Attached files
| file | filename |
|---|---|
| EX-99.1 - EX-99.1 - ecoTECH Energy Group Inc. | v210651_ex99-1.htm |
| EX-99.2 - EX-99.2 - ecoTECH Energy Group Inc. | v210651_ex99-2.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Amendment
No. 1 to
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of
Report (Date of earliest event reported): November 12, 2010
ecoTECH
Energy Group, Inc.
(Exact
name of registrant as specified in its charter)
|
Nevada
|
333-138989
|
98-0479847
|
||
|
(State
or other jurisdiction
|
(Commission
|
(IRS
Employer
|
||
|
of
incorporation)
|
File
Number)
|
Identification
No.)
|
|
800
Fifth Avenue, Suite 4100, Seattle, WA
|
98104
|
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant’s
telephone number, including area code: (206) 259-7867
Sea 2 Sky
Corporation
(Former
Name or former Address, if Changed Since Last report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2.below):
¨ Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
¨ Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
¨ Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
¨ Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
Current Report on Form 8-K contains forward-looking statements as that term is
defined in the Private Securities Litigation Reform Act of
1995. These statements relate to anticipated future events, future
results of operations or future financial performance. These
forward-looking statements include, but are not limited to, statements related
to our ability to raise sufficient capital to finance our planned operations,
our ability to develop or market our products, our ability to successfully
compete in the marketplace, and estimates of our cash expenditures for the next
12 to 36 months. In some cases, you can identify forward-looking statements by
terminology such as “may,” “might,” “will,” “should,” “intends,” “expects,”
“plans,” “goals,” “projects,” “anticipates,” “believes,” “estimates,”
“predicts,” “potential,” or “continue” or the negative of these terms or other
comparable terminology.
These
forward-looking statements are only predictions, are uncertain and involve
substantial known and unknown risks, uncertainties and other factors which may
cause our (or our industry’s) actual results, levels of activity or performance
to be materially different from any future results, levels of activity or
performance expressed or implied by these forward-looking statements. The “Risk
Factors” section of this Current Report on Form 8-K sets forth detailed risks,
uncertainties and cautionary statements regarding our business and these
forward-looking statements.
We cannot
guarantee future results, levels of activity or performance. You
should not place undue reliance on these forward-looking statements, which speak
only as of the date that they were made. These cautionary statements
should be considered with any written or oral forward-looking statements that we
may issue in the future. Except as required by applicable law,
including the securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements to reflect
actual results, later events or circumstances or to reflect the occurrence of
unanticipated events.
EXPLANATORY
NOTE
As
previously disclosed on a Current Report on Form 8-K filed with the Securities
and Exchange Commission on November 12, 2010 (the “Initial 8-K”), Sea
2 Sky Corporation (subsequently renamed to ecoTECH Energy Group Inc.) completed
its acquisition by three-cornered amalgamation of ecoTECH Energy Group (Canada)
Inc. (“ecoTECH”). As a result of the acquisition, ecoTECH became our
wholly-owned subsidiary. For accounting purposes, the acquisition was
accounted for as a reverse merger whereby we, as the legal acquirer, are treated
as the acquired entity and ecoTECH is treated as the acquiring entity with the
continuing operations.
This
Amendment No. 1 to Form 8-K (the “Amended 8-K) is being filed to provide
financial statements and related data of ecoTECH for the nine months ended
September 30, 2010 and 2009, and the period from Inception through September 30,
2010, which financial statements are filed in this Amendment No. 1 to
Current Report on Form 8-K as Exhibit 99.1 (See Item 9.01(a)
below). We are also filing as Exhibit 99.2 to this Amended 8-K
revised pro forma financial information to reflect the revised financial
statements of ecoTECH filed as Exhibit 99.1 with the Amended 8-K (see Item
9.02(b) below).
We have
also included a revised “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” under Item 2.01—Completion of Acquisition
or Disposition of Assets”—“Item 2. Financial Statements” to give effect to the
financial results for the period ended September 30, 2010 of ecoTECH as
presented in Exhibit 99.1.
Except as
specifically stated above, this Amended 8-K does not otherwise update
information in the Initial 8-K to reflect facts or events occurring subsequent
to the date of the Initial 8-K.
As used
in this Current Report on Form 8-K and unless otherwise indicated, the terms the
“Company,” “we,” “us,” and “our” refer to Sea 2 Sky Corporation after giving
effect to our acquisition of ecoTECH Energy Group (Canada) Inc., and the related
transactions described below, unless the context requires
otherwise.
2
Item
2.01 Completion
of Acquisition or Disposition of Assets.
Item
2. Financial Information
MANAGEMENT’S
DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
information set forth and discussed in this Management’s Discussion and Analysis
of Financial Condition and Results of Operation is derived from: (i) the audited
financial statements of ecoTECH for the period from Inception to December 31,
2009, and the years ended December 31, 2009 and 2008 and the related notes
thereto, which are included as Exhibit 99.1 to this Current Report on Form 8-K;
and (ii) the unaudited financial statements of ecoTECH for the period from
Inception to September 30, 2010, and the interim nine (9) month periods ended
September 30, 2010 and 2009 and the related notes thereto, which are included as
part of Exhibit 99.1. The following information and discussion should
be read in conjunction with such financial statements and notes
thereto. Additionally, this Management’s Discussion and Analysis of
Financial Condition and Results of Operation contains certain statements that
are not strictly historical and are “forward-looking” statements within the
meaning of the Private Securities Litigation Reform Act of 1995 and involve a
high degree of risk and uncertainty. Actual results may differ
materially from those projected in the forward-looking statements due to other
risks and uncertainties that exist in the Company’s operations, development
efforts and business environment, the other risks and uncertainties described in
the section entitled “Cautionary Note Regarding Forward-Looking Statements” at
the front of this Current Report on Form 8-K, and our “Risk Factors” section
herein. All forward-looking statements included herein are based on
information available to the Company as of the date hereof, and the Company
assumes no obligation to update any such forward-looking statement.
The
separate financial statements of Sea 2 Sky Corporation and the Management’s
Discussion and Analysis of Financial Condition and Results of Operation with
respect to the Sea 2 Sky Corporation’s financial statements are contained in Sea
2 Sky Corporation’s Annual Report on Form 10-K, for the year ended August 31,
2010, filed with the Securities and Exchange Commission on November 22, 2010.
The unaudited pro forma consolidated financial statements of the Company are
contained in Exhibit 99.2 to this Current Report and are also incorporated by
reference into this Current Report on Form 8-K.
Company
Overview
ecoTECH
was incorporated under the Canada Business Corporations Act on November 28, 2007
under the name “ecoPHASER Energy Corp.” Our name was changed to
“ecoTECH Energy Group (Canada) Inc. on July 1, 2010. ecoTECH is a
development stage renewable energy company which plans to manufacture
biomass-fuelled power stations that produce renewable and sustainable “green”
energy products.
ecoTECH’s
current executive offices are located at 101-26633 Gloucester Way, Langley, BC
V4W 3S8 and our telephone number is (604) 288-8263
Summary
of Critical Accounting Policies
Share-Based
Payments
The
Company accounts for stock issued to employees and directors under ASC 718 –
“Compensation – Stock Compensation”. Under ASC 718, stock-based compensation
cost to employees is measured at the grant date, based on the estimated fair
value of the award, and is recognized as expense over the employee's requisite
vesting period. No stock options are currently
outstanding. The Company measures compensation expense for its
non-employee stock-based compensation under ASC 505 – Equity. The fair value of
the option issued or committed to be issued is used to measure the
transaction. The fair value is measured at the value of the Company’s
common stock on the date that the commitment for performance by the counterparty
has been reached or the counterparty’s performance is complete or the award is
fully vested. The fair value of the equity instrument is charged directly to
stock-based compensation expense and credited to common stock (no par). ecoTECH
is a privately-held company, with no trading history. The fair market
value of the stock used for costing prior stock compensation transactions has
been based on the standard recurring sales price of CAD$0.32 per share, net of
any tax-benefit valued shares. Post-acquisition, the Company
will generally use the closing market price of the stock at grant date for the
valuation of stock issuances to both employees and
non-employees.
3
Research
and Development Costs
The
Company accounts for research and development (“R&D”) costs in accordance
with ASC 730, “ Accounting for
Research ” , which requires that R&D costs be expensed as incurred,
and that each year’s total R&D costs be disclosed in the financial
statements. ASC 730 views the research component of R&D as a
“planned search or critical investigation aimed at discovery of new knowledge”
that could result in a new or improved product, service, process, or technique.
The development component of R&D is translating “research findings or other
knowledge into a plan or design” for a new or improved product, service,
process, or technique. Development includes conceptual formulation, design, and
testing of product alternatives; construction of prototypes and operation of
pilot plants; but not routine alterations to existing products, processes, or
operations. The costs of materials and equipment that will be acquired or
constructed for use when beginning construction of the Company’s power stations
and development of related plant sites will be capitalized classified as
property, plant and equipment and depreciated over their estimated useful
lives. To date, research costs include engineering and environmental
expenses related to the Company's future waste-to-energy facilities, and all
have been expensed when incurred.
Business
Combinations
Effective
January 1, 2009, the Company adopted ASC 805, Business Combinations (“ASC
805”), a updated accounting standard which carries forward the requirements to
account for all business combinations using the acquisition method (formerly
called the purchase method). Under ASC 805, business combination accounting
applies to a wider range of transactions and events, including acquisitions of
some development stage companies, combinations of mutual entities, acquisitions
without the exchange of consideration, or other scenarios in which the acquirer
obtains control of one or more businesses. In general, ASC 805 requires
acquisition-date fair value measurement of identifiable assets acquired,
liabilities assumed, and non-controlling interests in the acquiree. Under ASC
805, the value of the business acquired usually is measured as the sum of the
acquisition-date values (measured at fair value, with a few
exceptions). ASC 805 applies prospectively to business combinations
for which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008.
The
business combination of ecoTECH and Sea 2 Sky Corporation was accounted for as a
reverse acquisition with ecoTECH being treated as the acquirer for accounting
purposes. Accordingly, for all periods presented in this Report, the financial
statements of ecoTECH have been adopted as the historical financial statements
of Sea 2 Sky Corporation. The assets and liabilities acquired were
recorded at their fair values at the Acquisition Date. Identified intangible
assets, goodwill and property, plant and equipment are recorded at their
estimated fair values per preliminary valuations and may change based on the
final valuation. The results of operations of the acquired business
have been included in our operating results beginning as of the Acquisition
Date.
Convertible
Debentures
Convertible
debt is accounted for under the guidelines established by ASC 740 “Beneficial
Conversion Features”. The Company records a beneficial conversion feature
(“BCF”) related to the issuance of convertible debt that have conversion
features at fixed or adjustable rates that are in-the-money when issued and
records the fair value of the conversion feature with those instruments. The BCF
for the convertible instruments is recognized and measured by allocating a
portion of the proceeds to the conversion feature, and as a reduction to the
carrying amount of the convertible instrument equal to the intrinsic value of
the conversion features, both of which are credited to common stock. The
Company recognizes that misapplication could materially impact the financial
condition and interest costs associated with such debentures.
Results
of Operations
We had no
revenues from November 28, 2007 (“Inception”) through September 30, 2010.
We incurred $24,853,271 in operating expenses for the period from
Inception through September 30, 2010, of which $21,977,568 was related to stock
compensation costs.
Net cash
used in operating activities for the period from Inception to September 30,
2010, was approximately $1,693,786, consisting primarily of our operating loss
of $27,797,028 offset by non-cash expenses of $139,837 in depreciation,
$21,977,568 of stock compensation expense, $541,131 for accretion of beneficial
conversion feature, $700,535 of loss on extinguishment of convertible debt,
financing costs of $1,389,908 and an increase in accounts payable of $747,924
and accrued liabilities of $685,747.
4
Net cash
provided by financing activities for the period from Inception to September 30,
2010, was approximately $1,957,416, which consisted of $140,730 in proceeds from
notes payable from related parties, less $11,607 in repayments; $574,070 in
proceeds from the sale of common stock; $109,639 in proceeds from the sale of
flow-through shares; $31,058 in loans from related parties, and $1,137,581 in
proceeds from the sale of convertible debentures.
The
report of our independent accountants for the fiscal year ended December 31,
2009, states that we have incurred operating losses since inception and require
additional capital to continue operations, and that these conditions raise
substantial doubt about our ability to continue as a going
concern. We believe that, as of the date of this report, in order to
fund our plan of operations over the next 12 months, we will need to fund our
operations and capital requirements from borrowings and/or the sale of
additional debt, equity, or convertible securities. It is possible
that we will be unable to obtain sufficient additional capital through the sale
of our securities as needed.
Plan of
Operations
The
Company intends to strategically position multiple CHP Power Stations in order
to:
|
|
•
|
Reduce
the reliance on fossil fuels by providing a sustainable and
environmentally friendly source of energy and fuel products manufactured
from local biomass feedstocks;
|
|
|
•
|
Meet
specific local needs for decentralized power, while reducing the cost of
biomass transportation;
|
|
|
•
|
Assist
communities to meet federal and state renewable energy and reduced
emissions mandates; and,
|
|
|
•
|
Provide
local jobs and community development for the project
communities.
|
Long-term
markets and goals have been identified for each ecoTECH project, designed to
fulfill corporate, investor and shareholder requirements. These can be
summarized as follows:
Renewable
Energy Production and Sales:
CHP Power Stations are
modular units built in chains to meet specified power needs of the community or
communities. Combined heat and power are produced in variable ratios, depending
on the application. Local fiber availability and transmission bandwidth are two
limiting factors when determining total capacity to construct. Hence, a Power
Station is expandable and flexible to changing environments. Each Power Station
project brings baseline income for two to three decades. Power supply purchase
agreements run from five to thirty years, and we generally expect a return on
investment circa 25%, being unaffected by market trends.
Green Fuel
Production:
Torrefied
Briquettes,
“Green-fuel”, production allows an alternative to coal-fired energy
manufacturers in order to meet renewable energy mandates by established
deadlines. When wood is roasted (“torrefied”), it becomes brittle at a certain
temperature and takes on the attributes of coal, with the exceptions that it
provides greater heat energy by weight, is sustainably renewable, and meets the
mandated criteria. ecoTECH uses surplus heat generated by the Power Stations to
provide this torrefaction process to woody biomass, which is then formed into
briquettes to be sold at respectable margins on long-term fuel supply contracts
with coal-fired power stations. This allies our efforts with the existing coal
power giants, where helping them gives access to transmission facilities that
would not be afforded a competitor. Our projections indicate this business
segment offers a return on investment (ROI) of approximately 20%.
Ancillary
Operations:
Food Production Projects are
interrelated self-contained businesses that can evolve around the Power
Stations, utilizing the surfeit of energy by-products to support local
hydroponic greenhouses and aquaculture fish facilities. These are essentially
franchises from a worldwide developer/operator that employs indigenous
personnel. Food production is an essential service, with profit margins our
management expects from 30-40%, and returns on investment of 23% (hydroponic
greenhouses) and 32% (aquaculture). We have the finest expertise available plus
full local staff training from these renowned specialist
organizations.
5
During
the following 18 months, the Company plans to fund the construction of its first
CHP Power Station projects in McBride, British Columbia, Canada, through debt
financing and private placement equity funding, obtaining the estimated $160
million in capital required for completion of this two-phase
project. Through proprietary thermal gasification technology, this
plant is expected to create a total of 41 MW/hour of electricity which can be
channeled via the Grid to utilities and end-users; and heat which can be used to
fuel ancillary operations such as large scale (four-hectare) hydroponic
greenhouses, and food fish propagation facilities. The Company has
already secured long-term biomass fuel source agreements to fuel the
plants. Once completed, projected combined revenue is estimated to be
in excess of $106 million annually, with a corresponding return on investment
(“ROI”) of between 26-28%.
Additionally,
the Company is finalizing agreements for its second project, located in Ashland,
Montana, which consists of a 36MW/hour biomass-fuelled CHP Power Station
projected to generate in excess of $42 million of electricity revenue during its
first full year of production. Capital required for this project is
approximately $95 million. The Company is currently in the process of
securing sources of fiber for fuel-stock in North America through long-term
multiple year contracts and letters of intent.
6
Off
Balance Sheet Arrangements
At
September 30, 2010, the Company did not have any off-balance-sheet
arrangements.
Item
9.01 Financial
Statements and Exhibits.
(a) Financial Statements of Business
Acquired. In accordance with Item 9.01(a), (i) ecoTECH’s audited
financial statements for the period from inception through December 31, 2009 are
filed in this Current Report on Form 8-K as Exhibit 99.1 and (ii) ecoTECH’s
unaudited financial statements for the three and nine month interim periods
ended September 30, 2010 are filed in this Amendment No. 1 to Current Report on
Form 8-K as Exhibit 99.1.
(b) Pro Forma Financial
Information. In accordance with Item 9.01(b), our unaudited pro forma
consolidated financial statements are filed in this Amendment No. 1 to Current
Report on Form 8-K as Exhibit 99.2.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
|
Date:
February 10, 2011
|
ecoTech
Energy Group Inc
(f/k/a
Sea 2 Sky Corporation)
|
|
|
By:
|
/s/ C. Victor Hall
|
|
|
Name:
|
C.
Victor Hall
|
|
|
Title:
|
Chief
Executive Officer
|
|
7