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EXCEL - IDEA: XBRL DOCUMENT - PEARTRACK SECURITY SYSTEMS, INC.Financial_Report.xls
EX-31.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER - PEARTRACK SECURITY SYSTEMS, INC.ex31-2.htm
EX-31.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER - PEARTRACK SECURITY SYSTEMS, INC.ex31-1.htm
EX-32.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER - PEARTRACK SECURITY SYSTEMS, INC.ex32-1.htm
EX-32.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER - PEARTRACK SECURITY SYSTEMS, INC.ex32-2.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-Q
 
(Mark One)
 
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended: March 31, 2013
 
or
 
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from__________ to _________
 
Commission File Number 333-139045
 
 
ECOLOGIC TRANSPORTATION, INC.
(Exact name of registrant as specified in its charter)
 
Nevada
 
26-1875304
(State or other jurisdiction of incorporation or organization)
 
(IRS Employer Identification No.)

1327 Ocean Avenue, Suite B, Santa Monica, California
 
90401
(Address of principal executive offices)
 
(Zip Code)

310-899-3900
(Registrant’s telephone number, including area code)
 
N/A
(Former name, former address and former fiscal year, if changed since last report)

 
 

 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
x YES      o 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 (§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).
x YES      o NO
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer
o
 
Accelerated filer
o
Non-accelerated filer
o
 
Smaller reporting company
x
(Do not check if a smaller reporting company)
     

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.
o YES     x NO
 
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.
o YES    o NO


APPLICABLE ONLY TO CORPORATE ISSUERS
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

26,674,740 common shares issued and outstanding as of May 15, 2013

 
 

 
 

 
PART 1 – FINANCIAL INFORMATION
 
ITEM 1. FINANCIAL STATEMENTS.

The Company’s unaudited interim consolidated financial statements for the three month period ended March 31, 2013, form part of this quarterly report. They are stated in United States Dollars (US$) and are prepared in accordance with United States generally accepted accounting principles.

These financial statements should be read in conjunction with the audited financial statements and notes included thereto for the year ended December 31, 2012, on Form 10-K, as filed with the Securities and Exchange Commission.
 
3

 

ECOLOGIC TRANSPORTATION, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
 
   
March 31, 2013
   
December 31, 2012
 
ASSETS
   (Unaudited)        
Current assets
           
Cash
  $ 2,921     $ 23,387  
Accounts receivable, net
    3,266        
Total current assets
    6,187       23,387  
                 
Investment in Amazonas Florestal, Ltd. (formerly Ecologic Systems, Inc.)
    12,062       12,062  
Equipment, net
    2,475       2,625  
Other assets
    6,600       6,600  
                 
TOTAL ASSETS
  $ 27,324     $ 44,674  
                 
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
                 
LIABILITIES
               
Current liabilities
               
Accounts payable and accrued expenses
  $ 792,943     $ 792,321  
Notes and loans payable, including accrued interest
    195,581       188,923  
Related party loans, including accrued interest
    947,773       849,734  
Related party payables
    540,699       470,932  
Total current liabilities
    2,476,996       2,301,910  
                 
STOCKHOLDERS' DEFICIT
               
Preferred stock, $0.001 par value, 10,000,000 shares
           
authorized, none issued and outstanding
               
Common stock, $0.001 par value,100,000,000 shares
    26,675       26,675  
authorized, 26,674,740 issued and outstanding
               
as of March 31, 2013 and December 31, 2012
               
Additional paid in capital
    6,036,153       5,976,153  
Deficit accumulated during the development stage
    (8,512,500 )     (8,260,064 )
Total stockholders' deficit
    (2,449,672 )     (2,257,236 )
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
  $ 27,324     $ 44,674  
 
The accompanying notes are an integral part of these consolidated financial statements

 
4

 
 

ECOLOGIC TRANSPORTATION, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 
               
Cumulative From
 
               
December 16, 2008
 
   
For the three months ended
   
(inception) to
 
   
March 31, 2013
   
March 31 2012
   
March 31, 2013
 
Revenue
  $ 206     $     $ 1,872  
Cost of sales
    170             1,022  
Gross profit
    36             850  
                         
General and administrative expenses
    232,040       677,080       7,802,879  
                         
Operating loss
    (232,004 )     (677,080 )     (7,802,029 )
                         
Interest expense
    (19,451 )     (30,360 )     (280,647 )
Interest income
    8       11       203  
    Loss on foreign currency exchange                 (351
Loss on EV Transportation, Inc. settlement
                (350,000 )
                         
Loss from continuing operations
    (251,447 )     (707,429 )     (8,432,824 )
                         
Income (loss) from discontinued operations, net of tax
    (989 )     2,977       (79,676 )
                         
Net loss
  $ (252,436 )   $ (704,452 )   $ (8,512,500 )
                         
                         
Net loss per share-basic and diluted:
                       
Continuing operations
  $ (0.01 )   $ (0.03 )        
Discontinued operations
  $ 0.00     $ 0.00          
                         
Weighted average common shares outstanding - basic and diluted
    25,372,321       25,211,968          
 
The accompanying notes are an integral part of these consolidated financial statements

 
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ECOLOGIC TRANSPORTATION, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 
 
   
Cumulative from
 
     
December 16, 2008
 
   
For the three months ended
   
(inception) to
 
   
March 31, 2013
   
March 31, 2012
   
March 31, 2013
 
Cash flow from continuing operations:
                 
Net loss from continuing operations
  $ (251,447 )   $ (707,429 )   $ (8,432,824 )
Adjustments to reconcile net loss to net cash used in operating activities:
                       
Stock compensation/amortization of deferred compensation
    60,000       496,500       3,715,355  
Stock issued for EV Transportation, Inc. settlement
                350,000  
Accruals converted to related party loans
    62,500       30,000       955,167  
Depreciation
    150             550  
Bad debt expense
                350  
Loss on foreign currency exchange
                351  
Changes in operating assets and liabilities:
                       
(Increase) decrease in accounts receivable
    (3,266 )     (12,741 )     12,670  
(Increase) decrease in other assets
          6,384       (4,863 )
Increase in accounts payable, accrued expenses, accrued interest, deferred compensation
    24,126       37,242       661,855  
Increase in due to related parties
    69,768       94,378       989,100  
Net cash used in operating activities
    (38,169 )     (55,666 )     (1,752,289 )
                         
Cash flow from investing activities:
                       
Cash received in reverse merger
                10,448  
Purchase of equipment
                (3,025 )
Net cash provided by investing activities
                7,423  
                         
Cash flow from financing activities:
                       
Proceeds from related party loans
    17,300       40,790       869,376  
Proceeds from notes payable
                284,500  
Contributed capital
                710  
Issuance of capital stock for cash
          462       522,885  
Common stock subscriptions received
                6,049  
Net cash provided by financing activities
    17,300       41,252       1,683,520  
                         
Net cash used in continuing operations
    (20,869 )     (14,414 )     (61,346 )
                         
Discontinued operations:
                       
Net cash provided by operating activities
    403       14,698       64,867  
Net cash provided by investing activities
                (600 )
                         
Net cash provided by discontinued operations
    403       14,698       64,267  
                         
Net increase (decrease) in cash
    (20,466 )     284       2,921  
                         
Cash - beginning of period
    23,387       29,550        
                         
Cash - end of period
  $ 2,921     $ 29,834     $ 2,921  
                         
                         
NONCASH ACTIVITIES
                       
Recapitalization for reverse acquisition
  $     $     $ (31,908 )
Conversion of related party payable to note payable
  $ 62,500     $ 30,000     $ 925,167  
Conversion of debt into common stock
  $     $ 147,908     $ 637,125  
Cancellation of debt
  $     $     $ 847,142  
Restricted stock issued in settlement
  $     $     $ 350,000  
Common stock subscriptions received
  $     $     $ 6,049  
Reduction in equity due to spin-off
  $     $     $ (60,000 )
                         
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
                       
Interest paid
  $     $ 3,408     $ 28,033  
Income taxes paid
  $     $     $  

The accompanying notes are an integral part of these consolidated financial statements
 
 
6

 

ECOLOGIC TRANSPORTATION, INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
(Unaudited)

NOTE 1. OVERVIEW

The accompanying unaudited interim consolidated financial statements of Ecologic Transportation, Inc. (”the Company”) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Item 210 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included thereto for the year ended December 31, 2012, on Form 10-K, as filed with the Securities and Exchange Commission, as the interim disclosures generally do not repeat those in the annual statements.

The Company is a development stage company as defined by ASC 915-10, “Accounting and Reporting by Development Stage Enterprises”. A development stage enterprise is one in which planned principal operations have not commenced or, if its operations have commenced, there has been no significant revenues therefrom.

The Company was incorporated in the State of Nevada on September 30, 2005, under the name Heritage Explorations Inc. On June 20, 2008, the Company merged with its wholly owned subsidiary and changed its name to USR Technology, Inc. (“USR”).  On June 26, 2008, USR, engaged primarily in the provision of international drilling services, began trading its common stock under the symbol “USRT”.

On April 26, 2009, the Company entered into an agreement and plan of merger, as amended, with Ecologic Sciences, Inc. (formerly, Ecologic Transportation, Inc.), a private Nevada corporation, and Ecological Acquisition Corp., a private Nevada corporation and wholly-owned subsidiary of the Company. Ecological Acquisition Corp. was formed by the Company for the purpose of acquiring all of the outstanding shares of Ecologic Sciences, Inc. Pursuant to the agreement and plan of merger, as amended, Ecologic Sciences, Inc. (formerly, Ecologic Transportation, Inc.) was to be merged with and into Ecological Acquisition Corp., with Ecologic Sciences, Inc. continuing after the merger as a wholly-owned subsidiary of the Company.

On July 2, 2009, the Company’s wholly-owned subsidiary Ecological Acquisition Corp. was merged into Ecologic Sciences, Inc. with Ecologic Sciences, Inc. being the sole surviving entity under the name “Ecologic Sciences, Inc.” and the Company being the sole shareholder of the surviving entity. Upon closing of the agreement and plan of merger on July 2, 2009, the Company issued 17,559,486 shares of its common stock to the former shareholders of Ecologic Sciences, Inc. in consideration for the acquisition of all of the issued and outstanding common shares in the capital of Ecologic Sciences, Inc. As of the closing date, the former shareholders of Ecologic Sciences, Inc. held approximately 75.85% of the issued and outstanding common shares of the Company.

Prior to the Merger, the Company was focused on the drilling services sector of the oil and gas industry. As of the closing date of the Merger on July 2, 2009, the Company became a development stage company in the business of environmental transportation, and was originally structured with three operating subsidiaries under the parent company, Ecologic Transportation, Inc.:

 
7

 
1.
Ecologic Car Rentals, Inc., a Nevada Corporation
2.
Ecologic Products, Inc., a Nevada Corporation
3.
Ecologic Systems, Inc., a Nevada Corporation

The subsidiary companies Ecologic Products, Inc. and Ecologic Systems, Inc. were created to provide an infrastructure and support for Ecologic Car Rentals, Inc., the Company’s primary operations.  This infrastructure also intended to provide distribution channels for its environmental products.

Change in infrastructure:
Through the Company’s subsidiary, Ecologic Systems, Inc. (“EcoSys”), the Company intended to develop and manage the “greening” of gas stations along with retrofitting them with alternative energy options and solutions.  To build this infrastructure, the Company intended to provide turnkey management, installation, and integration of equipment procurement, equipment installation, contracting, fuel, and regulatory tax incentive and grant subsidization proposals.

On May 13, 2011, EcoSys presented a proposed transaction to the Company’s Board of Directors in which EcoSys would spin out of the Company, and merge with a newly formed company, thereby facilitating EcoSys’ desire to pursue the alternative retail fuel network.  The Board requested that further information be presented, with a focus on the financials of the proposed business transaction.

In October 2011, EcoSys met with Amazonas Florestal, Inc. (“Amazonas”), a corporation headquartered in Florida, and a mutual Non-Disclosure Agreement was executed.  After the two companies completed due diligence in January 2012, it became apparent to the EcoSys management that there existed a viable opportunity to enhance shareholder value by combining EcoSys with Amazonas. 

The Company’s Board of Directors made the strategic decision to focus the majority of its resources and time on the development of its environmental car rental business, and on March 16, 2012, entered into a Share Exchange Agreement and Plan of Merger with Amazonas and EcoSys (the “Share Exchange”).

Prior to the Share Exchange, EcoSys introduced the Amazonas management to the holder of its sixty thousand dollar ($60,000) convertible note in order to have non-affiliate parties associated with Amazonas acquire all or a portion of the note.  EcoSys assisted in the facilitation of the acquisition of the note as part of its negotiations with Amazonas regarding the Share Exchange.  The terms of the convertible note allowed for the conversion of the debt into common stock at par value.  On March 26, 2012, the debt was converted, and an additional sixty million (60,000,000) shares were issued to the note holders. The issuance of common stock pursuant to the terms of the convertible note, affected the total number of EcoSys’ issued and outstanding shares, and triggered an anti-dilution provision as it pertains to the Company’s shares. As a result, an additional 2,020,618 shares were issued to the Company, thereby increasing the Company’s shares to 3%, pursuant to the anti-dilution provision.

As a result of the Share Exchange, Amazonas became a wholly owned subsidiary of EcoSys, the Company owns three percent (3%) of the EcoSys outstanding capital stock (the “EGCT shares”), and the former Amazonas shareholders (“Amazonas Shareholders”) own ninety-seven percent (97%) of the EcoSys outstanding capital stock. For a period of one hundred and eighty (180) days after the closing, the EGCT Shares were subject to an anti-dilution provision.  The anti-dilution provision protected the three (3%) percent ownership of the issued and outstanding capital stock of EcoSys owned by the Company.

 
8

 
Current Business

The Company continues to focus on the development of its environmental transportation business through its two operating subsidiaries, Ecologic Car Rentals, Inc. and Ecologic Products, Inc.

Through the Company’s two operating subsidiaries, the Company intends to provide distribution channels for its environmental products, and implement certain internal product requirements in order to establish it as a “green” company throughout its operations.

Ecologic Car Rentals, Inc.

The Company’s primary focus is to develop an environmental car rental operation through its subsidiary, Ecologic Car Rentals, Inc. The Company is currently pursuing viable opportunities within the car rental industry to develop and establish its own brand as a premier “green” car rental company, offering environmentally-friendly vehicles.

The Company plans to acquire existing profitable independent car rental operations on a multi-regional basis and convert their operations to an Ecologic platform. The Company has identified certain independent car rental operations that would provide a multi-regional presence, and that can be used as a platform to become the only large “green” independent car rental operation in the U.S.  The Company will incrementally replace the fleets with environmental vehicles over a 12–24 month period. The Company’s strategy is to co-brand with the acquisitions for a limited period of time, ultimately completing the rebranding transition to “green” outlets as “Ecologic Car Rentals”.

Currently, the Company intends to rent only environmentally friendly vehicles in the compact, full-size and sport-utility vehicle classes. The Company intends to rent cars on daily, multi-day, weekly and monthly basis. The Company expects that its primary source of revenue will consist of “base time and mileage” car rental fees which can include daily rates including mileage. The Company expects to also charge an additional fee for one-way rentals to and from specific locations. In addition to rental fees, the Company intends to sell other optional products to the Company’s customers, such as collision or loss damage waivers, supplemental liability insurance, personal effects coverage and gasoline.

The Company intends to have its car rental customers make rental reservations either via the Company’s website, www.ecologictransportation.com, at the Company’s proposed partners’ websites, at the rental counter at any of the Company’s proposed locations, by phone,  through online travel websites that the Company intends to partner with, or through a corporate account program in place with their employers.

 On August 2, 2012 the Company entered into a 120-day Letter of Intent (“LOI”) to acquire all of the issued and outstanding shares of ACE Rent A Car, Inc. (“ACE”), an Indiana corporation. Although the Company and ACE have not formally extended the LOI, they are currently actively engaged in due diligence.  Concurrently with the due diligence process, the Company has been actively seeking a debt instrument to effect the ACE acquisition.  As of the date of this filing, the Company has been unable to secure a debt-only financing structure that would be acceptable for the ACE principals. The Company is currently working with financial institutions to secure a combined debt-equity structure offering that will enable the Company to complete its proposed acquisition.  ACE is under no obligation, neither verbally or contractually, to sell ACE to the Company. The Company’s management and ACE are continuing discussions, and ACE is awaiting the Company’s revised acquisition proposal. There can be no guarantee that satisfactory financing arrangements will be secured to complete the acquisition.

 
9

 
Ecologic Products, Inc.

The Company is developing ecologically friendly products through its subsidiary, Ecologic Products, Inc. Initially, the Company’s product line will be focused on transportation and its ancillary markets. In anticipation of the Company’s first rental car location, and need for environmentally friendly car cleaning (one of the most important aspects of a car rental operation), the Company developed Ecologic Shine®, a device and system for near-waterless car washing that delivers cleaning comparable to normal washing without the use of any harmful chemicals.

In 2009, the Company launched Ecologic Shine® in collaboration with Park ‘N Fly, an airport parking chain with prominent locations in 15 airport markets, and established test market operations in Atlanta, San Diego and Los Angeles.  Management has evaluated the results of operations during the 3-year test period between 2009 and 2012, and has determined that a continued collaboration with Park ‘N Fly would not be in the Company’s best interest as a viable profit center.  In September, 2012, the testing sites in Atlanta ceased operations. The Park ‘N Fly Agreement expired on December 1, 2012, and operations ceased in Los Angeles and San Diego. The Company is not pursuing any arrangements with Park ‘N Fly in the future.

The Company is currently pursuing wholesale distribution opportunities for the Ecologic Shine® product, including the product placement into major retail automotive chains. In addition, a test market has concluded with the largest national automotive quick lube franchise network for the utilization of the Ecologic Shine® family of waterless car wash products to be offered as an additional service.  Ecologic Shine® is now an approved product for this network and earned this status after completion of an evaluation of the operations of the product line and its integration into the quick lube services at three quick lube locations.

Going Concern

The Company has incurred losses since inception resulting in an accumulated deficit of $8,512,500, and further losses are anticipated in the development of its business. The Company’s ability to continue as a going concern is dependent upon its ability to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, which may not be available at commercially reasonable terms  There can be no assurance that the Company will be able to continue to raise funds, in which case the Company may be unable to meet its obligations and the Company may cease operations. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

The consolidated financial statements reflect all adjustments consisting of normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of the results for the periods shown. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue as a going concern.

 
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NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies is presented to assist in understanding the Company’s financial statements.  These accounting policies conform to accounting principles, generally accepted in the United States of America, and have been consistently applied in the preparation of the financial statements.

Development Stage Company: The Company is a development stage company as defined by ASC 915-10-05, “Development Stage Entity.” The Company is still devoting substantially all of its efforts on establishing the business, and its planned principal operations, namely its car rental operations, have not commenced.  All losses accumulated since inception have been considered as part of the Company’s development stage activities.

Cash and Cash Equivalents: The Company considers cash in banks, deposits in transit, and highly-liquid debt instruments purchased with original maturities of three months or less to be cash and cash equivalents. As of March 31, 2013 and December 31, 2012, the Company had no cash equivalents.

Equipment: Equipment is carried at the cost of acquisition or construction and depreciated over the estimated useful lives of the assets. Costs associated with repairs and maintenance are expensed as incurred. Costs associated with improvements which extend the life, increase the capacity or improve the efficiency of the Company’s property and equipment are capitalized and depreciated over the remaining life of the related asset. Gains and losses on dispositions of equipment are reflected in operations. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, which are 5 to 7 years.

Net Income (Loss) Per Common Share: The Company calculates net income (loss) per share as required by ASC 450-10, "Earnings per Share."  Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period.  Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding. During the periods when anti-dilutive, common stock equivalents, if any, are not considered in the computation.

Income Taxes: The Company accounts for income taxes under the asset and liability method.  Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.  Valuation allowances are recorded, when necessary, to reduce deferred tax assets to the amount expected to be realized.

As a result of the implementation of certain provisions of ASC 740, Income Taxes (“ASC 740”), which clarifies the accounting and disclosure for uncertainty in tax positions, as defined, ASC 740 seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes.  The Company adopted the provisions of ASC 740 as of January 1, 2006, and have analyzed filing positions in each of the federal and state jurisdictions where we are required to file income tax returns, as well as all open tax years in these jurisdictions.  The Company has identified the U.S. federal as our "major" tax jurisdiction.  Generally, the Company remains subject to Internal Revenue Service examination of our 2007 through 2011 U.S. federal income tax returns.  However, the Company has certain tax attribute carryforwards which will remain subject to review and adjustment by the relevant tax authorities until the statute of limitations closes with respect to the year in which such attributes are utilized.

 
11

 
The Company believes that our income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material change to the Company’s financial position.  Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740.  In addition, the Company did not record a cumulative effect adjustment related to the adoption of ASC 740.  The Company’s policy for recording interest and penalties associated with income-based tax audits is to record such items as a component of income taxes.

Use of Estimates: The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. Estimates that are critical to the accompanying consolidated financial statements include the, estimates related to asset impairments of long lived assets and investments, classification of expenditures as either an asset or an expense, valuation of deferred tax assets, and the likelihood of loss contingencies. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Estimates and assumptions are revised periodically and the effects of revisions are reflected in the financial statements in the period it is determined to be necessary. Actual results could differ from these estimates.

Revenue Recognition: Revenue is recognized when all applicable recognition criteria have been met, which generally include (a) persuasive evidence of an existing arrangement; (b) fixed or determinable price; (c) delivery has occurred or service has been rendered; and (d) collectability of the sales price is reasonably assured.
 
The Company’s revenue stream is from Ecologic Shine®, the initial product being marketed through the Company’s subsidiary Ecologic Products, Inc.  The Company has made limited sales to certain retail automobile maintenance chains for the purpose of product testing.

Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of: In accordance with ASC 350-30, the Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable.  When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount.  Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made.  the Company currently believes there is no impairment of its long-lived assets.  There can be no assurance, however, that market conditions will not change or demand for the Company’s products under development will continue.  Either of these could result in future impairment of long-lived assets.

Stock Based Compensation: The Company records compensation expense for the fair value of stock options that are granted. Expense is recognized on a pro-rata basis over the vesting periods, if any, of the options. The fair value of stock options at their grant date is estimated by using the Black-Scholes-Merton option pricing model.

 
12

 
Fair Value Measurements: When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.  The Company uses the following three levels of inputs in determining the fair value of its assets and liabilities, focusing on the most observable inputs when available:

•  
Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
•  
Level 2 - Quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability.
•  
Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment.  In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.  In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed is determined based on the lowest level input that is significant to the fair value measurement.

Investments in securities: Investments in securities are accounted for using the equity method if the investment provides the Company the ability to exercise significant influence, but not control, over an investee.  Significant influence is generally deemed to exist if the Company has an ownership interest in the voting stock of the investee between 20% and 50%, although other factors, such as representation on the investee's Board of Directors, are considered in determining whether the equity method is appropriate.  All other equity investments, which consist of investments for which we do not possess the ability to exercise significant influence, are accounted for under the cost method.  Under the cost method of accounting, investments are carried at cost and are adjusted only for other-than-temporary declines in realizable value and additional investments.

Recent Accounting Pronouncements: The Company evaluates the pronouncements of various authoritative accounting organizations, primarily the Financial Accounting Standards Board (“FASB”), the US Securities and Exchange Commission (“SEC”), and the Emerging Issues Task Force (“EITF”), to determine the impact of new pronouncements on US GAAP and the impact on the Company. The Company has recently adopted the following new accounting standards:

Adopted:

Effective January 2012, the Company adopted ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (ASU 2011-04). ASU 2011-04 represents the converged guidance of the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) on fair value measurement. A variety of measures are included in the update intended to either clarify existing fair value measurement requirements, change particular principles requirements for measuring fair value or for disclosing information about fair value measurements. For many of the requirements, the FASB does not intend to change the application of existing requirements under Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements. ASU 2011-04 was effective for interim and annual periods beginning after December 15, 2011. The adoption of this update did not have a material impact on the consolidated financial statements.

 
13

 
Effective January 2012, the Company adopted ASU No. 2011-05, Presentation of Comprehensive Income (ASU 2011-05). ASU 2011-05 is intended to increase the prominence of items reported in other comprehensive income and to facilitate convergence of accounting guidance in this area with that of the IASB. The amendments require that all non-owner changes in shareholders’ equity be presented in a single continuous statement of comprehensive income or in two separate but consecutive statements. In December 2011, the FASB issued ASU No. 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 (ASU 2011-12). ASU 2011-12 defers the provisions of ASU 2011-05 that require the presentation of reclassification adjustments on the face of both the statement of income and statement of other comprehensive income. Amendments under ASU 2011-05 that were not deferred under ASU 2011-12 will be applied retrospectively for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of this update did not have a material impact on the consolidated financial statements.

Not Yet Adopted:

In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive (ASU 2013-02). This guidance is the culmination of the FASB’s deliberation on reporting reclassification adjustments from accumulated other comprehensive income (AOCI). The amendments in ASU 2013-02 do not change the current requirements for reporting net income or other comprehensive income. However, the amendments require disclosure of amounts reclassified out of AOCI in its entirety, by component, on the face of the statement of operations or in the notes thereto. Amounts that are not required to be reclassified in their entirety to net income must be cross-referenced to other disclosures that provide additional detail. This standard is effective prospectively for annual and interim reporting periods beginning after December 15, 2012. The Company is evaluating the effect, if any, the adoption of ASU 2013-02 will have on its consolidated financial statements.
 
In April 2013, the FASB issued ASU No. 2013-07, Presentation of Financial Statements (Top 205): Liquidation Basis of Accounting. The objective of ASU No. 2013-07 is to clarify when an entity should apply the liquidation basis of accounting and to provide principles for the measurement of assets and liabilities under the liquidation basis of accounting, as well as any required disclosures. The amendments in this standard is effective prospectively for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. We are evaluating the effect, if any, adoption of ASU No. 2013-07 will have on our consolidated financial statements.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the United States Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future financial statements.

NOTE 3: INVESTMENT IN SECURITIES

Amazonas Florestal, Ltd. (formerly Ecologic Systems, Inc.)

On March 16, 2012, Ecologic Systems, Inc. (“EcoSys”), a wholly-owned subsidiary of the Company with two million (2,000,000) issued and outstanding shares of common stock,  entered into a Share Exchange Agreement and Plan of Merger with Amazonas Florestal, Inc., resulting in, among other things, a change in control of EcoSys, whereby EcoSys was no longer a subsidiary of the Company.  Included in the Share Exchange was the condition that for a period of one hundred and eighty (180) days after the Closing, the shares of EcoSys held by the Company would be subject to an anti-dilution provision that protected the Company’s three percent (3%) ownership. As a result, on March 16, 2012, an additional 2,020,618 shares of EcoSys common stock was issued to the Company, thereby increasing the Company’s holdings to 4,020,618 shares, and maintaining the Company’s 3% ownership.

 
14

 
On April 11, 2012, Ecologic Systems, Inc. changed its name to Amazonas Florestal, Ltd. (“AZFL”), and Amazonas Florestal, Inc. became a wholly owned subsidiary of AZFL.  On April 19, 2012, AZFL effectuated a 3 for 1 forward stock split, which increased the Company’s holding to 12,061,854 shares of AZFL common stock.

As of March 31, 2013, the Company held 12,061,854 shares of AZFL common stock with a fair value of $12,062. Management’s intent is to hold the securities and does not intend to sell or trade them.

NOTE 4. EQUIPMENT

Equipment consists of the following:
 
 
   
March 31, 2013
   
December 31, 2012
 
Office equipment
  $ 3,025     $ 3,025  
Accumulated deprecation
    (550 )     (400 )
Equipment, net
  $ 2,475     $ 2,625  
                 

Depreciation expense totaled $150 and $100 for the three months ended March 31, 2013 and March 31, 2012, respectively.

NOTE 5. NOTES AND LOANS PAYABLE

Notes and loans payable consists of the following:

   
March 31, 2013
   
December 31, 2012
 
Skyy Holdings, Ltd.
  $ 100,000     $ 100,000  
Prominence Capital LLC
    25,000       25,000  
Total notes and loans payable-principal
  $ 125,000     $ 125,000  
Accrued interest     70,581       63,923  
Total notes and loans payable     195,581       188,923  
                 

On January 24, 2011, Skyy Holdings, Ltd. loaned the Company $100,000 evidenced by a Promissory Note bearing interest at the rate of 15%, with principal and interest payable 45 days from the date of issue, and thereafter at a rate of 25% per annum.  As of March 31, 2013, the note remains outstanding and no demand has been made for repayment.  Accrued interest at March 31, 2013 and December 31, 2012 was $66.575 and $60,411, respectively.
 
 
On March 29, 2011, Prominence Capital LLC loaned the Company $25,000 evidenced by a Promissory Note bearing interest at the rate of 8% per annum with the principal balance due on demand.  As of March 31, 2013, the note remains outstanding, and no demand has been made for repayment. Accrued interest at March 31, 2013 and December 31, 2012 was $4,006 and $3,512, respectively.

Accrued interest on notes and loans payable at March 31, 2013 and December 31, 2012 was $70,581 and $63,923, respectively.

 
15

 
NOTE 6. RELATED PARTY TRANSACTIONS

 On October 12, 2009, the Company entered into a consulting agreement with Huntington Chase, Ltd., a Nevada corporation, wherein Edward W. Withrow III, Ecologic Transportation’s Chairman, owns a majority control. The consulting agreement provides for Huntington Chase, Ltd. to perform certain advisory functions, and to be paid $15,000 per month for a period of three years until October 12, 2012. A modification to the consulting agreement was made on October 12, 2012, to extend the term for an additional three years.  The total consulting fees owing under this agreement at March 31, 2013 and December 31, 2012, are $557,500 and $512,500, respectively.  Of the total consulting fees owing, $197,500 was converted to a loan payable.  The loan bears interest at a rate of seven percent (7%) per annum, and is due upon demand.  In addition, as of March 31, 2013 and December 31, 2012, respectively, $360,000 and $315,000 in consulting fees is recorded as accrued compensation.  Accrued interest at March 31, 2013 and December 31, 2012 was $40,788 and $31,932, respectively.

On November 1, 2011, the Company entered into an employment agreement with William B. Nesbitt, for his services as President and Chief Executive Officer of the Company. The initial term of the Agreement was for a period of twelve (12) months, and is automatically renewed annually unless terminated by either party. The Agreement provides for initial compensation of $10,000 per month for the first six months, increasing to $20,833 effective August 1, 2012, having reached certain goals of the Company.  In addition, the Agreement provides for expense reimbursements, an initial Stock Option grant of 1,500,000 shares of the Company’s common stock, and annual performance options. Any unpaid compensation shall be converted to a Senior Note Payable on a monthly basis, accruing interest at a rate of five percent (5%) per annum. As of March 31, 2013 and December 31, 2012, respectively, accrued compensation in the amount of $266,667 and $204,166, has been converted to a Senior Note Payable, and is included in loans to the Company.  Accrued interest at March 31, 2013 and December 31, 2012 was $7,623 and $4,849, respectively.

Related party transactions consists of the following:
 
   
March 31, 2013
   
December 31, 2012
 
Loans to the Company
  $ 857,759     $ 777,959  
Accrued interest
    90,014       71,775  
Total related party loans
    947,773       849,734  
Accrued compensation
    531,522       459,522  
Reimbursable expenses
    9,177       11,410  
Total related party payable
    540,699       470,932  
Total related party transactions
  $ 1,488,472     $ 1,320,666  
                 
 
As at March 31, 2013 and December 31, 2012, respectively, affiliates and related parties are due a total of $1,488,472 and $1,320,666, which is comprised of loans to the Company of $857,759 and $777,959, accrued interest of $90,014 and $71,775, accrued compensation of $531,522 and $459,522, and reimbursable expenses of $9,177 and $11,410.

The Company’s increase in loans to the Company of $79,800 is due to an increase in cash loans of $17,300, and an increase in accrued compensation converted to notes payable of $62,500.

The Company’s increase in unpaid compensation of $72,000 is due to a net increase in accrued compensation of $72,000 payable to Huntington Chase, Ltd., The Kasper Group, Ltd. and MJ Management, LLC, all related party creditors.

All outstanding related party notes bear interest at the rate of 5% and 7% per annum, and are due and payable within one (1) year of receipt of written demand by the related party creditors.

Accrued interest payable to related parties at March 31, 2013 and December 31, 2012 was $90,014 and $71,775, respectively.

NOTE 7. COMMON SHARES

The total number of authorized shares of common stock that may be issued by the Company is 100,000,000 with a par value of $0.001 per share.

On January 30, 2012, William B. Nesbitt, the Company’s Chief Executive Officer, was afforded the opportunity to purchase 500,000 shares of common stock at par value of $0.001 for his contribution to the Company prior to executing an employment agreement with the Company.  Mr. Nesbitt elected to purchase the shares and, as a result, 500,000 restricted shares of the Company’s common stock were issued for $500 cash. The shares were valued at $75,000, which has been expensed in the current year, and $74,500 has been recorded as additional paid in capital.

 
16

 
On January 30, 2012, two Directors of the Company received the right to purchase 250,000 each shares of common stock at par value of $0.001 for their services over and above their roles as Directors of the Company.  Both Directors elected to purchase the shares and, as a result, a total of 500,000 restricted shares of the Company’s common stock were issued.  The shares were valued at $75,000, which has been expensed in the current year, and $74,500 has been recorded as additional paid in capital.

On January 30, 2012, 50,000 restricted shares of the Company’s common stock were issued to a consultant in exchange for services.  The shares were valued at $7,500, which has been expensed in the current year, and $7,450 has been recorded as additional paid in capital.

On January 31, 2012, the former Chief Financial Officer, Norman A. Kunin, converted his debt in the amount of $147,909 into 462,214 restricted shares of the Company’s common stock at $0.32 per share. As a result, $147,447 has been recorded as additional paid in capital.

On June 5, 2012, the Chief Financial Officer, Calli Bucci, converted her debt in the amount of $68,000 into 212,500 restricted shares of the Company’s common stock at $0.32 per share. As a result, $67,788 has been recorded as additional paid in capital.

On June 18, 2012, 1,250,000 restricted shares of the Company’s common stock were issued EV Transportation, Inc., a Nevada corporation, in connection with a Settlement Agreement and Mutual Release entered into on April 2, 2012.  The shares were valued at $350,000, which has been expensed in the current year, and $348,750 has been recorded as additional paid in capital.

On June 20, 2012, the Company authorized 350,000 shares of its restricted common stock to be issued to a consultant for services rendered to the Company, pursuant to the Consulting Agreement dated June 20, 2012.  The shares were valued at $112,000, which has been fully expensed in the current year.  As of March 31, 2013, 250,000 shares were issued and 100,000 shares remain to be issued.  As a result, $79,750 has been recorded as paid in capital, and $32,000 has been accrued for the 100,000 unissued shares until the shares are issued.

On June 27, 2012, The Kasper Group converted its debt in the amount of $424,624 into 1,326,952 shares of the Company’s common stock at $0.32 per share. As a result, $423,297 has been recorded as additional paid in capital.

On July 5, 2012, the Company issued 150,000 shares of its restricted common stock to two consultants in exchange for services rendered to the Company.  The shares were valued at $33,000, which has been expensed in the current year, and $32,925 has been recorded as paid in capital.  In addition, one shareholder paid $75.00 to purchase his shares at a par value of $0.001, pursuant to his Consulting Agreement.

In August 2012, Mr. William Plamondon returned 3,059,750 shares of the Company’s restricted common stock to the treasury, pursuant to the Settlement Agreement and Mutual Release dated July 23, 2012.  As a result, $3,060 has been recorded to additional paid in capital.

 
17

 
In August 2012, Ms. Erin Davis returned 500,000 shares of the Company’s restricted common stock to the treasury, pursuant to the Settlement Agreement and Mutual Release dated July 23, 2012. As a result, $500 has been recorded to additional paid in capital.

On September 5, 2012, the Company issued 750,000 shares of its restricted common stock for services rendered to the Company, pursuant to a Consulting Agreement dated September 5, 2012.  The shares were valued at $180,000, which has been recorded as deferred compensation, and will be amortized over a twelve month period. As a result, $179,250 has been recorded to additional paid in capital. As of March 31, 2013, a total of $105,000 has been expensed, and $75,000 will be expensed over the next 5 months.

On September 18, 2012, the Company issued 50,000 shares of its restricted common stock to one consultant in exchange for services rendered to the Company.  The shares were valued at $16,000, which has been expensed in the current year, and $15,950 has been recorded as additional paid in capital.

During the three months ended March 31, 2013 and the year ended March 31, 2012, respectively, a total of $45,000 and $78,750 in deferred stock compensation was expensed. Deferred stock compensation in the amount of $75,000 and $120,000 remains as of March 31, 2013 and December 31, 2012, respectively.

As of March 31, 2013 and December 31, 2012 the Company had 26,674,740 shares of common stock issued and outstanding.

NOTE 8. WARRANTS AND OPTIONS

As of March 31, 2013, and December 31, 2012, the  the Company has no warrants and 5,997,547 options issued and outstanding.

On November 1, 2011, the Company entered into an employment agreement with its Chief Executive Officer, under which the Company granted qualified stock options to purchase 1,500,000 shares of its common stock for five years at an option price of $0.20 per share. The options vest quarterly over a three (3) year period at 125,000 shares per quarter.  The options have been valued using the Black-Scholes valuation method at $0.12 per share or $180,000. The Company used the following assumptions in valuing the options: expected volatility 254%; expected term 5 years; expected dividend yield 0%, and risk-free interest rate of .90%.  The Company has recorded a total of $180,000 of deferred stock option compensation, of which $60,000 was expensed in the prior year, and $15,000 has been expensed during the current period.  There remains deferred stock option compensation in the amount of $105,000 as of March 31, 2013.

During the three months ended March 31, 2013 and the year ended March 31, 2012, respectively, the Company expensed a total of $15,000 and $191,250 in stock option compensation. There remained $105,000 and $120,000 in deferred stock option compensation at March 31, 2013 and December 31, 2012, respectively.

Outstanding and Exercisable Options
       
         
Remaining
 
Exercise Price
 
Weighted
 
   
Number of
   
Contractual Life
 
times Number
 
Average
 
Exercise Price
 
Shares
   
(in years)
 
of Shares
 
Exercise Price
 
$0.250
 
2,287,547
   
1.50
 
$
571,887
   
$0.25
 
$0.473
 
435,000
   
2.25
   
205,755
   
$0.37
 
$0.320
 
750,000
   
3.00
   
240,000
   
$0.35
 
$0.320
 
1,025,000
   
8.00
   
328,000
   
$0.35
 
$0.200
 
1,500,000
   
3.75
   
300,000
   
$0.31
 
   
5,997,547
       
$
1,645,642
 
$
$0.31
 


 
18

 
Options
 
Number
 
Weighted Average
 
   
Of Shares
 
Exercise Price
 
 
 
 
   
 
 
Outstanding at December 31, 2012
 
5,997,547
 
$
0.31
 
Issued
 
   
 
Exercised
 
   
 
Expired / Cancelled
 
   
 
Outstanding at March 31, 2013
 
5,997,547
 
$
0.31
 

NOTE 9. COMMITMENTS AND CONTINGENCIES

On June 20, 2012, the Company entered into a consulting agreement with Capital Group Communications, Inc. (“CGC”), a California corporation, for certain consulting services rendered to the Company.  The CGC agreement is for a term of 12 months beginning June 20, 2012, and includes compensation for services rendered in the form of 350,000 non-refundable restricted shares of the Company’s common stock, valued at $112,000.  On December 15, 2012, 250,000 shares were issued to CGC.  As of March 31, 2013, 100,000 shares remain to be issued.

On August 2, 2012 the Company entered into a 120-day Letter of Intent (“LOI”) to acquire all of the issued and outstanding shares of ACE Rent A Car, Inc. (“ACE”), an Indiana corporation. Although the Company and ACE have not formally extended the LOI, they are currently actively engaged in due diligence.  Concurrently with the due diligence process, the Company has been actively seeking a debt instrument to effect the ACE acquisition.  As of the date of this filing, the Company has been unable to secure a debt-only financing structure that would be acceptable for the ACE principals.  The Company is currently working with financial institutions to secure a combined debt-equity structure offering that will enable the Company to complete its proposed acquisition.  ACE is under no obligation, neither verbally or contractually, to sell ACE to the Company.  The Company’s management and ACE are continuing discussions, and ACE is awaiting the Company’s revised acquisition proposal. There can be no guarantee that satisfactory financing arrangements will be secured to complete the acquisition.
 
On September 5, 2012, the Company entered into a consulting agreement with NUWA Group, LLC (“NUWA”), a California corporation, for certain consulting services to be provided to the Company.  The NUWA agreement is for a term of 12 months beginning September 5, 2012, and includes compensation for such services in the form of 750,000 shares of non-refundable restricted shares of the Company’s common stock, valued at $180,000, which were issued in full on September 11, 2012. During the three months ended March 31, 2013 and the year ended December 31, 2012, respectively, $45,000 and $60,000 of deferred compensation was expensed.  There remains $75,000 and $120,000 in deferred compensation at March 31, 2013 and December 31, 2012, respectively.

 
19

 
On September 12, 2012, the Company retained the services of Wellington Shields & Co., LLC (“Wellington”) for the acquisition financing related to the purchase of ACE Rent A Car.  The proposed financing will be used primarily to complete the proposed acquisition of ACE. The Engagement Letter dated September 12, 2012, provides for an initial fee of $25,000 fee for Wellington to represent the Company to lenders to secure financing for the purchase of ACE. In addition, the Company engaged Wellington to represent the Company in a $30,000,000 equity financing, which is contingent upon the completion of the ACE acquisition.  There can be no guarantee that Wellington will be able to secure satisfactory financing for the acquisition of ACE, nor the contingent equity financing as a result thereof.

NOTE 10. DISCONTINUED OPERATIONS

On December 1, 2012, the Company discontinued all operations related to the former activities involving the three year test market with Park N Fly, Inc. for the Company’s car wash product and system, Ecologic Shine®. The 3-year test market with Park N Fly resulted in an accumulated deficit of $79,676 through March 31, 2013.  In addition, certain advances were made to Ecologic Products, Inc. for the purpose of overhead expenses that were not directly attributable to the Park N Fly segment of operations.  As a result, additional cash funds are required the in order to satisfy the accounts payable remaining.  As of March 31, 2013 and December 31, 2012, the Company had the following assets and liabilities relating to its discontinued operations:

 
March 31, 2013
 
December 31, 2012
 
Assets
           
Intercompany advances
$
72,192
 
$
71,789
 
             
Liabilities and accumulated deficit
           
Accounts payable and accrued expenses
$
151,868
 
$
150,476
 
Accumulated deficit
 
(79,676)
   
(78,687
)
Total liabilities and accumulated deficit
$
72,192
 
$
71,789
 
             

The results of discontinued operations are summarized as follows:

 
For the three
 months ended
March 31, 2013
 
Cumulative from September 1, 2009 to
March 31, 2013
 
Revenue
$
 
$
1,192,191
 
Cost of goods sold
 
   
1,168,796
 
Gross Profit
       
23,395
 
General and administrative expenses
 
   
(91,200
)
Interest expense
 
(989
)
 
(12,171
)
Gain on sale of equipment
 
   
300
 
Net loss from discontinued operations
$
(989
)
$
(79,676
)
             

 
20

 
NOTE 11. INCOME TAXES
 

Temporary differences are differences between the tax basis of assets and liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is recorded when the ultimate realization of a deferred tax as the tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at March 31, 2013  and December 31, 2012 are presented below:

 
March 31, 2013
 
December 31, 2012
 
Deferred tax assets:
 
 
 
 
 
 
Continuing operations:
           
Net operating loss carry forwards
$
2,803,000
 
$
2,717,000
 
Less valuation allowance
 
(2,803,000
)
 
(2,717,000
)
Net deferred tax asset - continuing operations
$
 
$
 
             
Discontinued operations:
           
Net operating loss carry forwards
$
24,000
 
$
24,000
 
Less valuation allowance
 
(24,000
)
 
(24,000
)
Net deferred tax asset - discontinued operations
$
 
$
 
             
 
 
A reconciliation of income taxes computed at the US federal statutory income tax rate to the change in valuation allowance is as follows:

 
Three months ended
 
Year ended
 
 
March 31, 2013
 
December 31, 2012
 
Income (Loss) Before Taxes:
           
Continuing operations
$
(251,447
)
$
(2,129,539
)
Discontinued operations
 
(989
)
 
(9,038
)
Total Income (loss) before taxes
 
(252,436
)
 
(2,138,577
)
Statutory rate
 
34%
   
34%
 
             
Computed expected tax payable (recovery)
$
86,000
 
$
727,000
 
Non-deductible expenses
 
   
 
Change in valuation allowance
 
(86,000
)
 
(727,000
)
             
Reported income taxes
$
 
$
 
             

At this time, the Company is unable to determine if it will be able to benefit from its deferred tax asset. There are limitations on the utilization of net operating loss carry forwards, including a requirement that losses be offset against future taxable income, if any. In addition, there are limitations imposed by certain transactions which are deemed to be ownership changes. Accordingly, a valuation allowance has been established for the entire deferred tax asset. The increase in the valuation allowance for continuing operations was approximately $86,000 for the three months ended March 31, 2013, and $727,000 for the year ended December 31, 2012.

 
21

 
As of March 31, 2013, the Company had cumulative net operating loss carryforwards of approximately $8,313,000, and $6,325,000 for federal and state income tax purposes, respectively, which begin to expire in the year 2029. Section 382 of the Internal Revenue Code of 1986 provides for an annual limitation of approximately $67,000 on the utilization of net operating loss carryforwards as the company underwent an ownership change in 2008, as defined in Section 382.  This limitation has been reflected in the US federal and state net operating loss carryforwards. The Company has elected to forgo any carryback of its net operating losses.

The Company adopted uncertain tax position in accordance with ASC 740 on January 1, 2007, and has not recognized any material increase in the liability for unrecognized income tax benefits as a result of the implementation.  The Company estimates that the unrecognized tax benefit will not change within the next twelve months.  The Company will continue to classify income tax penalties and interest, if any, as part of interest and other expenses in its consolidated statements of operations.  The Company has incurred no interest or penalties as of March 31, 2013 and December 31, 2012.

The amount of income taxes the Company pays is subject to ongoing examinations by federal and state tax authorities. To date, there have been no reviews performed by federal or state tax authorities on any of the Company’s previously filed returns. The Company’s 2008 and later tax returns are still subject to examination.
 
NOTE 12. SUBSEQUENT EVENTS
During the period April 1, 2013 through May 15, 2013, the Company increased its loans from related parties by $72,624, from a total of $1,488,472 at March 31, 2013 to $1,561,096 at May 15, 2013. The increase represents an increase in loans to the Company in the amount of $6,000, an increase in compensation converted to notes payable in the amount of $20,833, an increase in accrued compensation owed to related parties in the amount of $41,500, and an increase in accrued interest of $4,291.  The loans bear interest at the rates of 5% and 7% per annum, are unsecured and are payable within one year upon demand.
 


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

Forward-Looking Statements

This quarterly report contains forward-looking statements. These statements relate to future events or the Company’s future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause the Company’s or the Company’s industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

 
22

 
The Company’s unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with the Company’s financial statements and the related notes that appear elsewhere in this quarterly report.

The following discussion contains forward-looking statements that reflect the Company’s plans, estimates and beliefs. The Company’s actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to "common shares" refer to the common shares of the Company’s capital stock.

As used in this quarterly report and unless otherwise indicated, the terms “we”, “us”, “our”, “our company” and “Ecologic” refer to Ecologic Transportation, Inc., and its subsidiaries, unless otherwise indicated.

Corporate History

The Company was incorporated in the State of Nevada on September 30, 2005 under the name Heritage Explorations Inc. On June 20, 2008, the Company merged with its wholly owned subsidiary and changed its name to USR Technology, Inc. (“USR”).  On June 26, 2008, USR, engaged primarily in the provision of international drilling services, began trading its common stock under the symbol “USRT”.

On April 26, 2009, the Company entered into an agreement and plan of merger, as amended, with Ecologic Sciences, Inc. (formerly, Ecologic Transportation, Inc.), a private Nevada corporation, and Ecological Acquisition Corp., a private Nevada corporation and wholly-owned subsidiary of the Company. Ecological Acquisition Corp. was formed by the Company for the purpose of acquiring all of the outstanding shares of Ecologic Sciences, Inc. Pursuant to the agreement and plan of merger, as amended, Ecologic Sciences, Inc. (formerly, Ecologic Transportation, Inc.) was to be merged with and into Ecological Acquisition Corp., with Ecologic Sciences, Inc. continuing after the merger as a wholly-owned subsidiary of the Company.

On July 2, 2009, the Company’s wholly-owned subsidiary Ecological Acquisition Corp. was merged into Ecologic Sciences, Inc. with Ecologic Sciences, Inc. being the sole surviving entity under the name “Ecologic Sciences, Inc.” and the Company being the sole shareholder of the surviving entity. Upon closing of the agreement and plan of merger on July 2, 2009, the Company issued 17,559,486 shares of its common stock to the former shareholders of Ecologic Sciences, Inc. in consideration for the acquisition of all of the issued and outstanding common shares in the capital of Ecologic Sciences, Inc. As of the closing date, the former shareholders of Ecologic Sciences, Inc. held approximately 75.85% of the issued and outstanding common shares of the Company.

 
23

 
Prior to the Merger, the Company was focused on the drilling services sector of the oil and gas industry. As of the closing date of the Merger on July 2, 2009, the Company became a development stage company in the business of environmental transportation, and was originally structured with three operating subsidiaries under the parent company, Ecologic Transportation, Inc.:

1.
Ecologic Car Rentals, Inc., a Nevada Corporation
2.
Ecologic Products, Inc., a Nevada Corporation
3.
Ecologic Systems, Inc., a Nevada Corporation

The subsidiary companies Ecologic Products, Inc. and Ecologic Systems, Inc. were created to provide an infrastructure and support for Ecologic Car Rentals, Inc., the Company’s primary operations.  This infrastructure also intended to provide distribution channels for its environmental products.

Change in infrastructure:
Through the Company’s subsidiary, Ecologic Systems, Inc. (“EcoSys”), the Company intended to develop and manage the “greening” of gas stations along with retrofitting them with alternative energy options and solutions.  To build this infrastructure, the Company intended to provide turnkey management, installation, and integration of equipment procurement, equipment installation, contracting, fuel, and regulatory tax incentive and grant subsidization proposals.

On May 13, 2011, EcoSys presented a proposed transaction to the Company’s Board of Directors in which EcoSys would spin out of the Company, and merge with a newly formed company, thereby facilitating EcoSys’ desire to pursue the alternative retail fuel network.  The Board requested that further information be presented, with a focus on the financials of the proposed business transaction.

In October 2011, EcoSys met with Amazonas Florestal, Inc. (“Amazonas”), a corporation headquartered in Florida, and a mutual Non-Disclosure Agreement was executed.  After the two companies completed due diligence in January 2012, it became apparent to the EcoSys management that there existed a viable opportunity to enhance shareholder value by combining EcoSys with Amazonas. 

The Company’s Board of Directors made the strategic decision to focus the majority of its resources and time on the development of its environmental car rental business, and on March 16, 2012, entered into a Share Exchange Agreement and Plan of Merger with Amazonas and EcoSys (the “Share Exchange”).

Prior to the Share Exchange, EcoSys introduced the Amazonas management to the holder of its sixty thousand dollar ($60,000) convertible note in order to have non-affiliate parties associated with Amazonas acquire all or a portion of the note.  EcoSys assisted in the facilitation of the acquisition of the note as part of its negotiations with Amazonas regarding the Share Exchange.  The terms of the convertible note allowed for the conversion of the debt into common stock at par value.  On March 26, 2012, the debt was converted, and an additional sixty million (60,000,000) shares were issued to the note holders. The issuance of common stock pursuant to the terms of the convertible note, affected the total number of EcoSys’ issued and outstanding shares, and triggered an anti-dilution provision as it pertains to the Company’s shares. As a result, an additional 2,020,618 shares were issued to the Company, thereby increasing the Company’s shares to 3%, pursuant to the anti-dilution provision.

As a result of the Share Exchange, Amazonas became a wholly owned subsidiary of EcoSys, the Company owns three percent (3%) of the EcoSys outstanding capital stock (the “EGCT shares”), and the former Amazonas shareholders (“Amazonas Shareholders”) own ninety-seven percent (97%) of the EcoSys outstanding capital stock. For a period of one hundred and eighty (180) days after the closing, the EGCT Shares were subject to an anti-dilution provision.  The anti-dilution provision protected the three (3%) percent ownership of the issued and outstanding capital stock of EcoSys owned by the Company.

 
24

 
Current Business

The Company continues to focus on the development of its environmental transportation business through its two operating subsidiaries, Ecologic Car Rentals, Inc. and Ecologic Products, Inc.

Ecologic Car Rentals, Inc.

The Company’s primary focus is to develop an environmental car rental operation through its subsidiary, Ecologic Car Rentals, Inc. The Company is currently pursuing viable opportunities within the car rental industry to develop and establish its own brand as a premier “green” car rental company, offering environmentally-friendly vehicles.

The Company plans to acquire existing profitable independent car rental operations on a multi-regional basis and convert their operations to an Ecologic platform. The Company has identified certain independent car rental operations that would provide a multi-regional presence, and that can be used as a platform to become the only large “green” independent car rental operation in the U.S.

The Company will incrementally replace the fleets with environmental vehicles over a 12–24 month period. The Company’s strategy is to co-brand with the acquisitions for a limited period of time, ultimately completing the rebranding transition to “green” outlets as “Ecologic Car Rentals”.

Currently, the Company intends to rent only environmentally friendly vehicles in the compact, full-size and sport-utility vehicle classes. The Company intends to rent cars on daily, multi-day, weekly and monthly basis. The Company expects that its primary source of revenue will consist of “base time and mileage” car rental fees which can include daily rates including mileage. The Company expects to also charge an additional fee for one-way rentals to and from specific locations. In addition to rental fees, the Company intends to sell other optional products to the Company’s customers, such as collision or loss damage waivers, supplemental liability insurance, personal effects coverage and gasoline.

The Company intends to have its car rental customers make rental reservations either via the Company’s website, www.ecologictransportation.com, at the Company’s proposed partners’ websites, at the rental counter at any of the Company’s proposed locations, by phone,  through online travel websites that the Company intends to partner with, or through a corporate account program in place with their employers.

On August 2, 2012 the Company entered into a 120-day Letter of Intent (“LOI”) to acquire all of the issued and outstanding shares of ACE Rent A Car, Inc. (“ACE”), an Indiana corporation. Although the Company and ACE have not formally extended the LOI, they are currently actively engaged in due diligence.  Concurrently with the due diligence process, the Company has been actively seeking a debt instrument to effect the ACE acquisition.  As of the date of this filing, the Company has been unable to secure a debt-only financing structure that would be acceptable for the ACE principals.  The Company is currently working with financial institutions to secure a combined debt-equity structure offering that will enable the Company to complete its proposed acquisition.  ACE is under no obligation, neither verbally or contractually, to sell ACE to the Company.  The Company’s management and ACE are continuing discussions, and ACE is awaiting the Company’s revised acquisition proposal. There can be no guarantee that satisfactory financing arrangements will be secured to complete the acquisition.
 
25

 
Ecologic Products, Inc.

The Company is developing ecologically friendly products through its subsidiary, Ecologic Products, Inc. Initially, the Company’s product line will be focused on transportation and its ancillary markets. In anticipation of the Company’s first rental car location, and need for environmentally friendly car cleaning (one of the most important aspects of a car rental operation), the Company developed Ecologic Shine®, a device and system for near-waterless car washing that delivers cleaning comparable to normal washing without the use of any harmful chemicals.  The Ecologic Shine® products and services are:

·   
Good for the environment
·   
Good for the customer
·   
Good for the vehicle
·   
Good for the bottom line

The Company is currently pursuing wholesale distribution opportunities for the Ecologic Shine® product, including the product placement into major retail automotive chains. In addition, a test market has concluded with the largest national automotive quick lube franchise network for the utilization of the Ecologic Shine® family of waterless car was products to be offered as an additional service.  Ecologic Shine® is now an approved product for this network, and earned this status after completion of an evaluation of the operations of the product line and its integration into the quick lube services at three quick lube locations.

Results of Operations

Three months ended March 31, 2013 compared to three months ended March 31, 2012

The following summary of the Company’s results of operations should be read in conjunction with the Company’s financial statements for the quarter ended March 31, 2013, which are included herein.

     
December 16, 2008
 
 
Three months ended
 
(inception ) to
 
 
March 31, 2013
 
March 31, 2012
 
March 31, 2013
 
Revenue
$
206
 
$
 
$
1,872
 
Cost of sales
 
170
   
   
1,022
 
Gross profit
 
36
   
   
850
 
General and administrative expenses
 
232,040
   
677,080
   
7,802,879
 
Operating (loss)
 
(232,004
)
 
(677,080
)
 
(7,802,029
)
Interest expense
 
(19,451
)
 
(30,360
)
 
(280,647
)
Interest income
 
8
   
11
   
203
 
Loss on settlement of debt
 
-
   
   
(350,000
)
Loss from continuing operations
 
(251,447
)
 
(707,429
)
 
(8,432,473
)
Income (loss) from discontinued operations
 
(989
)
 
2,977
   
(79,676
)
Comprehensive loss
 
-
   
   
(351
)
Net loss and comprehensive loss
$
(252,436
)
$
(704,452
)
$
(8,512,500
)
                   

 
26

 
Revenue

For the three month period ended March 31, 2013 and March 31, 2012, respectively, revenue in the amount of $206 and $0 consisted of limited sales of car washing products to third-party retailers for product testing.

As a development stage company, the Company has not yet launched its major business activity, which is an environment-friendly car rental business.

Cost of sales

For the three month period ended March 31, 2013, and 2012, respectively, cost of sales in the amount of $170 and $0 consisted of limited purchase of car washing products from wholesale manufacturer.

An increase in sales and related costs of sales resulted in an increase in gross profit for the current period of $36 compared to $0 for the same period last year.

General and Administrative Expenses

General and administrative expenses in the amount of $232,040 for the three months ended March 31, 2013, were comprised of $60,000 of amortization of stock compensation, $19,261 of legal and accounting fees, $122,500 of consulting, and $30,279 of office, overhead and other general and administrative expenses.

General and administrative expenses in the amount of $677,080 for the three months ended March 31, 2012, were comprised of $496,500 in amortization of stock compensation, $15,450 of legal and accounting fees, $125,000 of consulting fees, and $33,692 of office overhead and other general and administrative expenses.

General and administrative expenses for the three month period ended March 31, 2013 were $232,040 as compared to $677,080 for the three month period ended March 31, 2012 which resulted in a decrease in general and administrative expenses for the current period of $445,040.

General and administrative expenses
For the three months ended
     
 
March 31,
   
 
 
2013
 
2012
 
Variances
 
Amortization of stock options granted
$
15,000
 
$
198,750
 
$
(183,750
)
Amortization of deferred stock compensation
 
45,000
   
297,750
 
 
(252,740
)
Legal, accounting and professional fees
 
19,261
   
15,450
 
 
3,811
 
Management consulting services
 
122,500
   
90,000
 
 
32,500
 
Other outside services
 
   
45,000
 
 
(45,000
)
Office supplies and miscellaneous expenses
 
14,079
   
16,742
 
 
(2,663
)
Rent expense
 
16,200
   
16,950
 
 
(750
)
                   
Total  general and administrative expenses
$
232,040
 
$
677,080
 
$
(445,040
)
                   

 
27

 
Significant changes in general and administrative expenses for the three month period ended March 31, 2013, compared to the three month period ended March 31, 2012, were attributable to the following items:

·    
a decrease in amortization of stock options of $183,750, primarily due to stock options fully amortized in the prior period, resulting in a reduced expense in the current period;
·    
a decrease in amortization of deferred stock compensation of $252,740, primarily due to certain deferred compensation fully expensed in the prior period, resulting in a reduced expense in the current period;
·    
an increase in legal, accounting and professional fees of $3,811, primarily due to legal costs of $1,011 and audits cost of $4,750 in the current period, versus none during the same period last year; and a decrease in general accounting services of $1,950;
·    
an increase in management consulting fees of $32,500, primarily due an increase in executive management fees of $32,500 pursuant to the employment agreement;
·    
a decrease in other outside services of $45,000, primarily due to an expired consulting contract resulting in no expense for the current period versus $45,000 for the same period in the prior year; and
·    
a decrease in other general and administrative expenses of $3,413, due to a decrease office supplies and miscellaneous expenses of $2,663 and a decrease in rent of $750.

General and administrative expenses for the three month periods ended March 31, 2013 and December 31, 2012 were incurred primarily for the purpose of advancing the Company closer to its goal of financing and operating an environment-friendly car rental business.

Off-Balance Sheet Arrangements:

The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
 
Liquidity and Capital Resources
 
           
 
Working capital
At March 31,
 
At December 31,
 
Increase
 
 
2013
 
2012
 
(decrease)
 
Current assets
$
6,237
 
$
23,387
 
$
(17,150
)
Current liabilities
 
2,476,996
 
 
2,301,910
   
175,086
 
Working capital (deficit)
$
(2,470,759
)
$
(2,278,523
)
$
(192,236
)
                   

   
 
Cash Flows
For the three months ended
 
 
March 31,
 
 
2013
 
2012
 
Net cash (used in) operating activities
$
(38,169
)
$
(55,666
)
Net cash provided by investing activities
 
 
 
-
 
Net cash provided by financing activities
 
17,300
 
 
41,252
 
Net cash used in continuing operations
 
(20,869
)
 
(14,414
)
Net cash provided by discontinued operations
 
403
   
14,698
 
Net increase (decrease) in cash
$
(20,466
)
$
284
 


 
28

 
The Company had cash in the amount of $6,237 as of March 31, 2013 as compared to $23,387 as of December 31, 2012. The Company had a working capital deficit of $2,470,759 as of March 31, 2013.

The Company has suffered recurring losses from operations resulting in an accumulated deficit of $8,512,500 since inception. The continuation of the Company is dependent upon its attaining and maintaining profitable operations and raising additional capital as needed. The Company anticipates that it will have to raise additional funds through private placements of the Company’s equity securities and/or debt financing to complete the Company’s business plan. There is no assurance that the financing will be completed as planned or at all. If the Company is unable to secure adequate capital to continue its planned operations, the Company’s shareholders may lose some or all of their investment and the Company’s business may fail.

As at March 31, 2013, affiliates and related parties are due a total of $1,488,472 which is comprised of loans to the Company of $857,759, accrued interest of $90,014, unpaid compensation of $531,522, and unpaid reimbursable expenses of $9,177.  During the three months ended March 31, 2013, loans to the Company increased by $79,900, accrued interest increased by $18,239, unpaid compensation increased by $72,000 and reimbursable expenses decreased by $2,232. The loans bear interest at the rate of 5% and 7% per annum, are unsecured and are payable one year from demand.

The Company’s principal sources of funds have been from sales of the Company’s common stock and loans from related parties.

Going Concern

The consolidated unaudited financial statements included with this quarterly report have been prepared on the going concern basis which assumes that adequate sources of financing will be obtained as required and that the Company’s assets will be realized and liabilities settled in the ordinary course of business. Accordingly, the consolidated unaudited financial statements do not include any adjustments related to the recoverability of assets and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.

Contractual Obligations

As a “smaller reporting company”, the Company is not required to provide tabular disclosure obligations.

Application of Critical Accounting Policies

The discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. The Company believes that understanding the basis and nature of the estimates and assumptions involved with the following aspects of the Company’s financial statements is critical to an understanding of the Company’s financial statements.

 
29

 
Net Income (Loss) Per Common Share

The Company’s company calculates net income (loss) per share as required by ASC 450-10, "Earnings per Share." Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding. During the periods when anti-dilutive, common stock equivalents, if any, are not considered in the computation.
 
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting company”, the Company is not required to provide the information required by this Item.

ITEM 4. CONTROLS AND PROCEDURES
 
Management’s Report on Disclosure Controls and Procedures
 
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s president, chief executive officer and chief financial officer to allow for timely decisions regarding required disclosure. In designing and evaluating the Company’s disclosure controls and procedures, the Company’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and the Company’s management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As of March 31, 2013, the end of the Company’s period covered by this quarterly report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s president, chief executive officer and chief financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on the foregoing, the Company’s president, chief executive officer and chief financial officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.

 
30

 
Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal controls over financial reporting that occurred during the three month period ended March 31, 2013 that have materially or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.



PART II
OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company knows of no material existing or pending legal proceedings against us, nor is the Company involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of the Company’s directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to the Company.

ITEM 1A. RISK FACTORS

As a “smaller reporting company”, The Company are not required to provide the information required by this Item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY STANDARDS

Not Applicable

ITEM 5. OTHER INFORMATION

None

 
31

 
ITEM 6. EXHIBITS

Exhibit
Number
Description
   
(2)
Plan of Purchase, Sale, Reorganization, Arrangement, Liquidation or Succession
   
2.1
Letter of Intent between the Company and ACE Rent A Car, Inc. dated August 2, 2012 (incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed on November 19, 2012)
   
(3)
Articles of Incorporation and Bylaws
   
3.1
Articles of Incorporation (incorporated by reference to the Company’s registration statement on form SB-2 filed on November 30, 2006).
   
3.2
Bylaws (incorporated by reference to the Company’s registration statement on form SB-2 filed on November 30, 2006).
   
3.3
Certificate of Change filed with the Secretary of State of Nevada on April 2, 2008 (incorporated by reference to the Company’s Current Report on Form 8-K filed on April 21, 2008).
   
3.4
Articles of Merger (incorporated by reference to the Company’s Current Report on Form 8-K filed on June 26, 2008).
   
3.5
Certificate of Change filed with the Secretary of State of Nevada on August 29, 2008 with respect to the reverse stock split (incorporated by reference to the Company’s Current Report on Form 8-K filed on September 17, 2008).
   
3.6
Articles of Merger (incorporated by reference to the Company’s Current Report on Form 8-K filed on June 11, 2009).
   
3.7
Certificate of Change filed with the Secretary of State of Nevada on May 15, 2009 with respect to the reverse stock split (incorporated by reference to the Company’s Current Report on Form 8-K filed on June 11, 2009).
   
3.8
Articles of Merger filed with the Secretary of State of Nevada on June 2, 2009 with respect to the merger between the Company’s wholly owned subsidiary, Ecological Acquisition Corp. and Ecologic Sciences, Inc. (incorporated by reference to the Company’s Current Report on Form 8-K filed on July 9, 2009).
   
3.9
Certificate of Change filed with the Secretary of State of Nevada on May 15, 2009, effective June 9, 2009 with respect to the merger between the Company’s wholly owned subsidiary, Ecological Acquisition Corp. and Ecologic Sciences, Inc. (incorporated by reference to the Company’s Current Report on Form 8-K filed on July 9, 2009).
   
(10)
Material Contracts
   
10.1
Agreement and Plan of Merger dated April 26, 2009 (incorporated by reference to the Company’s Current Report on Form 8-K filed on April 30, 2009).
   
10.2
Employment agreement dated January 30, 2009 between the Company and Mr. Plamondon (incorporated by reference to the Company’s Current Report on Form 8-K filed on July 9, 2009).
 
 
32

 
   
10.3
Agreement dated April 28, 2009 between the Company and Audio Eye, Inc. (incorporated by reference to the Company’s Current Report on Form 8-K filed on July 9, 2009).
   
10.4
Agreement dated May 15, 2009 between the Company and Audio Eye, Inc. (incorporated by reference to the Company’s Current Report on Form 8-K filed on July 9, 2009).
   
10.5
Employment agreement dated June 29, 2009 between the Company and Mr. Keppler. (incorporated by reference to the Company’s Current Report on Form 8-K filed on July 9, 2009).
   
10.6
Memorandum of Understanding dated May 12, 2009 between the Company and Green Solutions & Technologies, LLC (incorporated by reference to the Company’s Current Report on Form 8-K filed on July 9, 2009).
   
10.7
Form of Debt Settlement Subscription Agreement dated July 1, 2009 between the Company and John L. Ogden (incorporated by reference to the Company’s Current Report on Form 8-K filed on July 9, 2009).
   
10.8
Service Agreement dated September 24, 2009 between Ecologic Products, Inc. and Park ‘N Fly Inc. (incorporated by reference to the Company’s Current Report on Form 8-K filed on September 29, 2009).
   
10.9
Agreement dated September 29, 2009 between the Company and North Sea Securities LP. (incorporated by reference to the Company’s Annual Report on Form 10-K filed on April 14, 2010).
   
10.10
Consulting Agreement with Matrix Advisors, LLC dated October 1, 2009 (incorporated by reference to the Company’s Annual Report on Form 10-K filed on April 14, 2010).
   
10.11
Consulting Agreement with Huntington Chase Ltd. for Advisory Services dated October 12, 2009 (incorporated by reference to the Company’s Annual Report on Form 10-K filed on April 14, 2010).
   
10.12
Advisory Agreement for Executive Services of Norman A. Kunin dated as of January 1, 2010 (incorporated by reference to the Company’s Current Quarterly Report on Form 10-Q filed on August 16, 2010).
   
10.13
Independent Consulting Agreement between the Company and Prominence Capital, LLC effective as of April 5, 2010 (incorporated by reference to the Company’s Current Quarterly Report on Form 10-Q filed on August 16, 2010).
   
10.14
Agreement dated November 23, 2010 with BMO Capital Markets (incorporated by reference to the Company’s Annual Report on Form 10-K filed on April 16, 2012)
   
10.15
Independent Consulting Agreement between the Company and Oracle Capital Partners, LLC effective as of April 1, 2011. (incorporated by reference to the Company’s Current Quarterly Report on Form 10-Q filed on August 15, 2011)
 
 
33

 
   
10.16
Placement Agent Agreement between the Company and View Trade Securities, Inc. effective as of April 12, 2011. (incorporated by reference to the Company’s Current Quarterly Report on Form 10-Q filed on August 15, 2011)
   
10.17
Employment Agreement between  the Company and William B. Nesbitt effective as of November 1, 2011 (incorporated by reference to the Company’s Annual Report on Form 10-K filed on April 16, 2012)
   
10.18
Share Exchange Agreement and Plan of Merger dated March 16, 2012 (incorporated by reference to the Company’s Current Report on Form 8-K filed on March 22, 2012)
   
10.19
Consulting Agreement between  the Company and Greg Suess dated July 5, 2012 (incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed on November 19, 2012)
   
10.20
Consulting Agreement between  the Company and NUF Enterprises LLC dated July 5, 2012 (incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed on November 19, 2012)
   
10.21
Engagement Letter between  the Company and Wellington Shields & Co., LLC dated September 12, 2012 (incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed on November 19, 2012)
   
10.22
Engagement Letter between  the Company and Wellington Shields & Co., LLC dated September 12, 2012 (incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed on November 19, 2012)
   
10.23
Modification Agreement between the Company and Huntington Chase Financial Group dated October 12, 2012  (incorporated by reference to the Company’s Annual Report on Form 10-K filed April 1, 2013)
   
(16)
Auditors Letters
   
16.1
Letter dated March 22, 2012 from StarkSchenkein, LLP addressed to the Securities and Exchange Commission. (incorporated by reference to the Company’s Current Report on Form 8-K filed on March 22, 2012)
   
16.2
Auditor Consent Letter dated March 27, 2012 from Stan J.H. Lee, CPA (incorporated by reference to the Company’s Annual Report on Form 10-K filed on April 16, 2012)
   
16.3
Letter dated October 24, 2012 from Stan J.H. Lee, CPA (incorporated by reference to the Company’s Current Report on Form 8-K filed on October 30, 2012)
   
(21)
Subsidiaries of the Registrant
   
21.1
Ecological Products, Inc.
 
Ecologic Car Rentals, Inc.
 
 
34

 
   
   
(31)
Section 302 Certifications
   
31.1*
Section 302 Certification of William B. Nesbitt
   
31.2*
Section 302 Certification of Calli Bucci
   
(32)
Section 906 Certifications
   
32.1*
Section 906 Certification of William B. Nesbitt
   
32.2*
Section 906 Certification of Calli Bucci
 
 
(101)
Interactive Data Files
 
 
101.INS**
XBRL Instance Document
 
 
101.SCH**
XBRL Taxonomy Extension Schema Document
 
 
101.CAL**
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
101.DEF**
XBRL Taxonomy Extension Definition Linkbase Document
 
 
101.LAB**
XBRL Taxonomy Extension Label Linkbase Document
 
 
101.PRE**
XBRL Taxonomy Extension Presentation Linkbase Document

*      Filed herewith.
**
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 
35

 
 
SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
ECOLOGIC TRANSPORTATION, INC.
 
 
 
 
 Dated: May 20, 2013
/s/ William B. Nesbitt
 
William B. Nesbitt
 
President, Chief Executive Officer and Director
 
(Principal Executive Officer)
 
 
 
 
 
 
 Dated: May 20, 2013
/s/ Calli Bucci
 
Calli Bucci
 
Chief Financial Officer
 
(Principal Financial Officer and
 
Principal Accounting Officer)
 
36