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EXCEL - IDEA: XBRL DOCUMENT - ENIGMA-BULWARK, LTDFinancial_Report.xls
EX-32.1 - ENIGMA-BULWARK, LTDexhibit321.htm
EX-31.2 - ENIGMA-BULWARK, LTDexhibit312.htm
EX-31.1 - ENIGMA-BULWARK, LTDexhibit311.htm
EX-32.2 - ENIGMA-BULWARK, LTDexhibit322.htm
EX-10.13 - ENIGMA-BULWARK, LTDexhibit1013.htm
EX-10.12 - ENIGMA-BULWARK, LTDexhibit1012.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 June 30, 2011

or

[ ] 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)

(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      [ ] 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).

[ ] YES      [ ] 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

[ ]

 

Accelerated filer

[ ]

Non-accelerated filer

[ ]

(Do not check if a smaller reporting company)

Smaller 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     [ 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.
[ ] YES     [ ] 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).
[ ] YES     [ ] 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.
24,482,824 common shares issued and outstanding as of August 10, 2011

 

 


 

 

 

PART 1 – FINANCIAL INFORMATION

Item 1. Financial Statements.

Our unaudited interim financial statements for the three and six month periods ended June 30, 2011 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.



3


 

 

 

ECOLOGIC TRANSPORTATION, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEETS



 

 

 

 

 

 

 

 

 

June 30, 2011

 

 

 

 

 

 

(Unaudited)

 

 

December 31, 2010

 

 

 

 

 

 

 

 

ASSETS  

 

Current Assets

 

 

 

 

 

 

     Cash

$

27,400 

 

$

 21,579

 

     Accounts receivable

 

22,423

 

 

8,607

 

     Prepaid expenses and other current assets

 

13,844

 

 

5,952

 

 

 

 

 

 

 

 

Total Current Assets

 

63,667

 

 

36,138

 

 

 

 

 

 

 

 

Other Assets

 

9,455

 

 

9,239

 

 

 

 

 

 

 

 

TOTAL ASSETS

$

73,122 

 

$

 45,377

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' (DEFICIT) 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

     Accounts payable and accrued expenses

$

641,812 

 

$

 466,128

 

     Related party payables

 

176,949

 

 

60,559

 

  Loans and notes payable

 

147,740

 

 

-

 

Total Current Liabilities

 

966,501

 

 

526,687

 

 

 

 

 

 

 

 

Related party loans

 

1,413,450

 

 

1,124,084

 

 

 

 

 

 

 

 

STOCKHOLDERS' (DEFICIT)

 

 

 

 

 

 

     Preferred stock, no par value, 10,000,000 shares authorized
        no shares issued or outstanding at June 30, 2011 and
        December 31, 2010, respectively

 



-

 

 



-

 

     Common stock, $0.001 par value, 75,000,000 shares
         authorized 24,482,824 shares and 23,812,824 shares

issued and outstanding at June 30, 2011 and December 31, 2010, respectively

 

24,483

 

 

23,813

 

     Additional paid in capital

 

2,583,357

 

 

2,147,328

 

     (Deficit) accumulated during the development stage

 

(4,914,669

)

 

(3,776,535

)

 

 

 

 

 

 

 

      Total Stockholders' (Deficit)

 

(2,306,829

)

 

(1,605,394

)

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT)

$

73,122

 

$

 45,377

 

 

4


 

 

 

Please see accompanying notes to financial statements

ECOLOGIC TRANSPORTATION, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 AND 2010,
AND FOR THE PERIOD DECEMBER 16, 2008 (INCEPTION) TO JUNE 30, 2011
(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inception

 

 

 

Three months ended

 

 

Six months ended

 

 

(December 16, 2008) to

 

 

 

June 30, 2011

 

 

June 30, 2010

 

 

June 30, 2011

 

 

June 30, 2010

 

 

June 30, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

103,144

 

$

 109,577

 

$

191,512 

 

$

189,299

 

$

612,799

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

106,374

 

 

92,641

 

 

188,907

 

 

173,130

 

 

601,152

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit (loss)

 

(3,230

)

 

16,936

 

 

2,605

 

 

16,169

 

 

11,647

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative expenses

 

678,716

 

 

721,653

 

 

1,078,848

 

 

1,369,117

 

 

4,852,920

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating (loss)

 

(675,486

)

 

(704,717

)

 

(1,076,243

)

 

(1,352,948

)

 

(4,841,273

)

Interest Expense

 

(39,912

)

 

(2,940

)

 

(61,919

)

 

(6,328

)

 

(73,525 

)

                               
                               

Interest income

 

13

 

 

24

 

 

28

 

 

48

 

 

129

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss)

$

(715,385 

)

$

 (707,633

)

$

(1,138,134

)

$

 (1,359,228

)

$

 (4,914,669

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - basic and diluted

 

24,126,935

 

 

22,807,329

 

 

24,126,935

 

 

22,735,476

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) per common share - basic and diluted

$

(0.02

)

$

 (0.03

)

$

(0.02 

)

$

(0.06

)

 

 

 

 

Please see accompanying notes to financial statements

 

5


 

 

ECOLOGIC TRANSPORTATION, INC.

 

(A DEVELOPMENT STAGE COMPANY)

 

STATEMENTS OF CASH FLOWS

 

FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND 2010,

 

AND THE PERIOD DECEMBER 16, 2008 (INCEPTION) TO JUNE 30, 2011

 

(Unaudited)

 

 

 

 

 

 

 

 

 

Inception

 

 

 

 

 

 

 

 

 

(December 16, 2008)

 

 

 

June 30, 2011

 

 

June 30, 2010

 

 

to June 30, 2011

 

 

Cash flow from operating activities:

 

 

 

 

 

 

 

 

 

 

   Net (loss)

$

(1,138,134

)

$

 (1,359,228

)

$

 (4,914,669)

)

 

Adjustments to reconcile net (loss) to net cash
       (used in) operating activities:

 

 

 

 

 

 

 

 

 

 

       Stock compensation/amortization of deferred compensation

 

436,699

 

 

778,107

 

 

2,110,429

 

 

Expenses converted to related party loans

 

199,000

 

 

-

 

 

668,500

 

 

Provision for uncollectible accounts

 

7,993

 

 

-

 

 

-

 

 

Depreciation

 

-

 

 

-

 

 

600

 

 

       Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

(Increase) in accounts receivable

 

(21,809

)

 

4,689

 

 

(22,423

)

 

(Increase) in other assets

 

(8,109

)

 

(262

)

 

(21,571

)

 

Increase in accounts & notes payable, accrued expenses, deferred compensation

 

237,603

 

 

(38,695

)

 

659,647

 

 

Increase in due to related parties

 

116,390

 

 

376,805

 

 

176,949

 

 

       Net cash (used in) operating activities

 

(170,366)

 

 

(238,584)

 

 

(1,342,538

)

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

Cash received in reverse merger less cash used for fixed assets

 

-

 

 

(600

)

 

9,848

 

 

       Net cash provided by (used in) investing activities

 

-

 

 

(600

)

 

9,848

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

               Net proceeds from related party loans

 

51,187

 

 

246,800

 

 

705,771

 

 

               Contributed capital

 

-

 

 

-

 

 

710

 

 

Proceeds from loans and notes payable

 

125,000

 

 

-

 

 

125,000

 

 

               Subscriptions received

 

-

 

 

-

 

 

6,049

 

 

               Issuance of capital stock for cash

 

-

 

 

-

 

 

522,560

 

 

       Net cash provided by financing activities

 

176,187

 

 

246,800

 

 

1,360,090

 

 

Increase in cash

 

5,821

 

 

7,616

 

 

27,400

 

 

Cash - beginning of period

 

21,579

 

 

26,166

 

 

-

 

 

Cash - end of period

$

27,400

 

 

33,782

 

 

27,400

 

 

Cash paid for:

 

 

 

 

 

 

 

 

 

 

       Interest

$

-

 

$

-

 

$

 -

 

 

       Income taxes

$

-

 

$

-

 

$

 -

 

 

Non cash investing and financing activities

 

 

 

 

 

 

 

 

 

 

       Recapitalization for reverse acquisition

$

 

$

-

 

$

 (31,908

)

 

Conversion of related party payable to note payable

$

199,000

 

$

-

 

$

668,500

 

 

       Subscription receivable

$

-

 

$

-

 

$

 6,049

 

 

                                     

6


 

 

Please see accompanying notes to financial statements

7


 

 

ECOLOGIC TRANSPORTATION, INC.

(A Development Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

June 30, 2011

(Unaudited)

NOTE 1. NATURE AND CONTINUANCE OF OPERATIONS

The accompanying unaudited financial statements of Ecologic Transportation, Inc. (formerly USR Technology, Inc.) 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 financial statements should be read in conjunction with the audited financial statements and footnotes included thereto for the year ended December 31, 2010, on Form 10K, as filed with the Securities and Exchange Commission.

The 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 preparation of financial statements in conformity with generally accepted accounting principles 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 date of the financial statements and that effect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The Company was incorporated in the State of Nevada on September 30, 2005. 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 there from.

These financial statements have been prepared on a going concern basis. The Company has incurred losses since inception resulting in an accumulated deficit of $4,914,669 since inception and further losses are anticipated in the development of its business raising substantial doubt about the Company’s ability to continue as a going concern.

8


 

 

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. (formerly, Ecologic Transportation, 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. (formerly, Ecologic Transportation, 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. (formerly, Ecologic Transportation, 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. Pursuant to the merger the Company plans to raise additional capital required to meet immediate short-term needs and to meet the balance of its estimated funding requirements for the twelve months, primarily through the private placement of its securities. 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. Upon closing of the transactions contemplated by 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. 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 in existence.

The Company’s fiscal year end is December 31.

 

9


 

 

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.

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 judgements 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.

Fair Value of Financial Instruments:  ASC 825, “Disclosures About Fair Value of Financial Instruments,” requires disclosure of fair value information about financial instruments. ASC 820, “Fair Value Measurements” (“ASC 820”) defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of June 30, 2011.

The respective carrying value of certain on-balance-sheet financial instruments approximate their fair values. These financial instruments include cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities. Fair values were assumed to approximate carrying values for these financial instruments since they are short term in nature and their carrying amounts approximate fair value, or they are receivable or payable on demand.

 

10


 

 

Recently Adopted Accounting Standards:  The Company evaluates the pronouncements of various authoritative accounting organizations, primarily the Financial Accounting Standards Board (“FASB”), the 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 adopted the following new accounting standards during the period ended June 30, 2011:

Fair Value Measurements: – Accounting Standards Update (“ASU”) No. 2010-06 amended existing disclosure requirements about fair value measurements by adding required disclosures about items transferring into and out of levels 1 and 2 in the fair value hierarchy; adding separate disclosures about purchase, sales, issuances, and settlements relative to level 3 measurements; and clarifying, among other things, the existing fair value disclosures about the level of disaggregation. The final provisions of ASU No. 2010-06 were adopted during the period ended June 30, 2011, and had no impact on the Company’s consolidated financial position, results of operations or cash flows.

ASU No. 2010-13 clarifies the classification of an employee share based payment award with an exercise price denominated in the currency of a market in which the underlying security trades. The Company adopted ASU No. 2010-13 during the period ended June 30, 2011 and its adoption had no impact on the Company’s consolidated financial position, results of operations or cash flows.

ASU No. 2010-29 requires a public entity to disclose pro forma information for business combinations that occurred in the current reporting period. The disclosures include pro forma revenue and earnings of the combined entity for the current reporting period as though the acquisition date for all business combinations that occurred during the year had been as of the beginning of the annual reporting period. This ASU is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010, with early adoption permitted.  The adoption of this ASU had no impact on the Company’s consolidated financial position, results of operations or cash flows.

Recently Issued Accounting Standards Updates:   

There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries. None of the updates are expected to a have a material impact on the Company's consolidated financial position, results of operations or cash flows.

 

11


 

 

NOTE 3. LOANS AND NOTES PAYABLE

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 if not then paid interest shall accrue at a rate of 25% per annum.  As at the date of this filing, the note remains outstanding and no demand has been made.  This note was inadvertently included and reflected on the Balance Sheet as at March 31, 2011 as a Related Party Note and has been properly reflected on the Balance Sheet at June 30, 2011 as a current liability in Loans and Notes Payable.

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 at the date of this filing, no demand has been made.

NOTE 4. RELATED PARTY LOANS

As at June 30, 2011, affiliates and related parties are due a total of $1,590,399 which is comprised of loans to the Company of $1,322,986, accrued interest of $90,464, accrued compensation of $165,000, and reimbursable expenses of $11,949. During the three months ended June 30, 2011, loans to the Company increased by $34,937, accrued interest increased by $18,439, and accrued compensation increased by $165,000.

The Company’s increase in Related Party Loans is comprised of an increase in already outstanding cash loans of $34,937 from Huntington Chase Financial Group, and accrued interest increase of $18,439. The increase in Related Party Payables is due to an increase in accrued compensation of $165,000 payable to Huntington Chase, Ltd., The Kasper Group, and R.I. Heller, all Related Party Creditors. All outstanding related party notes bear interest at the rate of seven percent (7%) per annum and are due and payable within one (1) year of receipt of written demand by the related party creditors.

Accrued interest at June 30, 2011 was $90,464.

NOTE 5. STOCKHOLDERS’ (DEFICIT)

The total number of authorized shares of common stock that may be issued by the Company is 75,000,000 with a par value of $0.001 per share.

The Board of Directors has approved an action to amend the Articles of Incorporation to provide for the issuance of 10 million shares of preferred stock with no par value.

The Company issued 620,000 restricted shares of common stock at par value for services provided from April 1, 2011 to September 30, 2011.  As a result, the Company recorded deferred compensation of $229,400, which will be amortized over service period. The Company recognized $114,700 of deferred compensation in the period ended June 30, 2011.

12


 

 

On May 9, 2011, the Company issued 50,000 of restricted shares of the Company’s common stock relating to the April 1, 2011 amendment to the Agreement for Executive Services with Kunin Business Consulting. The shares were valued at $14,500. 

The Company expensed $343,449 of deferred compensation during the three month period ended June 30, 2011.  There remains $1,108,426 of deferred compensation which will be expensed over the following thirteen months. 

As at June 30, 2011 the Company has 24,482,824 common shares issued and outstanding.

NOTE 6. WARRANTS AND OPTIONS

In conjunction with the reverse acquisition in July 2009, the Company assumed 90,250 warrants outstanding with an exercise price of $2.50. The warrants expire on September 30, 2011.

On April 19, 2011 the Board of Directors, under the Company’s 2009 Stock Option Plan, granted qualified stock options to its Chief Executive Officer and its Chairman of the Board (“Ten Percent Holders”) to purchase 1,750,000 shares of its common stock for five years at $0.32 per share, qualified stock options to five of its employees (“Employee Options”) to purchase 775,000 shares of its common stock for ten years at $0.32 and qualified stock options to four of its directors (“Directors Options”) to purchase 500,000 shares of its common stock for ten years at $0.32 for a total grant of 3,025,000 stock options . Of the total options granted, 1,000,000 were granted to our Chief Executive Officer which vest (i) up to 250,000 at any time after the first 90 days of grant; (ii) up to an additional 250,000 after the second 90 days of grant; (iii) up to an additional 250,000 after the third 90 days of grant; and (iv) up to an additional 250,000 after the fourth 90 days of grant. Of the total options granted, 750,000 were granted to our Chairman of the Board which vest (i) up to 187,500 at any time after the first 90 days of grant; (ii) up to an additional 187,500 after the second 90 days of grant; (iii) up to an additional 187,500 after the third 90 days of grant; and (iv) up to an additional 187,500 after the fourth 90 days of grant.  Of the total options granted, 775,000 were granted to five employees which vest (i) up to 193,750 at any time after the first 90 days of grant; (ii) up to an additional 193,750 after the second 90 days of grant; (iii) up to an additional 193,750 after the third 90 days of grant; and (iv) up to an additional 193,750 after the fourth 90 days of grant.  Of the total options granted, 450,000 were granted to three directors which vest up to 450,000 at any time after the date of grant and 50,000 were granted to one director which vests up to 50,000 at any time after the date of grant.  The value of the options for the Ten Percent Holders, using the Black-Scholes valuation method is $0.27 per share or $472,500.  The 775,000 Employee Options and 500,000 Directors Options were valued at $0.30 per share or $382,500. The Company used the following assumptions in valuing the options: expected volatility 1.2; expected term 5 years for the Ten Percent Holders and 10 years for the Employee Options and the Directors Options; expected dividend yield 0%, and risk-free interest rate of 1.97%.

13


 

 

As at June 30, 2011, the Company has 90,250 warrants and 5,747,547 options issued and outstanding.

Outstanding and Exercisable Warrants

 

 

 

 

 

Remaining

 

 

Exercise Price

 

 

Weighted

 

 

 

Number of

 

 

Contractual Life

 

 

times Number

 

 

Average

 

Exercise Price

 

Shares

 

 

(in years)

 

 

of Shares

 

 

Exercise Price

 

$2.50

 

90,250

 

 

.25

 

$

 225,625

 

$

 2.50

 

 

 

90,250

 

 

 

 

$

 225,625

 

$

 2.50

 

 

 

 

Number

 

 

Weighted

 

 

 

of

 

 

Average

 

Warrants

 

Shares

 

 

Exercise

 

 

 

 

 

 

Price

 

 

 

 

 

 

 

 

Outstanding at December 31, 2010

 

90,250

 

$

 2.50

 

Issued

 

-

 

 

-

-

Exercised

 

-

 

 

-

 

Expired / Cancelled

 

-

 

 

-

 

Outstanding at June 30, 2011

 

90,250

 

$

 2.50

 



 

 

Outstanding and Exercisable Options

 

 

 

 

 

 

 

 

 

Remaining

 

 

Exercise Price

 

 

Weighted

 

 

 

Number of

 

 

Contractual Life

 

 

times Number

 

 

Average

 

Exercise Price

 

Shares

 

 

(in years)

 

 

of Shares

 

 

Exercise Price

 

$0.25

 

2,287,547

 

 

3.25

 

$

 571,887

 

$

 0.25

 

$0.473

 

435,000

 

 

4.00

 

 

205,755

 

 

0.47

 

$0.32

 

1,750,000

 

 

4.75

 

 

560,000

 

 

0.32

 

$0.32

 

1,275,000

 

 

9.75

 

 

408,000

 

 

0.32

 

 

 

5,747,547

 

 

 

 

$

1,745,642

 

$

0.30

 

 

 

 

Number

 

 

Weighted

 

 

 

of

 

 

Average

 

Options

 

Shares

 

 

Exercise

 

 

 

 

 

 

Price

 

 

 

 

 

 

 

 

Outstanding at December 31, 2010

 

2,722,547

 

$

 0.28

 

Issued

 

3,025,000

 

 

0.32

 

Exercised

 

-

 

 

-

 

Expired / Cancelled

 

-

 

 

-

 

Outstanding at June 30, 2011

 

5,747,547

 

$

0.30

 

14


 

 

NOTE 7. COMMITMENTS AND CONTINGENCIES

The Company has an employment agreement with William N. Plamondon III, Chief Executive Officer. The employment agreement calls for Mr. Plamondon to be paid $35,000 per month for a period of three years. The employment agreement provides for standard health benefits.

Huntington Chase, Ltd., a Nevada corporation wherein Edward W. Withrow, III, Ecologic Transportation’s Chairman owns a majority control, signed a consulting agreement with the Company on October 12, 2009. The consulting agreement provides for Huntington Chase, Ltd. to perform certain advisory functions to the Company. The consulting agreement provides that Huntington Chase, Ltd. be paid $15,000 per month for a period of three years.

The Company has an employment agreement with Richard Keppler on July 9, 2009 to create, produce and perform an online radio show entitled Ecologic Radio. The employment agreement has a term of two years and calls for Mr. Keppler to be paid $3,000 per month for the initial six months and then reverts to $5,000 per month for the remaining 18 months The employment agreement also provides for Mr. Keppler to receive, as additional compensation, 100,000 shares of the Company’s common stock; 25,000 shares at signing and 12,500 shares per quarter until the end of his two year agreement. Pursuant to his employment agreement, As of June 30, 2011, Mr. Keppler has been issued 100,000 shares. Mr. Keppler is currently employed by the Company and the Company issued Mr. Keppler the shares pursuant to his employment agreement.

The Company signed an Investment Banking and Financial Advisory Agreement (“the Innovator Agreement”) with Innovator Capital of London England (“Innovator”) dated January 9, 2010. The Agreement provides for Innovator to perform the following services; strategic business consulting, capital raising activities, strategic partnership in both the private and public sector, merger and acquisition advisory and corporate communications strategy. The economics of the agreement are as follows; an engagement fee of 15,625 pound sterling (USD$23,437) was to be paid upon signing. The Company negotiated to pay 7,812.50 pound sterling (USD$12,481) upon signing and the remaining 7,812.50 pounds sterling after the Company raises a minimum of $1,000,000. The agreement provides for a monthly retainer fee of 15,625 pounds sterling (USD $23,437) which will accrue on a daily basis payable monthly in arrears; such fee will be deferred and will commence, with arrears also being payable, immediately upon the receipt by Ecologic of a minimum aggregate $2,000,000. Innovator receives a 5% fee of all monies raised for the Company. As at June 30, 2011, the Company and Innovator are in dispute with respect to the Innovator Agreement, however it is management’s belief that the outcome will not adversely affect the Company.

15


 

 

Matrix Advisors, LLC a New York Limited Liability Company (“Matrix”) signed a consulting agreement with the Company dated effective October 1, 2009. The consulting agreement provides for Matrix Advisors to deliver advisory services to the Company for a period of three years for a fee of $10,000 per month and options to purchase 2,287,547 shares exercisable at $0.25 per share for a term of three years from September 1, 2009. The vesting period for the options ended on September 1, 2010. On November 24, 2010, Matrix waived its right of first refusal to participate in the financing transaction contemplated in the engagement letter between BMO Capital Markets Corp and the Company.

On May 18, 2010 the Company entered into an Independent Consulting Agreement (“Consulting Agreement”) with Prominence Capital, LLC (“Prominence”) to represent the Company in investor communications and public relations for a term of two (2) years commencing May 18, 2010. As remuneration for the services of Prominence, the Company issued to Prominence 1,000,000 restricted common shares of the Company valued at $0.45 for a per share which was the stock price on May 18, 2010, the date of issuance. The Company recorded $28,125 as operating expense for the period May 18, 2010 to June 30, 2010 and deferred compensation of $421,875 which will be amortized through May 18, 2012. The Company has a deferred compensation balance of $196,875 at June 30, 2011.

On July 1, 2010 the Company entered into an Advisory Agreement for Executive Services of Norman A. Kunin with Kunin Business Consulting (“KBC”), a division of Ace Investors, LLC (the “Advisory Agreement”.) The Advisory Agreement is for the non-exclusive services of Norman A. Kunin (the “Executive”) to serve as Chief Financial Officer of the Company. The term of the engagement is for one year commencing on July 1, 2010, with a one year option to continue upon mutually agreeable terms. Executive fee compensation is at the rate of $5,000 per month, payment of which is deferred until the Company is capitalized with a minimum of $1,000,000, but will continue to accrue on a monthly basis. The Company will reimburse KBC for services already rendered in the one-time amount of $25,000, which has been recorded as a fee payable as of June 30, 2011.

On April 1, 2011, the Company amended the Agreement for Executive Services dated July 1, 2010 with Kunin Business Consulting, a division of Ace Investors, LLC (the “Amendment”).  The Amendment (i) increased the monthly Executive Fee from $5,000 to $7,500 effective October 1, 2010; (ii) defined payment terms of executive fee deferment; (iii) added an additional one-time deferred payment of $10,000; and (iv) provided for the issuance, not later than May 1, 2011, of 50,000 restricted shares of the Company’s common stock (“Kunin Shares”) the Kunin shares were issued on May 9, 2011.  The Amendment also stipulates that KBC shall be paid accrued fees up to a maximum of 5% of the net amount of debt or equity capital received by the Company after payment of Placement Agent Fees.

16


 

 

On April 1, 2011 the Company entered into an independent consulting agreement (“the Oracle Agreement”) with Oracle Capital Partners, LLC (“Oracle”) wherein Oracle was engaged to represent the Company in investors’ communications and public relations from the date of issuance of the Remuneration Shares until September 30, 2011.  Remuneration for the services to be provided by Oracle was the issuance, on April 4, 2011, of Six Hundred Twenty Thousand (620,000) restricted shares of the Company’s common stock at par value (the “Remuneration Shares”).  The Remuneration Shares were recorded on the books and records of the Company at a value of $229,400 ($0.37 per share on the date of the Oracle Agreement) and will be amortized ratably over the period April 1, 2011 to September 30, 2011. 

On April 12, 2011 the Company entered into a non-exclusive Placement Agent Agreement with View Trade Securities, Inc. to act as the Company’s exclusive agent to sell up to $2,000,000 of the Company’s Senior Convertible Notes and paid View Trade a fee of $15,000.

NOTE 8. SUBSEQUENT EVENTS

On July 1, 2011 the Company gave thirty day notice to their landlord, effective August 1, 2011, that the Company would be vacating the space referred to as Suite F at 1327 Ocean Avenue, Santa Monica, California.  This segment of the overall space leased by the Company at that address was rarely utilized and will reduce the Company’s overall rental expense by $2,200 per month commencing August 1, 2011. The Company continues to lease other office space at the same address.

During the period July1, 2011 to July 31, 2011 the Company increased its loans from related parties by $70,630, from a total of $1,590,399 at June 30, 2011 to $1,661,029 at July 31, 2011. The increase represents cash loans to the Company in the amount of $13,130 and accrued compensation owed to related parties in the amount of $57,500.  The loans bear interest at the rate of 7% per annum, are unsecured and are payable within one year upon demand.

Effective August 9, 2011, Shelly J. Meyers resigned from the Audit Committee and the Board of Directors of the Company. John L. Ogden has replaced Ms. Meyers as Chairman of the Audit Committee.

Effective August 16, 2011, Norman A. Kunin will resign his position as Chief Financial Officer of the Company due to health reasons. Calli Bucci, Controller of the Company since January, 2010, has been appointed interim Chief Financial Officer. Mr. Kunin will enter into a consulting agreement to provide financial services and advice to the Company including support to Ms. Bucci. The terms of the Agreement are currently being negotiated.

17


 

 

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 our 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, including the risks in the section entitled "Risk Factors", that may cause our or our 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 we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our 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 our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our 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, particularly in the section entitled "Risk Factors".

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 in our 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 unless otherwise indicated, our subsidiaries.

Corporate History

We were incorporated in the State of Nevada on September 30, 2005 under the name Heritage Explorations Inc. On June 20, 2008, we merged with our wholly owned subsidiary and changed our name to USR Technology, Inc. and on June 26, 2008 and our shares began trading under the symbol “USRT”. We were engaged primarily in the provision of drilling services internationally.

18


 

 

On July 2, 2009, USR's wholly owned subsidiary Ecological Acquisition Corp. was merged into Ecologic Sciences, Inc. (formerly, Ecologic Transportation, Inc.) with Ecologic Sciences, Inc. being the sole surviving entity under the name “Ecologic Sciences, Inc.” and our company being the sole shareholder of the surviving entity. In connection with the closing of the merger, we issued an aggregate of 17,309,486 restricted shares of our common stock representing approximately 75.85% of the issued and outstanding shares of our company to the former shareholders of Ecologic Sciences, Inc.

Following the completion of the acquisition of Ecologic Sciences, Inc., we are a development stage company that plans to be engaged in the rental of environmentally friendly hybrid, electric and low-emission vehicles to the public.

Pursuant to the terms of the Agreement and Plan of Merger, as amended:

  • effective June 11 2009, we effected a 2 old for 1 new reverse stock split of our issued and outstanding common stock. As a result, our authorized capital decreased from 150,000,000 shares of common stock with a par value of $0.001 to 75,000,000 shares of common stock with a par value of $0.001 and our issued and outstanding shares decreased from 15,020,017 shares of common stock to 7,510,000 shares of common stock;
  • effective June 11, 2009, we changed our name from “USR Technology, Inc.” to “Ecologic Transportation, Inc.”, by way of a merger with our wholly owned subsidiary Ecologic Transportation, Inc., which was formed solely for the change of name. The name change and forward stock split became effective with the Over-the-Counter Bulletin Board at the opening of trading on June 11, 2009 under the new stock symbol “EGCT”. Our CUSIP number was changed to 27888B 105;

·         certain of our pre-closing stockholders canceled 2,000,002 pre-consolidated shares of our common stock for no consideration for the purpose of making our capitalization more attractive to future equity investors; and

·         certain affiliates of our company cancelled an aggregate of $108,500 of debt at no consideration.

On July 2, 2009 and in connection with the closing of the agreement and plan of merger, there was a change in control of our company that resulted from the issuance of 17,559,486 shares of our common stock to the former shareholders of Ecologic Sciences, Inc.

The issuance of the 17,559,486 common shares to the former shareholders of Ecologic Sciences, Inc. was deemed to be a reverse acquisition for accounting purposes. Ecologic Sciences, Inc., the acquired entity, is regarded as the predecessor entity as of July 2, 2009. Starting with the periodic report for the quarter in which the acquisition was consummated, our company will file annual and quarterly reports based on the December 31st fiscal year end of Ecologic Sciences, Inc. Such financial statements will depict the operating results of Ecologic Sciences, Inc., including the acquisition of our company, from July 2, 2009.

19


 

 

On September 24, 2009, we, through our wholly owned subsidiary Ecologic Products, Inc., entered into a service agreement with Park N Fly Inc., a national off-airport parking company. Pursuant to the terms of the service agreement, we have agreed to provide car wash cleaning services using our 100% organic cleaning products, known as Ecologic Shine TM , for a period of three years at certain of Park N Fly Inc.’s locations. We have opened and commenced operations at the following locations: 1. Atlanta, Georgia (October, 2009), 2. San Diego, California (November, 2009), 3. Los Angeles, California (December, 2009), and 4. Houston, Texas, during this most recent quarterly period.

On April 1, 2011 we entered into an independent consulting agreement with Oracle Capital Partners, LLC wherein Oracle was engaged to represent our company in investors’ communications and public relations from the date of issuance of the remuneration shares until September 30, 2011.  Remuneration for the services to be provided by Oracle was the issuance, on April 4, 2011, of 620,000 restricted shares of our company’s common stock at par value.  The shares were recorded on the books and records of our company at a value of $229,400 ($0.37 per share on the date of the Oracle Agreement) and will be amortized ratably over the period April 1, 2011 to September 30, 2011

On April 1, 2011, we amended the advisory agreement for executive services dated July 1, 2010 with Kunin Business Consulting, a division of Ace Investors, LLC.  The amendment (i) increased the monthly executive fee from $5,000 to $7,500 effective October 1, 2010; (ii) defined payment terms of executive fee deferment; (iii) added an additional one-time deferred payment of $10,000; and (iv) provided for the issuance, not later than May 1, 2011, of 50,000 restricted shares of our company’s common stock (“Kunin Shares”) the Kunin shares were issued on May 9, 2011. 

Effective August 16, 2011, Kunin Business Consulting will terminate its advisory agreement and subsequent first amendment for executive services of Norman A. Kunin.  This termination was in consideration of the condition of Mr. Kunin’s health. Mr. Kunin will enter into a consulting agreement to provide financial services and advice to the Company. The terms of the Agreement are currently being negotiated.

On April 12, 2011 we entered into a non-exclusive placement agent agreement with View Trade Securities, Inc. to act as our company’s exclusive agent to sell up to $2,000,000 of our company’s senior convertible notes and paid View Trade a fee of $15,000.

20


 

 

Overview

We are a development stage company in the business of environmental transportation. We are structured with three operating units. Our primary operation is the car rental division which will focus on an environmental car rental operation.

We have two subsidiaries in addition to Ecologic Car Rentals Inc.:

1.

Ecologic Products, Inc., a Nevada Corporation

 

 

2.

Ecologic Systems, Inc., a Nevada Corporation

These subsidiaries were created to provide an infrastructure and support for Ecologic Car Rentals. Our car rental business and our systems business intends to provide distribution channels for certain environmental products and both generate certain internal product requirements in order to allow us to be “green” throughout our operation. Initially our business plan calls for the products to be focused on transportation and its ancillary markets.

Results of Operations

Three and six months ended June 30, 2011 compared to three and six months ended June 30, 2010

The following summary of our results of operations should be read in conjunction with our financial statements for the quarter ended June 30, 2011 which are included herein.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inception

 

 

 

Three months ended

 

 

Six months ended

 

 

(December 16, 2008) to

 

 

 

June 30, 2011

 

 

June 30, 2010

 

 

June 30, 2011

 

 

June 30, 2010

 

 

June 30, 2011

 

Revenue

$

103,144

 

$

 109,577

 

$

191,512 

 

$

189,299

 

$

612,799

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

$

106,374

 

$

92,641

 

$

188,907

 

$

173,130

 

$

601,152

 

General and administrative expenses

678,716

 

$

721,653

 

$

1,078,848

 

$

1,369,117

 

$

4,852,920

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss)

$

(715,385 

)

$

 (707,633

)

$

(1,138,134

)

$

 (1,359,228

)

$

 (4,914,669

)  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

For the three month period ended June 30, 2011, revenue in the amount of $103,144 consisted of limited levels of car washing services in Atlanta, San Diego and Los Angeles, our initial cities of test market operations. For the three month period ended June 30, 2010, revenue in the amount of $109,577 consisted of limited levels of car washing services beginning in October 2009 in Atlanta, San Diego and Los Angeles, our initial cities of test market operations.

21


 

 

For the six month period ended June 30, 2011, revenue in the amount of $191,512 consisted of limited levels of car washing services in Atlanta, San Diego and Los Angeles, our initial cities of test market operations For the six month period ended June 30, 2010, revenue in the amount of $189,299 consisted of limited levels of car washing services beginning in October 2009 in Atlanta, San Diego and Los Angeles, our initial cities of test market operations.

As a development stage company, we have not yet launched our major business activity, which is car rental.

Cost of sales

For the three month period ended June 30, 2011, cost of sales in the amount of $106,374 consisted of cleaning supplies and payroll, including related payroll taxes and workers compensation insurance. For the three month period ended June 30, 2010, cost of sales in the amount of $92,641 consisted of cleaning supplies and payroll, including related payroll taxes and workers compensation insurance. An audit of the workers compensation insurance resulted accordingly, in a reduction of the deposit premium and reduced cost of sales for the prior period. The decrease in revenue resulted in a gross loss in the current period of ($3,230) compared to a gross profit of $16,936 for the same period last year.

For the six month period ended June 30, 2011, cost of sales in the amount of $188,907 consisted of cleaning supplies and payroll, including related payroll taxes and workers compensation insurance. For the six month period ended June 30, 2010, cost of sales in the amount of $173,130 consisted of cleaning supplies and payroll, including related payroll taxes and workers compensation insurance. An audit of the workers compensation insurance resulted accordingly, in a reduction of the deposit premium and reduced cost of sales for the prior period. The decrease in revenue resulted in a gross profit in the current period of $2,605 compared to a gross profit of $16,169 for the same period last year.

General and Administrative Expenses

Operating expenses for the three months ended June 30, 2011, were comprised of $217,871 of consulting, $343,449 of amortization of stock compensation, $57,309 of legal and accounting fees and $60,087 of office, overhead and other general and administrative expenses.

Operating expenses for the three months ended June 30, 2010, were comprised of $272,850 of consulting, $343,266 of amortization of stock compensation, $18,453 of legal and accounting fees and $87,084 of office, overhead and other general and administrative expenses.

22


 

 

Decreases in general and administrative expenses for the three months ended June 30, 2011 as compared to 2010 were significantly attributable to a decrease in consulting fees of $54,979, an increase in legal and accounting fees of $38,856, and a decrease in office, overhead and other general and administrative expenses of $26,814.

Operating expenses for the six months ended June 30, 2011, were comprised of $409,383 of consulting, $422,199 of amortization of stock compensation, $114,747 of legal and accounting fees and $132,519 of office, overhead and other general and administrative expenses.

Operating expenses for the six months ended June 30, 2010, were comprised of $526,563 of consulting, $686,532 of amortization of stock compensation, $41,339 of legal and accounting fees and $114,683 of office, overhead and other general and administrative expenses.

Decreases in general and administrative expenses for the six months ended June 30, 2011 as compared to 2010 were significantly attributable to a decrease in consulting fees of $117,180, a decrease in amortization of stock compensation of $264,333, an increase in legal and accounting fees of $73,408, and an increase in office, overhead and other general and administrative expenses of $17,836.

 

23


 

 

General and administrative expenses for the three month period ended June 30, 2011were $678,716 as compared to $721,653 for the three month period ended June 30, 2010 which resulted in a decrease in general and administrative expenses for the current period of $42,937. Decreases in general and administrative expenses in the year 2011 as compared to 2010 were significantly attributable to the following items:

General and Administrative Expenses

 

Three Months Ended

 

 

Three Months Ended

 

 

 

 

 

 

June 30,

2011

 

 

June 30,

2010

 

 

 

Variances

 

 

 

 

 

 

 

 

 

 

 

Accounting and Audit fees

$

57,129

 

$

9,122

 

$

48,007

 

 

 

 

 

 

 

 

 

 

 

Management consulting services

 

165,000

 

 

165,000

 

 

0

 

Amortization of stock options related to consulting services

 

193,449

 

 

371,391

 

 

(177,942)

 

 

 

 

 

 

 

 

 

 

 

Amortization of stock options to Directors

 

 

150,000

 

 

40,950

 

 

109,050

 

Other outside services

 

62,000

 

 

67,500

 

 

(5,500)

 

Insurance Claims

 

4,933

 

 

0

 

 

4,933

 

All other general and administrative expenses

 

46,205

 

 

67,690

 

 

(21,485)

 

 

 

 

 

 

 

 

 

 

 

Total

$

678,716

 

$

721,653

 

$

(42,937)

 

 

General and administrative expenses for both 2011 and 2010 were incurred primarily for the purpose of advancing our company closer to its goal of financing and operating an environment-friendly car rental business.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

 

24


 

 

Liquidity and Capital Resources

 

Working Capital

 

 

 

 

 

 

 

 

 

 

 

 

At

 

 

At

 

 

Increase/Decrease

 

 

 

 

June 30, 2011

 

 

December 31, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets

$

63,667

 

$

36,138

 

$

27,529

 

 

Current Liabilities

$

966,501

 

$

526,687

 

$

439,814

 

 

Working Capital

$

 (902,834

)

$

 (490,549

)

$

(412,285

)

 

 

 Cash Flows

 

Six Months

 

 

Six Months

 

 

 

 

Ended

 

 

Ended

 

 

 

 

June 30,

 

 

June 30,

 

 

 

 

2011

 

 

2010

 

 

Net Cash (Used in) Operating Activities

$

(170,366)

 

$

(238,584)

 

Net Cash Provided By Investing Activities

$

Nil

 

$

(600)

 

 

Net Cash Provided by Financing Activities

$

176,187

 

$

246,800

 

 

Increase (decrease) in Cash

$

5,821

 

$

7,616

 

We had cash in the amount of $27,400 as of June 30, 2011 as compared to $21,579 as of December 31, 2010. We had a working capital deficit of $902,834 as of June 30, 2011. We anticipate continuing to earn revenues in the near future as a result of our launching Ecologic Shine in collaboration with Park N’ Fly, the airport parking chain with prominent locations in 15 airport markets. We have operations at the following locations: 1. Atlanta, Georgia (October, 2009), 2. San Diego, California (November, 2009) and 3. Los Angeles, California (December, 2009). We have suffered recurring net losses since inception. The continuation of our company is dependent upon our company attaining and maintaining profitable operations and raising additional capital as needed. We anticipate that we will have to raise additional funds through private placements of our equity securities and/or debt financing to complete our business plan. There is no assurance that the financing will be completed as planned or at all. If we are unable to secure adequate capital to continue our planned operations, our shareholders may lose some or all of their investment and our business may fail.

Our principal sources of funds have been from sales of our common stock and loans from related parties.

As at June 30, 2011, affiliates and related parties are due a total of $1,590,399 which is comprised of loans to our company of $466,485, accrued compensation of $1,021,500, accrued interest of $90,465 and unpaid expenses of $11,949. For the period April 1, 2011 to June 30, 2011, loans to our company increased by $34,936, accrued compensation increased by $165,000 and accrued interest increased by $18,439. The loans to our company bear interest at the rate of 7% per annum, are unsecured and are payable within one year upon demand. No payments of principal or interest were made to date.

25


 

 

 

Going Concern

We anticipate that additional funding will be required in the form of equity financing from the sale of our common stock. At this time, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock or through a loan from our directors to meet our obligations over the next twelve months. We do not have any arrangements in place for any future debt or equity financing.

 

26


 

 

Contractual Obligations

As a “smaller reporting company”, we are not required to provide tabular disclosure obligations.

Application of Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based upon our 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. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financial statements.

Net Income (Loss) Per Common Share

Our 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 4. Controls and Procedures

Management’s Report on Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our 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 our management, including our president (also our principal executive officer) and our chief financial officer (also our principal financial officer and principal accounting officer) to allow for timely decisions regarding required disclosure.

As of June 30, 2011, the end of the quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our president (also our principal executive officer) and our chief financial officer (also our principal financial and accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president (also our principal executive officer) and our chief financial officer (also our principal financial and accounting officer) concluded that our disclosure controls and procedures were effective.

27


 

 

Changes in Internal Control over Financial Reporting

There have been no changes in our internal controls over financial reporting that occurred during the quarter ended June 30, 2011 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

We know of no material, active or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

Item 1A. Risk Factors

Much of the information included in this quarterly report includes or is based upon estimates, projections or other “forward looking statements”. Such forward looking statements include any projections and estimates made by us and our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein.

Such estimates, projections or other “forward looking statements” involve various risks and uncertainties as outlined below. We caution the reader that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other “forward looking statements”.

Risks Related to our Business

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We have a limited operating history, and it is difficult to evaluate our financial performance and prospects. There is no assurance that we will achieve profitability or that we will not discover problems with our business model.

We have a limited operating history. As such, it is difficult to evaluate our future prospects and performance, and therefore we cannot ensure that we will operate profitably in the future.

We have limited funds available for operating expenses. If we do not obtain funds when needed, we will have to cease our operations.

Currently, we have limited operating capital. As of June 30, 2011, our cash available was $27,400. In the foreseeable future, we expect to incur significant expenses when developing our business. We may be unable to locate sources of capital or may find that capital is not available on terms that are acceptable to us to fund our additional expenses. There is the possibility that we will run out of funds, and this may affect our operations and thus our profitability. If we cannot obtain funds when needed, we may have to cease our operations.

Our business plan may not be realized. If our business plan proves to be unsuccessful, our business may fail and you may lose your entire investment.

Our operations are subject to all of the risks inherent in the establishment of a new business enterprise, including inadequate working capital and a limited operating history. The likelihood of our success must be considered in light of the problems, expenses, complications and delays frequently encountered in connection with the development of a new business. Unanticipated events may occur that could affect the actual results achieved during the forecast periods. Consequently, the actual results of operations during the forecast periods will vary from the forecasts, and such variations may be material. In addition, the degree of uncertainty increases with each successive year presented. There can be no assurance that we will succeed in the anticipated operation of our business plan. If our business plan proves to be unsuccessful, our business may fail and you may lose your entire investment.

We will need additional financing to expand our business, and to implement our business plan. Such financing may not be available on favorable terms, if at all.

If we need funds and cannot raise them on acceptable terms, we may not be able to:

  • execute our business plan;
  • acquire or lease our proposed fleet of rental cars;
  • take advantage of future opportunities, including synergistic acquisitions;
  • respond to customers, competitors or violators of our proprietary and contractual rights; or
  • remain in operation.

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We will have to raise substantial additional capital if we wish to execute our business plan. There can be no assurance that debt or equity financing, or cash generated by operations, will be available or sufficient to meet our requirements. Additional funding may not be available under favorable terms, if at all.

We may be unable to predict accurately the timing and amount of our capital requirements. We have historically financed our activities through the sale of our equity securities, loans and from lines of credit. We may be required to raise additional funds through public or private financing, bank loans, collaborative relationships or other arrangements. It is possible that banks, venture capitalists and other investors may perceive our capital structure or operating history as too great a risk to bear. As a result, additional funding may not be available at attractive terms, or at all. If we cannot obtain additional capital when needed, we may be forced to agree to unattractive financing terms, change our method of operations, curtail operations significantly, obtain funds through entering into arrangements with collaborative partners or others, or issue additional securities. Any future issuances of our securities may result in substantial dilution to existing stockholders.

Our success will depend on our newly assembled senior management team.

Our success will be largely dependent upon the performance of our senior management team. Investors must rely on the expertise and judgment of senior management and other key personnel. The failure to attract and retain individuals with the skill and experience necessary to execute our business plan could have a materially adverse impact upon our prospects. We currently do not have any key man insurance policies and have no current plans to obtain any; therefore, there is a risk that the death or departure of any director, member of management, or any key employee could have a material adverse effect on operations.

We face significant competition in the car rental industry. There can be no assurance that we will be able to compete successfully against our competitors.

The car rental business is highly competitive. We compete against a number of established rental car companies with greater marketing and financial capabilities. Our market specialization is the rental of hybrid electric and low-emissions cars. Although we believe that we will be the first rental company featuring predominately environmentally friendly cars, we may face difficulty competing against other car rental companies should they devote significant resources to such cars. There can be no assurance that one or more competitors may not initiate a rental business similar to ours, thus compromising the differentiating factor for us. Increased competition in the rental car industry may result in reduced operating margins, loss of market share and a diminished brand franchise. There can be no assurance that we will be able to compete successfully against our competitors, and competitive pressures faced by us may have a material adverse effect on our business, prospects, financial condition and results of operations.

30


 

 

We are dependent on fleet financing for acquiring cars. Our failure to obtain financing for the acquisition of cars could have a material adverse effect on our business and prospects.

Our ability to purchase and finance our proposed fleet of rental vehicles will depend on the calculation and assignment of risk for the resale value of the vehicles. Despite our plans for securing the resale value, lending companies may not be enticed to finance the cars. There can be no assurance that the financing required to purchase and deploy cars will be available to us in order to meet business projections. Our failure to obtain financing for the acquisition of cars could have a material adverse effect on our business and prospects.

We may not maintain insurance sufficient to cover the full extent of our liabilities. The payment of such uninsured liabilities would reduce the funds available to us.

We intend to maintain various forms of insurance. However, such insurance has limitations on liability that may not be sufficient to cover the full extent of such liabilities. Also, such risks may not, in all circumstances, be insurable or, in certain circumstances, we may elect not to obtain insurance to deal with specific risks due to the high premiums associated with such insurance or other reasons. The payment of such uninsured liabilities would reduce the funds available to us. The occurrence of a significant event that we are not fully insured against, or the insolvency of the insurer of such event, could have a material adverse effect on our financial position, results of operations or prospects.

We may not be able to obtain all the necessary licenses and permits required to carry on our business activities.

Our operations may require licenses and permits from various governmental authorities. There can be no assurance that we will be able to obtain all necessary licenses and permits that may be required to carry required business activities.

We may not be able to maintain the information technology and computer systems required to serve our customers.

Our reputation and ability to attract retain, and serve customers are dependent upon the reliable performance of our technology infrastructure and fulfillment processes. Interruptions or technical problems could make our systems unavailable to service customers and could diminish the overall attractiveness of our service to potential customers.

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Risks Relating to Our Common Shares

Trading on the OTC Bulletin Board may be volatile and sporadic, which could depress the market price of our common shares and make it difficult for our shareholders to resell their shares.

Our common shares are quoted on the OTC Bulletin Board service. Trading in shares quoted on the OTC Bulletin Board is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of our common shares for reasons unrelated to operating performance. Moreover, the OTC Bulletin Board is not a stock exchange, and trading of securities on the OTC Bulletin Board is often more sporadic than the trading of securities listed on a quotation system like Nasdaq or a stock exchange like Amex. Accordingly, shareholders may have difficulty reselling any of the shares.

Our share is a penny stock. Trading of our share may be restricted by the SEC’s penny stock regulations which may limit a shareholder’s ability to buy and sell our shares.

Our share is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the shares that are subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common shares.

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FINRA sales practice requirements may also limit a shareholder's ability to buy and sell our shares.

In addition to the “penny stock” rules promulgated by the Securities and Exchange Commission, the Financial Industry Regulatory Authority, or FINRA, has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, the FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common shares, which may limit your ability to buy and sell our shares.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On April 1, 2011 we issued 620,000 restricted shares of our company’s common stock at $0.37 per share or $229,400 for remuneration of services.  These shares were issued pursuant to an exemption from registration relying on Section 4(2) of the Securities Act of 1933.

On May 1, 2011, we issued 50,000 restricted shares of our company’s common stock at a $0.29 per share or $14,500 for remuneration of services. These shares were issued pursuant to an exemption from registration relying on Section 4(2) of the Securities Act of 1933.

Item 3. Defaults Upon Senior Securities

None.

Item 4. [Removed and Reserved]

Item 5. Other Information

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Effective August 9, 2011, Shelly J. Meyers resigned from the Audit Committee and the Board of Directors of the Company. John L. Ogden has replaced Ms. Meyers as Chairman of the Audit Committee.

Effective August 16, 2011, Norman A. Kunin will resign his position as Chief Financial Officer of the Company due to health reasons. Calli Bucci, Controller of the Company since January, 2010, has been appointed interim Chief Financial Officer. Mr. Kunin will enter into a consulting agreement to provide financial services and advice to the Company including support to Ms. Bucci. The terms of the Agreement are currently being negotiated.

Item 6. Exhibits

Exhibit Number

Description

(3)

(i) Articles of Incorporation; (ii) By-laws

3.1

Articles of Incorporation (incorporated by reference from our Registration Statement on Form SB-2 filed on November 30, 2006).

3.2

By-laws (incorporated by reference from our 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 from our Current Report on Form 8-K filed on April 21, 2008).

3.4

Articles of Merger (incorporated by reference from our 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 from our Current Report on Form 8-K filed on September 17, 2008).

3.6

Articles of Merger (incorporated by reference from our 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 from our 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 our wholly owned subsidiary, Ecological Acquisition Corp. and Ecologic Sciences, Inc. (incorporated by reference from our 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 our wholly owned subsidiary, Ecological Acquisition Corp. and Ecologic Sciences, Inc. (incorporated by reference from our 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 from our Current Report on Form 8-K filed on April 30, 2009).

10.2

Employment Agreement dated January 30, 2009 between our company and Mr. Plamondon (incorporated by reference from our Current Report on Form 8-K filed on July 9, 2009).

10.3

Agreement dated April 28, 2009 between our company and Audio Eye, Inc. (incorporated by reference from our Current Report on Form 8-K filed on July 9, 2009).

10.4

Agreement dated May 15, 2009 between our company and Audio Eye, Inc. (incorporated by reference from our Current Report on Form 8-K filed on July 9, 2009).

10.5

Employment Agreement dated June 29, 2009 between our company and Mr. Keppler. (incorporated by reference from our Current Report on Form 8-K filed on July 9, 2009).

10.6

Memorandum of Understanding dated May 12, 2009 between our company and Green Solutions & Technologies, LLC (incorporated by reference from our Current Report on Form 8-K filed on July 9, 2009).

10.7

Form of Debt Settlement Subscription Agreement dated July 1, 2009 between our company and John L. Ogden (incorporated by reference from our 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 from our Current Report on Form 8-K filed on September 29, 2009).

10.9

Agreement dated September 2, 2009 between Ecologic Transportation, Inc. and North Sea Securities LP. (incorporated by reference from our Annual Report on Form 10-K filed on April 14, 2010).

10.10

Advisory Agreement for Executive Services of Norman A. Kunin dated as of January 1, 2010 (incorporated by reference from our Current Quarterly Report on Form 10-Q filed on August 16, 2010).

10.11

Independent Consulting Agreement between our company and Prominence Capital, LLC effective as of April 5, 2010 (incorporated by reference from our Current Quarterly Report on Form 10-Q filed on August 16, 2010).

10.12*

Independent Consulting Agreement between our company and Oracle Capital Partners, LLC effective as of April 1, 2011.

10.13*

Placement Agent Agreement between our company and View Trade Securities, Inc. effective as of April 12, 2011.

(21)

Subsidiaries of the Registrant

 

Ecologic Products, Inc.
Ecologic Car Rentals, Inc.
Ecologic Systems, Inc.

(31)

Rule 13a-14(a) / 15d-14(a) Certifications

31.1*

Section 302 Certification under the Sarbanes-Oxley Act of 2002 of William M. Plamondon III.

31.2*

Section 302 Certification under the Sarbanes-Oxley Act of 2002 of Norman A. Kunin

(32)

Section 1350 Certifications

32.1*

Section 906 Certification under the Sarbanes-Oxley Act of 2002 of William M. Plamondon III.

32.2*

Section 906 Certification under the Sarbanes-Oxley Act of 2002 of Norman A. Kunin

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*filed herewith

 

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.

 

(Registrant)

 

 

 Dated: August 15, 2011

/s/ William N. Plamondon III

 

William N. Plamondon III

 

President, Chief Executive Officer and Director

 

(Principal Executive Officer)

 

 

 

 

 

ECOLOGIC TRANSPORTATION, INC.

 

(Registrant)

 

 

 Dated: August 15, 2011

/s/ Norman A Kunin

 

Norman A Kunin

 

Chief Financial Officer

 

(Principal Financial Officer and

 

Principal Accounting Officer)