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U.S. 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 quarter ended September 30, 2011

o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to _______

Commission File No. 000-53104

Onteco Corporation
(Name of small business issuer in its charter)
 
Nevada
 
51-0668045
(State or other jurisdiction of incorporation
or organization)
 
(I.R.S. Employer
Identification No.)
 
19495 Biscayne Blvd.
Suite 411
Aventura, Florida 33180
(Address of principal executive offices)
      
 
      
(305) 932-9795
(Issuer’s telephone number)
 
Securities registered pursuant to Section
12(b) of the Act:
 
Name of each exchange on which
registered:
None
   
      
 
      
Securities registered pursuant to Section 12(g) of the Act:
   
Common Stock, $0.001
   
(Title of Class)
   
 
Indicate by checkmark whether the issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x   No o
 
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 (Section 229.405 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 o   No o
 
Indicate by check mark whether the registrant is a large accelerated filed, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
 
Large accelerated filer o   Accelerated filer o  
           
Non-accelerated filer o   Smaller reporting company x  
 
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No x
 
Applicable Only to Issuer Involved in Bankruptcy Proceedings During the Preceding Five Years. N/A
 
Indicate by checkmark whether the issuer has filed all documents and reports required to be filed by Section 12, 13 and 15(d) of the Securities Exchange Act of 1934 after the distribution of securities under a plan confirmed by a court.  Yes o No o
 
Applicable Only to Corporate Registrants
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the most practicable date:
 
Class
Outstanding as of  November 14, 2011
Common Stock, $0.001
373,014,903
 


 
 

 
ONTECO CORPORATION
Form 10-Q

Part 1.   
FINANCIAL INFORMATION
       
           
Item 1.
Financial Statements
    3  
   
Consolidated Balance Sheets as of September 30, 2011 (unaudited) and    December 31, 2010
    3  
      
Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2011 and 2010 (unaudited)
    4  
 
Consolidated Statements of Cash Flows for the Nine Months Ended September 309, 2011 and 2010 (unaudited)
    5  
 
Consolidated Statements of Stockholders’ Equity (Deficit) for the Period December 31, 2007 (inception) to September 30, 2011 (unaudited)
    7  
 
Notes to Consolidated Financial Statements (unaudited)
    9  
           
Item 2.   
Management’s Discussion and Analysis of Financial Condition and Results of Operations
    38  
      
         
Item 3.   
Quantitative and Qualitative Disclosures About Market Risk
    55  
      
         
Item 4.
Controls and Procedures
    55  
           
Part II.
OTHER INFORMATION
       
      
         
Item 1.   
Legal Proceedings
    58  
      
         
Item 1A.
Risk Factors
    58  
           
Item 2.  
Unregistered Sales of Equity Securities and Use of Proceeds
    58  
           
Item 3.   
Defaults Upon Senior Securities
    60  
      
         
Item 4.      
Reserved and Removed
    60  
           
Item 5.  
Other Information
    60  
      
         
Item 6.     
Exhibits
    60  
 
 
2

 

PART I

ITEM 1. FINANCIAL STATEMENTS

ONTECO CORPORATION
 
CONSOLIDATED FINANCIAL STATEMENTS
 
SEPTEMBER 30, 2011
(Unaudited)
 
ONTECO CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Balance Sheets
             
   
September 30,
   
December 31,
 
   
2011
   
2010
 
   
(unaudited)
       
             
ASSETS
 
             
Current assets:
           
Cash in banks
  $ 84,181     $ 62,428  
Due from NexPhase Lighting
    -       35,150  
Accounts receivable
    143,103       -  
Inventories
    52,851       -  
Project development costs
    -       27,600  
Prepaid expenses
    541       -  
                 
Total current assets
    280,676       125,178  
                 
Fixed assets:
               
Property and equipment, net
    42,933       -  
                 
Other assets:
               
Security deposits
    11,709       -  
Intellectual property
    2,988,607       -  
                 
Total other assets
    3,000,316       -  
                 
Total assets
  $ 3,323,925     $ 125,178  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
 
                 
Current liabilities:
               
Accounts payable
  $ 33,349     $ 1,942  
Accrued interest
    77,829       -  
Accrued employee compensation
    443,000       308,000  
Sales tax payable
    2,678       -  
Notes payable, non-affiliated related parties
    753,845       224,855  
Notes payable, third parties
    304,590       57,100  
Total current liabilities
    1,615,291       591,897  
                 
Other liabilities
    -       -  
                 
Total liabilities
    1,615,291       591,897  
                 
Commitments and contingencies
    -       -  
                 
Stockholders' equity (deficit):
               
Preferred stock $.001 par value 100,000,000 shares authorized, no shares issued
               
and outstanding at September 30, 2011 and December 31, 2010, respectively
            -  
Common stock $.001 par value 750,000,000 and 350,000,000 shares authorized,
    -          
373,014,903 and 116,890,258 shares issued and 372,770,903 and 116,890,258
               
shares outstanding at September 30, 2011 and December 31, 2010, respectively
    373,015       116,890  
Additional paid-in capital
    2,902,008       194,132  
Treasury stock, at cost (244,000 shares)
    (61,000 )     -  
Deficit accumulated during the development stage
    (1,505,389 )     (777,741 )
Total stockholders' equity (deficit)
    1,708,634       (466,719 )
                 
Total liabilities and stockholders' equity (deficit)
  $ 3,323,925     $ 125,178  
 
See accompanying notes to consolidated financial statements.
 
 
3

 

ONTECO CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Operations
(unaudited)
               
                           
For the Period
 
                           
December 31, 2007
 
   
For the Three Months Ended
   
For the Nine Months Ended
   
(Inception) to
 
   
September 30,
   
September 30,
   
September 30,
   
September 30,
   
September 30,
 
   
2011
   
2010
   
2011
   
2010
   
2011
 
                               
Revenue
  $ 203,024     $ -     $ 282,461     $ -     $ 282,461  
                                         
Cost of goods sold
    219       -       36,229               36,229  
                                         
Gross profit
    202,805       -       246,232       -       246,232  
                                         
Operating expenses:
                                       
General and administrative
    47,454       9,115       99,512       12,786       177,122  
Investor relations
    27,500       -       145,512       -       145,512  
Occupancy - Headquarters
    19,367       -       53,546       -       58,848  
Officer compensation
    42,176       45,000       115,176       285,000       450,176  
Professional fees
    33,580       1,988       97,833       13,163       137,785  
Staff compensation
    150,229       12,000       352,899       12,000       367,899  
Stock-based compensation
    -       -       -       -       290,055  
Depreciation
    7,402       -       7,402       -       7,402  
Total operating expenses
    327,708       68,103       871,880       322,949       1,634,799  
                                         
Loss from operations
    (124,903 )     (68,103 )     (625,648 )     (322,949 )     (1,388,567 )
                                         
Other expenses:
                                       
Loss on dispotion of assets
    -       -       -               567  
Interest expense
    22,151       1,900       74,400       11,655       87,655  
Write-off of project development costs
    -       -       27,600               27,600  
Write-off of amount due from other
    -       -       -       1,000       1,000  
Total other expenses
    22,151       1,900       102,000       12,655       116,822  
                                         
Net loss
  $ (147,054 )   $ (70,003 )   $ (727,648 )   $ (335,604 )   $ (1,505,389 )
                                         
                                         
Net loss per share - basic and diluted
  $ (0.00 )   $ (0.00 )   $ (0.00 )   $ (0.01 )        
                                         
Weighted average number of shares
                                       
oustanding during the period -
                                       
Basic and diluted
    290,678,921       29,199,530       221,345,251       29,199,530          
 
See accompanying notes to consolidated financial statements.
 
 
4

 
 
ONTECO CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Cash Flows
(unaudited)
                   
                   
                   
               
For the Period
 
               
December 31, 2007
 
   
For the Nine Months Ended
   
(Inception of Development Stage) to
 
   
September 30,
   
September 30,
   
September 30,
 
   
2011
   
2010
   
2011
 
                   
Cash flows used in operating activities:
                 
Net loss
  $ (727,648 )   $ (335,604 )   $ (1,505,389 )
Adjustments to reconcile net loss to net cash used in operations:
                       
Depreciation
    7,402       -       7,402  
Stock-based compensation
    -       -       170,055  
Stock issued for services
    80,685       -       200,685  
Cancellation of stock issued for services
    (84,000 )     -       (84,000 )
Write-off of project development costs
    27,600       -       27,600  
Write-off of amounts due to others
    -       1,000       -  
Loss on disposition of software
    -       -       567  
Interest accrued on notes payable, non-affiliated related parties
    62,295       -       62,295  
Interest accrued on notes payable, third parties
    12,105       -       12,105  
Changes in operating assets and liabilities:
                       
Due from NexPhase Lighting
    35,150       -       -  
Accounts Receivable
    (143,103 )     -       (143,103 )
Inventories
    (52,851 )     -       (52,851 )
Prepaid expenses
    (541 )     -       (541 )
Security deposits
    (7,589 )     -       (7,589 )
Accounts payable
    30,858       5,000       32,800  
Accrued expenses
    -       (59,000 )     -  
Sales tax payable
    2,678       -       2,678  
Accrued compensation
    135,000       263,000       443,000  
Net cash used in operating activities
    (621,959 )     (125,604 )     (834,286 )
                         
Cash flows used in investing activities:
                       
Net cash received from acquisition
    14,942       -       14,942  
Purchase of property and equipment
    (15,775 )             (16,342 )
Project development costs
    -       (27,600 )     (27,600 )
Net cash used in investing activities
    (833 )     (27,600 )     (29,000 )
                         
Cash flows from financing activities:
                       
Proceeds from issuance of note payable, non-affiliated related parties
    400,450       166,955       652,455  
Payments on notes payable, non-affiliated related parties
    (14,905 )     (9,000 )     (26,655 )
Proceeds from issuance of notes payable, third parties
    259,000       -       316,100  
Proceeds from sale of common stock
    -       -       5,567  
Net cash provided by financing activities
    644,545       157,955       947,467  
                         
Net increase (decrease) in cash
    21,753       4,751       84,181  
                         
Cash at beginning of period
    62,428       -       -  
                         
Cash at end of period
  $ 84,181     $ 4,751     $ 84,181  
 
Continued
 
See accompanying notes to consolidated financial statements.
 
5

 
 
ONTECO CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Statements of Cash Flows (Continued)
(unaudited)
                   
               
For the Period
 
               
December 31, 2007
 
               
(Inception of
 
   
For the Nine Months Ended
   
Development Stage) to
 
   
September 30,
   
September 30,
   
September 30,
 
   
2011
   
2010
   
2011
 
                   
Supplemental disclosure of cash flow information:
                 
                   
Cash paid for interest
  $ -     $ -     $ -  
                         
Cash paid for taxes
  $ -     $ -     $ -  
                         
Non-cash investing and financing activities:
                       
                         
Net assets acquired in acquisition of NexPhase Lighting
  $ (2,700,000 )   $ -     $ (2,700,000 )
Common stock issued
    67,500       -       67,500  
Additional paid in capital on stock issued
    2,632,500       -       2,632,500  
                         
Conversion of note payable, related parties to common stock
    (156,316 )     -       (171,716 )
Conversion of accrued interest, related parties to common stock
    (500 )             (500 )
Common stock issued
    147,816       -       163,216  
Additional paid in capital on stock issued
    9,000       -       9,000  
                         
Conversion of note payable, third parties to common stock
    (109,000 )     -       (109,000 )
Conversion of accrued interest, third parties to common stock
    (1,500 )     -       (1,500 )
Common stock issued
    45,592       -       45,592  
Additional paid in capital on stock issued
    64,908       -       64,908  
                         
244,000 shares of stock acquired and placed in treasury
    (61,000 )     -       (61,000 )
Issuance of notes payable to former investors in NexPhase
    61,000       -       61,000  
 
See accompanying notes to consolidated financial statements.
 
 
6

 
 
ONTECO CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity (Deficit)
For the period from December 31, 2007 (Inception) to September 30, 2011
(unaudited)
                                     
                           
Deficit
       
                           
accumulated
       
         
Additional
         
during the
   
Total
 
   
Common stock
   
paid-in
   
Treasury
   
development
   
stockholders'
 
   
Shares
   
Amount
   
capital
   
stock
   
stage
   
equity (deficit)
 
                                     
Common stock issued per Court Order Dec. 31, 2007
    567,324     $ 567     $ -     $ -     $ -     $ 567  
                                                 
Net loss for the year ended December 31, 2007
    -       -       -       -       (225 )     (225 )
                                                 
Balance, December 31, 2007
    567,324       567       -       -       (225 )     342  
                                                 
Common stock issued per Court Order Jan. 15, 2008
    1,000,000       1,000       -       -       -       1,000  
                                                 
Common stock issued for cash
    4,000,000       4,000       -       -       -       4,000  
                                                 
Net loss for the year ended December 31, 2008
    -       -       -       -       (3,775 )     (3,775 )
                                                 
Balance, December 31, 2008
    5,567,324       5,567       -       -       (4,000 )     1,567  
                                                 
Common stock issued for warrants
    28,571,429       28,571       (28,571 )     -       -       -  
                                                 
Common stock issued for compensation
    35,851,505       35,852       71,703       -       -       107,555  
                                                 
Net loss for the year ended December 31, 2009
    -       -       -       -       (172,122 )     (172,122 )
                                                 
Balance, December 31, 2009
    69,990,258       69,990       43,132       -       (176,122 )     (63,000 )
                                                 
Common stock issued for conversion of notes payable to non-affiliated related parties
    14,400,000       14,400       1,000       -       -       15,400  
                                                 
Common stock issued for compensation
    12,500,000       12,500       50,000       -       -       62,500  
                                                 
Common stock issued for consulting services
    20,000,000       20,000       100,000       -       -       120,000  
                                                 
Net loss for the year ended December 31, 2010
    -       -       -       -       (601,619 )     (601,619 )
                                                 
Balance, December 31, 2010
    116,890,258     $ 116,890     $ 194,132     $ -     $ (777,741 )   $ (466,719 )
 
Continued
 
See accompanying notes to consolidated financial statements.

 
7

 
 
ONTECO CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Statement of Stockholders' Equity (Deficit) (Continued)
For the period from December 31, 2007 (Inception) to September 30, 2011
(unaudited)
                                     
                           
Deficit
       
                           
accumulated
       
   
 
   
Additional
         
during the
   
Total
 
    Common stock    
paid-in
   
Treasury
   
exploration
   
stockholders'
 
   
Shares
   
Amount
   
capital
   
stock
   
stage
   
equity (deficit)
 
                                     
Balance, December 31, 2010
    116,890,258     $ 116,890     $ 194,132     $ -     $ (777,741 )   $ (466,719 )
                                                 
Common stock issued for acquisition of subsidiary –NexPhase
    67,500,000       67,500       2,632,500       -       -       2,700,000  
                                                 
Common stock issued for conversion of notes payable to non-affiliated related parties
    147,815,790       147,816       9,000       -       -       156,816  
                                                 
Common stock issued for conversion of notes payable to third parties
    45,592,188       45,592       64,908       -       -       110,500  
                                                 
Common stock issued for consulting services
    9,216,667       9,217       71,468       -       -       80,685  
                                                 
Common stock returned for cancelled consulting services
    (14,000,000 )     (14,000 )     (70,000 )     -       -       (84,000 )
                                                 
Common stock re-purchased from NexPhase investors
    (244,000 )     -       -       (61,000 )     -       (61,000 )
                                                 
Net loss for the nine months ended September 30, 2011 (unaudited)
    -       -       -       -       (727,648 )     (727,648 )
                                                 
Balance, September 30, 2011 (unaudited)
    372,770,903     $ 373,015     $ 2,902,008     $ (61,000 )   $ (1,505,389 )   $ 1,708,634  
 
See accompanying notes to consolidated financial statements.
 
 
8

 
 
ONTECO CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Notes to Consolidated Financial Statements
September 30, 2011
(unaudited)

Note 1 – Nature of Business, Presentation, and Going Concern

Organization

Onteco Corporation ("the Company") was organized under the laws of the State of Nevada on December 31, 2007. The Company was established as part of the implementation of the Chapter 11 plan of reorganization of Arrin Systems, Inc. ("Arrin").  Arrin filed for Chapter 11 Bankruptcy in April 2007 in the U.S. Bankruptcy Court for the Southern District of California.  Arrin’s plan of reorganization was confirmed by the Court on December 12, 2007 and became effective on December 30, 2007.  The plan of reorganization provided for the establishment of the Issuer and the sale to the Issuer of Arrin’s proprietary software (used in the employee background screening industry) in exchange for 567,324 shares of InfoSpi’s common stock which were distributed to Arrin’s general unsecured creditors.  

At that time, management believed the Company lacked the resources to effectively market its services on its own and therefore engaged in a search for a merger or acquisition partner with the resources to either develop this business or enter another line of business which will bring value to the Issuer's shareholders.

The Company was founded to develop innovative, practical and cost-effective solutions to some of the most significant environmental challenges facing industries and governments around the world. Additionally, these solutions must show promise of generating profits for the company. Specifically the company has determined that one industry that meets both of the above-mentioned prongs of criteria is the Energy Saving Lighting Industry.

Effective on February 14, 2011, the Board of Directors of the Company approved and authorized the execution of a definitive agreement dated February  14, 2011 (the “Agreement”) among the Company, NexPhase Lighting, Inc., a privately held Florida corporation (“NexPhase”)., and the shareholders of NexPhase (the “NexPhase Shareholders”). In accordance with the terms and provisions of the Agreement: (i) the Company acquired from the NexPhase Shareholders an aggregate 55,622,000 shares of common stock of NexPhase representing the total issued and outstanding shares of NexPhase; (ii) in exchange thereof, the Company issued to the NexPhase Shareholders an aggregate 67,500,000 shares of its restricted common stock generally in proportion to the equity holdings of the NexPhase Shareholders; (iii) NexPhase transferred and assigned to the Company all existing material contracts including those related to distribution, licensing and marketing and those dealing with the grant of rights for the use of any and all intellectual property; (iv) the Company assumed all other assets of NexPhase, including licenses, royalty rights, equipment, product designs, marketing and sale materials, logos, trademarks, copyrights and website; and (v) the Company further assumed all liabilities of NexPhase, including all trade and debt obligations.  Therefore, as of the February 14, 2011, NexPhase has become a wholly-owned subsidiary of the Company.

NexPhase is in the business of designing, developing, manufacturing and marketing a high quality and high efficiency full line of LED intelligent lighting fixtures and control systems for commercial applications and projects involving both new construction and retrofits (the “LED Lighting Fixtures”).
 
 
9

 

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) for interim financial statement presentation and in accordance with Form 10-Q.  Accordingly, they do not include all of the information and footnotes required in annual financial statements.  In the opinion of management, the unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position and results of operations and cash flows.  The results of operations presented are not necessarily indicative of the results to be expected for any other interim period or for the entire year.
 
These unaudited consolidated financial statements should be read in conjunction with our 2010 annual financial statements included in our Form 10-K/A, filed with the U.S. Securities and Exchange Commission (“SEC”) on May 6, 2011.
 
Going Concern

The accompanying unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The Company has incurred a net loss of $727,648 for the nine months ended September 30, 2011 and has incurred cumulative losses since inception of $1,505,389.  These factors raise substantial doubt about the ability of the Company to continue as a going concern.  The Company’s continuation as a going concern is dependent upon its ability to generate revenues, its ability to continue to raise investment capital, and to implement its business plan.  No assurance can be given that the Company will be successful in these efforts.

The unaudited consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.  Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern.

Note 2 – Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to its deferred income tax asset valuation allowances.

The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
 
 
10

 

Cash and Cash Equivalents

The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At September 30, 2011 and December 31, 2010, respectively, the Company had no cash equivalents.

Accounts Receivable

The Company grants unsecured credit to commercial and governmental customers in the United States and abroad.  Accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts.  The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable.  The Company determines the allowance based on historical write-off experience, customer specific facts and economic conditions. Bad debt expense was $0 for the three and nine months ended September 30, 2011 and 2010, respectively.  At September 30, 2011 and December 31, 2010, the allowance for doubtful accounts was $0 and $0, respectively.
 
Outstanding account balances are reviewed individually for collectability.  Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.  The Company does not have any off-balance sheet credit exposure to its customers.

Inventories

Inventories are stated at the lower of cost or market (“LCM”). The Company uses the first-in-first-out (“FIFO”) method of valuing inventory. Inventory consists primarily of finished goods and accessories for resale.

Property and Equipment

Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation of property and equipment is computed by the straight-line method (after taking into account their respective estimated residual values) over the assets estimated useful lives ranging from 5 years to 7 years. Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the consolidated statements of operations. Leasehold improvements are amortized on a straight-line basis over the term of the lease or the estimated useful lives, whichever is shorter.

Depreciation expense was $2,467 and $0 for the three months ended September 30, 2011 and 2010, respectively, and $7,402 and $0 for the nine months ended September 30, 2011 and 2010, respectively.

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash, prepaid expenses and payables due to a stockholder.  The carrying amount of cash, prepaid expenses and payables approximates fair value because of the short-term nature of these items. 
 
 
11

 

Concentration of Credit Risk

Financial instruments that potentially subject the Company to credit risk consist principally of cash. Cash was deposited with a high quality credit institution.

Beneficial Conversion Feature of Convertible Notes Payable

The Company accounts for convertible notes payable in accordance with the guidelines established by the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 470-20, “Debt with Conversion and Other Options”, Emerging Issues Task Force ("EITF") 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios and EITF 00-27, Application of Issue No 98-5 To Certain Convertible Instruments. The Beneficial Conversion Feature ("BCF") of a convertible note is normally characterized as the convertible portion or feature of certain notes payable that provide a rate of conversion that is below market value or in-the-money when issued. The Company records a BCF related to the issuance of a convertible note when issued and also records the estimated fair value of the warrants issued with those convertible notes.
 
The BCF of a convertible note is measured by allocating a portion of the note's proceeds to the warrants and as a reduction of the carrying amount of the convertible note equal to the intrinsic value of the conversion feature, both of which are credited to additional paid-in-capital. The Company calculates the fair value of warrants issued with the convertible note using the Black Scholes valuation model and uses the same assumptions for valuing employee options in accordance with SFAS No. 123R. The only difference is that the contractual life of the warrants is used.
 
The value of the proceeds received from a convertible note is then allocated between the conversion features and warrants on a relative fair value basis. The allocated fair value is recorded in the financial statements as a debt discount (premium) from the face amount of the note and such discount is amortized over the expected term of the convertible note (or to the conversion date of the note, if sooner) and is credited to interest expense.

Income Taxes

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740. “Accounting for Income Taxes” The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, and for operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using the currently exacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduced deferred tax assets to the amount that is believed more likely than not to be realized.

Basic and Diluted Loss Per Share

The Company computes income (loss) per share in accordance with ASC 260, "Earnings per Share", which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the statement of operations.  Basic EPS is computed by dividing income (loss) available to common shareholders by the weighted average number of shares outstanding during the period.  Diluted EPS gives effect to all dilutive potential shares of common stock outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method.  In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants.  Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.   There were no potentially dilutive shares as of September 30, 2011 and 2010.
 
 
12

 
 
Accounting for Obligations and Instruments Potentially to be settled in the Company’s Own Stock

We account for obligations and instruments potentially to be settled in the Company’s stock in accordance with ASC 815 “Accounting for Derivative Financial Instruments”. This issue addresses the initial balance sheet classification and measurement of contracts that are indexed to, and potentially settled in, the Company’s own stock.

Valuation of Long-lived Assets

The Company reviews the recoverability of its long-lived assets; including buildings, equipment and intangible assets, when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on the Company’s ability to recover the carrying value of the asset from the expected future pre-tax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying value. The primary measure of fair value is based on discounted cash flows. The measurement of impairment requires management to make estimates of these cash flows related to long-lived assets, as well as other fair value determinations.

The Company amortizes the costs of other intangibles (excluding goodwill) over their estimated useful lives unless such lives are deemed indefinite. Amortizable intangible assets are tested for impairment based on undiscounted cash flows and, if impaired, written down to fair value based on either discounted cash flows or appraised values. Intangible assets with indefinite lives are tested for impairment, at least annually, and written down to fair value as required. At September 30, 2011 and 2010, the Company has no impaired carrying value of its intangible assets.
 
Fair Value Accounting
 
On October 1, 2010, we adopted ASC 820, “Fair Value Measurements.” which defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements.  ASC 820 does not require any new fair value measurements, and has been partially deferred for non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. The partial adoption of ASC 820 for financial assets and liabilities did not have a material impact on our financial position, results of operations or cash flow.
 
Revenue and Expense Recognition

Revenue is recognized when earned rather than when received. Sales are recognized when a product is delivered or shipped to the customer and all material conditions relating to the sale have been substantially performed. Expenses are charged to operations as incurred.

Stock-based Compensation

The Company accounts for employee stock-based compensation costs such that all share-based payments to employees, including grants of employee stock options, are recognized in our statements of operations based on their fair values. Unless otherwise determined, the Company will utilize the Black-Scholes option pricing model, as appropriate, to estimate the fair value of employee stock based compensation at the date of grant, which requires the input of highly subjective assumptions, including expected volatility and expected life. Changes in these inputs and assumptions can materially affect the measure of estimated fair value of our stock-based compensation. Other factors considered by the Company when issuing stock-based compensation include:
 
 
13

 

1.  
A lack of  observable market price because of the minimal volume of shares that had been traded on any independent market since inception of the Company,
2.  
The volatility of  the market price due to the limited marketability of the shares,
3.  
The number of shares being issued compared to the number of shares of common stock outstanding prior to the stock issuance,
4.  
The unregistered status of the shares which limits the marketability of the shares,
5.  
The fact that issuance of the shares may not change who is in control of the Company, and
6.  
The estimated value of the services provided.

During the nine months ended September 30, 2011 and 2010, the Company recorded no stock-based compensation expenses related to issuances of stock to the Company's employees, directors and consultants.

Accounting Standards Codification

The FASB’s Accounting Standards Codification (“ASC”) became effective on September 15, 2009.  At that date, the ASC became FASB’s officially recognized source of authoritative generally accepted accounting principles (“GAAP”) applicable to all public and non-public non-governmental entities, superseding existing FASB, American Institute of Certified Public Accountants (“AICPA”), Emerging Issues Task Force (“EITF”) and related literature.  All other accounting literature is considered non-authoritative.  The switch to the ASC affects the way companies refer to U.S. GAAP in financial statements and accounting policies.  Citing particular content in the ASC involves specifying the unique numeric path to the content through the Topic, Subtopic, Section and Paragraph structure.
 
Reclassifications

Certain items on the 2010 consolidated statement of cash flows and statement of stockholders’ equity (deficit) have been reclassified to conform to current period presentation.

Development Stage Company

Since its formation of December 31, 2007, the Company became a “development stage company” as defined in ASC Topic 915 “Development Stage Entities”.  To date, the Company's planned principal operations have not fully commenced.

Effect of Recent Accounting Pronouncements

The Company reviews new accounting standards as issued. No new standards had any material effect on these financial statements. The accounting pronouncements issued subsequent to the date of these financial statements that were considered significant by management were evaluated for the potential effect on these financial statements. Management does not believe any of the subsequent pronouncements will have a material effect on these financial statements as presented and does not anticipate the need for any future restatement of these financial statements because of the retro-active application of any accounting pronouncements issued subsequent to September 30, 2011 through the date these financial statements were issued.
 
 
14

 

Note 3 – Project Development Costs

On January 15, 2010 the Company engaged an engineering firm to design, plan and supervise the development of proprietary “critical reactor” equipment to be used in environmentally friendly sewer and sludge conversion and used tire and plastic recovery. The initial cost of this project, in the amount of $27,600 was capitalized pending the results of the Company’s efforts to commercialize this technology. On June 30, 2011, Management determined that although the critical reactor project was commercially feasible, it was in the best interest of the company to commit all future funding to the NexPhase Lighting subsidiary.  Therefore, on June 30, 2011, the project development cost in the amount of $27,600 was written off.
 
Note 4 – Notes Payable – Non-affiliated Related Parties

   
September 30,
   
December 31,
 
   
2011
   
2010
 
Notes Payable -- Related Parties - Onteco
           
             
On February 10, 2010 the Company entered into a convertible promissory note with a web designer for services rendered in the amount of $3,150. Terms include bonus interest of $315, the note is payable on demand and has no stated interest rate or due date. On January 3, 2011 the parties amended the terms and conditions of the promissory note as follows:
 
The note was assigned from the web designer to a non-affiliated related party investment firm.  The “Note Conversion Price” shall be adjusted from $0.03 to the par value of the common stock, or $0.001 per share representing 3,465,000 unregistered common shares. No payments have been made on this note.
 
On February 25, 2011 a portion of the note in the amount of $1,316 was converted to Common Stock.
  $ 2,149     $ -  
                 
On August 9, 2010 the Company entered into a convertible promissory note with an investor in the amount of $5,000. The note is payable on demand, has no stated interest rate or due date and is convertible at a rate of $0.001. No payments have been made on this note.
    5,000       5,000  
                 
On August 25, 2010 the Company entered into a convertible promissory note with an investor in the amount of $4,000. The note is payable on demand, has no stated interest rate or due date and is convertible at a rate of $0.001. No payments have been made on this note.
    4,000       4,000  
                 
On September 2, 2010 the Company entered into a convertible promissory note with an investor in the amount of $20,000. The note is payable on demand, has no stated interest rate or due date and is convertible at a rate of $0.001 per share. No payments have been made on this note.
    20,000       20,000  
                 
On October 13, 2010 the Company entered into a convertible promissory note with an investor in the amount of $3,000. The note is payable on demand, has no stated interest rate or due date and is convertible at a rate of $0.001 per share. No payments have been made on this note.
    3,000       3,000  
                 
On November 4, 2010 the Company entered into a convertible promissory note with  an investor in the amount of $19,600. The note is payable on demand, includes bonus interest of $1,600, has no due date and is convertible at a rate of $0.001 per share. No payments have been made on this note.
    19,600       19,600  

 
15

 
 
   
September 30,
   
December 31,
 
   
2011
   
2010
 
             
On November 8, 2010 the Company entered into a convertible promissory note with an investment firm in the amount of $5,500. Terms include bonus interest of $500, the note is payable on demancd and is convertible at a rate of $0.001 per share. No payments have been made on this note.
    5,500       5,500  
                 
On November 30, 2010 the Company entered into a convertible promissory note with an investment firm in the amount of $9,300. Terms include bonus interest of $930, the note is payable on demand and has no stated interest rate or due date and is convertible at a rate of $0.001 per share. No payments have been made on this note.
    9,300       9,300  
                 
On December 15, 2010 the Company entered into a convertible promissory note with an investment firm in the amount of $15,500. Terms include simple interest at ten percent (10.0%), the note is due on December 15, 2011 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    15,500       7,500  
                 
On December 23, 2010 the Company entered into a convertible promissory note with an investment firm in the amount of $100,000. Terms include simple interest at ten percent (10.0%), the note is due on December 23, 2011 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice.
 
As of September 30, 2011, a portion of the note in the amount of $55,500 has been converted to Common Stock.
    44,500       100,000  
                 
On January 10, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $1,000. Terms include simple interest at ten percent (10.0%), the note is due on January 10, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    1,000       -  
                 
On February 23, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $21,600. Terms include simple interest at ten percent (10.0%), the note is due on February 23, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    21,600       -  

 
16

 
 
   
2011
   
2010
 
             
On March 1, 2011 the Company entered into a convertible promissory note assigned from NexPhase in the amount of $60,000. Terms include simple interest at ten percent (10.0%), the note is due on March 1, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
 
As of September 30, 2011, a portion of the note in the amount of $49,000 has been converted to Common Stock.
    11,000       -  
                 
On March 2, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $6,000. Terms include simple interest at ten percent (10.0%), the note is due on March 2, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    6,000       -  
                 
On March 8, 2011 the Company entered into a convertible promissory note assigned from NexPhase in the amount of $105,000. Terms include simple interest at ten percent (10.0%), the note is due on March 8, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice.
 
As of September 30, 2011, a portion of the note in the amount of $100,500 has been converted to Common Stock.
    4,500       -  
                 
On March 10, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $3,000. Terms include simple interest at ten percent (10.0%), the note is due on March 10, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    3,000       -  
                 
On March 31, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $5,500. Terms include simple interest at ten percent (10.0%), the note is due on March 31, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    5,500       -  
                 
On March 31, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $6,500. Terms include simple interest at ten percent (10.0%), the note is due on March 31, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    6,500       -  

 
17

 
 
   
September 30,
   
December 31,
 
   
2011
   
2010
 
             
On April 11, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $3,000. Terms include simple interest at ten percent (10.0%), the note is due on April 11, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    3,000       -  
                 
On April 14, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $17,500. Terms include simple interest at ten percent (10.0%), the note is due on April 14, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    17,500       -  
                 
On April 18, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $1,000. Terms include simple interest at ten percent (10.0%), the note is due on April 18, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    1,000       -  
                 
On April 18, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $2,000. Terms include simple interest at ten percent (10.0%), the note is due on April 18, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    2,000       -  
                 
On April 21, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $5,000. Terms include simple interest at ten percent (10.0%), the note is due on April 21, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    5,000       -  
                 
On April 27, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $2,500. Terms include simple interest at ten percent (10.0%), the note is due on April 27, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    2,500       -  

 
18

 
 
   
September 30,
   
December 31,
 
   
2011
   
2010
 
             
On April 28, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $2,500. Terms include simple interest at ten percent (10.0%), the note is due on April 28, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    2,500       -  
                 
On May 16, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $15,000. Terms include simple interest at ten percent (10.0%), the note is due on May 16, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    15,000       -  
                 
On June 1, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $3,000. Terms include simple interest at ten percent (10.0%), the note is due on June 1, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    3,000       -  
                 
On June 10, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $3,000. Terms include simple interest at ten percent (10.0%), the note is due on June 10, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    3,000       -  
                 
On June 20, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $6,500. Terms include simple interest at ten percent (10.0%), the note is due on June 20, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    6,500       -  
                 
On June 24, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $2,000. Terms include simple interest at ten percent (10.0%), the note is due on June 24, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    2,000       -  

 
19

 
 
   
September 30,
   
December 31,
 
   
2011
   
2010
 
             
On August 4, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $15,000. Terms include simple interest at ten percent (10.0%), the note is due on August 4, 2012 and is convertible at the option of the holder at a price of $0.001 per share. No payments have been made on this note.
    15,000       -  
                 
On August 4, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $20,000. Terms include simple interest at ten percent (10.0%), the note is due on August 4, 2012 and is convertible at the option of the holder at a price of $0.001 per share. No payments have been made on this note.
    20,000       -  
                 
On August 18, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $2,500. Terms include simple interest at ten percent (10.0%), the note is due on August 18, 2012 and is convertible at the option of the holder at a price of $0.001 per share. No payments have been made on this note.
    2,500       -  
                 
On September 13, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $6,000. Terms include simple interest at ten percent (10.0%), the note is due on September 13, 2012 and is convertible at the option of the holder at a price of $0.001 per share. No payments have been made on this note.
    6,000       -  
                 
On September 22, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $1,000. Terms include simple interest at ten percent (10.0%), the note is due on September 22, 2012 and is convertible at the option of the holder at a price of $0.001 per share. No payments have been made on this note.
    1,000       -  
                 
On September 28, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $2,000. Terms include simple interest at ten percent (10.0%), the note is due on September 28, 2012 and is convertible at the option of the holder at a price of $0.001 per share. No payments have been made on this note.
    2,000       -  

 
20

 
 
   
September 30,
   
December 31,
 
   
2011
   
2010
 
             
On March 31, 2011 the Company entered into a stock repurchase agreement with a NexPhase investor to repurchase 100,000 shares of Common Stock acquired in the NexPhase acquisition. Terms include principal in the amount of $27,500 including premium interest of ten percent (10.0%) ($2,500), the note is due on June 30, 2012.  Payments totaling $7,453 have been made on this note as of September 30, 2011.
    20,048       -  
                 
On March 31, 2011 the Company entered into a stock repurchase agreement with a NexPhase investor to repurchase 20,000 shares of Common Stock acquired in the NexPhase acquisition. Terms include principal in the amount of $5,500 including premium interest of ten percent (10.0%) ($500), the note is due on June 30, 2012.  No payments have been made on this note.  Payments totaling $1,490 have been made on this note as of September 30, 2011.
    4,010       -  
                 
On March 31, 2011 the Company entered into a stock repurchase agreement with a NexPhase investor to repurchase 24,000 shares of Common Stock acquired in the NexPhase acquisition. Terms include principal in the amount of $6,600 including premium interest of ten percent (10.0%) ($600), the note is due on June 30, 2012.  No payments have been made on this note.
    6,600       -  
                 
On March 31, 2011the Company entered into a stock repurchase agreement with a NexPhase investor to repurchase 20,000 shares of Common Stock acquired in the NexPhase acquisition. Terms include principal in the amount of $5,500 including premium interest of ten percent (10.0%) ($500), the note is due on June 30, 2012.  No payments have been made on this note.
    5,500       -  
                 
On March 31, 2011 the Company entered into a stock repurchase agreement with a NexPhase investor to repurchase 80,000 shares of Common Stock acquired in the NexPhase acquisition. Terms include principal in the amount of $22,000 including premium interest of ten percent (10.0%) ($2000), the note is due on June 30, 2012.  On June 21 2011, a payment in the amount of $2,200 was made on this note.  Payments totaling $5,962 have been made on this note as of September 30, 2011.
    16,038       -  
                 
                 
Subtotal Notes Payable -- Related Parties - Onteco
    349,345       173,900  
 
 
21

 
 
   
September 30,
   
December 31,
 
   
2011
   
2010
 
Notes Payable -- Related Parties - NexPhase
           
             
On June 21, 2010 the Company entered into a convertible promissory note with an investment firm in the amount of $105,000. Terms include simple interest at twelve percent (12.0%), the note is due on June 21, 2011 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
 
On March 8, 2011, the Note was assigned to Onteco. As of June 30, 2011, through a series of common stock conversions, the remaining balance of the note is $14,500.
    -       -  
                 
On August 4, 2010 the Company entered into a convertible promissory note with an investment firm in the amount of $60,000. Terms include simple interest at twelve percent (12.0%), the note is due on August 4, 2011 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
 
On March 1, 2011, the Note was assigned to Onteco. Through June 30, 2011, a portion of the note in the amount of $29,000 has been converted to Common Stock.
    -       -  
                 
On November 1, 2010 the Company entered into a convertible promissory note with an investment firm in the amount of $70,000. Terms include simple interest at twelve percent (12.0%), the note is due on November 1, 2011 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    70,000       -  
                 
On December 1, 2010 the Company entered into a convertible promissory note with an investment firm in the amount of $10,000. Terms include simple interest at twelve percent (12.0%), the note is due on December 1, 2011 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    10,000       -  
                 
On December 8, 2010 the Company entered into a convertible promissory note with an investment firm in the amount of $40,000. Terms include simple interest at twelve percent (12.0%), the note is due on December 8, 2011 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    40,000       -  

 
22

 
 
   
September 30,
   
December 31,
 
   
2011
   
2010
 
             
On December 23, 2010 the Company entered into a convertible promissory note with an investment firm in the amount of $10,000. Terms include simple interest at twelve percent (12.0%), the note is due on December 23, 2011 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    10,000       -  
                 
On January 10, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $15,000. Terms include simple interest at twelve percent (12.0%), the note is due on January 10, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    15,000       -  
                 
On February 7, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $10,000. Terms include simple interest at twelve percent (12.0%), the note is due on February 7, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    10,000       -  
                 
On February 11, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $12,000. Terms include simple interest at twelve percent (12.0%), the note is due on February 11, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    12,000       -  
                 
On March 2, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $12,500. Terms include simple interest at twelve percent (12.0%), the note is due on March 2, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    12,500       -  
                 
On March 11, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $20,000. Terms include simple interest at twelve percent (12.0%), the note is due on March 11, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    20,000       -  

 
23

 
 
   
September 30,
   
December 31,
 
   
2011
   
2010
 
             
On May 9, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $10,000. Terms include simple interest at twelve percent (12.0%), the note is due on May 9, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    10,000       -  
                 
On May 24, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $30,000. Terms include simple interest at twelve percent (12.0%), the note is due on May 24, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    30,000       -  
                 
On June 1, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $15,000. Terms include simple interest at twelve percent (12.0%), the note is due on June 1, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    15,000       -  
                 
On June 20, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $16,000. Terms include simple interest at twelve percent (12.0%), the note is due on June 20, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    16,000       -  
                 
On June 23, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $50,000. Terms include simple interest at twelve percent (12.0%), the note is due on June 23, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    50,000       -  
                 
On July 13, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $14,000. Terms include simple interest at twelve percent (12.0%), the note is due on July 13, 2012 and is convertible at the option of the holder at a price which is the lesser of (i) the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    14,000       -  

 
24

 
 
   
September 30,
   
December 31,
 
   
2011
   
2010
 
             
On July 27, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $15,000. Terms include simple interest at twelve percent (12.0%), the note is due on July 27, 2012 and is convertible at the option of the holder at a price which is the lesser of (i) the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    15,000       -  
                 
On August 1, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $40,000. Terms include simple interest at twelve percent (12.0%), the note is due on August 1, 2012 and is convertible at the option of the holder at a price of $0.001.
    40,000       -  
                 
On August 30, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $5,000. Terms include simple interest at twelve percent (12.0%), the note is due on August 30, 2012 and is convertible at the option of the holder at a price which is the lesser of (i) the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    5,000       -  
                 
On August 31, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $10,000. Terms include simple interest at twelve percent (12.0%), the note is due on August 31, 2012 and is convertible at the option of the holder at a price which is the lesser of (i) the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    10,000       -  
                 
                 
Subtotal Notes Payable -- Related Parties -- NexPhase
    404,500       -  
                 
Total Notes Payable -- Related Parties
  $ 753,845     $ 173,900  

 
25

 
 
Note 5 – Notes Payable – Third Parties
 
   
September 30,
   
December 31,
 
   
2011
   
2010
 
             
On January 17, 2010 the Company entered into a convertible promissory note with an advisory firm for services rendered in the amount of $59,000. Terms include bonus interest of $5,900, the note is payable on demand and has no stated interest rate or due date and is convertible at a rate of $0.03 per share or 1,771667 unregistered common shares. Total payments of $11,750 have been made on this note.
  $ 53,150     $ 53,150  
                 
On February 10, 2010 the Company entered into a convertible promissory note with a project consultant for services rendered in the amount of $7,800. Terms include bonus interest of $780, the note is payable on demand and has no stated interest rate or due date and is convertible at a rate of $0.03 per share or 286,000 unregistered common shares. No payments have been made on this note.
    8,580       8,580  
                 
On February 10, 2010 the Company entered into a convertible promissory note with an engineering firm for services rendered in the amount of $27,600. Terms include bonus interest of $2,760, the note is payable on demand and has no stated interest rate or due date and is convertible at a rate of $0.03 per share or 1,012,000 unregistered common shares. No payments have been made on this note.
    30,360       30,360  
                 
On February 10, 2010 the Company entered into a convertible promissory note with a web designer for services rendered in the amount of $3,150. Terms include bonus interest of $315, the note is payable on demand and has no stated interest rate or due date. On January 3, 2011 the parties amended the terms and conditions of the promissory note as follows:
 
The note was assigned from the web designer to a non-affiliated related party investment firm.  The “Note Conversion Price” shall be adjusted from $0.03 to the par value of the common stock, or $0.001 per share representing 3,465,000 unregistered common shares. No payments have been made on this note.
 
On February 25, 2011 a portion of the note in the amount of $1,316 was converted to Common Stock.
    -       3,465  
                 
On June 7, 2010 the Company entered into a convertible promissory note with an investor in the amount of $10,000. The note is payable on demand and has no stated interest rate or due date and is convertible at a rate of $0.03 per share or 333,333 unregistered common shares. No payments have been made on this note.
    10,000       10,000  

 
26

 
 
   
September 30,
   
December 31,
 
   
2011
   
2010
 
             
On July 19, 2010 the Company entered into a convertible promissory note with an investor in the amount of $2,500. The note is payable on demand and has no stated interest rate or due date and is convertible at a rate of $0.03 per share or 83,333 unregistered common shares. No payments have been made on this note.
    2,500       2,500  
                 
On March 2, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $60,000. Terms include simple interest at eight percent (8.0%), the note is due on December 5, 2011 and is convertible at the option of the holder at a price calculated at a forty percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
 
As of September 30, 2011, a portion of the note in the amount of $34,000 has been converted to Common Stock.
    26,000       -  
                 
On March 1, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $25,000. Terms include simple interest at ten percent (10.0%), the note is due on March 1, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
 
As of September 30, 2011, the note of $25,000 has been converted to Common Stock.
    -       -  
                 
On April 28 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $56,000. Terms include simple interest at eight percent (8.0%), the note is due on January 31 2012 and is convertible at the option of the holder at a price calculated at a forty percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    56,000       -  
                 
On June 20, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $53,000. Terms include simple interest at eight percent (8.0%), the note is due on March 22, 2012 and is convertible at the option of the holder at a price calculated at a forty percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    53,000       -  
                 
On August 24, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $15,000. Terms include simple interest at ten percent (10.0%), the note is due on April 24, 2012 and is convertible at the option of the holder at a price calculated at a fifty percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    15,000       -  

 
27

 
 
   
September 30,
   
December 31,
 
   
2011
   
2010
 
             
On September 1, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $50,000. Terms include simple interest at eight percent (8.0%), the note is due on June 6, 2012 and is convertible at the option of the holder at a price calculated at a forty percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note.
    50,000       -  
                 
                 
Total - Notes Payable -- Third Parties
  $ 304,590     $ 108,055  
 
Note 6 – Executive Compensation Agreement

On January 8, 2010, the Company entered an Executive Employment Agreement effective January 11, 2010 with its Chief Executive Officer. Terms of the agreement include an inception bonus of $150,000 and monthly payments of $15,000. The agreement expires on December 31, 2013.
 
During the three months and nine months ended September 30, 2011 and 2010, the Company recorded executive compensation expenses to the Company's chief executive officer; $45,000 and $135,000 respectively. During the year ended December 31, 2010, the Company paid $22,000 resulting in an accrued employee compensation liability of $443,000 at September 30, 2010.
 
On November 25, 2010, effective with the change in control, the chief executive officer resigned. The executive compensation agreement remains in effect through December 31, 2013.

Note 7 – Executive Office Lease

On January 1, 2011, we entered into a three-year office building lease for our corporate headquarters located in Aventura, Florida. The lease terms include: (i) monthly rent commencing on February 1, 2011 in the amount of $3,794.35 plus sales tax; (ii) triple-net provisions; and (iii) our responsibility for the cost of build-out and partitioning of the space.  Future annual lease payments over the term of the lease are as follows:
 
2011 (remainder) $12,066
2012 $48,264
2013 $48,264
2014 $ 3,794
 
 
28

 
 
Note 8 – Stockholders’ Equity (Deficit) and Common Stock

On June 15, 2010, our Board of Directors and shareholders holding a majority of the total issued and outstanding shares of common stock pursuant to written consents in lieu of a meeting approved an amendment to our Articles of Incorporation to increase the authorized capital (the “2010 Amendment”). The 2010 Amendment was filed with the Nevada Secretary of State on July 22, 2010 increasing our authorized capital from 75,000,000 shares of common stock to 350,000,000 shares of common stock, par value $0.001, and 100,000,000 shares of preferred stock, par value $0.001.  
 
On January 18, 2011, our Board of Directors and shareholders holding a majority of the total issued and outstanding shares of common stock pursuant to written consents in lieu of a meeting approved a further amendment to our Articles of Incorporation to increase the authorized capital (the “2011 Amendment”). The 2011 Amendment was filed with the Nevada Secretary of State on January 19, 2011 increasing our authorized capital from 350,000,000 shares of common stock to 750,000,000 shares of common stock, par value $0.001, and 100,000,000 shares of preferred stock, par value $0.001.

As of June September 30, 2011 and December 31, 2010, there were a total of 373,014,903 and 116,890,258 common shares issued and 372,770,903 and 116,890,258 outstanding, respectively.

The Company’s first and second stock issuances took place pursuant to the Plan of Reorganization confirmed by the Bankruptcy Court:  On December 12, 2007, the Court ordered the distribution of shares in the Company to all general unsecured creditors of Arrin Systems, Inc.  ("Arrin"), with these creditors to receive one share in InfoSpi for each $2.94 of Arrin’s debt which they held. These creditors received an aggregate of 567,324 shares in the Company on December 31, 2007.

On February 4, 2008 the Company issued a total of 4,000,000 shares of common stock to an Officer and Director in exchange for $4,000 in cash to be used as operating capital for the Company.  The shares were issued at a price of $0.001 per share, which is their par value.

The Court also ordered the distribution of shares and warrants in the Company to all administrative creditors of Arrin, with these creditors to receive one share and five warrants in InfoSpi for each $0.10 of Arrin's administrative debt which they held. On January 15, 2008, these creditors received an aggregate of 1,000,000 common shares in the Company and 5,000,000 warrants.

On October 28, 2009 and effective September 23, 2009, our Board of Directors pursuant to unanimous written consent authorized the issuance of an aggregate 35,851,505 shares of restricted common stock at $0.003 per share in exchange for prior services rendered including, but not limited to, introduction to potential funding arrangements and various strategic partners. Factors considered by the Board in determining the fair value of the 35,851,515 shares of common stock included:

1.  
A lack of  observable market price because of the minimal volume of shares that had been traded on any independent market since inception of the Company,
2.  
The large number of shares being issued compared to the number of shares of common stock outstanding prior to the stock issuance,
3.  
The Company’s issuance of  28,571,429 shares for 5,000,000 warrants converted to common stock effective September 22,2009 at an issuance price of $0.001 per share,
4.  
The unregistered status of the shares which limits the marketability of the shares,
5.  
The fact that issuance of these shares does not change who is in control of the Company, and
6.  
The estimated value of the services provided.
 
 
29

 

On November 13, 2009 and effective September 22, 2009, our Board of Directors pursuant to unanimous written consent acknowledged the warrants and authorized the exchange of 5,000,000 warrants and issuance of an aggregate 28,571,429 shares of our common stock at a per share price of $0.001 (par value).

On October 7, 2010, the Board of Directors approved the issuance of 14,400,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated July 19, 2010 in the amount of $15,400 including bonus interest. In accordance with the terms of the note, the shares were issued at $0.001 per share.
 
Effective on November 25, 2010, in accordance with the appointment of Dror Svorai as our sole executive officer, President/Chief Executive Officer, Secretary, Treasurer/Chief Financial Officer, and our sole director, we issued an aggregate 12,500,000 shares of restricted common stock to Svorai at $0.001 per share. The Board of Directors evaluated certain factors regarding the issuance including, but not limited to, the following: (i) the 12,5000,000 shares of common stock are restricted and cannot be resold except under the parameters of Rule 144; (ii) the opportunity for successful new business operations for us based upon the engagement of Svorai and the opportunities and business contacts provided to us through his engagement; and (iii) our inability to monetarily compensate Dror Svorai and recognition of his current and continuous dedication and long-term loyalty to us.

On December 1, 2010, we entered into an agreement (the “FIS Agreement”) with Financial Insights & Solutions Inc. (“FIS”). In accordance with the terms and provisions of the FIS Agreement: (i) FIS shall provide consulting services to us in the form of a senior administrator support for business transactions and coordination of outside legal and accounting services and other corporation matters and general business counsel relating to our overall business; (ii) we shall pay FIS an hourly rate of $175.00 for performance of such services; and (iii) issue to FIS 4,000,000 shares of our restricted common stock.

On December 10, 2010, we entered into a consulting agreement (the “CEC Consulting Agreement”) with Corporate Excellence Consulting LLC (“CEC”). In accordance with the terms and provisions of the CEC Consulting Agreement: (i) CEC shall perform such services in connection with business development and marketing and growth capital funding; and (ii) we shall issue to CEC 16,000,000 shares of our restricted common stock.

Effective February 22, 2011, we entered into a termination and settlement agreement (the “Termination Agreement”) with CEC. In accordance with the terms and provisions of the Termination Agreement: (i) CEC is to return share certificate no. 1332 evidencing the issuance of the 16,000,000 shares of common stock, which have been cancelled and returned to treasury; and (ii) we shall issue to CEC 2,000,000 shares as settlement for services rendered by CEC to us.

Effective on February 14, 2011, the Board of Directors of the Company approved and authorized the execution of a definitive agreement dated February  14, 2011 (the “Agreement”) among the Company, NexPhase Lighting, Inc., a privately held Florida corporation (“NexPhase”)., and the shareholders of NexPhase (the “NexPhase Shareholders”). In accordance with the terms and provisions of the Agreement: (i) the Company acquired from the NexPhase Shareholders an aggregate 55,622,000 shares of common stock of NexPhase representing the total issued and outstanding shares of NexPhase; (ii) in exchange thereof, the Company issued to the NexPhase Shareholders an aggregate 67,500,000 shares of its restricted common stock generally in proportion to the equity holdings of the NexPhase Shareholders; (iii) NexPhase transferred and assigned to the Company all existing material contracts including those related to distribution, licensing and marketing and those dealing with the grant of rights for the use of any and all intellectual property; (iv) the Company assumed all other assets of NexPhase, including licenses, royalty rights, equipment, product designs, marketing and sale materials, logos, trademarks, copyrights and website; and (v) the Company further assumed all liabilities of NexPhase, including all trade and debt obligations.
 
The parties agreed to value the transaction as follows: value based on the patent appraisal and other corporate asset and on-going operations of $18,000,000; agreed discount to value based on the cost to “perfect” the patent and need for additional capital funding to maintain the on-going operations of the subsidiary $17,400,000; agreed value of the transaction: $600,000; agreed number of shares issued 67,500,000.
 
 
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On February 25, 2011, the Board of Directors approved the issuance of 1,315,790 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated February 10, 2010 in the amount of $1,316. In accordance with the terms of the note, the shares were issued at $0.001 per share.

On March 10, 2011, the Board of Directors approved the issuance of 4,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 21, 2010 in the amount of $4,000. In accordance with the terms of the note, the shares were issued at $0.001 per share.
 
On March 15, 2011, we entered into a consulting agreement with Kodial Capital (“Kodial”). In accordance with the terms and provisions of the agreement: (i) Kodial shall perform such services in connection with business development and marketing and growth capital funding; and (ii) we shall issue to Kodial 1,666,667 shares of our restricted common stock.

On March 17, 2011, we entered into a consulting agreement with Tracy Clinton (“Clinton”). In accordance with the terms and provisions of the agreement: (i) Clinton shall perform such services in connection with business development and marketing and growth capital funding; and (ii) we shall issue to Clinton 100,000 shares of our restricted common stock.

On March 23, 2011, we entered into a consulting agreement with Eric Weinberger (“Weinberger”). In accordance with the terms and provisions of the agreement: (i) Weinberger shall perform such services in connection with business development and marketing and growth capital funding; and (ii) we shall issue to Weinberger 1,000,000 shares of our restricted common stock.

On March 23, 2011, we entered into a consulting agreement with Dominick Falso (“Falso”). In accordance with the terms and provisions of the agreement: (i) Falso shall perform such services in connection with business development and marketing and growth capital funding; and (ii) we shall issue to Faslo 1,250,000 shares of our restricted common stock.

On March 23, 2011, we entered into a consulting agreement with Michael Zoyes (“Zoyes”). In accordance with the terms and provisions of the agreement: (i) Zoyes shall perform such services in connection with business development and marketing and growth capital funding; and (ii) we shall issue to Zoyes 1,000,000 shares of our restricted common stock.

On March 23, 2011, the Board of Directors approved the issuance of 2,032,521 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated March 21, 2011 in the amount of $12,500. In accordance with the terms of the note, the shares were issued at $0.006 per share.

On March 29, 2011, we filed a Certificate of Amendment with the Nevada Secretary of State in order to change our name from “InfoSpi Inc.” to “Onteco Corporation” (the “Name Change”). The Name Change was effective with the Nevada Secretary of State on March 29, 2001 when the Certificate of Amendment was filed. The Name Change was approved by our Board of Directors pursuant to written consent resolutions dated March 15, 2011 and further approved by certain shareholders holding a majority of our total issued and outstanding shares of common stock pursuant to written consent resolutions dated March 16, 2011.
 
We filed the appropriate documentation with FINRA in order to effectuate the Name Change in the OTC Markets. The Name Change was effected on the OTC Markets April 11, 2011. Our new cusip number is 683311104.
 
 
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Therefore, as of the date of this Report, our trading symbol is “ONTC”. Our management deemed it appropriate to change our name to Onteco Corporation in furtherance of and to better reflect the nature of our new business operations.
 
On March 31, 2011 the Company entered into a stock repurchase agreement with five NexPhase investors to repurchase 244,000 shares of Common Stock acquired in the NexPhase acquisition. Terms include principal and premium interest of ten percent (10.0%), the note is due on June 30, 2012.
On April 5, 2011, we entered into a consulting agreement with Virmmac, LLC (“Virmmac”). In accordance with the terms and provisions of the agreement: (i) Virmmac shall perform such services in connection with business development and marketing and growth capital funding; and (ii) we shall issue to Virmmac 1,200,000 shares of our restricted common stock.
 
On April 7, 2011, the Board of Directors approved the issuance of 9,500,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 21, 2010 in the amount of $9,500. In accordance with the terms of the note, the shares were issued at $0.001 per share.

On April 7, 2011, the Board of Directors approved the issuance of 9,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 4, 2010 in the amount of $18,000. In accordance with the terms of the note, the shares were issued at $0.002 per share.

On April 13, 2011, the Board of Directors approved the issuance of 1,875,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated March 21, 2011 in the amount of $7,500. In accordance with the terms of the note, the shares were issued at $0.004 per share.

On May 4, 2011, the Board of Directors approved the issuance of 5,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 21, 2010 in the amount of $5,000. In accordance with the terms of the note, the shares were issued at $0.001 per share.

On May 23 2011, we entered into a consulting agreement with Charles Neustein (“Neustein”). In accordance with the terms and provisions of the agreement: (i) Neustein shall perform such services in connection with business development and marketing and growth capital funding; and (ii) we shall issue to Neustein 1,000,000 shares of our restricted common stock.

On May 23, 2011, the Board of Directors approved the issuance of 10,500,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 21, 2010 in the amount of $10,500. In accordance with the terms of the note, the shares were issued at $0.001 per share.

On May 26, 2011, the Board of Directors approved the issuance of 3,076,924 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated March 21, 2011 in the amount of $10,000. In accordance with the terms of the note, the shares were issued at $0.003 per share.
 
 
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On June 7, 2011, we entered into a consulting agreement with Virmmac, LLC (“Virmmac”). In accordance with the terms and provisions of the agreement: (i) Virmmac shall perform such services in connection with business development and marketing and growth capital funding; and (ii) we shall issue to Virmmac 2,000,000 shares of our restricted common stock.

On June 10, 2011, the Board of Directors approved the issuance of 11,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 4, 2010 in the amount of $11,000. In accordance with the terms of the note, the shares were issued at $0.001 per share.

On June 20, 2011, the Board of Directors approved the issuance of 12,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 21, 2010 in the amount of $12,000. In accordance with the terms of the note, the shares were issued at $0.001 per share.

On June 21, 2011, the Board of Directors approved the issuance of 4,395,605 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated March 21, 2011 in the amount of $20,000. In accordance with the terms of the note, the shares were issued at $0.0045 per share.

On July 20, 2011, the Board of Directors approved the issuance of 10,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated December 23, 2010 in the amount of $10,000. In accordance with the terms of the note, the shares were issued at $0.001 per share.
 
On August 23, 2011, the Board of Directors approved the issuance of 10,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 21, 2010 in the amount of $10,000. In accordance with the terms of the note, the shares were issued at $0.001 per share.

On August 23, 2011, the Board of Directors approved the issuance of 10,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated December 23, 2010 in the amount of $10,000. In accordance with the terms of the note, the shares were issued at $0.001 per share.

On August 23, 2011, the Board of Directors approved the issuance of 4,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated December 23, 2010 in the amount of $4,000. In accordance with the terms of the note, the shares were issued at $0.001 per share.

On August 24, 2011, the Board of Directors approved the issuance of 9,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 4, 2010 in the amount of $9,000. In accordance with the terms of the note, the shares were issued at $0.001 per share.

On September 1, 2011, the Board of Directors approved the issuance of 15,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated December 23, 2010 in the amount of $15,000. In accordance with the terms of the note, the shares were issued at $0.001 per share.

On September 3, 2011, the Board of Directors approved the issuance of 11,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 4, 2010 in the amount of $11,000. In accordance with the terms of the note, the shares were issued at $0.001 per share.
 
 
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On September 8, 2011, the Board of Directors approved the issuance of 14,449,292 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated March 1, 2011 in the amount of $26,500. In accordance with the terms of the note, the shares were issued at $0.002 per share.

On September 12, 2011, the Board of Directors approved the issuance of 16,500,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated December 23, 2010 in the amount of $16,500. In accordance with the terms of the note, the shares were issued at $0.001 per share.

On September 15, 2011, the Board of Directors approved the issuance of 5,217,391 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated March 1, 2011 in the amount of $12,000. In accordance with the terms of the note, the shares were issued at $0.002 per share.

On September 21, 2011, the Board of Directors approved the issuance of 4,545,455 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated March 1, 2011 in the amount of $10,000. In accordance with the terms of the note, the shares were issued at $0.002 per share.

On September 27, 2011, the Board of Directors approved the issuance of 10,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated March 1, 2011 in the amount of $12,000. In accordance with the terms of the note, the shares were issued at $0.0012 per share.
 
Note 9 – Income Taxes

The Company accounts for income taxes for financial statement recognition of the impact of a tax position, if that position is more likely than not to be sustained on examination, based on the technical merits of the position.  Based on management's assessment, the Company's results of operations or financial position required no adjustments.  The period-end analysis supports the conclusion that the Company does not have an accrual for uncertain tax positions as of September 30, 2011.  If interest and penalties were to be assessed, the Company would charge interest to interest expense and penalties to other operating expense.  It is not anticipated that unrecognized tax benefits would significantly increase or decrease within twelve (12) months of the reporting date.

The Company provides for a net deferred tax asset/liability equal to the expected future tax benefit/expense of temporary reporting differences between book and tax accounting methods and any available operating loss or tax credit carryforwards.  The Company has incurred net operating losses of $1,505,389, which expire in 2025.

The amount of and ultimate realization of the benefits from the operating loss carry-forwards for income tax purposes is dependent, in part, upon the tax laws in effect, the future earnings of the Company, and other future events, the effects of which cannot be determined.  Because of the uncertainty surrounding the realization of the loss carryforwards, the Company has established a valuation allowance equal to the tax effect of the loss carryforwards and, therefore, no deferred tax asset has been recognized for the loss carryforwards.  The net deferred tax asset is approximately $nil as of September 30, 2011, for which the Company recorded a valuation allowance because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.
 
 
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The components of the net deferred tax asset at September 30, 2011 and 2010 and the statutory tax rate, the effective tax rate and the elected amount of the valuation allowance are indicated below:

               
For the Period
 
               
December 31, 2007
 
               
(Inception) to
 
   
Nine Months Ended September 30,
   
September 30,
 
   
2011
   
2010
    2011  
                   
Net operating losses carried forward
  $ 727,648     $ 335,604     $ 1,505,389  
Statutory tax rate
    37.6 %     37.6 %     37.6 %
Effective tax rate
    -       -       -  
Deferred tax asset
    274,000       126,000       566,000  
Change in valuation allowance
    (274,000 )     (126,000 )     (566,000 )
                         
Actual tax expense
  $ -     $ -     $ -  
 
Note 10 – Related Party Transactions

The officers and directors for the Company are involved in other business activities and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interest. The Company has not formulated a policy for the resolution of such conflicts.

Note 11 – Commitments and Contingencies

As of the date of this Report, we have entered into the following material commitments:

On January 8, 2010, the Company entered an Executive Employment Agreement effective January 11, 2010 with the previous Chief Executive Officer.  Terms of the agreement include an (inception bonus) of $150,000 and monthly payments of $15,000.  The agreement expires on December 31, 2013.
 
On January 1, 2011, we entered into a three-year office building lease for our corporate headquarters located in Aventura, Florida. The lease terms include: (i) monthly rent commencing on February 1, 2011 in the amount of $3,794.35 plus sales tax; (ii) triple-net provisions; and (iii) our responsibility for the cost of build-out and partitioning of the space.

During the nine months ended September 30, 2011 and the year ended December 31, 2010, the company executed a series of notes payable as reflected in the schedule presented in Note #4 and #5.
 
 
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Note 12 – Consulting Agreement

On March 1, 2009, we entered into a consulting agreement (the “Consulting Agreement”) with an advisory firm. In accordance with the terms and provisions of the Consulting Agreement: (i) we are to pay monthly fees in the amount of $5,000 and reimburse expenses up to $9,000 previously incurred; (ii) the advisory firm shall provide services including, but not limited to, economic analysis, economic forecast, negotiate and endeavor to arrange sales and/or purchases and/or distribution agreements and/or joint venture agreements on a best efforts basis; and (iii) either party can terminate upon a 90-days written notice.

On January 17, 2010, the agreement was terminated by mutual consent. The parties entered into a convertible promissory demand note in exchange for the outstanding balance of $59,000. Terms include a bonus payment (simple interest at 10%) in the amount of $5,900. The note includes a voluntary conversion feature allowing the holder to convert all or part of the amount outstanding into fully paid, non-assessable whole shares of the Company at a rate of $0.03 per share. The note has no stated due date.

Note 13 – Subsequent Events

On October 14, 2011, the Board of Directors approved the issuance of 12,500,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated March 1, 2011 in the amount of $10,000. In accordance with the terms of the note, the shares were issued at $0.0008 per share.

On October 20, 2011, the Board of Directors approved the issuance of 10,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated March 1, 2011 in the amount of $8,000. In accordance with the terms of the note, the shares were issued at $0.0008 per share.
 
On October 28, 2011, the Board of Directors approved the issuance of 9,375,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated March 1, 2011 in the amount of $7,500. In accordance with the terms of the note, the shares were issued at $0.0008 per share.

Effective October 31, 2011, the Board of Directors of the Company authorized the issuance of an aggregate 150,000 shares of Series A Preferred stock and an aggregate 70,000,000 shares of restricted common stock to Dror Svorai, its President/Chief Executive Officer and a member of the Board of Directors (“Svorai”). The Board of Directors had previously authorized the creation of 1,000,000 shares of preferred stock from the Corporation’s authorized capital. The Board of Directors further designated and authorized the issuance 150,000 shares of Series A Preferred Stock and 70,000,000 shares of common stock to Svorai for the period November 24, 2010 through November 23, 2011 based upon recognition of the outstanding services, leadership and innovative business operational strategies provided by Svorai and his continuous dedication and loyalty to the Company.

The shares of Series A Preferred stock carry certain rights and preferences, including voting rights consisting of ten thousand votes for each one shares of Series A Preferred stock. The shares of Series A preferred stock are convertible into shares of common stock on a one-to-one thousand share basis.

On November 4, 2011, our Board of Directors and shareholders holding a majority of the total issued and outstanding shares of common stock pursuant to written consents in lieu of a meeting approved a further amendment to our Articles of Incorporation to increase the authorized capital (the “November 2011 Amendment”). The November 2011 Amendment was filed with the Nevada Secretary of State on November 4, 2011 increasing our authorized capital from 750,000,000 shares of common stock to 2,000,000,000 shares of common stock, par value $0.001, and 100,000,000 shares of preferred stock, par value $0.001.

On November 4, 2011, the Board of Directors approved the issuance of 3,918,919 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated March 1, 2011 in the amount of $500. In accordance with the terms of the note, the shares were issued at $0.00074 per share.

The Company has evaluated subsequent events through the date the financial statements were issued and filed with Securities and Exchange Commission. The Company has determined that there are no other events that warrant disclosure or recognition in the financial statements.
 
 
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FORWARD LOOKING STATEMENTS

Statements made in this Form 10-Q that are not historical or current facts are "forward-looking statements" made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 (the "Act") and Section 21E of the Securities Exchange Act of 1934. These statements often can be identified by the use of terms such as "may," "will," "expect," "believe," "anticipate," "estimate," "approximate" or "continue," or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management's best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.
 
 
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ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
BUSINESS DEVELOPMENT
 
Onteco Corporation, formerly known as InfoSpi, Inc., was organized under the laws of the State of Nevada on December 31, 2007 as part of the implementation of the Chapter 11 plan of reorganization of Arrin Systems, Inc. ("Arrin"). Arrin filed for Chapter 11 Bankruptcy in April 2007 in the U.S. Bankruptcy Court for the Southern District of California. Arrin's plan of reorganization was confirmed by the U.S. Bankruptcy Court for the Southern District of California on December 12, 2007 and became effective on December 30, 2007. The plan of reorganization provided for our establishment and the sale to us of Arrin's proprietary software (used in the employee background screening industry) in exchange for 567,324 shares of our common stock, which were distributed to Arrin's general unsecured creditors. The shares of common stock were distributed to Arrin’s general unsecured creditors pursuant to section 1145 of the Bankruptcy code and were exempt from the registration requirements of Section 5 of the Securities Act of 1933 and any state or local law requiring registration for an offer or sale of securities.

Share Purchase Agreement

Effective on November 25, 2010, Eilay Maman and Oyster Shell Investments LLLP (collectively, the “Seller”), who are the record holders of an aggregate 28,915,810 shares of our common stock entered into a share purchase agreement dated November 25, 2010 (the “Share Purchase Agreement”) with Dror Svorai, our current President/Chief Executive Officer (“Svorai”). In accordance with the terms and provisions of the Share Purchase Agreement, the Seller sold the 28,915,810 shares of restricted common stock to Svorai at a price of $0.011 per share for a total purchase price of $325,000.00. The terms and provisions of the Share Purchase Agreement provide that: (i) $150,000 is to be paid upon execution; (ii) $50,000 is due and owing on January 15, 2011; (iii) $50,000 is due and owing on February 15, 2011; and (iv) $75,000 is due and owing on March 15, 2011. As of the date of this Quarterly Report, an aggregate amount of $275,000 has been paid to the Seller. The parties have agreed that the final payment due date of March 15, 2011 is extended to April 30, 2011. Until the purchase price is paid in full by Svorai, the shares of common stock are being held in an escrow account to be released pro-rata to Svorai as the installments are paid to the Seller by Svorai. The sale and purchase of the 28,915,810 shares of our common stock constituted approximately 29.8% of the total issued and outstanding shares.
 
RECENT DEVELOPMENTS

Certificate of Amendment – Increase in Authorized Common Stock

On November 4, 2011, our Board of Directors and shareholders holding a majority of the total issued and outstanding shares of common stock pursuant to written consents in lieu of a meeting approved an amendment to our Articles of Incorporation to increase the authorized capital (the “November 2011 Amendment”). The November 2011 Amendment was filed with the Nevada Secretary of State on November 14, 2011 increasing our authorized capital from 750,000 shares of common stock to 2,000,000,000 shares of common stock, par value $0.001, and 100,000,000 shares of preferred stock, par value $0.001.

The Board of Directors of the Corporation may authorize the issuance from time to time of shares of its stock of any class, whether now or hereafter authorized, or securities convertible into shares of its stock of any class, whether now or hereafter authorized, for such consideration as the Board of Directors may deem advisable, subject to such restrictions or limitation, if any, as may be set forth in the bylaws of the Corporation.
 
 
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Certificate of Amendment – Name Change

On March 29, 2011, we filed a Certificate of Amendment with the Nevada Secretary of State in order to change our name from “InfoSpi Inc.” to “Onteco Corporation” (the “Name Change”). The Name Change was effective with the Nevada Secretary of State on March 29, 2001 when the Certificate of Amendment was filed. The Name Change was approved by our Board of Directors pursuant to written conent resolutions dated March 15, 2011 and further approved by certain shareholders holding a majority of our total issued and outstanding shares of common stock pursuant to written consent resolutions dated March 16, 2011.

We filed the appropriate documentation with FINRA in order to effectuate the Name Change in the OTC Markets. The Name Change was effected on the OTC Markets April 11, 2011. Our new cusip number is 683311104.

Therefore, as of the date of this Quarterly Report, our trading symbol is “ONTC”. Our management deemed it appropriate to change our name to Onteco Corporation in furtherance of and to better reflect the nature of our new business operations.

Please note that throughout this Quarterly Report, and unless otherwise noted, the words "we," "our," "us," the "Company," or "InfoSpi" or “Onteco Corporation” refers to Onteco Corporation.

Certificate of Amendment to Articles of Incorporation

On January 18, 2011, our Board of Directors and shareholders holding a majority of the total issued and outstanding shares of common stock pursuant to written consents in lieu of a meeting approved a further amendment to our Articles of Incorporation to increase the authorized capital (the “January 2011 Amendment”). The January 2011 Amendment was filed with the Nevada Secretary of State on January 19, 2011 increasing our authorized capital from 350,000 shares of common stock to 750,000,000 shares of common stock, par value $0.001, and 100,000,000 shares of preferred stock, par value $0.001.

The preferred stock may also be issued by the Corporation from time to time in one or more series and in such amounts as may be determined by the Board of Directors. The designations, voting rights, amounts of preference upon distribution of assets, rates of dividends, premiums of redemption, conversion rights and other variations, if any, the qualifications, limitations or restrictions thereof, shall be such as are fixed by the Board of Directors, authority so to do being hereby expressly granted and as are stated and expressed in a resolution or resolutions adopted by the Board of Directors providing for the issue of such series of preferred stock.”

CURRENT OPERATIONS

Agreement
 
Effective on February 14, 2011, our Board of Directors approved and authorized the execution of a definitive agreement dated February 14, 2011 (the “Agreement”) with NexPhase Lighting, Inc., a privately held Florida corporation (“NexPhase”)., and the shareholders of NexPhase (the “NexPhase Shareholders”). In accordance with the terms and provisions of the Agreement: (i) we acquired from the NexPhase Shareholders an aggregate 60,622,000 shares of common stock of NexPhase representing the total issued and outstanding shares of NexPhase; (ii) in exchange therefore, we issued to the NexPhase Shareholders an aggregate 67,500,000 shares of its restricted common stock in proportion to the equity holdings of the NexPhase Shareholders; (iii) NexPhase transferred and assigned to us all existing material contracts including those related to distribution, licensing and marketing and those dealing with the grant of rights for the use of any and all intellectual property; (iv) we assumed all other assets of NexPhase, including licenses, royalty rights, equipment, product designs, marketing and sale materials, logos, trademarks, copyrights and website; and (v) we further assumed certain liabilities of NexPhase, including all trade and debt obligations.  Therefore, as of the date of this Quarterly Report, NexPhase has become our wholly-owned subsidiary.
 
 
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Business Operations
 
NexPhase is in the business of designing, developing , manufacturing and marketing a high quality and high efficiency full line of LED intelligent lighting fixtures and control systems for commercial applications and projects involving both new construction and retrofits (the “LED Lighting Fixtures”). NexPhase uses the highest quality products in the manufacture of its LED Lighting Fixtures which provides customers with an approximate six-year or 50,000 hour warrant y on its fixtures. By utilizing Cree LEDs and photo-metrics and thermal management in the manufacture of the LED Lighting Fixtures, management believes that the NexPhase LED Lighting Fixtures of are of the highest quality and most reliable in lighting products. The LED Lighting Fixtures are as follows: (i) downlight troffer; (ii) reflective troffer, which adds an architectural flair to any space; (iii) high-bay fixtures, which provide a 50-70% energy savings over metal halide and high pressure sodium high bays; (iv) low-bay and parking garage fixtures, which provide a 50-70% savings over metal halide and high pressure sodium high bays; (v) MR-16 lamps with approximate 90% energy savings over conventional MR-16 with significantly less heat; and (vi) PAR 38 lamsp with approximately 90% energy savings over conventional MR-16 with significantly less heat.
 
Purchase Orders
 
We received an order on March 16, 2011 to supply over 800 units of our 5 watt MR16 and 15 watt PAR38 lamped LED product to the 1060 Brickell Avenue Condominium Association. The products have been on trial at the two tower facility since July 2010 and January 2011, the board of directors of the condominium association approved the first phase of LED adoption in the buildings. The 5 watt MR16 product is primarily used in the interior of the building and will be deployed throughout the lobby and residential areas. It will be replacing 10 watt halogen lamps. The 15 watt PAR 38 product will be used mainly in the exterior entrance area and will be replacing 100 watt halogen lamps. Management believes that the first phase of the LED retrofit project is projected to save the association about $4,000 monthly in electricity costs with a full payback in approximately one year.
 
We received our first sales channel order for multiple units of our LED 100 watt High Bay fixture for warehouse use from a large south-Florida based retailer. In this installation, we will replace 400 watt conventional light source fixtures with the 100 watt LED technology. Management believes that the LED fixtures will provide the warehouse significant energy savings while also providing much greater life hours and better delivered light.
 
Ingredient Branding and Trademark License Agreement
 
On March 3, 2011, we entered into an ingredient branding and trademark license agreement (the “Branding and License Agreement”) with Cree, Inc. (“Cree”), which is a market-leading innovator of lighting class LEDs. In accordance with the terms and provisions of the Branding and License Agreement, Cree will provide to us their MX-6 LEDs for use in our troffer. We believe that the MX-6 provides better color consistency and higher reliability than incumbent solutions. The MX-6 delivers higher lumen output without having to compromise between light output and efficacy. We will also be able to display the Cree logo on our website, marketing materials and packaging.
 
U.S. Patent
 
On February 10, 2011, we filed a patent application with the United States Patent, Trademark and Copyright Office (the “Patent”).  The Patent is a utility patent that covers our intelligent solution, We intend to make corresponding international, regional or national filings to pursue further patent protection. We also license and have cross-licensing arrangements with respect to third party technologies that are incorporated into some elements of our design activities, products and manufacturing processes.
 
 
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATION

The summarized financial data set forth in the table below is derived from and should be read in conjunction with our unaudited financial statements for the period from inception (December 31, 2007) through September 30, 2011, including the notes to those financial statements which are included in this Quarterly Report. The following discussion should be read in conjunction with our unaudited 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. Our unaudited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.

We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.

STATEMENT OF OPERATIONS
 
Nine Month Periods Ended
September 30, 2011 and June 30, 2010
   
For the Period from December 29, 2003 (inception) to September 30, 2011
                 
Revenue
  $ 282,461     $ -0-     $ 282,461  
Cost of Goods Sold
    36,229       -0-       36,229  
Gross Profit
    246,232       -0-       246,232  
                     
Expenses
                   
General and administrative expenses
    99,512       12,786       177,122  
Stock-Based Compensation
    -0-       -0-       290,055  
Investor Relations
    145,512       -0-       145,512  
Occupancy-Headquarters
    53,546       -0-       58,848  
Officer Compensation
    115,176       285,000       450,176  
Professional Fees
    97,833       13,163       137,785  
Staff Compensation
    352,899       12,000       367,899  
Total Expenses
    864,478       322,949       1,627,397  
                         
Operating Income (Loss)
    (618,246 )     (322,949 )     (1,381,165 )
                     
Other Expenses
                   
     Loss on Disposition of Asset
  $ -0-     $ -0-     $ 567  
     Write-off Amount Due from Others
    -0-       1,000       1,000  
     Depreciation
    7,402       -0-       7,402  
     Interest Expense
    74,400       11,655       87,655  
     Write-off Project Development
    27,600       -0-       27,600  
Total Other Expenses
    109,402       12,655       124,224  
                         
Net Income (Loss)
    (727,648 )     (335,604 )     (1,505,389 )
 
BALANCE SHEET DATA
 
September 30, 2011
   
December 31, 2010
 
Total Assets
  $ 3,323,9215     $ 125,178  
Total Liabilities
    1,615,291       591,897  
Total Stockholders’ Equity (Deficit)
    1,708,634       (466,719 )

 
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RESULTS OF OPERATION

Nine Month Period Ended September 30, 2011 Compared to Nine Month Period Ended September 30, 2010.

Our net loss for the nine month period ended September 30, 2011 was ($727,648) compared to a net loss of ($335,604) for the nine month period ended September 30, 2010 (an increase of $392,044). During the nine month period ended September 30, 2011, we generated total revenue in the amount of $282,461 resulting from the sale of our NexPhase lighting products. During the nine month period ended September 30, 2011, our cost of goods sold was $36,229 resulting in a net profit of $246,232. During the nine month period ended September 30, 2010, we did not generate any revenue from operations.

During the nine month period ended September 30, 2011, we incurred operating expenses of $864,478 compared to operating expenses of $322,949 incurred during the nine month period ended September 30, 2010 (an increase of $541,529). The operating expenses incurred during the nine month period ended September 30, 2011 consisted of: (i) professional fees of $97,833 (2010: $13,163); (ii) general and administrative expenses of $99,512 (2010: $12,786); (iii) officer compensation of $115,176 (2010: $285,000); (iv) staff compensation of $352,899 (2010: $12,000); (v) occupancy – headquarters of $53,546 ($-0-); and (vi) investor relations of $145,512 (2010: $-0-). Our operating expenses increased primarily based on the increased scope and scale of our business operations relating to the acquisition of NexPhase as our wholly-owned subsidiary and marketing and sale of our NexPhase lighting products. Thus, operating expenses increased resulting from an increase of $340,899 in staff compensation, $145,512 in investor relations, $53,546 in occupancy-headquarters, $86,726 in general and administrative expenses and $84,670 in professional fees. General and administrative expenses generally include corporate overhead, financial and administrative contracted services, marketing, and consulting costs.

Therefore, our operating loss incurred during the nine month period ended September 30, 2011 was ($618,246) as compared to an operating loss incurred during the nine month period ended September 30, 2010 of ($322,949).

Other expenses incurred during the nine month period ended September 30, 2011 included: (i) interest expense of $74,400 (2010: $11,655); (ii) depreciation of $7,402 (2010: $-0-); (iii) write off of amount due from other of $-0- (2010: $1,000); and (iv) write off – project development of $27,600 (2010: $-0-).

Therefore, our net loss and loss per share during the nine month period ended September 30, 2011 was ($727,648) or $0.00 per share compared to a net loss and loss per share of ($335,604) or ($0.01) per share during the nine month period ended September 30, 2010. The weighted average number of shares outstanding was 221,326,936 for the nine month period ended September 30, 2011 compared to 29,199,530 for the nine month period ended September 30, 2010.

Three Month Period Ended September 30, 2011 Compared to Three Month Period Ended September 30, 2010.

Our net loss for the three month period ended September 30, 2011 was ($142,119) compared to a net loss of ($70,003) for the three month period ended September 30, 2010 (an increase of $72,116). During the three month period ended September 30, 2011, we generated total revenue in the amount of $203,024 resulting from the sale of our NexPhase lighting products. During the three month period ended September 30, 2011, our cost of goods sold was $219 resulting in a net profit of $202,805. During the three month period ended September 30, 2010, we did not generate any revenue from operations.
 
 
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During the three month period ended September 30, 2011, we incurred operating expenses of $320,306 compared to operating expenses of $68,103 incurred during the three month period ended September 30, 2010 (an increase of $252,203). The operating expenses incurred during the three month period ended September 30, 2011 consisted of: (i) professional fees of $33,580 (2010: $1,988); (ii) general and administrative expenses of $47,454 (2010: $9,115); (iii) officer compensation of $42,176 (2010: $45,000); (iv) staff compensation of $150,229 (2010: $12,000); (v) occupancy – headquarters of $19,367 ($-0-); and (vi) investor relations of $27,500 (2010: $-0-). Our expenses increased primarily based on the increased scope and scale of our business operations relating to the acquisition of NexPhase as our wholly-owned subsidiary and marketing and sale of our NexPhase lighting products. Thus, operating expenses increased resulting from an increase of $138,229 in staff compensation, $27,500 in investor relations, $38,339 in general and administrative expenses, $19,367 in occupancy - headquarters and $31,592 in professional fees.

Therefore, our operating loss incurred during the three month period ended September 30, 2011 was ($117,501) as compared to an operating loss incurred during the three month period ended September 30, 2010 of ($68,103).

Other expenses incurred during the three month period ended September 30, 2011 included: (i) interest expense of $22,151 (2010: $-0-); and (ii) depreciation of $2,467 (2010: $-0-).

Therefore, our net loss and loss per share during the three month period ended September 30, 2011 was ($142,119) or $0.00 per share compared to a net loss and loss per share of ($70,003) or $0.00 per share during the three month period ended September 30, 2010. The weighted average number of shares outstanding was 290,678,921 for the three month period ended September 30, 2011 compared to 29,199,530 the three month period ended September 30, 2010.

LIQUIDITY AND CAPITAL RESOURCES

Nine Month Period Ended September 30, 2011

As of September 30, 2011, our current assets were $280,676 and our current liabilities were $1,615,291, which resulted in a working capital deficit of $1,334,615. As of September 30, 2011, current assets were comprised of: (i) $84,181 in cash; (ii) $143,103 accounts receivable; (iii) $52,851 inventories; and (iv) $541 in prepaid expenses. As of September 30, 2011, current liabilities were comprised of: (i) $33,349 in accounts payable; (ii) $77,829 in accrued interest; (iii) $443,000 in accrued employee compensation; (iv) $753,845 in notes payable – third parties; (v) $304,590 in notes payable – third parties; and (vi) $2,678 in sales tax payable.

As of September 30, 2011, our total assets of $3,323,925 were comprised of: (i) $280,676 in current assets; (ii) $42,933 in fixed assets of net property and equipment; (iii) $11,709 in security deposits; and (iv) $2,988,607 in valuation of investment in NexPhase as our wholly-owned subsidiary. As of September 30, 2011, our total liabilities of $1,615,291 were comprised of current liabilities.

Stockholders’ equity (deficit) decreased from ($466,719) for fiscal year ended December 31, 2010 to $1,708,634 for the nine month period ended September 30, 2011.
 
 
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Cash Flows from Operating Activities

We have not generated positive cash flows from operating activities. For the nine month period ended September 30, 2011, net cash flows used by operations was ($621,959). Net cash flows used in operating activities for the nine month period ended September 30, 2011 consisted of a net loss of ($727,648) adjusted by: (i) $7,402 in depreciation; (ii) $80,685 in stock issued for services; (iii) $27,600 in write-off of project development costs; and (iv) ($84,000) in cancellation of stock issued for services. Net cash flows used by operating activities was further changed by a decrease of: (i) $35,150 due from NexPhase; (ii) $2,678 in sales tax payable; (iii) $135,000 in accrued compensation; and.(iv) $30,858 in accounts payable. Net cash flows used by operating activities was further changed by an increase of: (i) $143,103 in accounts receivable; (ii) $52,851 in inventories; (iii) $541 in prepaid expenses; and (iv) $7,589 in security deposits.

Cash Flows from Investing Activities

For the nine month period ended September 30, 2011, net cash flows used in investing activities was $833 consisting of $14,942 in net cash received from acquisition, which was offset by $15,775 in purchase of property and equipment.

Cash Flows from Financing Activities

We have financed our operations primarily from debt or the issuance of equity instruments. For the nine month period ended September 30, 2011, net cash flows provided from financing activities was $644,545 consisting of $461,450 in proceeds from note payable – non-affiliated related parties and $259,000 in proceeds from issuance of notes payable – third parties, which was offset by $14,905 in payments on notes payable – non-affiliated related parties and $61,000 in purchase of treasury stock.

PLAN OF OPERATION AND FUNDING

As noted above, we have acquired NexPhase as our wholly-owned subsidiary. Our business operations have increased in scale and scope with regards to the development, marketing and sale of our NexPhase lighting products. We have commenced generation of revenues. In connection with our future business plan, management anticipates additional increases in operating expenses and capital expenditures relating to our business operations. We would finance these expenses with further issuances of securities and debt issuances. We expect we would need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities would result in dilution to our current shareholders. Further, such securities may have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all.

MATERIAL COMMITMENTS

As of the date of this Quarterly Report, we do not have any material commitments other than as described below.
 
 
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Convertible Promissory Notes – Non-Affiliated Related Parties - Onteco

On February 10, 2010, we entered into a convertible promissory note with a web designer in the amount of $3,150. The terms of the convertible promissory note included a bonus payment (interest) in the amount of $315 and a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of $0.03 per share.  On January 3, 2011, we amended the terms and conditions of the convertible promissory note regarding the conversion price, which was adjusted from $0.03 to $0.001, the par value of our shares of common stock. No payments have been made on this note. On February 25, 2011, a portion of the note in the amount of $1,316 was converted to common stock.

On August 9, 2010, we entered into a non-interest bearing convertible promissory demand note with a related party investor in the amount of $5,000. The terms of the convertible promissory demand note include a bonus payment (interest) of $500 and a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of $0.03 per share.  The note has no stated due date. No payments have been made on this note.

On August 25, 2010, we entered into a non-interest bearing convertible promissory demand note with a related party investor in the amount of $4,000. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of $0.03 per share.  The note has no stated due date. No payments have been made on this note.

On September 2, 2010, we entered into a non-interest bearing convertible promissory demand note with a related party investor in the amount of $20,000. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of $0.03 per share.  The note has no stated due date. No payments have been made on this note.

On October 13, 2010, we entered into a non-interest bearing convertible promissory demand note with Halevi Mayan Investments in the amount of $3,000. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of $0.01 per share. The note has no stated due date and has a bonus payment of $300 upon payment. No payments have been made on this note.

On November 4, 2010, we entered into a non-interest bearing convertible promissory demand note in the amount of $19,600. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of $0.01 per share. The note has no stated due date and has a bonus payment of $200 upon payment. No payments have been made on this note.

On November 8, 2010, we entered into a non-interest bearing convertible promissory demand note in the amount of $5,500. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of $0.01 per share. The note has no stated due date and has a bonus payment of $500 upon payment. No payments have been made on this note.
 
 
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On November 30, 2010, we entered into a non-interest bearing convertible promissory demand note in the amount of $9,300. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of $0.01 per share. The note has no stated due date and has a bonus payment of $930 upon payment. No payments have been made on this note.

On December 15, 2010, we entered into a convertible promissory demand note with S & E Capital LLC in the amount of $15,500, which bears interest at the rate of 10% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due December 15, 2011.  No payments have been made on this note.

On December 23, 2010, we entered into a convertible promissory demand note with D & D Capital Inc. in the amount of $100,000, which bears interest at the rate of 10% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due December 23, 2011.  No payments have been made on this note. As of September 30, 2011, a portion of the note in the amount of $55,500 has been converted into shares of common stock.

On January 10, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $1,000, which bears interest at the rate of 10% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due January 10, 2012. No payments have been made on this note.

On February 23, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $21,600, which bears interest at the rate of 10% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due February 23, 2012.  No payments have been made on this note.

On March 1, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $60,000, which bears interest at the rate of 10% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due March 1, 2012.  No payments have been made on this note. As of September 30, 2011, a portion of the note in the amount of $49,000 has been converted into shares of common stock.

On March 2, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $6,000, which bears interest at the rate of 10% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due March 2, 2012. No payments have been made on this note.

On March 8, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $105,500, which bears interest at the rate of 10% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due March 8, 2012.  No payments have been made on this note. As of September 30, 2011, a portion of the note in the amount of $100,500 has been converted into shares of common stock.
 
 
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On March 10, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $3,000, which bears interest at the rate of 10% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due March 10, 2012. No payments have been made on this note.

On March 31, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $5,500, which bears interest at the rate of 10% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due March 31, 2012. No payments have been made on this note.

On March 31, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $6,500, which bears interest at the rate of 10% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due March 31, 2012. No payments have been made on this note.

On April 11, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $3,000, which bears interest at the rate of 10% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due April 11, 2012. No payments have been made on this note.

On April 14, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $17,500, which bears interest at the rate of 10% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due April 14, 2012.  No payments have been made on this note.

On April 18, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $1,000, which bears interest at the rate of 10% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due April 18, 2012.  No payments have been made on this note.

On April 18, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $2,000, which bears interest at the rate of 10% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due April 18, 2012.  No payments have been made on this note.

On April 21, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $5,000, which bears interest at the rate of 10% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due April 21, 2012.  No payments have been made on this note.
 
 
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On April 27, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $2500, which bears interest at the rate of 10% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due April 27, 2012.  No payments have been made on this note.

On April 28, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $2,500, which bears interest at the rate of 10% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due April 28, 2012.  No payments have been made on this note.

On May 16, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $15,000, which bears interest at the rate of 10% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due May 16, 2012.  No payments have been made on this note.

On June 1, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $3,000, which bears interest at the rate of 10% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due June 1, 2012.  No payments have been made on this note.

On June 10, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $3,000, which bears interest at the rate of 10% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due June 10, 2012.  No payments have been made on this note.

On June 20, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $6,500, which bears interest at the rate of 10% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due June 20, 2012.  No payments have been made on this note.

On June 24, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $2,000, which bears interest at the rate of 10% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due June 24, 2012.  No payments have been made on this note.

On August 4, 2011, we entered into a convertible promissory demand note in the amount of $15,000. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of $0.001 per share. The note bears interest at the rate of 10% per annum and is due August 4, 2012. No payments have been made on this note.
 
 
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On August 4, 2011, we entered into a convertible promissory demand note in the amount of $20,000. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of $0.001 per share. The note bears interest at the rate of 10% per annum and is due August 4, 2012. No payments have been made on this note.

On August 18, 2011, we entered into a convertible promissory demand note in the amount of $2,500. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of $0.001 per share. The note bears interest at the rate of 10% per annum and is due August 18, 2012. No payments have been made on this note.

On September 13, 2011, we entered into a convertible promissory demand note in the amount of $6,000. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of $0.001 per share. The note bears interest at the rate of 10% per annum and is due September 13, 2012. No payments have been made on this note.

On September 22, 2011, we entered into a convertible promissory demand note in the amount of $1,000. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of $0.001 per share. The note bears interest at the rate of 10% per annum and is due September 22, 2012. No payments have been made on this note.

On September 28, 2011, we entered into a convertible promissory demand note in the amount of $2,000. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of $0.001 per share. The note bears interest at the rate of 10% per annum and is due September 28, 2012. No payments have been made on this note.

Convertible Notes – Non-Affiliated Related Party – NexPhase

On June 21, 2010, we entered into a convertible promissory demand note with an investment firm in the amount of $105,000, which bears interest at the rate of 12% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due June 21, 2011.  No payments have been made on this note. On March 8, 2011, the note was assigned to us. As of September 30, 2011, through a series of common stock conversions, the remaining balance on the note is $14,500.

On August 4, 2010, we entered into a convertible promissory demand note with an investment firm in the amount of $60,000, which bears interest at the rate of 12% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due August 4, 2011.  No payments have been made on this note. On March 1, 2011, the note was assigned to us. As of September 30, 2011, a portion of the note in the amount of $29,000 has been converted to common stock.
 
 
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On November 1, 2010, we entered into a convertible promissory demand note with an investment firm in the amount of $70,000, which bears interest at the rate of 12% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due November 1, 2011.  No payments have been made on this note.

On December 1, 2010, we entered into a convertible promissory demand note with an investment firm in the amount of $10,000, which bears interest at the rate of 12% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due December 1, 2011.  No payments have been made on this note.

On December 8, 2010, we entered into a convertible promissory demand note with an investment firm in the amount of $40,000, which bears interest at the rate of 12% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due December 8, 2011. No payments have been made on this note.

On December 23, 2010, we entered into a convertible promissory demand note with an investment firm in the amount of $10,000, which bears interest at the rate of 12% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due December 23, 2011. No payments have been made on this note.

On January 10, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $15,000, which bears interest at the rate of 12% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due January 10, 2011.  No payments have been made on this note.

On February 7, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $10,000, which bears interest at the rate of 12% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due February 7, 2012. No payments have been made on this note.

On February 11, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $12,000, which bears interest at the rate of 12% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due February 11, 2012.  No payments have been made on this note.

On March 2, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $12,500, which bears interest at the rate of 12% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due March 2, 2012. No payments have been made on this note.
 
 
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On March 11, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $20,000, which bears interest at the rate of 12% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due March 11, 2012.  No payments have been made on this note.

On May 9, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $10,000, which bears interest at the rate of 12% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due May 9, 2012. No payments have been made on this note.

On May 24, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $30,000, which bears interest at the rate of 12% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due May 24, 2012.  No payments have been made on this note.

On June 1, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $15,000, which bears interest at the rate of 12% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due June 1, 2012. No payments have been made on this note.

On June 20, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $16,000, which bears interest at the rate of 12% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due June 20, 2012. No payments have been made on this note.

On June 23, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $50,000, which bears interest at the rate of 12% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due June 23, 2012.  No payments have been made on this note.

On July 13, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $14,000, which bears interest at the rate of 12% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due July 13, 2012. No payments have been made on this note.

On July 27, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $15,000, which bears interest at the rate of 12% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due July 27, 2012. No payments have been made on this note.
 
 
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On August 1, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $40,000, which bears interest at the rate of 12% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due August 1, 2012.  No payments have been made on this note.

On August 30, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $5,000, which bears interest at the rate of 12% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due August 30, 2012. No payments have been made on this note.

On August 31, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $10,000, which bears interest at the rate of 12% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due August 31, 2012. No payments have been made on this note.

Convertible Notes – Third Parties

On January 17, 2010, we entered into a convertible promissory demand note with an advisory firm for services rendered in the amount of $59,000. The terms of the convertible promissory demand note include a bonus payment (interest) of $5,900 and a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of $0.03 per share.  Payments in the amount of $11,750 have been made on this note.

On February 10, 2010, we entered into a convertible promissory demand note with a project consultant for services rendered in the amount of $7,800. The terms of the convertible promissory demand note include a bonus payment (interest) of $780 and a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of $0.03 per share.  No payments have been made on this note.

On February 10, 2010, we entered into a convertible promissory demand note with an engineering firm for services rendered in the amount of $27,600. The terms of the convertible promissory demand note include a bonus payment (interest) of $2,760 and a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of $0.03 per share.  No payments have been made on this note.

On February 10, 2010, we entered into a convertible promissory demand note with a web designer for services rendered in the amount of $3,150. The terms of the convertible promissory demand note include a bonus payment (interest) of $315 and a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of $0.03 per share.  No payments have been made on this note. The note was assigned from the web designer to a non-affiliated related party investment firm. The conversion price was adjusted from $0.03 to $0.001 per share of common stock.  On February 25, 2011, a portion of the note in the amount of $1,316 was converted into shares of common stock.
 
 
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On June 7, 2010, we entered into a convertible promissory demand note in the amount of $10,000. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of $0.03 per share.  No payments have been made on this note.

On July 19, 2010, we entered into a convertible promissory demand note with a project consultant for services rendered in the amount of $2,500. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of $0.03 per share.  No payments have been made on this note.

On March 2, 2011, we entered into a convertible promissory demand note in the amount of $60,000. The terms of the convertible promissory demand note include interest at the rate of 8% per annum and a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at a price calculated at a 40% discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. As of September 30, 2011, a portion of the note in the amount of $34,000 has been converted to common stock.

On March 1, 2011, we entered into a convertible promissory demand note with an investment firm in the amount of $25,000, which bears interest at the rate of 10% per annum. The terms of the convertible promissory demand note include a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at the rate of either the greater of: (i) twice the par value of the common stock; or (ii) a 75% discount to the market closing bid price on the date of the conversion. The note is due March 1, 2012. No payments have been made on this note. As of September 30, 2011, a portion of the note in the amount of $25,000 has been converted to common stock.

On April 28, 20011, we entered into a convertible promissory demand note with an investment firm in the amount of $56,000. The terms of the convertible promissory demand note include interest at the rate of 8% per annum and a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at a price calculated at a 40% discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. The note is due January 31, 2012.

On June 20, 2011, we entered into a convertible promissory demand note in the amount of $53,000. The terms of the convertible promissory demand note include interest at the rate of 8% per annum and a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at a price calculated at a 40% discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. The note is due March 22, 2012.

On August 24, 2011, we entered into a convertible promissory demand note in the amount of $15,000. The terms of the convertible promissory demand note include interest at the rate of 10% per annum and a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at a price calculated at a 50% discount to the market closing bid price on the date of the conversion notice. The note is due April 24, 2012. No payments have been made on this note.

On September 1, 2011, we entered into a convertible promissory demand note in the amount of $50,000. The terms of the convertible promissory demand note include interest at the rate of 8% per annum and a voluntary conversion feature allowing the holder thereof to convert all or a portion of the amount outstanding into shares of our restricted common stock at a price calculated at a 40% discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. The note is due June 6, 2012.
 
 
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Stock Repurchase Agreements

On March 31, 2011, we entered into five separate stock repurchase agreements with those certain NexPhase investors to repurchase an aggregate of 244,000 shares of common stock acquired in the NexPhase acquisition. The terms of the stock repurchase agreement include principal and premium interest of 10%. The notes are due June 30, 2012. As of September 30, 2011, payments on certain of the stock repurchase agreements have been made aggregating $14,905.

Executive Employment Agreement

On January 8, 2010, we entered into an executive employment agreement effective January 11, 2010 with our then President/Chief Executive Officer (the “Executive Employment Agreement”). In accordance with the terms and provisions of the Executive Employment Agreement: (i) we shall pay a monthly fee of $15,000; (ii) we shall pay an inception bonus of $150,000; and (iii) the termination date shall be December 31, 2013. As of September 30, 2011, we accrued executive compensation of $443,000.

The executive officer resigned effective November 25, 2010 pursuant to a change in control. The terms of the Executive Employment Agreement remain in effect through December 31, 2013.

Lease

On January 1, 2011, we entered into a three-year office building lease for our corporate headquarters located in Aventura, Florida. The lease terms include: (i) monthly rent commencing on February 1, 2011 in the amount of $3,794.35 plus sales tax; (ii) triple-net provisions; and (iii) our responsibility for the cost of build-out and partitioning of the space.

PURCHASE OF SIGNIFICANT EQUIPMENT

We do not intend to purchase any significant equipment during the next twelve months.

OFF-BALANCE SHEET ARRANGEMENTS

As of the date of this Quarterly Report, we do not have any 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 are material to investors.

GOING CONCERN

The independent auditors' report accompanying our December 31, 2010 and December 31, 2009 financial statements contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. These unaudited consolidated financial statements have been prepared "assuming that we will continue as a going concern," which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.
 
 
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ITEM III. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Market risk represents the risk of loss that may impact our financial position, results of operations or cash flows due to adverse change in foreign currency and interest rates. 

Exchange Rate

Our reporting currency is United States Dollars (“USD”).  If we distribute and market our products outside of the United States, the fluctuation of exchange rates may have positive or negative impacts on our results of operations. However, all revenue and expenses will be denominated in U.S. Dollars, and the net income effect of appreciation and devaluation of the currency against the U.S. Dollar will be limited to our costs of goods sold.

Interest Rate

Interest rates in the United States are generally controlled. Any potential future loans will relate mainly to acquisition of properties and will be mainly short-term. However our debt may be likely to rise in connection with expansion and if interest rates were to rise at the same time, this could have a significant impact on our operating and financing activities. We have not entered into derivative contracts to hedge existing risks for speculative purposes.

ITEM IV. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

Management performed an evaluation under the supervision and with the participation of our prior management, including our prior Chief Executive Officer/Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our management concluded that our disclosure controls and procedures were not effective as of September 30, 2011 to provide reasonable assurance that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act. Our management is also required to assess and report on the effectiveness of our internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 ("Section 404"). Based on that evaluation, our management concluded that our internal controls over financial reporting were not effective as of September 30, 2011. Management assessed the effectiveness of our internal control over financial reporting as of September 30, 2011. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. During our assessment of the effectiveness of internal control over financial reporting as of September 30, 2011, management identified significant deficiencies related to: (i) the non-PCAOB registered auditor engaged by us to reivew and audit our financial statements; (ii) our internal audit functions; (iii) the absence of an Audit Committee as of September 30, 2011; and (iv) a lack of segregation of duties within accounting functions.
 
 
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We began preparing to be in compliance with the internal control obligations, including Section 404, for our fiscal year ending December 31, 2010. We believe that our current accounting staff is professional and experienced in accounting requirements and procedures generally accepted in the United States. Management, however, has determined that our internal audit function may be deficient due to insufficient qualified resources to perform internal audit functions. Our management determined that the lack of an audit committee of our Board of Directors at September 30, 20110 may have contributed to insufficient oversight of our accounting and audit functions.

In order to correct the foregoing weaknesses, we have taken certain remediation measures and designed new internal controls and procedures to ensure: (a) effectiveness and efficiency of operations; (b) reliability of financial reporting; and (c) compliance with laws and regulations. To that end, management will provide a controlled environment which organizes and influences its people.

In early January 2011, we acquired new office space and relocated its headquarters. Additionally, management is establishing an information and communication system for its executives and employees allowing them to carry out their responsibilities in an organized and process driven manner.

Following the recent change in control the following steps have been implemented:

(a)
The new public accounting firm Randall N. Drake, CPA, P.A. has been engaged to review and or audit our restated financial statements beginning with the quarterly report for period ended September 30, 2009.

(b)
The firm engaged an accounting facilitator to assist with: (a) compiling and maintaining our financial records; (b) assisting the bookkeeping staff with proper recording of transactions; (c) maintaining permanent accounting records and proper backup procedures; and (d) providing continuous monitoring of accounting functions throughout the company. In addition, the facilitator will perform a risk assessment which identifies and analyzes the relevant risks management should address in order to achievement of its objectives. The facilitator will also assist with the preparation of written policies and procedures that will help ensure management directives are carried out.

(c)
Our President/Chief Executive Officer is serving as the point of communication between us and the audit firm. Communication between our President/Chief Executive Officer and the audit firm’s engagement partner has been established to ensure that the audit is aware of management’s intent and actions.

Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, we will implement procedures to assure that the initiation of transactions, the custody of assets and the recording of transactions will be performed by separate individuals.

We believe that the foregoing steps will remediate the significant deficiencies identified above, and we will continue to monitor the effectiveness of these steps and make any changes that our management deems appropriate. A material weakness (within the meaning of PCAOB Auditing Standard No. 5) is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the company's financial reporting.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
 
 
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Inherent Limitations on Effectiveness of Controls

We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, and our prior Chief Executive Officer/Chief Financial Officer have concluded that these controls and procedures are effective at the “reasonable assurance” level.

Changes in internal controls

As discussed above, no significant changes were implemented in our internal controls over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

AUDIT COMMITTEE REPORT

Our Board of Directors has not established an audit committee. The respective role of an audit committee has been conducted by our Board of Directors. We are contemplating establishment of an audit committee during fiscal year 2011. When established, the audit committee's primary function will be to provide advice with respect to our financial matters and to assist our Board of Directors in fulfilling its oversight responsibilities regarding finance, accounting, and legal compliance. The audit committee's primary duties and responsibilities will be to: (i) serve as an independent and objective party to monitor our financial reporting process and internal control system; (ii) review and appraise the audit efforts of our independent accountants; (iii) evaluate our quarterly financial performance as well as its compliance with laws and regulations; (iv) oversee management's establishment and enforcement of financial policies and business practices; and (v) provide an open avenue of communication among the independent accountants, management and our Board of Directors.
 
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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Management is not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this Quarterly Report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against us or our properties
 
ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors previously disclosed in out Annual Report on Form 10-K/A for fiscal year ended December 31, 2010 filed with the Securities and Exchange Commission on May 6, 2011.

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

NexPhase Agreement
 
Effective on February 14, 2011, we issued an aggregate of 67,500,000 shares of our restricted common stock to the NexPhase Shareholders. In accordance with the terms and provisions of the Agreement, the NexPhase Shareholders acquired an aggregate of 67,500,000 shares of our restricted common stock in exchange for one hundred percent (100%) of the total issued and outstanding shares of NexPhase held of record by the NexPhase Shareholders in a private transaction. The shares were issued to ten United States resident NexPhase shareholders in reliance on Section 4(2) and Regulation D of the United States Securities Act of 1933, as amended (the “Securities Act”). The shares of common stock have not been registered under the Securities Act or under any state securities laws and may not be offered or sold without registration with the United States Securities and Exchange Commission or an applicable exemption from the registration requirements. The NexPhase Shareholders acknowledged that the securities to be issued have not been registered under the Securities Act, that they understood the economic risk of an investment in the securities, and that they had the opportunity to ask questions of and receive answers from our management concerning any and all matters related to acquisition of the securities
 
Consultant Agreements
 
CEC Consulting Agreement. In accordance with the terms and provisions of the CEC Consulting Agreement, we issued an aggregate 16,000,000 shares of restricted common stock at $0.006 per share. The shares were issued to CEC in reliance on Section 4(2) of the Securities Act. The shares have not been registered under the Securities Act or under any state securities laws and may not be offered or sold without registration with the United States Securities and Exchange Commission or an applicable exemption from the registration requirements. CEC acknowledged that the securities to be issued have not been registered under the Securities Act, that it understood the economic risk of an investment in the securities, and that it had the opportunity to ask questions of and receive answers from our management concerning any and all matters related to acquisition of the securities.
 
 
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Effective February 22, 2011, we entered into a termination and settlement agreement (the “Termination Agreement”) with CEC. In accordance with the terms and provisions of the Termination Agreement: (i) CEC is to return share certificate no. 1332 evidencing the issuance of the 16,000,000 shares of common stock, which will be cancelled and returned to treasury; and (ii) we shall issue to CEC 2,000,000 shares as settlement for services rendered by CEC to us. As of the date of this Quarterly Report, the 16,000,000 shares have been cancelled or returned to treasury.

FIS Agreement. In accordance with the terms and provisions of the FIS Agreement, we issued an aggregate 4,000,000 shares of restricted common stock at $0.006 per share. The shares were issued to FIS in reliance on Section 4(2) of the Securities Act. The shares have not been registered under the Securities Act or under any state securities laws and may not be offered or sold without registration with the United States Securities and Exchange Commission or an applicable exemption from the registration requirements. FIS acknowledged that the securities to be issued have not been registered under the Securities Act, that it understood the economic risk of an investment in the securities, and that it had the opportunity to ask questions of and receive answers from our management concerning any and all matters related to acquisition of the securities.

Consultant Agreements

During the nine month period ended September 30, 2011, we issued an aggregate of 9,216,667 shares of our restricted common stock to certain consultants in consideration for the performance of certain consulting services to us in accordance with the terms and provisions of the respective consultant agreements. The shares were issued at $0.001 per share. The shares were issued to approximately eight United States residents in reliance on Section 4(2) and Regulation D of the United States Securities Act of 1933, as amended (the “Securities Act”). The shares of common stock have not been registered under the Securities Act or under any state securities laws and may not be offered or sold without registration with the United States Securities and Exchange Commission or an applicable exemption from the registration requirements. The consultants acknowledged that the securities to be issued have not been registered under the Securities Act, that they understood the economic risk of an investment in the securities, and that they had the opportunity to ask questions of and receive answers from our management concerning any and all matters related to acquisition of the securities

Conversion of Notes

During the nine month period ended September 30, 2011, we issued an aggregate of 229,201,897 shares of our restricted common stock to approximately twenty-eight investors in accordance with the conversion of the convertible notes. The conversion per share price ranged from $0.001 to $0.006. The shares were issued to United States residents and/or non United States residents in reliance on Section 4(2) and Regulation D or Regulation S of the United States Securities Act of 1933, as amended (the “Securities Act”). The shares of common stock have not been registered under the Securities Act or under any state securities laws and may not be offered or sold without registration with the United States Securities and Exchange Commission or an applicable exemption from the registration requirements. The investors acknowledged that the securities to be issued have not been registered under the Securities Act, that they understood the economic risk of an investment in the securities, and that they had the opportunity to ask questions of and receive answers from our management concerning any and all matters related to acquisition of the securities
 
 
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES

No report required.

ITEM 4. REMOVED AND RESERVED

ITEM 5. OTHER INFORMATION

No report required.
 
ITEM 6. EXHIBITS

The following exhibits are filed as part of this Annual Report.
 
EXHIBIT NO.    DOCUMENT
     
3.1   Articles of Incorporation (1)
     
3.1.2   Certificate of Amendment as filed with the Nevada Secretary of State on July 22, 2010.  (2)
     
3.1.3   Certificate of Amendment as filed with the Nevada Secretary of State on January 19, 2011 (3).
     
3.1.4   Certificate of Amendment as filed with the Nevada Secretary of State on November 14, 2011 (8).
     
3.2   Bylaws (1)
     
10.1   Share Exchange Agreement between InfoSpi  Inc., NexPhase Lighting Inc. and the shareholders of NexPhase Lighting Inc. dated February 14, 2011. (4)
     
10.2   Letter of Intent dated January 20, 2011 between InfoSpi Inc. and NexPhase Lighting Inc. (5)
     
16. 1   Letter from Cornell, Beale and Leigh, LLC dated December 14, 2010.  (6)
     
16.2   Letter from Randall N. Drake, CPA, dated January 5, 2011 regarding confirmation of Section 4.02(b)(3). (7)
     
31.1   Certification  of  Chief  Executive   Officer  Pursuant  to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act.
     
31.2   Certification of Chief Financial Officer Pursuant  to  Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act.
     
32.1   Certification  of Chief  Executive  Officer  and Chief Financial Officer Under Section 1350 as Adopted  Pursuant to Section 906 of the Sarbanes-Oxley Act.
 
 
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101.INS **
 
XBRL Instance Document
     
101.SCH **
 
XBRL Taxonomy Extension Schema Document
     
101.CAL **
 
XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF **
 
XBRL Taxonomy Extension Definition Linkbase Document
     
101.LAB **
 
XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE **
 
XBRL Taxonomy Extension Presentation Linkbase Document
 
(1)
Incorporated by reference from the Registration Statement on Form 10 filed with the Securities and Exchange Commission on February 28, 2008.
(2)
Incorporated by reference from the Current Report on Form 8-K filed with the Securities and Exchange Commission on December 6, 2010.
(3)
Incorporated by reference from the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 4 , 2011.
(4)
Incorporated by reference from the Current Report on Form 8-K filed with the Securities and Exchange Commission on February 22 , 2011.
(5)
Incorporated by reference from the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 24, 2011.
(6)
Incorporated by reference from the Current Report on Form 8-K filed with the    Securities and Exchange Commission on December 14, 2010.
(7)
Incorporated by reference from the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 5, 2011.
(8)
Incorporated by reference from the Current Report on Form 8-K filed with the Securities and Exchange Commission on November 15, 2011.

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
 
 
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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
  ONTECO CORPORATION  
       
Dated: November 16, 2011 By: /s/ Dror Svorai  
   
Dror Svorai, Chief Executive Officer
 
       
Dated: November 16, 2011 By: /s/ Dror Svorai  
   
Dror Svorai, Chief Financial Officer
 
 
 
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