH AND DEVELOPMENT
Research and development costs are charged to expense as incurred.
NOTE 2- ACQUISITION OF MICRO BUBBLE TECHNOLOGIES INC.
On September 10, 2009, the Company completed the acquisition of 55% of MBT, engaged in the business of manufacturing, marketing, distributing, setting up sub-distributors, and selling products based on nano technologies, for a purchase price of $7,172,000 in common shares of the Company. This acquisition was funded from common stock. The final purchase price remains subject to post-closing working capital adjustments. The purchase price allocation is considered preliminary; additional adjustments may be recorded during the allocation period specified by the relevant authoritive guidance as additional information becomes known or payments are made.
The acquisition was accounted for using the purchase method of accounting in accordance with the relevant authoritive guidance. The purchase price has been assigned to the assets acquired and liabilities assumed based on their estimated fair values. The intangible assets are being amortized over periods ranging from ten to fifteen years. The weighted average amortization period in total is 15.0 years. The weighted average amortization period by major asset class is: customer relationship 10.0 years; technology batteries 15.0 years and technology M-Fuel 15.0 years. In connection with the acquisition, the Company recorded $7,425,000 of goodwill. The Company’s financial statements include the results of operations of Micro Bubble subsequent to the acquisition date.
MBT developed and manufactures M-Fuel, an innovative suspension fuel that far exceeds all conventional fuels’ costs and efficiencies. It also developed and manufactures the Carbon Nano Tube Battery (CNT-Battery), a fully recyclable, rechargeable battery that far exceeds the performance capabilities of any existing battery on the market at this time. The acquisition of this business will enable the Company to expand its reference in an integrated and complementary network of environmentally focused technology companies that utilize advanced nanotechnology to design, develop, manufacture and sell cleaner alternative energy products.
The acquisition was accounted for as follows (in thousands):
|
Assets:
|
||
|
Cash
|
38
|
|
|
Technology Batteries
|
2,790
|
|
|
Technology EM Fuel
|
80
|
|
|
Customer Relationships
|
3,350
|
|
|
Goodwill
|
7,009
|
|
|
$
|
12,915
|
|
|
Liabilities:
|
||
|
Accrued liabilities
|
452
|
|
|
Minority interest
|
$
|
5,643
|
|
Total Purchase Price
|
$
|
7,172
|
-9-
Business Combinations
In 2008, prior to the acquisition of MBT, MBT had no income or expenses incurred and accordingly no pro-forma information is presented.
NOTE 3--GOING CONCERN
The Company's consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business. During the nine months ended September 30, 2010 and 2009 the Company has incurred losses of $8,385,870 and $274,678 respectively. The Company has negative working capital of $2,298,504 and $1,009,838 at September 30, 2010 and 2009, respectively and a stockholders’ deficiency of $1,125,689 and $11,893,329 at September 30, 2010 and 2009. These factors among others raise substantial doubt about the Company's ability to continue as a going concern.
Management's plans for the Company's continued existence include selling additional stock and borrowing additional funds to pay overhead expenses.
With the opportunities created by the Kyoto Protocol Exchange Mechanisms, management has begun the process of redeploying its assets, identifying business strategies that offers above average profit potential and identifying the resources necessary to successfully execute it new strategic direction.
Recognizing the opportunity this new market represents, the Company has developed an integrated development approach that focuses upon both existing and needed infrastructure facilities to produce substantial new value in the form of tradable CERs.
The Company's future success is dependent upon its ability to achieve profitable operations, generate cash from operating activities and obtain additional financing. There is no assurance that the Company will be able to generate sufficient cash from operations, sell additional shares of common stock or borrow additional funds.
The Company's inability to obtain additional cash could have a material adverse effect on its financial position, results of operations and its ability to continue in existence. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 4 --PROPERTY & OFFICE EQUIPMENT
Equipment is stated at cost. Depreciation is computed using the straight-line method over the estimated useful life of the assets ranging from 3 to 7 years.
|
September 30,
|
||
|
2010
|
||
|
Testing equipment
|
478,285
|
|
|
Furniture & fixtures - 5 yrs
|
8,409
|
|
|
Balance September 30, 2010
|
$
|
486,694
|
NOTE 5 – INTANGIBLE ASSETS
The intangible assets are being amortized over periods ranging from ten to fifteen years. The weighted average amortization period by major asset class is: customer relationship 10.0 years; technology batteries 15.0 years and technology M-Fuel 15.0 years.
-10-
|
September 30,
|
|||
|
2010
|
|||
|
Technology Batteries
|
2,790,000
|
||
|
Technology EM Fuel
|
80,000
|
||
|
Customer Relationships
|
-
|
||
|
$
|
2,870,000
|
||
|
Less : accumulated amortization
|
204,619
|
||
|
Balance September 30, 2010
|
$
|
2,665,381
|
|
NOTE 6--ACCRUED EXPENSES AND SUNDRY CURRENT LIABILITIES
Accrued expenses consisted of the following at September 30:
|
2010
|
||
|
Accrued interest
|
$
|
34,121
|
|
Accrued operating expenses
|
1,344,967
|
|
|
$
|
1,379,088
|
On August 30, 2010, War Chest Capital Multi-Strategy Fund, LLC and the holder of a debt by the Company signed an agreement whereby the holder of a debt transferred part of its debt ($25,000) to War Chest Capital Multi-Strategy Fund, LLC. On September 15, 2010, War Chest Capital Multi-Strategy Fund, LLC has elected to convert debt of $25,000 into 600,000 common shares of the Company. The price of the shares of the Company is equal to $0,041666 per common shares of the Company. The amount owed to War Chest Capital Multi-Strategy Fund, LLC at September 30 is $0.
On August 31, 2010, Barclay Lyons, LLC and the holder of a debt by the Company signed an agreement whereby the holder of a debt transferred part of its debt ($25,000) to Barclay Lyons, LLC. On September 15, 2010, Barclay Lyons, LLC has elected to convert debt of $25,000 into 600,000 common shares of the Company. The price of the shares of the Company is equal to $0,041666 per common shares of the Company. The amount owed to Barclay Lyons, LLC at September 30 is $0.
NOTE 7- NOTE PAYABLE
In 2008, the Company received loans from Carnavon Trust REG (“Carnavon”) in the amount of $250,000. These loans carry an interest of 10% and are payable on demand. On July 28, 2009, Carnavon and Larinton Investments S.A.(“Larinton”) signed an agreement whereby Carnavon transferred its loans plus the accrued interest ($287 500) to Larinton On July 28, 2009, Larinton converted loans of $287 500 into 2,875,000 common shares of the Company. The common shares were issued on February 14, 2010.
In 2009, the Company received loans from Capex Investments Limited in the amount of $47,386. In 2010, the Company received loans from Capex Investments Limited in the amount of $19,500. The amount owed to Capex Investments Limited at September 30, 2010 is $66,886. These loans carry an interest of 8% and are payable on demand.
In 2010, the Company received a loan from Asher Enterprises Inc. in the amount of $50,000. The amount owed to Asher Enterprises Inc. at September 30, 2010 is $50,000. The loan is convertible, over a one year period, into restricted common shares of the Company at a fix price. The price of the shares of the Company is equal to 61% of the market price of the common shares of the Company at the date of the execution of the conversion. This loan carries an interest of 8% and is payable on demand.
-11-
NOTE 8--PAYABLE – STOCKHOLDERS
In 2008, the Company received loans from POMA Management Inc.(“POMA”), a shareholder, in the amount of $450,000. In 2009, the Company received additional loans from POMA in the amount of $1,000. These loans carry an interest of 10% and are payable on demand. On July 28, 2009, POMA and Toniland S.A and DT Crystal Holdings Ltd (“DT Crystal”) signed an agreement whereby POMA transferred its loans plus the accrued interests ($490 490) to Toniland S.A ($220 720) and DT Crystal ($269 770). On July 28, 2009, Toniland S.A has elected to convert loans of $220 720 into 2,207 206 common shares of the Company and DT Crystal has elected to convert loans of $269 770 into 2,697 697 common shares of the Company. The common shares were issued on February 14, 2010.The amount owed to Toniland S.A at September 30 is $0. In 2009, the Company received additional loans from DT Crystal of $117,454. In 2010, the Company received loans from DT Crystal in the amount of $364,685. The amount owed to DT Crystal at September 30, 2010 is $482,139. These loans carry an interest of 10% and are payable on demand.
The amount owed to Larinton Investments S.A.at September 30 is $0.
In 2009, the Company received loans from a stockholder in the amount of $57,000. In 2010, the Company received additional loans from stockholder of $100,000. The loans are convertible, over a one year period, into restricted common shares of the Company at a fix price. The price of the shares of the Company is equal to $0.122 per common shares of the Company. The amount owed to a stockholder at September 30, 2010 is $157,000. These loans carry an interest of 8% and are payable on demand.
In 2009, the Company received loans from stockholders in the amount of $447,096. In 2010, the Company received additional loans from stockholders of $107,300. On January 5, 2010, the stockholders signed an agreement where they transferred part of their debt ($417,725). The amount owed to stockholders at September 30 is $136,671. These loans carry an interest of 5.00% and are payable on demand.
In 2009, the Company received loans from Hanscom K. Inc. in the amount of $67,034. In 2010, the Company received additional loans from stockholders of $18,020. On January 5, 2010, Hanscom K. Inc. signed an agreement where it transferred part of its debt ($65,804). The amount owed to stockholders at September 30 is $19,250. These loans have no interest and are payable on demand.
In 2009, the Company received loans from SRD Inc. in the amount of $12,471. On January 5, 2010, SRD Inc. signed an agreement where it transferred its debt ($12,471).The amount owed to SRD Inc. at September 30 is $0.These loans have no interest and are payable on demand.
On August, 2009, Black Mountain Equities Inc. and a stockholder signed an agreement whereby the shareholder transferred part of its loans ($25,000) to Black Mountain Equities Inc. On September 23, 2010, Black Mountain Equities Inc. has elected to convert loans of $13,000 into 174,348 common shares of the Company. The price of the shares of the Company is equal to $0,0745635per common shares of the Company. The amount owed to Black Mountain Equities Inc. at September 30 is $12,000. These loans carry an interest of 10.00% and are payable on demand.
NOTE 9--CAPITAL STOCK
On November 30, 2009, at a special meeting of shareholders, our shareholders approved an amendment to our articles of incorporation whereby we increased our authorized shares of common stock from 100,000,000 shares to 500,000,000 shares with a par value of $0.001 per share.
The Company is authorized to issue 500,000,000 shares of common stock (par value $0.001) of which 105,400,784 were issued and outstanding as of June 30, 2010.
-12-
As of February 12, 2008, the Company entered into an agreement with United Best Technology Limited (“United”). The agreement is a five (5) year renewable Service Agreement (the “Agreement”) pursuant to which United shall provide advice to undertake for and consult with the Company concerning certain operational areas and shall review and advise the Company regarding Carbon Credits (“CER”) and Clean Development Mechanism projects as well as the Company’s overall progress, needs and condition in those areas, find, negotiate and close contracts and projects for a minimum of Three Million Six Hundred Thousand (3,600,000) CERs that could be certified, traded and delivered and to assist the execution of said contracts or projects by the Company or one of its affiliates. United for the exclusivity of its services was granted Three Million Five Hundred Thousand (3,500,000) restricted shares of the Company’s common stock, out of said Three Million Five Hundred Thousand (3,500,000) restricted shares, One Million (1,000,000) restricted shares will be put in escrow as provided in the executed Escrow Agreement.
On September 10, 2008, Webster Plus S.A. paid seventy-five thousand dollars ($75,000) to purchase from the Company (i) 250,000 shares of the Company's common stock; and (ii) Series A Warrants to purchase up to an additional 125,000 shares of the Company's common stock at an exercise price initially set at $2.50 per share.
On June 11, 2008, Larinton Investments S.A has elected to convert loans of $1,637,300 into 1,811,176 common shares of the Company. The price of the shares of the Company is equal to the average market price of the common shares of the Company during the 60 previous days of the date of the execution of the conversion.
On June 11, 2008, Toniland S.A has elected to convert loans of $1,500,000 into 1,659,295 common shares of the Company. The price of the shares of the Company is equal to the average market price of the common shares of the Company during the 60 previous days of the date of the execution of the conversion.
On October 9, 2008, the Company entered into an agreement with Lakeview Consulting LLC (“Lakeview”). The agreement is a one (1) year Service Agreement (the “Agreement”) pursuant to which Lakeview shall provide advice to undertake for and consult with the Company concerning management advisement, strategic planning and marketing in connection with its business, together with advisory and consulting related to shareholder management and public relations. Lakeview for its services was granted One Million (1,000,000) restricted shares of the Company’s common stock.
On May 1, 2009, the Company entered into an agreement with RMN Consulting LLC (“RMN”). The agreement is a one (1) year Service Agreement (the “Agreement”) pursuant to which RNM shall provide us with services including but not limited to prepare a report on us, produce a profile page and display the information on the various internet properties it owns, write updates about us when newsworthy events occur and disseminate the updates to the various databases and internet properties of RMN and handle part of our media relations, shareholder and investor communications.. RNM for its services was granted two hundred thousand (250,000) restricted shares of the Company’s common stock.
On June 24, 2009, we issued 650,000 restricted shares of common stock to Tri Vu Truong, our former president and CEO as consideration for services rendered to us.
On September 8, 2009, we issued 750,000 restricted shares of common stock to Tri Vu Truong, our former president and CEO as consideration for services rendered to us in the past.
On September 10, 2009, we issued 54,000,000 restricted shares of our common stock to acquire 55% of MBT.
On August 9, 2010, the Company entered into an agreement with Kodiak Capital Group LLC (“Kodiak”). The agreement was to provide advice to undertake for and consult with the Company concerning financing. Kodiak for its services was granted One Hundred and Seventy five Thousand (175,000) restricted shares of the Company’s common stock.
-13-
On September 15, 2010, War Chest Capital Multi-Strategy Fund, LLC has elected to convert debt of $25,000 into 600,000 common shares of the Company. The price of the shares of the Company is equal to $0.041666 per common shares of the Company.
On September 15, 2010, Barclay Lyons, LLC has elected to convert debt of $25,000 into 600,000 common shares of the Company. The price of the shares of the Company is equal to $0.041666 per common shares of the Company.
On September 23, 2010, Black Mountain Equities Inc. has elected to convert loans of $13,000 into 174,348 common shares of the Company. The price of the shares of the Company is equal to $0,0745635per common shares of the Company.
NOTE 10-STOCK-BASED COMPENSATION EXPENSE
On August 9, 2010, the Company entered into an agreement with Kodiak Capital Group LLC (“Kodiak”). The agreement was to provide advice to undertake for and consult with the Company concerning financing. Kodiak for its services was granted One Hundred and Seventy five Thousand (175,000) restricted shares of the Company’s common stock.
For the exclusivity of its services United Best was granted Three Million Five Hundred Thousand (3,500,000) restricted shares of the Company’s common stock, out of said Three Million Five Hundred Thousand (3,500,000) restricted shares, One Million (1,000,000) restricted shares will be put in escrow as provided in the executed Escrow Agreement.
A summary of option activity for the period ended September 30, 2010 is presented below:
|
Weighted-
|
Weighted-Average
|
|||
|
Average Exercise
|
Remaining
|
|||
|
Options
|
Shares
|
Price
|
Contractual Term
|
|
|
Outstanding at December 31, 2008
|
1,465,000
|
$
|
1.10
|
5.74
|
|
Exercised, forfeited, or expired
|
-
|
|||
|
Outstanding at December 31, 2009
|
1,465,000
|
$
|
1.10
|
4.74
|
|
Exercisable at December 31, 2009
|
1,465,000
|
$
|
1.10
|
4.74
|
|
Granted
|
-
|
-
|
-
|
|
|
Exercised, forfeited, or expired
|
-
|
-
|
-
|
|
|
Outstanding at September 30, 2010
|
1,465,000
|
$
|
1.10
|
3.99
|
|
Exercisable at September 30, 2010
|
1,465,000
|
$
|
1.10
|
3.99
|
NOTE 11 -INCOME TAXES
As of September 30, 2010 the company had net operating loss carry forwards of approximately $17,734,000 of which $5,710,000 were generated through foreign transactions and were already taken into account in the tax filing of the Foreign Subsidiary and are not available for US tax purpose. The remaining net operating losses are being carried forward for subsequent years.. This results in no tax expense or provision for the year.
Components of deferred tax assets and liabilities at September 30, 2010 are as follows:
|
2010
|
||
|
Deferred tax asset
|
$
|
3,965,000
|
|
Valuation allowance
|
(3,965,000)
|
|
|
Net deferred tax asset
|
$
|
0
|
-14-
The Company has recorded a full valuation allowance against its deferred tax asset since it believes it is more likely than not that such deferred tax asset will not be realized.
NOTE 12 -COMMITMENTS AND CONTINGENCIES
The Company is a party to a lease for its Montreal office, at a minimum annual rental of approximately $64,000 per year. The Company has vacated the premises and according to the lease, a six month rent might have to be paid if the landlord intends a lawsuit against the Company. The six month rent amount has been accrued in the accompanying Financial Statements. The rent expense charged to operations for the nine month period ended September 30, 2010 was $11,300. The Company is a party to a lease for its Barrington office, at a minimum annual rent of approximately $23,000 per year. The Barrington Lease expires in May, 2013.
NOTE 13 -RELATED PARTY TRANSACTIONS
In 2010, the Company received loans from stockholders in the amount of $107,300. These loans carry an interest of 5.00% and are payable on demand.
In 2010, the Company received loans from Hanscom K. Inc. in the amount of $18,020. These loans have no interest and are payable on demand.
In 2010, the Company received loans from a stockholder in the amount of $100,000. These loans carry an interest of 8.00% and are payable on demand.
NOTE 14 - RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING GUIDANCE
Adopted
In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2010-06, Fair Value Measurements and Disclosures (topic 820) – Improving Disclosures about Fair Value Measurements. ASU 2010-06 requires new disclosures regarding transfers in and out of the Level l and 2 and activity within Level 3 fair value measurements. ASU 2010-06 also includes conforming amendments to employers’ disclosures about postretirement benefit plan assets. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosure of activity within Level 3 fair value measurements, which is effective for fiscal years beginning after December 15, 2010, and for interim periods within those years. There was no impact upon adoption of ASU 2010-06 on January 1, 2010 to the Company’s financial position or results of operations. The Company does not expect there will be an impact to its financial position or results of operations for the additional disclosure requirements in 2011.
In February 2010, the FASB issued ASU 2010-09, Subsequent Events (Topic 855) – Amendments to Certain Recognition and Disclosure Requirements. ASU 2010-09 requires an entity that is a Securities and Exchange Commission (“SEC”) filed to evaluate subsequent events through the date that the financial statements are issued and removes the requirement that an SEC filer disclose the date through which subsequent events have been evaluated. ASC 2010-09 was effective upon issuance. The adoption of this standard had no effect on the Company’s results of operation or its financial position
-15-
Issued
In October 2009, the FASB issued changes to revenue recognition for multiple-deliverable arrangements. These changes require separation of consideration received in such arrangements by establishing a selling price hierarchy (not the same as fair value) for determining the selling price of a deliverable, which will be based on available information in the following order: vendor-specific objective evidence, third-party evidence, or estimated selling price; eliminate the residual method of allocation and require that the consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method, which allocates any discount in the arrangement to each deliverable on the basis of each deliverable’s selling price; require that a vendor determine its best estimate of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis; and expand the disclosures related to multiple-deliverable revenue arrangements. These changes become effective on January 1, 2011. The Company has determined that the adoption of these changes will not have an impact on the consolidated financial statements, as the Company does not currently have any such arrangements with its customers.
In January 2010, the FASB issued guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires a roll forward of activities on purchases, sales, issuance, and settlements of the assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements). The guidance will become effective for the Company with the reporting period beginning July 1, 2011. The adoption of this guidance will not have a material impact on the Company’s consolidated financial statements.
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not, or are not believed by management to, have a material impact on the Company’s present or future consolidated financial statements.
NOTE 15 – SUBSEQUENT EVENTS
Management evaluated all activity of the Company through August 14, 2010 (the issue date of the Consolidated Financial Statements) and noted there were no material subsequent events as of that date.
NOTE 16 – LITIGATION
As of the filling of the present report on form 10QSB, the Company considers there was no pending or threatened litigation, claims, or assessments against the Company for its acts or omission.
-16-
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS
Operations
The following discussion of the financial condition and results of our operations should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-QSB for the period ended September 30, 2010 (this “Report”). This Report contains certain forward-looking statements and our future operating results could differ materially from those discussed herein. Certain statements contained in this Report, including, without limitation, statements containing the words "believes", "anticipates," "expects" and the like, constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). However, as we issue “penny stock,” as such term is defined in Rule 3a51-1 promulgated under the Exchange Act, we are ineligible to rely on these safe harbor provisions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. We disclaims any obligation to update any such factors or to announce publicly the results of any revisions of the forward-looking statements contained or incorporated by reference herein to reflect future events or developments.
On November 13, 2007, we changed our name from “XL Generation International Inc.” to “Ecolocap Solutions Inc.” Our shares of common stock are traded on the Bulletin Board operated by the Financial Industry Regulatory Authority under the symbol ECOS.
In January 2010, MBT delivered its first Lithium X batteries to Halo Renewable Energy of Seattle, WA. Halo will conduct preliminary testing in collaboration with a major potential customer.
In February 2010, MBT announced that it has signed an agreement with Exponent Inc. Engineering and Scientific Consulting of Phoenix, AZ to test EcoloCap's newly announced Lithium X battery.
In March 2010, the preliminary test results showed that the EcoloCap Nano Lithium battery performs better than predicted. Testing has also demonstrated an actual increase in the power densities previously calculated.A single cell of EcoloCap's Nano Lithium Battery, rated at a minimum of 200 Ahr, can replace hundreds of existing lithium-ion battery cells. Rigorous testing has concluded that the Nano Lithium X Battery performs even better than the company previously estimated, and represents a substantial improvement over existing lithium-ion batteries in terms of energy density and recharge time.
In May 2010, the Company retained Enersol Energy System Solutions, a leading battery and energy system consulting firm in the U.S., to finalize its plans to build a production facility in Seoul, Korea and begin manufacturing its proprietary Nano Lithium X Battery. In conjunction with EcoloCap's personnel in the U.S. and South Korea, Enersol will first conduct a needs analysis for the proposed production facility. Subsequently, Enersol will determine the physical layout, the equipment required, and perform a cost analysis. The Enersol report will serve as a basis for the construction of the facility, the purchasing and layout of the plant and equipment with the goal of maximizing production and quality while controlling cost.
In May 2010, the Company entered into a Letter of Intent with MEGES BV io ("Meges") wherein we agreed to form a new joint venture entity with Meges wherein we and Meges would each own a 50% interest in the new entity. The new entity will market and sell batteries of all types in Europe. All technology developed will be owned by us. This Letter of Intent contemplates the execution of a final agreement.
In June 2010, we announced the sale of an NPW-30 unit to R3 Energy LLC (http://www.R3energyllc.com) of Cottonwood Falls, Kansas.
-17-
In July 2010, we announced that contract negotiations are underway with a large Indian business group to initiate the next steps in a joint venture for local production of our advanced Li Nano battery.
In August 2010, we announced that we have held successful discussions with the Indian Joint Secretary, Ministry of Petroleum and Natural Gas. As a result of the meeting, the Minister has directed that testing on M-Fuel to be started as soon as possible and following positive results, a program will be put in place for full implementation of the use of M-Fuel in India with the Argentum group as project manager for the operation.
In August 2010, we announced that we have reached an agreement with EMTECH FUELS to start testing M-Fuel, with an accredited lab, to get local and EPA approval for the proprietary, emulsified diesel fuel. The accreditation will mean the M-Fuel will be able to earn approval to be used as an alternative to low sulfur diesel for immediate use as both internal and external diesel engines, and in addition, will meet the EPA emission reduction mandates for the year 2014.
In September 2010, we announced that our CEO, was invited by the ArcelorMittal management to visit their steel fabrication operation in Kazakhstan. The visit will serve to launch a feasibility study in order to demonstrate the many features of our fuel processing technologies.
Business Plan
MBT is in the process of locating a site to build its first battery factory in Korea. MBT is also in discussion with various international companies for joint ventures in battery production. MBT will be delivering 60 test batteries to an international communications company and a European bus company. MBT plans to start testing M-Fuel in California by the third quarter of 2010 for approval of the California Air Resources Board.
The Kyoto Protocol established various exchange mechanisms in order to achieve its targeted reduction in carbon emission. In addition to the targets set by Kyoto, countries and companies not bound by the Kyoto Protocol are voluntarily creating national schemes and offsetting their emissions associated to their normal activities as part of their corporate responsibility.
Recognizing the opportunity these new mechanisms represent, we are developing an integrated development approach that focuses upon both existing and needed infrastructure facilities to produce substantial new value in the form of tradable CERs while at the same time maximizing alternative energy generation co-products. Our partners with owners of facilities emitting the harmful greenhouse gas as well as with all other environmental projects’ owners in developing countries, to capitalize on the opportunities afforded by the emerging market in carbon credit trading turning potential liabilities into lucrative resources while maximizing available possibilities for clean and renewable energy production.
Our initial geographical focus will be Vietnam and China followed by expansions into Africa and Latin America. These areas have been identified by leading authorities as representing substantial opportunities for remediation of greenhouse gasses and therefore represent the greatest opportunities for the production of CERs. They also represent geographies in which we can develop efficient operating scale thereby enhancing potential profitability.
For the Nine Month Period ended September 30, 2010
Overview
We posted net losses of $7,745,684 and $8,385,870 respectively for the three and the nine month periods, for the nine month period ended September 30, 2010 as compared to net losses of $93,657 and $274,678 for the comparable periods of 2009.
-18-
Development Stage Expenditures
Development stage expenditures for the nine month period ended September 30, 2010, were $364,551 in salaries, $23,189 in travel, $606,000 in research and development and $204,809 in professional fees.
Sales
For the three and nine month periods ended September 30, 2010 we had gross revenues of $469,840. This compared to gross revenues of $765,000for the same periods of 2009.
Total Cost and Expenses
For the three and nine month periods ended September 30, 2010, we incurred total costs and expenses of $7,745,684 and $8,403,710. This compared to $636,821 and $817,842 for the same periods of 2009. The increase in total cost and expenses resulted from the activities of Micro Bubble Inc. The subsidiary was not part of the operations in September 2009
Selling, General and Administration
For the three and nine month periods ended September 30, 2010, we incurred selling, general and administration expenses of $280,276 and $642,907. This compared to $208,904 and $342,651for the same periods last year. The increase resulted from expenses from Micro Bubble Inc. the subsidiary acquired in September 2009.
Interest
We calculate interest in accordance with the respective note payable. For the three and nine month periods ended September 30, 2010, we incurred a charge of $8,023 and $35,280. This compared to $915 and $35,494 for the same periods of the previous year. The decrease is caused by the conversion of $701,000 of debt into common shares.
At September 30, 2010, we had $3,343 in cash, as opposed to $1,944 in cash at December 31, 2009. Total cash provided by operations for the nine month period ended September 30, 2010 was $148,894. As a result of certain measures implemented to reduce corporate overhead, management estimates that cash requirements through the end of the fiscal year ended December 31, 2010 will be between $2.0 million to $5.5 million. As of the date of this Report, we do not have available resources sufficient to cover the expected cash requirements through the balance of the year. As a result, there is substantial doubt that we can continue as an ongoing business without obtaining additional financing. Management's plans for maintaining our operations and continued existence include selling additional equity securities and borrowing additional funds to pay operational expenses. There is no assurance we will be able to generate sufficient cash from operations, sell additional shares of Common Stock or borrow additional funds. Our inability to obtain additional cash could have a material adverse effect on our financial position, results of operations and our ability to continue its existence. If our losses continue and we are unable to secure additional financing, we may ultimately be required to seek protection from creditors under applicable bankruptcy laws.
At September 30, 2010, we had total assets of $6,565,533 compared to total assets of $13,705,275 at December 31, 2009. The decrease is mainly due to impairment loss expenses on intangible assets and goodwill.
At September 30, 2010, we had total current liabilities of $2,478,034 compared to total current liabilities of $2,295,558 at December 31, 2009. The liabilities are mainly due to (i) accrued operational costs and (ii) loan note from a shareholder. The increase is mainly due to research and development expenses.
-19-
EcoloCap Solutions Inc. is a party to a lease for its Montreal (the “Montreal Lease”), at a minimum annual rent of approximately $64,000 per year. The Montreal Lease expires in February 15, 2014. The Company has vacated the premises and according to the lease, a six month rent might have to be paid if the landlord intends a lawsuit against the Company. The six month rent amount has been provisioned in the Financial Statements.
Our financial condition raises substantial doubt about our ability to continue as a going concern. Management's plan for our continued existence includes selling additional stock through private placements and borrowing additional funds to pay overhead expenses while maintaining marketing efforts to raise our sales volume. Our future success is dependent upon our ability to achieve profitable operations, generate cash from operating activities and obtain additional financing. There is no assurance that we will be able to generate sufficient cash from operations, sell additional shares of common stock or borrow additional funds. Our inability to obtain additional cash could have a material adverse effect on our financial position, results of operations and our ability to continue as a going concern.
This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.
We have only had operating losses which raise substantial doubts about our viability to continue our business and our auditors have issued an opinion expressing the uncertainty of our company to continue as a going concern. If we are not able to continue operations, investors could lose their entire investment in our Company.
Limited Operating History
We have a history of operating losses, and may continue to incur operating losses. During the nine months ended September 30, 2010, we incurred losses of $8,385,870 (compared with losses of $274,678 for the same period last year). We had negative working capital of $2,298,504 compared to $1,668,483 at December 31, 2009, and a stockholders' deficiency of $1,125,689 compared with a stockholders' equity of $5,835,523 at December 31, 2009. These factors among others raise substantial doubt about the Company's ability to continue as a going concern.
Contractual Obligations
The Company is a party to a lease for its Montreal office, at a minimum annual rent of approximately $64,000 per year. The Montreal Lease expires in February 15, 2014. The Company has vacated the premises and according to the lease, a six month rent might have to be paid if the landlord intends a lawsuit against the Company. The six month rent amount has been provisioned in the Financial Statements. The Company is a party to a lease for its Barrington office, at a minimum annual rent of approximately $23,000 per year. The Barrington Lease expires in May, 2013.
Off-Balance Sheet Arrangements
The Company is not a party to any off-balance sheet arrangements.
ITEM 4. CONTROLS AND PROCEDURES.
Under the supervision and with the participation of our management, including the Principal Executive Officer and Principal Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on their evaluation of our disclosure controls and procedures as of September 30, 2010, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were not effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and this information is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer to allow timely decisions regarding required disclosures.
Management identified a material weakness (as defined in Public Company Accounting Oversight Board Standard No. 2) in our internal control over financial reporting regarding a lack of adequate segregation of duties and concluded that such controls were not effective as of September 30, 2010.
Changes in Internal Control Over Financial Reporting
The Company is in the process of improving its internal control over financial reporting in an effort to remediate this material weakness by improving period-end closing procedures and requiring all period-end recurring and non-recurring adjustments be reviewed by the Chief Financial Officer.
As of September 30, 2010, there has been no change in the Company’s internal control over financial reporting that has materially affected or is reasonably likely to materially affect the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS.
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Exhibit No.
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Description of Exhibits
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Exhibit 31.1
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Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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Exhibit 31.2
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Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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Exhibit 32.1
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Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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Exhibit 32.2
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Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Registrant and in the capacities on this 19th day of November, 2010.
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ECOLOCAP SOLUTIONS INC.
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BY:
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MICHAEL SIEGEL
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Michael Siegel
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Principal Executive Officer and a member of the
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Board of Directors
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BY:
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MICHEL ST-PIERRE
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Michel St-Pierre
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Principal Financial Officer and Principal Accounting
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Officer
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EXHIBIT INDEX
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Exhibit No.
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Description of Exhibits
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Exhibit 31.1
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Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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Exhibit 31.2
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Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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Exhibit 32.1
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Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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Exhibit 32.2
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Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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