ADARNA ENERGY Corp - FORM 10-K/A

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EX-31.1 - EXHIBIT 31.1 - ADARNA ENERGY Corp	esyr10ka208ex31-1.htm
EX-32.1 - EXHIBIT 32.1 - ADARNA ENERGY Corp	esyr10k208ex32.htm
EX-10.6 - EXHIBIT 10.6 - ADARNA ENERGY Corp	exyr10ka08ex10-6.htm
EX-31.2 - EXHIBIT 31.2 - ADARNA ENERGY Corp	esyr10ka208ex31-2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________

FORM 10-K/A

_________________________

(AMENDMENT No. 2)

ANNUAL REPORT UNDER SECTION 13 OR 15 (D)

OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008

COMMISSION FILE NO.: 0-32143

ECOSYSTEM CORPORATION

(Exact name of registrant as specified in its charter)

Delaware			20-3148296
(State of other jurisdiction of			(IRS Employer
incorporation or organization			Identification No.)

One Penn Plaza, Suite 1612, New York, NY		10119
(Address of principal executive offices)			(Zip Code)
	(212) 994-5374
(Registrant’s telephone number)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 406 of the Securities Act. Yes __ No X

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes __ No X

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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. Yes X No __

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One)

Large accelerated filer Accelerated filer _Non-accelerated filer Small reporting company X

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes __ No X

The number of outstanding shares of common stock held by non-affiliates of the Registrant as of April 15, 2009 was 589,000,000.

ECOSYSTEM CORPORATION

ANNUAL REPORT ON FORM 10K

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008

TABLE OF CONTENTS

Page No
Part I
Item 1	Business	5
Item 1A	Risk Factors	8
Item 2	Description of Properties	10
Item 3	Legal Proceedings	10
Item 4	Submission of Matters to a Vote of Security Holders	10

Part II
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters
	and Issuer Purchase of Equity Securities	11
Item 6	Selected Financial Data
Item 7	Management’s Discussion and Analysis	12
Item 8	Financial Statements and Supplementary Data	15
Item 9	Changes and Disagreements with Accountants on Accounting and Financial Disclosure	27
Item 9A	Controls and Procedures	27
Item 9B	Other Information	28

Part III
Item 10	Directors, Executive Officers and Corporate Governance	29
Item 11	Executive Compensation	30
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related
	Stockholder Matters	30
Item 13	Certain Relationships and Related Transactions and Director Independence	30
Item 14	Principal Accountant Fees and Services	31

Part IV
Item 15	Exhibits and Financial Statement Schedules	31

Signatures

Amendment No. 2

This Amendment No.2 on Form 10-K/A, which amends and restates items identified below with respect to the Form 10- K, filed by Ecosystem Corporation ("we" or "the Company") with the Securities and Exchange Commission (the "SEC") on April 15, 2009 (the "Original Filing"), is being filed in order to:

Ø	Include restated financial statements as described in Note 12 to the financial statements;
Ø	Amend Item 7, Management’s Discussion and Analysis, to reflect the amended financial statements;
Ø	Amend the following notes under Item 8, Financial Statements and Supplementary Schedules, to reflect the amended financial statements;
	Ø	Report of Independent Auditor to indicate that the audit was conducted in accordance with the standards of the PCAOB as discussed in PCAOB Auditing Standard One and to include dual dating of report due to the restatements;
	Ø	Note 12, Restatements, was updated to outline the additional changes that were made to the financial statements;

	Ø	Item 9A, Controls and Procedures was revised to disclose that disclosure control procedures were not adequate at December 31, 2008;
	Ø	Item 11, Executive Compensation, was revised to disclose compensation accurately;
	Ø	Item 13, Certain Relationships And Related Transactions And Director Independence, was revised to disclose the relationship with GreenShift Corporation;
	Ø	Item 14, Principal Accountant Fees and Services, was revised to indicate that Board approval was required; and

	Ø	Item 15, Exhibits, was revised to include additional exhibits.

None of the other disclosures in this Report have been amended or updated. For updated information about Ecosystem Corporation, please refer to the more recent filings made with the SEC.

PART I

Basis of Presentation

In this Annual Report on Form 10-K, the terms “we,” “our,” “us,” “EcoSystem,” or the “Company” refer to EcoSystem Corporation.

Forward Looking Statements

We make certain forward-looking statements in this Annual Report on Form 10-K and in the documents that are incorporated herein by reference. These forward-looking statements relate to our outlook or expectations for earnings, revenues, expenses, asset quality or other future financial or business performance, strategies or expectations, or the impact of legal, regulatory or supervisory matters on our business, results of operations or financial condition. Specifically, forward-looking statements may include statements preceded by, followed by or that include the words “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target” or similar expressions. These statements reflect our management’s judgment based on currently available information and involve a number of risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Future performance cannot be ensured. Actual results may differ materially from those in the forward-looking statements. Some factors that could cause our actual results to differ include:

Ø	the volatility and uncertainty of commodity prices;

Ø	the costs and business risks associated with developing new products and entering new markets;

Ø	our ability to locate and integrate future acquisitions;

Ø	the impact of new, emerging and competing technologies on our business;

Ø	the possibility of one or more of the markets in which we compete being impacted by political, legal and regulatory changes or other external factors over which they have no control;

Ø	changes in or elimination of governmental laws, tariffs, trade or other controls or enforcement practices;

Ø	our reliance on key management personnel;

Ø	limitations and restrictions contained in the instruments and agreements governing our indebtedness;

Ø	our ability to raise additional capital and secure additional financing;

Ø	our ability to implement additional financial and management controls, reporting systems and procedures and comply with Section 404 of the Sarbanes-Oxley Act, as amended; and

Ø	other risks referenced from time to time in our filings with the SEC and those factors listed in this Form 10k under Item 1A, Risks Factors, beginning on page 5.

You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this Form 10-K, or in the case of a document incorporated by reference, as of the date of that document. Except as required by law, we undertake no obligation to publicly update or release any revisions to these forward-looking statements to reflect any events or circumstances after the date of this Form 10-K or to reflect the occurrence of unanticipated events.

ITEM 1 BUSINESS

OVERVIEW

EcoSystem Corporation (“we,” “our,” “us,” “EcoSystem,” or the “Company”) is innovating industrial-scale applications of bioreactor technology that are designed to resolve compelling ecological challenges while producing value added carbon neutral products.

We use engineered ecosystems and biotechnologies that nature has already selected to bioconvert food, animal and human wastes into feedstock for biofuel production, high protein animal feed and nutrient-rich fertilizer. The natural mechanisms at work here have been proven to be amazingly effective at consuming and metabolizing targeted wastes into protein, fat and other valuable products in a clean and safe way.

Society faces significant challenges caused by the way we grow, manage, distribute, consume and dispose of agriproducts today. These challenges include the downstream “dead-zone” shocks caused by concentrations of phosphorus and nitrogen rich effluent from confined animal processing facilities, the high carbon intensity of landfilling food waste, and the environmental and financial costs of transporting and processing food and waste. Our society has an ever-growing need for increasingly-scarce food, fuel and water resources; we cannot continue to operate in our current inefficient manner if we are to meet this ever increasing need for resources without straining our sensitive regional and planet-wide ecosystems.

Our founding mission is to streamline the flow of resources into, through and out of our food chain, and to do it in ways that are rapidly scalable in multiple geographies. We intend to achieve this by delivering distributed, engineered ecosystems to intercept agricultural and food wastes prior to landfill or other disposal. Our engineered ecosystems are designed to convert these wastes into feedstocks for regional animal feeds, natural oils for fuel and chemical uses, and high nutrient soil amendments. In the process, we hope to generate significant shareholder wealth by reducing the environmental and financial costs of our food chain.

The design of the first evolution of our bioreactor technologies is based on extensive bench trials and over 30 years of applied university research. Our primary goal during 2009 is to build at least one demonstration-scale bioreactor facility (“Pilot Facility”) to confirm our scale-up assumptions and to collect the field data we need to design and deploy commercial-scale applications of our technologies.

While our long-term revenue model is based on the use of our technologies to sell products produced by our technologies on an ongoing basis to generate recurring revenues, we intend to sell one or more Pilot Facilities to qualified early adopters to minimize our pre-cash flow financing needs and to refine our commercialization strategy. We are currently in negotiation with several early adopter partners for construction and operation of at least one Pilot Facility proximate to Dayton, Ohio, co-located at a qualified source of raw material for consumption by the organisms in our bioreactors. We are currently working with a number of contract entomologists, nutritionists and process engineers on a consulting and part-time employment basis to minimize our overhead costs while we execute on this plan. We have also applied for grant financing from the U.S. Department of Energy.

Our strategic plan also involves the acquisition of accretive assets and cash flows that are strategic to our technology development efforts. We are currently evaluating a number of qualified opportunities that produce the raw materials needed for our technologies, or that have the infrastructure we need to scale our technologies, or that have the ability to refine the products we produce with our technologies into finished goods. Our plan in this respect is to leverage the targeted assets and cash flows to defray our technology and financing risk as we commercialize our technologies.

OUR TECHNOLOGIES

EcoSystem’s technologies rely on a number of natural organisms including the black soldier fly (Hermetia illucens), other compatible insects, yeast, cyanobacteria, bacteria, methanogenic archea, and various specious of fish. The species and process balance utilized for a targeted application will depend on the available waste resources and regional resource needs. Our planned Pilot Facilities will be initially based on the natural consumption behavior of the black solider fly (“BSF”).

BSF are clean, energy-efficient and voracious. They rapidly consume large quantities of feed during maturation, with a high tolerance against chemical, bacteria and pathogens that would cripple algae and other bioreactor technologies. The natural BSF life cycle allows for the following important benefits:

Ø	Rapid conversion of waste into biomass;

Ø	Low energy demand and favorable carbon footprint;

Ø	High tolerance to contamination equates to increased caloric uptake and survival until harvesting;

Ø	Works by itself or with other organisms in an engineered food chain; and,

Ø	Low cost distributed deployment based on the localized food, fuel and other resource requirements.

BSF are able to reduce incoming waste stream volumes by up to 90% (depending on cellulose and inedible matter composition) depending on the feedstock source. We estimate BSF will be able to convert up to 25% of the volume of food waste into BSF larvae with a dry weight of about 42% protein and about 35% natural oils (with the balance to other BSF biomass and castings, which can be sold in fertilizer applications).

The protein and natural oils produced by BSF will be extracted using conventional rendering equipment. The protein will be sold under EcoSystem’s ECOMEAL™ brand as a high value aquaculture feed. The oil will be sold under EcoSystem’s MAGFUEL™ brand as a biodiesel feedstock to our offtake vendor, Biofuel Industries Group in Adrian, Michigan, for conversion into biodiesel.

The market opportunity for our BSF technologies in the U.S. is a function of the available sources of qualified feedstock. Qualified high-volume feedstock sources include food waste, animal and plant processing wastes, manure, and sewage.

INTELLECTUAL PROPERTIES

EcoSystem is party to a technology commercialization agreement with GreenShift Corporation, which company is majority owned by our majority shareholder, Viridis Capital, LLC, pursuant to which GreenShift has agreed to provide commercialization support services and access to GreenShift’s portfolio of clean technologies for applications not involving the production of renewable fuels. EcoSystem will pay GreenShift a royalty equal to 10% of the pre-tax net income generated by EcoSystem through use of GreenShift technology, and EcoSystem has agreed to sell all MAGFUEL™ and other qualified renewable fuel precursors produced by EcoSystem on an exclusive basis to GreenShift, unless waived by GreenShift.

“ESYM,” EcoSystem, MAGFUEL, ECOMEAL, the FEEDSTOCK MACHINE, and the “EcoSystem Logo” are the registered trademarks of EcoSystem Corporation.

INDUSTRY OVERVIEW

Food Scrap Waste Diverted From Landfills

The problem is global: the United Nations Environment Programme (UNEP) found that over half of the food produced today is lost, wasted or discarded as a result of inefficiency in the human-managed food chain. UNEP also found that:

Ø	Up to one quarter of all fresh fruits and vegetables in the U.S. are lost between the field and the table;

Ø	In Australia it is estimated that food waste makes up half of that country's landfill;

Ø	Almost one-third of all food purchased in the United Kingdom every year is not eaten;

Ø	Over one third of the world's cereals are being used as animal feed, rising to 50 per cent by 2050 – continuing to feed cereals to growing numbers of livestock will aggravate environmental degradation;

Ø	Recycling food wastes and deploying new technologies, aimed at producing biofuels, to produce sugars from discards such as straw and even nutshells could be a key environmentally-friendly alternative to increased use of cereals for livestock; and

Ø	The world could feed its entire projected population growth alone simply by becoming more efficient.

There are other tangible benefits of increased efficiency. For example, in August 2008, the City of San Francisco reported that it achieved 70% landfill diversion between 1996 and 2006, corresponding to a reduction of 1.4 million tons per year down to about 600,000 tons per year. This included 100,000 tons of diverted food waste. The City of San Francisco further reported that this degree of diversion dramatically reduced emissions of methane-laden landfill gas, a potent greenhouse gas. The University of Arizona estimates that the adverse environmental impact of inefficient food chain including methane emissions, land fill use, soil depletion, use of fertilizers, pesticides and herbicides could be reduced by 25% with landfill diversion practices.

Livestock Waste

Agricultural runoff poses major challenges for many of the nation's most polluted water ways. Agricultural runoff is the leading source of nitrogen for 13 of the 17 bays federal officials identified as highly eutrophic. In each of these water ways, farmland runoff contributes at least one-third of the pollutants that cause low oxygen levels, toxic algae blooms, and contribute to the loss of underwater grasses that provide critical habitat for fish, crabs and other commercially-important species. In addition, more than half of the bays featuring moderate-high symptoms of nutrient pollution also receive one-third or more of these nutrients from agriculture

The second major source of this excess nitrogen and phosphorus comes from the manure associated with livestock: hogs, poultry and beef and dairy cows. Livestock produce 130 times more waste per year than all Americans combined. Increasingly, hogs, poultry and many cows are kept primarily or exclusively in large feedlots, where the manure is concentrated. The predominant manure management technique involves storing this waste in an open lagoon, and then spraying the waste on adjacent fields. But this primitive technology presents challenges: one, manure lagoons leach nitrogen and phosphorus into the groundwater; two, many lagoons or pipes used to convey waste to farm fields fail or leak; three, manure cannot be cost-effectively transferred more than a few miles, so manure is typically applied to cropland in inappropriate levels; and four, significant amounts of nitrogen evaporates from lagoons and feedlots into the air as ammonia and ultimately descends into bays or lands draining into bays.

ITEM 1A BUSINESS RISK FACTORS

There are many important factors that have affected, and in the future could affect, EcoSystem Corporation’s business, including but not limited to the factors discussed below, which should be reviewed carefully together with other information contained in this report. Some of the factors are beyond our control and future trends are difficult to predict.

There is substantial doubt concerning our ability to continue as a going concern.

EcoSystem incurred a loss from continuing operations of $805,652 during the twelve months ended December 31, 2008, and we had $0 in cash at December 31, 2008. These matters raise substantial doubt about our ability to continue as a going concern. Management’s plans include raising additional proceeds from debt and equity transactions and completing strategic acquisitions.

We are implementing new business plans which make the results of our business uncertain.

Our limited operating history makes it difficult for potential investors to evaluate our business. Therefore, our proposed operations are subject to all of the risks inherent in the initial expenses, challenges, complications and delays frequently encountered in connection with the formation of any new business, as well as those risks that are specific to the biodiesel, ethanol and culinary oils industry in general. Investors should evaluate an investment in our company in light of the problems and uncertainties frequently encountered by companies attempting to develop markets for new products, services and technologies. Despite best efforts, we may never overcome these obstacles to achieve financial success. Our business is speculative and dependent upon the implementation of our business plan, as well as our ability to enter into agreements with third parties for necessary financing, the provision of necessary feedstock sources, engineering, procurement and construction services and the sale and distribution of our biodiesel fuel on terms that will be commercially viable for us. There can be no assurance that our efforts will be successful or result in revenue or profit. There is no assurance that we will earn significant revenues or that our investors will not lose their entire investment.

The fiscal efficiencies of highly capitalized competitors in biotechnology could defeat our efforts to capture a viable market share.

The business of developing new biotechnologies is a capital-intense business, requiring substantial capital resources. The costs that we may incur in obtaining capital are substantially greater per dollar than the cost incurred by large scale enterprises in the industry. This situation could cause us to be unable to compete effectively.

The exercise of our outstanding warrants and options and EcoSystem Corporation’s various anti-dilution and price-protection agreements could cause the market price of our common stock to fall, and may have dilutive and other effects on our existing stockholders.

The exercise of our outstanding warrants and options could result in the issuance of up to 275,000 shares of common stock, assuming all outstanding warrants and options are currently exercisable. Such issuances would reduce the percentage of ownership of our existing common stockholders and could, among other things, depress the price of our common stock. This result could detrimentally affect our ability to raise additional equity capital. In addition, the sale of these additional shares of common stock may cause the market price of our stock to decrease.

We lack capital to fund our operations.

During the twelve months ended December 31, 2008 our operations used $98,131 in cash. In addition, during those twelve months we were required to make payments on some of our outstanding debts. Loans from some of our shareholders funded both the cash shortfall from operations and our debt service. Those individuals may not be able to continue to fund our operations or our debt service.

Our failure to attract qualified engineers and management personnel could hinder our success.

Our ability to attract and retain qualified engineers and other professional personnel when we need them will be a major factor in determining our future success. There is a very competitive market for individuals with advanced engineering training, and we are not assured of being able to retain the personnel we will need.

Key personnel are critical to our business and our future success depends on our ability to retain them.

Our success depends on the contributions of our key management, and engineering personnel. The loss of these officers could result in lost sales opportunities, lost business, difficulties operating our assets, difficulties raising additional funds and could therefore significantly impair our financial condition. Our future success depends on our ability to retain and expand our staff of qualified personnel, including environmental technicians, sales personnel and engineers. Without qualified personnel, we may incur delays in rendering our services or be unable to render certain services.

Viridis Capital can exert control over us and may not make decisions that further the best interests of all stockholders.

Viridis Capital, LLC owns 80% of our outstanding common stock. As a result, Viridis exerts a significant degree of influence over our management and affairs and over matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. In addition, this concentration of ownership may delay or prevent a change in control of us and might affect the market price of our common stock, even when a change in control may be in the best interest of all stockholders. Furthermore, the interests of this concentration of ownership may not always coincide with our interests or the interests of other stockholders and accordingly, they could cause us to enter into transactions or agreements which we would not otherwise consider.

EcoSystem Corporation is not likely to hold annual shareholder meetings in the next few years.

Delaware corporation law provides that members of the board of directors retain authority to act until they are removed or replaced at a meeting of the shareholders. A shareholder may petition the Delaware Court of Chancery to direct that a shareholders meeting be held. But absent such a legal action, the board has no obligation to call a shareholders’ meeting. Unless a shareholders’ meeting is held, the existing directors elect directors to fill any vacancy that occurs on the board of directors. The shareholders, therefore, have no control over the constitution of the board of directors, unless a shareholders’ meeting is held. Management does not expect to hold annual meetings of shareholders in the next few years, due to the expense involved. Kevin Kreisler and Glen Courtright, who are currently the directors of EcoSystem Corporation, were appointed to that position by the previous directors. If other directors are added to the Board in the future, it is likely that Messrs. Kreisler and Courtright will appoint them. As a result, the shareholders of EcoSystem Corporation will have no effective means of exercising control over the operations of EcoSystem Corporation.

Investing in our stock is highly speculative and you could lose some or all of your investment.

The value of our common stock may decline and may be affected by numerous market conditions, which could result in the loss of some or the entire amount invested in our stock. The securities markets frequently experience extreme price and volume fluctuations that affect market prices for securities of companies generally and very small capitalization companies such as us in particular.

The volatility of the market for EcoSystem Corporation common stock may prevent a shareholder from obtaining a fair price for his shares.

The common stock of EcoSystem Corporation is quoted on the OTC Bulletin Board. It is impossible to say that the market price on any given day reflects the fair value of EcoSystem Corporation, since the price sometimes moves up or down by 50% or more in a week’s time. A shareholder in EcoSystem Corporation who wants to sell his shares, therefore, runs the risk that at the time he wants to sell, the market price may be much less than the price he would consider to be fair.

Our common stock qualifies as a "penny stock" under SEC rules which may make it more difficult for our stockholders to resell their shares of our common stock.

Our common stock trades on the OTC Bulletin Board. As a result, the holders of our common stock may find it more difficult to obtain accurate quotations concerning the market value of the stock. Stockholders also may experience greater difficulties in attempting to sell the stock than if it were listed on a stock exchange or quoted on the NASDAQ Global Market or the NASDAQ Capital Market. Because our common stock does not trade on a stock exchange or on the NASDAQ Global Market or the NASDAQ Capital Market, and the market price of the common stock is less than $5.00 per share, the common stock qualifies as a "penny stock." SEC Rule 15g-9 under the Securities Exchange Act of 1934 imposes additional sales practice requirements on broker-dealers that recommend the purchase or sale of penny stocks to persons other than those who qualify as an "established customer" or an "accredited investor." This includes the requirement that a broker-dealer must make a determination on the appropriateness of investments in penny stocks for the customer and must make special disclosures to the customer concerning the risks of penny stocks. Application of the penny stock rules to our common stock affects the market liquidity of the shares, which in turn may affect the ability of holders of our common stock to resell the stock.

Only a small portion of the investment community will purchase “penny stocks” such as our common stock.

EcoSystem Corporation common stock is defined by the SEC as a “penny stock” because it trades at a price less than $5.00 per share. EcoSystem Corporation common stock also meets most common definitions of a “penny stock,” since it trades for less than $1.00 per share. Many brokerage firms will discourage their customers from purchasing penny stocks, and even more brokerage firms will not recommend a penny stock to their customers. Most institutional investors will not invest in penny stocks. In addition, many individual investors will not consider a purchase of a penny stock due, among other things, to the negative reputation that attends the penny stock market. As a result of this widespread disdain for penny stocks, there will be a limited market for EcoSystem Corporation common stock as long as it remains a “penny stock.” This situation may limit the liquidity of your shares.

ITEM 2 DESCRIPTION OF PROPERTIES

EcoSystem Corporation currently maintains office space at One Penn Plaza, Suite 1612, New York, NY. The lease for this space expires in May of 2011. We paid no rent during 2008 for these offices. During 2008 EcoSystem does not expect to pay rent for these offices. We have located offices proximate to Dayton, Ohio that we intend to lease commencing in 2009.

ITEM 3 LEGAL PROCEEDINGS

None

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5 MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED SHAREHOLDER

MATTERS

EcoSystem’s Common Stock trades on the OTC Bulletin Board under the symbol “ESYM.” The following table sets forth, for the periods indicated, the range of high and low closing bid prices for EcoSystem Common Stock as reported by the National Association of Securities Dealers composite. The reported bid quotations reflect inter-dealer prices without retail markup, markdown or commissions, and may not necessarily represent actual transactions.

Period		High		Low
2008 First Quarter			0.0552		0.0552
2008 Second Quarter			0.0100		0.0060
2008 Third Quarter			0.0010		0.0007
2008 Fourth Quarter			0.0028		0.0026
2007 First Quarter			0.0014		0.0012
2007 Second Quarter			0.0012		0.0010
2007 Third Quarter			0.0006		0.0005
2007 Fourth Quarter			0.0003		0.0002
Title of Class	Approximate Number of Holders of Record as of April 11, 2008
Common Stock, 0.001 par			268

The number of holders does not give effect to beneficial ownership of shares held in the street name by stock brokerage houses or clearing agents.

REVERSE SPLIT

On February 11, 2008, the Company completed a 1 for 500 reverse stock split. All stock prices, share amounts, per share information, stock options and stock warrants in this Report reflect the reverse stock split.

DIVIDENDS

We have no present intention of paying dividends in the foreseeable future. Our policy for the time being is to retain earnings and utilize the funds for operations and growth. The Board of Directors based on our earnings, financial condition, capital requirements and other existing conditions will determine future dividend policies.

SALE OF UNREGISTERED SECURITIES

The Company did not sell any unregistered securities during the 4th quarter of 2008.

REPURCHASE OF EQUITY SECURITES

The Company did not repurchase any of its equity securities that were registered under Section 12 of the Securities Act during the 4th quarter of 2008.

ITEM 6 SELECTED FINANCIAL DATA

Not applicable.

ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS

AND RESULTS OF OPERATION

OVERVIEW

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The financial statements included herein have been prepared by the Company, in accordance with Generally Accepted Accounting Principles. This requires the Company’s management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of the contingent assets and liabilities at the date of the financial statements. These estimates and assumptions will also affect the reported amounts of certain revenues and expenses during the reporting period. In the opinion of management, all adjustments which, except as described elsewhere herein, are of a normal recurring nature, necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented. Actual results could differ materially based on any changes in the estimates and assumptions that the Company uses in the preparation of its financial statements and any changes in the Company’s future operational plans.

RESULTS OF OPERATIONS

Year Ended December 31, 2008 Compared to Year Ended December 31, 2007

Revenues

There were no revenues from continuing operations for the year ended December 31, 2008, and no revenues for the twelve months ended December 31, 2007.

For the years ending December 31, 2008 and 2007, the revenues from discontinued operations were $0 and $5,695,482, respectively.

All revenues realized in discontinued operations during the year ended December 31, 2007 were due to the operating activities of our former subsidiary, GS Design, Inc. ("GSD"). GSD has traditionally engaged in the engineering and fabrication of manufacturing equipment for large domestic and international manufacturers, and revenues for the year ended December 31, 2007 related primarily to orders from that customer base.

Cost of Revenues

There was no cost of revenues from continuing operations for the year ended December 31, 2008 or for the year ended December 31, 2007. Cost of revenues reflected in discontinued operations was incurred by GSD.

The cost of revenues attributable to discontinued operations for the years ending December 31, 2008 and 2007 were $0 and $4,385,195, respectively.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $768,787 for the year ended December 31, 2008 and $341,809 for the year ending December 31, 2007. Selling, general and administrative expenses include stock based compensation of $707,028 and $229,231 for 2008 and 2007, respectively. Selling, general and administrative expenses are expected to remain high relative to revenues until such time that the Company can achieve enough revenue growth and obtain the economies of scale necessary to support these expenses.

Selling, general and administrative expenses attributable to discontinued operations for the years ending December 31, 2008 and 2007 were $0 and $914,237, respectively.

Interest Expense and Financing Costs

Interest expenses and financing costs for the year ended December 31, 2008 were $32,069 and $25,665 for the year ended December 31, 2007.

Net Income and Net Loss

Our net loss from continuing operations for the year ended December 31, 2008 was $805,652 and $367,474 for the year ended December 31, 2007. Our net income attributable to discontinued operations for the year ended December 31, 2007 was $293,330. Our net loss for the year ended December 31, 2008 was $805,652 and our net loss for the year ended December 31, 2007was $74,144.

Liquidity and Capital Resources

Our primary sources of liquidity are cash provided by investing and financing activities. For the twelve months ended December 31, 2008, net cash used by operating activities was $130,199. The Company had $156,129 in liabilities at the end of the twelve months ended December 31, 2008, and will need to obtain additional financing to satisfy these obligations.

The Company’s capital requirements consist of general working capital needs, scheduled principal and interest payment on debt, obligations and capital leases and planned capital expenditures. The Company’s capital resources consist primarily of cash generated from the issuance of debt and common stock. At December 31, 2008 the company had $0 in cash.

The Company plans to finance its planned development activities during 2009 through a combination of (a) proceeds from the sales of pilot facilities based on our technologies to qualified early adopters, (b) proceeds from the issuance of equity and debt, and (c), if awarded, grant proceeds. In addition, the Company is actively seeking acquisition opportunities with a view towards internalizing sufficient cash flows to service the Company’s overhead, technology development and other development needs.

Cash Flows

For the twelve months ending December 31, 2008, net cash provided by financing was $130,108. The Company had a working capital deficit of $156,129 at December 31, 2008. In reviewing our financial statements as of December 31, 2008, our auditor concluded that there was substantial doubt as to our ability to continue as a going concern.

Off Balance Sheet Arrangements

None.

ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES

Page No
FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	16

Balance Sheets	17

Statements of Operations	18

Statements of Stockholders’ Equity	19

Statements of Cash Flows	20

Notes to Financial Statements	21

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

EcoSystem Corporation and Subsidiaries:

We have audited the accompanying balance sheet of EcoSystem Corporation and Subsidiaries as of December 31, 2008 and 2007 and the related statements of operations, stockholders' equity (impairment) and cash flows for the two years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the auditing standards established by the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of EcoSystem Corporation and Subsidiaries as of December 31, 2008, and the results of their operations and their cash flows for the two years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully discussed in Note 2 to the financial statements, the Company has suffered losses from operations and has a working capital deficiency as of December 31, 2008. These conditions raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

As discussed in Note 12, the financial statements as of and for the year ended December 31, 2008 have been restated.

/s/ Rosenberg Rich Baker Berman & Company

Bridgewater, New Jersey

April 15, 2009, except for Note 12 as to which the date is May 21, 2010

ECOSYSTEM CORPORATION

BALANCE SHEETS

ASSETS	12/31/08			12/31/07
				(As Restated)
Current assets:
Cash	$	--		$	91
Due from related parties		--			1,007,751
Total current assets		--			1,007,842
TOTAL ASSETS	$	--		$	1,007,842

LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Due to related party		3,612			400,863
Accounts payable and accrued expenses		152,517			--
Convertible debenture, net of discounts - affiliate		--			170,293
Total current liabilities		156,129			571,156

TOTAL LIABILITIES		156,129			571,156

STOCKHOLDERS’ EQUITY
Preferred stock, $0.001 par value:
Series D: 1,000,000 authorized, 0 issued and outstanding		--			921
Common stock, $0.001 par value, 5,000,000,000 authorized;
8,354,328 issued and outstanding as of 12/31/07 and500,000,000 issued and outstanding as of 12/31/08
		500,000			8,354
Additional paid-in capital		6,574,119			6,852,007
Accumulated deficit		(7,230,248	)		(6,424,596	)

TOTAL STOCKHOLDERS’ EQUITY		(156,129	)		436,686
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY	$	--		$	1,007,842

The notes to the condensed financial statements are an integral part of these statements.

ECOSYSTEM CORPORATION

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND DECEMBER 31, 2007

	12/31/08			12/31/07
	(As Restated)
Revenues	$	--		$	--
Cost of revenues		--			--
Gross profit		--			--

Operating expenses
Stock based compensation		707,028			229,231
Selling, general and administrative expenses		61,759			112,578
Total operating expenses		768,787			341,809

Operating loss		(768,787	)		(341,809	)

Other expenses and financing costs
Interest expense		(32,069	)		(25,665	)
Total other expense		(32,069	)		(25,665	)

Loss before provision for income taxes		(800,856	)		(367,474	)

Provision for income taxes		(4,796	)		--

Net loss from continuing operations	$	(805,652	)	$	(367,474	)

Net income from discontinued operations	$	--		$	293,330

Net Income	$	(805,652	)	$	(74,144	)

Net loss per common share from continuing operations, basic and diluted	$	(.02	)	$	(0.07	)

Net loss per common share from discontinued operations, basic and diluted	$	0.00		$	0.06

Weighted average of shares of common stock
Outstanding, basic and diluted		53,547,882			5,260,701

The notes to the condensed financial statements are an integral part of these statements.

ECOSYSTEM CORPORATION

STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2008 AND DECEMBER 31, 2007

	Series C						Series D						Series E
	Preferred Stock						Preferred Stock						Preferred Stock
	Shares			Amount			Shares			Amount			Shares			Amount

Balance at 12/31/06		1,600,369		$	1,600			1,000,000			1,000			5,054,328		$	5,054
Cancellation of shares		--			--			--			--			(60,000	)		(60	)
Conversion of series C to Common		(1,600,369	)		(1,600	)		--			--			320,000			320
Cashless exercise of warrants		--			--			--			--			123,077			123
Shares issued for services		--			--			--			--			916,923			917
Conversion of series D Preferred		--			--			(78,687	)		(79	)		2,000,000			2,000
Forgiveness of related party debt, net
Transfer of subsidiaries
Balance at 12/31/07		--		$	--			921,313		$	921			8,354,328		$	8,354
Cancellation of shares		--			--			--			--			(11,407	)		(11	)
Shares issued for services		--			--			--			--			91,211,326			91,211
Conversion of series D Preferred		--			--			(921,313	)		(921	)		400,000,000			400,000
Forgiveness of related party debt, net		--			--			--			--			--			--
Issuance of fractional shares from reverse split		--			--			--			--			445,753			446
Beneficial conversion feature of convertible debt (As Restated)		--			--			--			--			--			--
Net loss, as restated
Balance at 12/31/08		--		$	--			--		$	--			500,000,000		$	500,000

	Additional Paid-in Capital			Accumulated Deficit			Total Stockholders’ Equity (Deficit)


Balance at 12/31/06	$	8,086,959		$	(6,350,452	)	$	1,744,161
Cancellation of shares		60			--			--
Conversion of series C to Common		1,280			--			--
Cashless exercise of warrants		(123	)		--			--
Shares issued for services		228,314			--			229,231
Conversion of series D Preferred		(1,921	)		--			--
Forgiveness of related party debt, net		(155,348	)		--			(155,348	)
Transfer of subsidiaries		(1,307,214	)		--			(1,307,214	)
Net Loss		--			(74,144	)		(74,144	)
Balance at 12/31/07	$	6,852,007		$	(6,424,596	)	$	436,686
Cancellation of shares		11			--			--
Shares issued for services		615,817			--			707,028
Conversion of series D Preferred		(399,079	)		--			--
Forgiveness of related party debt, net		(927,123	)		--			(927,123	)
Issuance of fractional shares from reverse split		(446	)		--			--
Beneficial conversion feature of convertible debt (As Restated)		432,932			--			432,932
Net Loss, as restated		--			(805,652	)		(787,318	)
Balance at 12/31/08 (As Restated)	$	6,574,119		$	(7,230,248	)	$	(156,129	)

The notes to the condensed financial statements are an integral part of these statements.

ECOSYSTEM CORPORATION

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2008

	12/31/08			12/31/07
CASH FLOWS FROM OPERATING ACTIVITIES	(As Restated)
Net loss from continuing operations	$	(805,652	)	$	(367,474	)
Net Income from discontinued operations		--			293,330

Adjustments to reconcile net loss to net cash used in
operating activities:
Stock and stock options issued for services		707,028			229,231
Changes in assets and liabilities:
Increase in accounts payable and accrued expenses		(31,575	)		5,144
Net cash provided (used) in operating activities		(130,199	)		160,231
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of convertible debt		432,932			--
Repayment of related party debt		(302,824	)		(160,140	)
Net cash provided (used) by financing activities		130,108			(160,140	)
Increase (decrease) in cash		(91	)		91
Cash at beginning of period		91			--
Cash at end of period	$	--		$	91

SUPPLEMENTAL STATEMENT OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Transfer of subsidiaries into equity	$	--		$	1,307,214

The notes to the condensed financial statements are an integral part of these statements.

ECOSYSTEM CORPORATION

NOTES TO FINANCIAL STATEMENTS

NOTE 1 BASIS OF PRESENTATION

THE COMPANY

At December 2007, we liquidated our manufacturing operation and executed a technology commercialization and license agreement with GreenShift Corporation, which company is majority owned by our majority shareholder, Viridis Capital, LLC, pursuant to which GreenShift has agreed to provide commercialization support services and access to GreenShift’s portfolio of clean technologies for applications not involving the production of renewable fuels. EcoSystem will pay GreenShift a royalty equal to 10% of the pre-tax net income generated by EcoSystem through use of GreenShift technology, and EcoSystem has agreed to sell all MAGFUEL™ and other qualified renewable fuel precursors produced by EcoSystem on an exclusive basis to GreenShift, unless waived by GreenShift.

NOTE 2 GOING CONCERN

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company incurred a loss in continuing operations of $805,652 during the year ended December 31, 2008, and had an accumulated deficit and negative cash flow from continuing operations. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans include raising additional proceeds from debt and equity transactions and completing strategic acquisitions.

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

REVENUE RECOGNITION

The Company follows the percentage-of-completion method of accounting for contracts for which the outcomes can be reliably estimated. Costs include all direct material and labor costs, and indirect costs, such as supplies, tools, repairs and depreciation. Revenue on such contracts is determined by reference to stage of completion. Revenue on long-term contracts is for which the outcomes cannot be estimated reliably at the outset is recognized to the extent that costs incurred are deemed recoverable.

ACCOUNTS RECEIVABLE

Accounts receivable are customer obligations due under normal trade terms requiring payment within 30 days from the invoice date. No interest is charged on any past due accounts. The carrying amount of accounts receivable is reduced by a valuation allowance that reflects management’s best estimate of the amount that will not be collected. Management reviews balances that are 90 days from the invoice date and based on assessment of current creditworthiness, estimates the portion, if any, of the balance that will not be collected.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost, less accumulated depreciation. For financial reporting purposes, the costs of plant and equipment are depreciated over the estimated useful lives of the assets, which range from three to five years for equipment, and 40 years for real estate, using the straight-line method.

INCOME TAXES

The Company accounts for income taxes under the provisions of Statement of Financial Accounting Standards (SFAS) No. 109, “Accounting for Income Taxes”. SFAS No. 109 uses the asset and liability method so that deferred taxes are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities given the provisions of enacted tax laws and tax rates. Deferred income tax expense or benefit is based on the changes in the financial statement basis versus the tax bases in the Company’s assets or liabilities from period to period.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

CONCENTRATIONS OF CREDIT RISK

Financial instruments, which potentially subject the Company to a concentration of credit risk, consist of cash and cash equivalents. The Company places its cash and cash equivalents with various high quality financial institutions; these deposits may exceed federally insured limits at various times throughout the year. The Company provides credit in the normal course of business. The Company performs ongoing credit evaluations of its customers and maintains allowances for doubtful accounts based on factors surrounding the credit risk of specific customers, historical trends, and other information.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts reported in the balance sheet as of December 31, 2008 for cash equivalents and accounts payable approximate fair value because of the immediate or short-term maturity of these financial instruments. The fair value of notes payable and long-term debt approximates their carrying value as the stated or discounted rates of the debt reflect recent market conditions.

LIMITATIONS

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial statement. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

CASH AND CASH EQUIVALENTS

For purposes of balance sheet classification and the statements of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

EARNINGS (LOSS) PER SHARE

Earnings (Loss) per common share represents the amount of earnings (loss) for the period available to each share of common stock outstanding during the reporting period. Diluted earnings (loss) per share reflects the amount of earnings (loss) for the period available to each share of common stock outstanding during the reporting period, while giving effect to all dilutive potential common shares that were outstanding during the period, such as common shares that could result from the potential exercise or conversion of securities into common stock. The computation of diluted earnings (loss) per share does not assume conversion, exercise, or contingent issuance of securities that would have an anti-dilutive effect on earnings (loss) per share. Potential future dilutive securities include approximately 275,000 shares issuable under outstanding options as of December 31, 2008.

STOCK BASED COMPENSATION

The Company accounts for stock based compensation in accordance with SFAS 123R, “Accounting for Stock-Based Compensation”, under the fair value recognition provisions of SFAS 123R, stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the vesting period.

As required by Statement No. 123R the Company accounts for stock issued for services to non-employees by reference to the fair market value of the Company's stock on the date of issuance as it is the more readily determinable value.

DEFERRED FINANCING CHARGES AND DEBT DISCOUNTS

Deferred finance costs represent costs which may include direct costs paid to our warrants issued to third parties in order to obtain long-term financing and have been reflected as other assets. Costs incurred with parties who are providing the actual long-term financing, which generally include the value of warrants, or the intrinsic value of beneficial conversion features associated with the underlying debt, are reflected as a debt discount. These costs and discounts are generally amortized over the life of the related debt. These costs were fully amortized in 2007.

During the year ended December 31, 2008, due to a change in the terms of the MIF convertible debenture, the Company recorded a note discount in the amount of $432,932 in order to record the beneficial conversion feature in relation to the debenture.

NOTE 4 STOCKHOLDERS’ EQUITY

COMMON STOCK

During the second quarter of 2008 the Company issued 10,000,000 shares of common stock at $0.05 per share, the closing price on the grant date, for a total of $500,000 relating to stock based compensation. During the third quarter of 2008 the Company issued 6,000,000 shares to the Company’s chief executive officer for services rendered. The Company also issued 2,000,000 shares for consulting services rendered pertaining to the Company’s development stage activities. These shares were issued at $0.003, the closing price on the grant date. During the fourth quarter of 2008 the Company issued 73,211,326 shares for consulting services rendered pertaining to the Company’s development stage activities. These shares were issued at $0.003, the closing price on the grant date for a total of $707,028 relating to stock based compensation.

SERIES D PREFERRED STOCK

Shares of the Series D Preferred Stock (the “Series D Shares”) may be converted by the holder into Company common stock. The conversion ratio is such that the full 1,000,000 Series D Shares originally issued convert into Company common shares representing 80% of the fully diluted outstanding common shares outstanding after the conversion (which includes all common shares outstanding plus all common shares potentially issuable upon the conversion of all derivative securities not held by the holder). The holder of Series D Shares may cast the number of votes at a shareholders meeting or by written consent that equals the number of common shares into which the Series D Shares are convertible on the record date for the shareholder action. In the event the Board of Directors declares a dividend payable to Company common shareholders, the holders of Series D Shares will receive the dividend that would be payable if the Series D Shares were converted into Company common shares prior to the dividend. In the event of a liquidation of the Company, the holders of Series D Shares will receive a preferential distribution of $0.001 per share, and will share in the distribution as if the Series D Shares had been converted into common shares.

During the year ended December 31, 2008, the remaining shares of Series D Preferred Stock were converted into 400,000,000 shares of common stock.

NOTE 5 DISCONTINUED OPERATIONS

As of December 31, 2007, EcoSystem’s holdings in GS Design Services, Inc. and GS Rentals, LLC were transferred to GreenShift at cost GS Design and GS Rentals were previously consolidated with EcoSystem. The operating results for 2007 for GS Design and GS Rentals are reflected in the Statement of Operations as Discontinued Operations.

The components of discontinued operations for the years ended December 31, 2008 and 2007are as follows:

	2008		2007
Net revenues	$	--	$	5,695,482
Cost of revenues		--		4,385,195
Gross profit		--		1,310,287

Selling, general and administrative expense		--		914,237
(Loss) income from operations		--		396,050
Other income and expenses, net		--		102,720
Total other income and expense		--		102,720
(Loss) income before provision for income taxes		--		293,330
Total provision for tax		--		--
Net income (loss) from discontinued operations		--		293,330
Gain (loss) on disposal of discontinued operations		--		--
Total income (loss) – discontinued operations	$	--	$	293,330

NOTE 6 RELATED PARTY TRANSACTIONS

As of December 31, 2008 the Company had a convertible debenture payable to Minority Interest Fund (II), LLC (“MIF”) in the amount of $432,932. This debenture was originally issued to GreenShift Corporation and was subsequently acquired by MIF during the year ended December 31, 2008. The debenture payable to MIF shall bear interest at a rate of 10% per year and matures December 31, 2010. MIF is entitled to convert the accrued interest and principal of the debenture into common stock of the Company at a conversion price of $0.0001 per share. The managing member of MIF is a relative of Kevin Kreisler, the Company’s chairman.

On January 25, 2008, a financing was completed that resulted in EcoSystem becoming the guarantor of the debts of several of its affiliates. The beneficiary of the guarantees was YA Global Investments, LP (“YAGI”), which committed to extend credit to those affiliates. EcoSystem issued the guarantees because it expects to be the beneficiary of the projects being funded through that credit. As of December 31, 2008, the outstanding principal and accrued interest of the debt was $44,758,833

NOTE 7 CONVERTIBLE DEBENTURE

During the year ended December 31, 2008, Minority Interest Fund (II), LLC (“MIF”) purchased the debenture payable to GreenShift Corporation. The convertible debentures to MIF shall bear interest at a rate of 20% per year and mature on December 31, 2010. MIF is entitled to convert the accrued interest and principal of the debenture into common stock of the Company at a conversion price of $0.0001 per share. For the year ending December 31, 2008, interest expense of $6,405 for these obligations was incurred. The principal balance of these notes at December 31, 2008 was $432,932. The conversion price represented a beneficial conversion feature at the commitment date which was valued at the intrinsic value of $432,932 and recorded as a debt discount.

NOTE 8 STOCK BASED COMPENSATION

During the second quarter of 2008 the Company issued 10,000,000 shares of common stock at $0.05 per share, the closing price on the grant date, for a total of $500,000 relating to stock based compensation. During the third quarter of 2008 the Company issued 6,000,000 shares to the Company’s chief executive officer for services rendered. The Company also issued 2,000,000 shares for consulting services rendered pertaining to the Company’s development stage activities. These shares were issued at $0.003, the closing price on the grant date. During the fourth quarter of 2008 the Company issued 73,211,326 shares for consulting services rendered pertaining to the Company’s development stage activities at $0.003, the closing price on the grant date. A total of $707,028 was issued as stock based compensation.

NOTE 9 INCOME TAXES

EcoSystem Corporation has incurred losses, which have generated net operating loss carry forwards for EcoSystem Corporation as of December 31, 2008. These loss carry forwards are subject to limitation in future years should certain ownership changes occur. For the years ended December 31, 2008 and 2006, EcoSystem Corporation’s effective tax rate differs from the federal statutory rate principally due to net operating losses and other temporary differences for which no benefit was recorded. The provision for income taxes for the years ended December 31, 2007 and 2006 consisted of state income tax provisions. Deferred tax assets are as follows:

	12/31/2008			12/31/2007
Deferred Tax Asset:
Total deferred tax assets		1,130,000			1,130,000
Less: Valuation allowance		(1,130,000	)		(1,130,000	)
Net deferred tax asset	$	--		$	--

EcoSystem Corporation has federal net operating loss carry-forwards of approximately $3,300,000 which expire through December 31, 2026.

NOTE 10 OPTIONS AND WARRANTS

The following is a table of stock options and warrants outstanding as of December 31, 2008 and December 31, 2007. The number of shares and price has been adjusted to reflect the 500-1 reverse stock split which occurred on February 11, 2007.

	Number of Shares			Weighted Average Exercise Price
Outstanding at December 31, 2007		475,000		$	0.46
Issued		--		$	--
Exercised		(200,000	)	$	--
Cancelled		--		$	--
Outstanding at December 31, 2008		275,000		$	0.46

Summarized information about EcoSystem Corporation’s stock options outstanding at December 31, 2008 is as follows:

Exercise Prices	Number of Options Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price	Exercisable
Exercise Prices	Number of Options Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price	Number of Options	Weighted Average Exercise Price
$0.25	75,000	7	0.25	75,000	0.25
$0.75	200,000	7	0.75	200,000	0.75
	275,000			275,000

Options exercisable at December 31, 2008 were 275,000, with a weighted average exercise price of $0.46 per share. The fair value of each option granted during 2006 is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

	2008
Dividend yield	--
Expected volatility	69%
Risk-free interest rate	2%
Expected life	10 yrs.

NOTE 11 COMMITMENTS AND CONTINGENCIES

NOTE 12 RESTATEMENTS

Ecosystem Corporation has amended the accompanying financial statements for the fiscal year ended December 31, 2008. The restatements are necessary (1) as a result of the change in how the conversion feature of the convertible debenture was reported as of December 31, 2008, (2) in order to clarify some of its disclosures and (3) to record additional executive compensation of $18,334 previously omitted. The conversion feature of the convertible debenture was originally recorded as a derivative in the amount of $432,932 when it should have been recorded as a beneficial conversion feature in the amount of $432,932 with a corresponding increase to additional paid in capital. These restatements had no effect on total assets.

The following shows the effect of the restatements on the financial statements:

	12/31/08			12/31/08
Balance Sheets:	As reported			As restated

Accounts payable and accrued expenses	$	134,183		$	152,517
Additional paid in capital		6,141,187			6,574,119
Accumulated deficit		(7,211,914	)		(7,230,248	)

	12/31/08			12/31/08
Statements of Operations:	As reported			As restated

Selling, general and administrative expenses	$	43,426		$	61,759
Loss before provision for income taxes		(782,523	)		(800,856	)
Net income (loss)		(787,318	)		(805,652	)

Earnings (loss) per share:
Continuing operations	$	(0.01	)	$	(0.02	)


	12/31/08			12/31/08
Statements of Stockholders’ Equity:	As reported			As restated

Net income		(787,318	)		(805,652	)

	12/31/08			12/31/08
Statements of Cash Flows:	As reported			As restated

Net loss	$	(787,318	)	$	(805,652	)
Increase in accounts payable and accrued expenses		(49,909	)		(31,575	)

ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Our principal executive officer and principal financial officer participated in and supervised the evaluation of our disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed by us in the reports that we file is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that the information required to be disclosed by us in the reports that we file or submit under the Act is accumulated and communicated to our management, including our principal executive officer or officers and principal financial officer, to allow timely decisions regarding required disclosure. The Company’s chief executive officer and chief financial officer determined that, as of the end of the period covered by this report, the Company had a material weakness because it did not have a sufficient number of personnel with an appropriate level of knowledge and experience of generally accepted accounting principles in the United States of America (U.S. GAAP) that are commensurate with the Company’s financial reporting requirements. As a result, Management concluded that the Company’s disclosure controls and procedures were not effective at December 31, 2008.

There have been no changes in the Company’s internal control over financial reporting during the most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect, the company’s internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in rules 13a-15(f) and 15(f) under the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projection of any evaluation of effectiveness to future periods is subject to the risk that controls may become inadequate because of change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management has conducted, with the participation of the Chief Executive Officer and the Chief Financial Officer, an assessment, including testing of the effectiveness of our internal control over financial reporting. The assessment was conducted using the criteria in Internal Control—Integrated Framework issued by the committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. In connection with management’s assessment of the company’s internal control over financial reporting, management identified the following material weakness in the company’s internal control over financial reporting as of December 31, 2008. Management determined that at December 31, 2008, the company had a material weakness related to its control environment because it did not have a sufficient number of personnel with an appropriate level of U.S. GAAP knowledge and experience commensurate with its financial reporting requirements. Contributing to this lack of sufficient resources was the unanticipated voluntary turnover of key personnel late in the year. This material weakness resulted in the identification of adjustment during the financial statement close process that have been recorded in the financial statements. The Company’s plan to correct this deficiency is to obtain sufficient additional working capital resources to enable the Company to hire additional staff.

Because of the material weakness described above, management has concluded that the company did not maintain effective internal control over financial reporting as of December 31, 2008, based on the Internal Control—Integrated Framework issued by COSO.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

ITEM 9B OTHER INFORMATION

None.

PART III

ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Name	Age	Position
Glen Courtright	48	President and Chief Executive Officer
Jacqueline L. Flynn	43	Chief Financial Officer
Kevin Kreisler	36	Chairman

Mr. Courtright is the president and chief executive officer of EcoSystem Corporation since December 2008. Prior to joining EcoSystem, Mr. Courtright was President of CTS Corporation from 2007 to 2008, where he provided engineering and management services to the renewable energy, petroleum, telecommunications, and automotive industries. From 1997 to 2007, Mr. Courtright was Vice President at Science Applications International Corporation (SAIC) where he provided strategic leadership for technology development for Fortune 50 customers in the automotive, energy, and telecommunications. Mr. Courtright is a graduate of Southern Illinois University (B.S. Electronics Management, 1989). Mr. Courtright also has military experience as an officer in the United States Navy.

Ms. Flynn is the chief financial officer of EcoSystem Corporation since December 2008. Jacqueline Flynn has twenty years experience in financial accounting for both public and private companies. Ms. Flynn has been employed since 2006 as Controller of GreenShift Corporation, an affiliate of Carbonics Capital. From 2002 to 2005, Ms. Flynn was employed as Chief Financial Officer by Accent Mortgage Company of Alpharetta, Georgia. During the three years prior to 2002 Ms. Flynn was employed by Lahaina Acquisitions, Inc., a public company that owned Accent Mortgage Company during that period. She was employed by Lahaina Acquisitions first as Controller and then as Chief Financial Officer. Ms. Flynn was awarded an M.B.A. in 1994 by Brenau University.

Mr. Kreisler is the chairman and the majority shareholder of EcoSystem through his holding company, Viridis Capital, LLC. Mr. Kreisler is also the chairman and chief executive officer of GreenShift Corporation. Mr. Kreisler served as GreenShift’s vice president from 1998 to 2000, president from 2000 to 2002, chief executive officer from 2002 to 2005 and has served as GreenShift’s chairman from 2005 to the present. Mr. Kreisler is a graduate of Rutgers University College of Engineering (B.S., Civil and Environmental Engineering, 1994), Rutgers University Graduate School of Management (M.B.A., 1995), and Rutgers University School of Law (J.D., 1997). Mr. Kreisler was admitted to practice law in New Jersey and the United States District Court for the District of New Jersey.

NOMINATING, COMPENSATION AND AUDIT COMMITTEE

The Board of Directors does not have an audit committee, a compensation committee or a nominating committee due to the small size of the Board. The Board of Directors also does not have an audit committee financial expert, for the same reason.

CODE OF ETHICS

The Company does not have a written code of ethics applicable to its executive officers. The Board of Directors has not adopted a written code of ethics because there is only one member of management.

SHAREHOLDER COMMUNICATIONS

The Board of Directors will not adopt a procedure for shareholders to send communications to the Board of Directors until it has reviewed the merits of several alternative procedures.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

None of the officers, directors or beneficial owners of more than 10% of the Company’s common stock failed to file on a timely basis the reports required by Section 16(a) of the Exchange Act during the year ended December 31, 2008, except that none of the three members of management has filed a Form 3, and Mr. Kreisler failed to file a Form 4 when due.

ITEM 11 EXECUTIVE COMPENSATION

The following table sets forth compensation information for EcoSystem Corporation’s executive officers during the years indicated as relevant. As of December 31, 2008, no executive officer held shares of exercisable options for EcoSystem Corporation’s Common Stock.

	Name and Principal Position	Annual Compensation									Long-term Compensation	All Other Compensation
		Year	Salary		Bonus			Other			Securities Underlying Options Granted (shares)
Glen Courtright		2008	$	8,333	$	--	$		--	--		$	--
President and Chief Executive Officer		2007		--		--			--	--			--
Jackie Flynn		2008	$	10,000	$	--	$		--	--		$	--
Chief Financial Officer		2007		--		--			--	--			--

EMPLOYMENT AGREEMENTS

The Company has entered into an employment agreement with Glen Courtright which provides for an annual salary of $125,000, payable in stock and/or cash, periodic bonuses, four weeks’ vacation and participation in any employee plans made available to all Company employees. The agreement terminates in December, 2013. All other employees are at-will employees of the Company.

COMPENSATION OF DIRECTORS

Our directors are reimbursed for out-of-pocket expenses incurred on our behalf, but receive no additional compensation for service as directors.

ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information regarding the voting stock beneficially owned by any person who, to our knowledge, owned beneficially more than 5% of any class of voting stock as well as by the members of our Board of Directors and by all officers and directors as a group.

	Amount and Nature of Beneficial Ownership
Name and Address(1)			Series D		Percentage of
Of Beneficial Owner	Common	% of Class	Preferred	% of Class	Voting Power
Kevin Kreisler(2)	400,320,000	80.0%	--	--	80.00%
Glen Courtright	7,000,000	1.2%	--	--	1.2%

(1)	The address of each shareholder is One Penn Plaza, Suite 1612, New York, NY 10119.

(2)	All shares listed for Mr. Kreisler are owned of record by Viridis Capital, LLC, of which Mr. Kreisler is the sole member.

ITEM 13

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

As of December 31, 2008 the Company had a convertible debenture payable to Minority Interest Fund (II), LLC (“MIF”) in the amount of $432,932. This debenture was originally issued to GreenShift Corporation and was subsequently acquired by MIF during the year ended December 31, 2008. The debenture payable to MIF shall bear interest at a rate of 20% per year and matures December 31, 2010. MIF is entitled to convert the accrued interest and principal of the debenture into common stock of the Company at a conversion price of $0.0001 per share. The managing member of MIF is a relative of Kevin Kreisler, the Company’s chairman.

GreenShift Corporation is a related party. The Company’s subsidiary, EcoSystem Technologies, LLC is party to an early adopter license agreement with GS CleanTech Corporation, a subsidiary of GreenShift. In addition, the majority shareholder of the Company, Viridis Capital, LLC, is also the majority shareholder of GreenShift Corporation. Viridis is owned by the Company’s chairman and chief executive officer.

DIRECTOR INDEPENDENCE

None of the members of the Board of Directors is independent as “independent” is defined in the rules of the NASDAQ Stock Market.

PART IV

ITEM 14 PRINCIPAL ACCOUNTANT FEES AND SERVICES

INDEPENDENT AUDITOR FEES

Audit Fees

Rosenberg Rich Baker Berman & Company, P.A. billed $14,250 to the Company in 2008 and $57,040 in 2007 for professional services rendered for the audit of our 2008 financial statements.

Audit-Related Fees

Rosenberg Rich Baker Berman & Company, P.A. billed $0 to the Company in 2008 and $0 in 2007 for assurance and related services that are reasonably related to the performance of the 2005 audit or review of the quarterly financial statements.

Tax Fees

Rosenberg Rich Baker Berman & Company, P.A. billed $0 to the Company in 2008 and $0 in 2007 for professional services rendered for tax compliance, tax advice and tax planning.

All Other Fees

Rosenberg Rich Baker Berman & Company, P.A. billed $0 to the Company in 2008 and $0 in 2007 for services not described above.

It is the policy of the Company’s Board of Directors that all services other than audit, review or attest services, must be pre-approved by the Board of Directors. All of the services described above were approved by the Board of Directors.

ITEM 15 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Index to Exhibits

Exhibit Number Description

3.1	Certificate of Incorporation – filed as an exhibit to the Current Report on Form 8-K filed on July 15, 2005 and incorporated herein by reference.

3.1(a)

Certificate of Amendment of Certificate of Incorporation – filed as an Exhibit to the Current Report on Form 8-K filed on February 13, 2008, and incorporated herein by reference.

3.2	By-Laws – filed as an exhibit to the Current Report on Form 8-K filed on July 15, 2005 and incorporated herein by reference.

10.1	GS AgriFuels Guaranty agreement with Stillwater Asset-Backed Fund, LP – filed as an exhibit to the current report on form 8K filed on November 7, 2006 and incorporated herein by reference.

10.2	Credit Agreement dated January 11, 2008 between GS COES (Yorkville I), LLC and YA Global Investments, LP – filed as an Exhibit to the Current Report on Form 8-K filed on January 13, 2008, and incorporated herein by reference.

10.3

Global Guaranty Agreement dated January 11, 2008 among Viridis Capital LLC, Kevin Kreisler, Carbonics Capital Corporation, GreenShift Corporation, GS AgriFuels Corporation, each of their subsidiaries, and YA Global Investments, LP – filed as an Exhibit to the Current Report on Form 8-K filed on January 13, 2008, and incorporated herein by reference.

10.4

Unit Subscription Agreement dated July 24, 2009 among EcoSystem Corporation and Copperbottom Investments, Ltd., Absentia Holdings, Ltd., On Time Investments, Ltd., Agri-Technologies, Ltd., and Britannia Securities International, Ltd. filed on Form 8/A – filed April 9, 2010, and incorporated herein by reference.

10.5

Account Management Agreement dated July 24, 2009 among EcoSystem Corporation and Copperbottom Investments, Ltd., Absentia Holdings, Ltd., On Time Investments, Ltd., Agri-Technologies, Ltd., Britannia Securities International, Ltd., and Elco Securities, Ltd. filed on Form 8/A – filed April 9, 2010, and incorporated herein by reference.

10.6	Employment Agreement between EcoSystem Corporation and Glen Courtright.

31.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to the Sarbanes-Oxley Act of 2002.

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 on the date indicated.

ECOSYSTEM CORPORATION

By:	/S/ GLEN COURTRIGHT GLEN COURTRIGHT Chief Executive Officer
Date:	May 21, 2009

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

	/S/ JACQUELINE FLYNN JACQUELINE FLYNN Chief Financial Officer and Principal Accounting Officer
Date:	May 21, 2009

	/S/ KEVIN KREISLER KEVIN KREISLER Director
Date:	May 21, 2009

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