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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q
(Mark One)

[X]
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

OR

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

For the transition period from ___________ to ______________.

Commission File Number 000-54507

Sandalwood Ventures, Ltd.
(Exact name of registrant as specified in its charter)

Nevada
 
68-0679096
(State or other
jurisdiction of
incorporation or organization)
 
(IRS Employer Identification No.)

15-65 Woodstream Blvd,
Woodbridge, Ontario, Canada
L4L 7X6
 (Address of principal executive offices)(Zip Code)

Telephone: (877) 275-2545
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [X] No [  ]
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes [  ]   No [X]

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

Large accelerated filer  [  ]
Accelerated filer  [  ]
Non-accelerated filer  [  ]
Smaller reporting company [X]

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

As of November 1, 2012, we had 250,819,800 shares of $0.001 par value common stock outstanding.

 
 

 
 
SANDALWOOD VENTURES, LTD.

FORM 10-Q

INDEX

   
Page No.
PART I   FINANCIAL INFORMATION
 
     
ITEM 1.   Financial Statements (Unaudited)
 
     
 
Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011
F-1
 
Consolidated Statements of Operations for the three and nine months ended September 30, 2012 and 2011
F-2
 
Consolidated Statement of Changes in Stockholders’ Deficit for the nine months ended September 30, 2012
F-3
 
Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 and 2011
F-4
 
Notes to Consolidated Financial Statements
F-5
     
ITEM 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
3
     
ITEM 3.
Quantitative and Qualitative Disclosures About Market Risk
11
     
ITEM 4.
Controls and Procedures
11
     
PART II
OTHER INFORMATION
 
     
ITEM 1.
Legal Proceedings
13
     
ITEM 1A.
Risk Factors
13
     
ITEM 2.
Unregistered Sales Of Equity Securities And Use Of Proceeds
13
     
ITEM 6.
Exhibits
13

 

 
 

 
 
PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SANDALWOOD VENTURES, LTD
CONSOLIDATED BALANCE SHEETS
(Unaudited)
             
   
September 30, 2012
   
December 31, 2011
 
ASSETS
           
Current Assets
           
Cash
 
$
765
   
$
6,878
 
Restricted cash– merger attorney escrow account
   
9,144
     
-
 
Accounts receivable, net of allowance of $4,926
   
58,320
     
31,496
 
Inventory
   
27,520
     
22,405
 
Investment tax credit recoverable
   
16,830
     
9,739
 
Prepaid and sundry assets
   
610
     
2,829
 
                 
Total Current Assets
   
113,189
     
73,347
 
                 
Long Term Assets
               
Equipment, net
   
8,069
     
9,683
 
                 
Total Assets
 
$
121,258
   
$
83,030
 
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
Current Liabilities
               
Accounts payable
 
$
61,284
   
$
54,737
 
Accrued liabilities
   
64,417
     
54,260
 
Notes payable
   
75,000
     
-
 
Convertible notes payable – net of discount of $100,626
   
164,374
     
-
 
Advances from stockholders
   
474,794
     
404,795
 
                 
Total Current Liabilities
   
839,869
     
513,792
 
                 
Stockholders' Deficit
               
Preferred stock, $0.001 par value; 50,000,000 shares
               
1,000 and 0 shares outstanding as of September 30, 2012 and December 31, 2011, respectively
   
1
     
-
 
Common stock, $0.001 par value; 7,000,000,000 shares authorized and 250,819,800  and 125,000,000  shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively
   
250,820
     
125,000
 
Additional paid in capital
   
151,128
     
351,515
 
Accumulated other comprehensive loss
   
 (39,499
)
   
(29,939
)
Accumulated deficit
   
(1,081,061
)
   
(877,338
)
                 
Total Stockholders' Deficit
   
(718,611
)
   
(430,762
)
                 
Total Liabilities and Stockholders' Deficit
 
$
121,258
   
$
83,030
 
 
The accompanying notes are an integral part of these unaudited consolidated financial statements
 
 
F-1

 

 
SANDALWOOD VENTURES, LTD.
 
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
 
(Unaudited)
 
   
       
   
For the Three Months Ended
September 30,
   
For the Nine Months Ended
September 30,
 
   
2012
   
2011
   
2012
   
2011
 
                         
Sales
 
$
70,749
   
$
52,287
   
$
220,890
   
$
173,480
 
                                 
Cost of goods sold
   
48,788
     
36,638
     
153,925
     
99,574
 
                                 
Gross profit
   
21,961
     
15,649
     
66,965
     
73,906
 
                                 
Operating expense:
                               
General and administrative
   
82,126
     
14,259
     
126,843
     
68,675
 
Salaries and wages
   
25,379
     
13,645
     
56,973
     
46,413
 
Selling and delivery
   
30,000
     
1,635
     
32,102
     
12,511
 
Depreciation
   
626
     
529
     
1,916
     
1,752
 
                                 
Total operating expenses
   
138,131
     
30,068
     
217,834
     
129,351
 
                                 
Operating loss
   
(116,170
)
   
(14,419
   
(150,869
   
(55,445
                                 
Other income (expense):
                               
  Interest expense
   
(52,190
)
   
(863
)
   
(52,854
   
(2,078
                                 
Net  loss
   
(168,360
)
   
(15,282
)
   
(203,723
)
   
(57,523
)
Foreign currency translation adjustment
   
(14,755)
     
33,462
     
(9,560)
     
28,803
 
Net comprehensive  (loss) income
 
$
(183,115
)
 
$
18,180
   
$
(213,283
)
 
$
(28,720
)
                                 
Net loss per share:
                               
Basic and diluted
 
$
(0.00
 
$
0.00
   
$
(0.00
)
 
$
0.00
 
Weighted average number of common shares outstanding:
                               
Basic and diluted
   
250,819,800
     
125,000,000
     
 169,542,046
     
125,000,000
 

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

 
 
 
 
 
F-2

 

 
 
SANDALWOOD VENTURES, LTD.
 
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
 
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012
 
(Unaudited)
 
                                                 
                                                 
   
Common Stock
   
Series A
Preferred Stock
         
Accumulated Other Comprehensive Loss
             
   
Shares
   
Amount
   
Shares
   
Amount
   
Additional
Paid-in Capital
   
Accumulated Deficit
   
Total
 
                                                 
Shares issued at share
   exchange
   
125,000,000
   
$
125,000
     
-
   
$
-
   
$
351,515
   
$
(29,939
)
 
$
(877,338
)
 
$
(430,762
)
                                                                 
Reverse merger adjustment
   
125,819,800
     
125,820
     
1,000
     
1
     
(254,057
)
   
-
     
-
     
(128,236
)
                                                                 
Contributed services
   
-
     
-
     
-
     
-
     
53,670
     
-
     
-
     
53,670
 
                                                                 
                                                                 
Foreign currency translation
   adjustment
   
-
     
-
     
-
     
-
     
-
     
(9,560)
     
-
     
(9,560)
 
                                                                 
Net loss
   
-
     
-
     
-
     
-
     
-
     
-
     
(203,723
)
   
(203,723
)
                                                                 
Balance, September 30, 2012
   
250,819,800
   
$
250,820
     
1,000
   
$
1
   
$
151,128
   
$
(39,499
)
 
$
(1,081,061
)
 
$
(718,611
)


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

 








 
F-3

 

 
SANDALWOOD VENTURES, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
   
For the Nine Months Ended
September 30,
 
   
2012
   
2011
 
CASH FLOWS FROM OPERATING ACTIVITIES
           
Net loss
 
$
(203,723
)
 
$
(57,523
)
Adjustments to reconcile net loss to net cash used in operating activities:
               
Depreciation
   
1,916
     
1,752
 
Amortization of debt discount
   
46,250
     
-
 
Contributed services
   
53,670
     
51,029
 
Bad debt expense
   
-
     
6,000
 
Changes in operating assets and liabilities:
               
  Accounts receivable
   
(26,824
)
   
(11,108
)
  Inventory
   
(5,115
)
   
(13,696
  Investment tax credit recoverable
   
(7,091
)
   
-
 
  Prepaid and sundry assets
   
   2,219
     
(12,491
)
  Accounts payable and accrued liabilities
   
    (32,603
   
(1,307
     Net cash used in operating activities
   
(171,301
)
   
(37,344
)
                 
                 
CASH FLOWS FROM INVESTING ACTIVITIES
               
  Purchase of equipment
   
(302
   
(5,267
)
  Restricted cash
   
30,051
     
-
 
     Net cash used in investing activities
   
(29,749
   
(5,267
)
 
CASH FLOWS FROM FINANCING ACTIVITIES
               
Advances from stockholders
   
69,999
     
3,457
 
Proceeds from borrowings
   
75,000
     
-
 
Net cash provided by financing activities
   
144,999
     
3,457
 
 
               
Effect of exchange rate changes on cash
   
(9,560
   
28,803
 
Net decrease in cash
   
(6,113
)
   
(10,351
)
 
Cash at the beginning of the period
   
6,878
     
13,368
 
Cash at the end of the period
 
$
765
   
$
3,017
 
                 
Supplemental cash flow information
               
Cash paid for:
               
Interest
 
$
6,604
   
$
2,078
 
Income taxes
   
-
     
-
 
                 
NonNon-cash investing activity:
               
Reverse merger adjustment
 
$
128,236
   
$
-
 
The accompanying notes are an integral part of these unaudited consolidated financial statements
 
 
 
F-4

 
SANDALWOOD VENTURES, LTD.
Notes to Consolidated Financial Statements
September 30, 2012
(Unaudited)
 
1.
NATURE OF OPERATIONS

Sandalwood Ventures, Ltd. (the "Company" or “Sandalwood”) was incorporated on April 10, 2007 in Nevada for the purpose of acquiring, exploring and developing mining properties.

Eco-Tek Group Inc. (the “Company” or “Eco-Tek”, formerly Cliktech) was incorporated on May 4, 2005 in Ontario, Canada. Eco-Tek blends and sells oil lubrication products and is the developer of Clik Tech Engine Treatment (“Clik”).
 
On June 25, 2012, the Company entered into a share exchange agreement with the shareholders of and corporate entity of Eco-Tek, which closed on June 29, 2012, wherein it acquired the latter in exchange for 125,000,000 common shares in a transaction accounted for as a reverse merger.  On June 25, 2012, certain of Eco-Tek’s shareholders also entered into a stock purchase agreement wherein they acquired the 1,000 Series A Preferred Stock shares which provided them 51% voting rights to the Company.  As a result of these transactions, Eco-Tek’s shareholders became the Company’s majority shareholders and Eco-Tek became a wholly-owned subsidiary of the Company.  Following the share exchange, the Company will undertake continued manufacturing and distribution of Clik’s products and ongoing research, development and commercialization of associated products.  In connection with this change in business focus, the Company will cease undertaking any mineral exploration activities and anticipates letting the rights to its Sandalwood 1 Lode Claim expire in September 2012. The Company has also changed its year-end to December 31.

Consequently, the assets and liabilities and the historical operations reflected in the consolidated financial statements for the periods prior to June 29, 2012 are those of Eco-Tek and are recorded at the historical cost basis. After June 29, 2012 (the closing date), the Company’s consolidated financial statements include the assets and liabilities of both Eco-Tek and Sandalwood and the historical operations of both after that date.

2.
BASIS OF PRESENTATION
 
The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the Securities Exchange Commission (“SEC”) instructions to Form 10-Q and Article 8 of SEC Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with Eco-Tek’s audited financial statements and notes thereto included in the Form 8-K/A filed with the SEC on September 21, 2012.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of financial position and results of operations for the interim periods presented have been reflected herein.  Operating results for the three and nine months ended September 30, 2012, are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.  Notes to the consolidated financial statements which would substantially duplicate the disclosures contained in Eco-Tek’s audited financial statements for 2011 as included in the Form 8-K/A filed on September 21, 2012 have been omitted.



 
 
 
 
 

 
 
F-5

 
 
SANDALWOOD VENTURES, LTD.
Notes to Consolidated Financial Statements
September 30, 2012
(Unaudited)

3.          
GOING CONCERN

The Company's financial statements are presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.  The Company has experienced losses from operations and has negative working capital as of September 30, 2012, that raises substantial doubt as to its ability to continue as a going concern.

The Company's existence is dependent upon management's ability to develop profitable operations and resolve its liquidity problems. Management anticipates the Company will attain profitable status and improve its liquidity through continued business development and additional equity investment in the Company.  Management is pursuing various sources of financing and intends to raise equity financing through a private placement with a private group of investors in the near future.  In the event the Company is not able to raise the necessary equity financing from private investors, the stockholders intend to finance the Company by way of stockholder loans, as needed, until profitable operations are attained.
 
The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.
  
4.
SIGNIFICANT ACCOUNTING POLICIES
 
Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the period in which they become known.

Restricted cash

Restricted cash at September 30, 2012 consists of cash held in trust by Sandalwood’s attorneys, which is disbursed at the direction of the Company.

Fair value of financial instruments

The carrying value of the Company's cash, accounts receivable, accounts payable and accrued liabilities, advances from stockholders, notes payable and convertible notes approximate fair value because of the short-term maturity of these instruments.





 
F-6

 
 
SANDALWOOD VENTURES, LTD.
Notes to Consolidated Financial Statements
September 30, 2012
(Unaudited)

Recently issued accounting pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that recently issued accounting pronouncements adopted do not have a material impact on its financial position or results of operations.

5.           NOTES PAYABLE

The Company issued two notes totaling $75,000 which bear interest at 8% per annum and have a term of one year.   In the event of default, the noteholders have the option to convert the notes to common shares at a conversion price equal to 70% of the volume weighted average closing prices of the Company’s common share during the 10 trading days prior to the conversion date.

6.           CONVERTIBLE NOTES PAYABLE
 
Convertible notes as of September 30, 2012 consist of:

Principal amount
 
$
265,000
 
Less – debt discount
   
(100,626
)
   
$
164,374
 
 
The notes were issued by Sandalwood, bear interest at the rate of 8% per annum, have a term of one year and are convertible into common shares at a conversion price equal to $0.0003571 per share, subject to adjustment upon certain events.  Notes amounting to $80,000 have matured and are currently past due.

The Company evaluated the terms of the convertible notes in accordance with ASC 815-40, Contracts in Entity’s Own Equity, and concluded that the convertible notes did not result in a derivative. The Company evaluated the terms of the convertible notes and concluded that there was a beneficial conversion feature since the convertible notes were convertible into shares of common stock at a discount to the market value of the common stock.  The beneficial conversion feature is recorded as a discount to the notes and is amortized over the term of the debt.  Amortization expense during the period amounted to $46,250.

 
 
 
 
 
 
 
F-7

 

SANDALWOOD VENTURES, LTD.
Notes to Consolidated Financial Statements
September 30, 2012
(Unaudited)
7         ADVANCES FROM STOCKHOLDERS

Advances from stockholders are unsecured, non-interest bearing and due on demand.  At September 31, 2012, and December 31, 2011, the Company had $474,794 and $404,795 in advances outstanding, respectively.

8.          STOCKHOLDERS’ EQUITY

The Company is authorized to issue 50,000,000 shares of $0.001 par value preferred stock, which may be issued from time to time in one or more series as shall be determined by the Board of Directors. Such stock shall have such voting powers, full or limited, or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualification, limitations or restriction thereof, as shall be stated in resolutions providing for the issue of such class or series of preferred stock.
 
On April 13, 2012, the Company filed a Certificate of Designation of a series of 1,000 shares of Series A Preferred Stock of the Company. The holders of the Series A Preferred Stock, voting separately as a class are entitled to vote in aggregate, on all shareholders matters, 51% of the total vote on such shareholder matters, no matter how many shares of common stock or other voting stock of the Company are issued or outstanding in the future.  Additionally, the Company is prohibited from adopting any amendments to the Company’s Bylaws, Articles of Incorporation, as amended, making any changes to the Certificate of Designation establishing the Series A Preferred Stock, or effecting any reclassification of the Series A Preferred Stock, without the affirmative vote of at least 66-2/3% of the outstanding shares of Series A Preferred Stock. However, the Company may, by any means authorized by law and without any vote of the holders of shares of Series A Preferred Stock, make technical, corrective, administrative or similar changes to such Certificate of Designation that do not, individually or in the aggregate, adversely affect the rights or preferences of the holders of shares of Series A Preferred Stock.
 
Prior to January 6, 2012, the Company was authorized to issue 250,000,000 common shares with a par value of $0.001 per share. On January 23, 2012, the Company affected a 28:1 forward stock split of its common stock without adjusting the par value of $0.001. The Company now has 7,000,000,000 common shares authorized. All share amounts have been restated to reflect the stock split.

During the nine months ended September 30, 2012, certain shareholders contributed services to the Company valued at $53,670.

In June 2012, the Company issued 125,000,000 shares to acquire Eco-Tek.  The transaction was accounted for as a reverse merger.  Shares outstanding immediately prior to the transaction of 125,819,800 and the net book value of Sandalwood $(128,236) are presented as reverse merger adjustments.
 





 

 
F-8

 
 
ITEM 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

All statements in this discussion that are not historical are forward-looking statements. Statements preceded by, followed by or that otherwise include the words "believes", "expects", "anticipates", "intends", "projects", "estimates", "plans", "may increase", "may fluctuate" and similar expressions or future or conditional verbs such as "should", "would", "may" and "could" are generally forward-looking in nature and not historical facts. These forward-looking statements were based on various factors and were derived utilizing numerous important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements. Forward-looking statements include the information concerning our future financial performance, business strategy, projected plans and objectives. These factors include, among others, the factors set forth below under the heading "Risk Factors." although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Most of these factors are difficult to predict accurately and are generally beyond our control. We are under no obligation to publicly update any of the forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Readers are cautioned not to place undue reliance on these forward-looking statements. References in this Form 10-Q, unless another date is stated, are to September 30, 2012. As used herein, the "Company," “Sandalwood,” "we," "us," "our" and words of similar meaning refer to Sandalwood Ventures, Ltd. and its wholly-owned subsidiary, Eco-Tek Group, Inc., unless otherwise stated or the context requires otherwise.

Overview

Sandalwood Ventures, Ltd. was incorporated on April 10, 2007 in Nevada for the purpose of acquiring, exploring and developing mining properties. The Company was an Exploration Stage Company.

On June 25, 2012, the Company entered into a Share Exchange Agreement with Eco-Tek Group Inc., an Ontario corporation (“Eco-Tek”) and its shareholders (the “Eco-Tek Shareholders”).  The Eco-Tek Shareholders included Luciana D’Alessandris, Jim Vogiatzis, Michael Zitser and Sergey Kartsev who in April 2012, entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”), which closed in May 2012, and each purchased 1/4th of the total shares of common stock held by Edwin Slater, our then Chief Executive Officer (280,000,000 shares of common stock each or 1,120,000,000 shares of common stock in total, representing 93.7% of our total outstanding shares of common stock) for $5,000, or $20,000 in aggregate.

Effective June 25, 2012, Ira Morris, who held all 1,000 shares of the Company’s outstanding Series A Preferred Stock, which provided him 51% voting control over the Company, entered into a Stock Purchase Agreement (as amended and restated) with Luciana D’Alessandris, Jim Vogiatzis, Michael Zitser and Sergey Kartsev and purchased all 1,120,000,000 of the shares of common stock originally purchased by such individuals pursuant to the Stock Purchase Agreement with Mr. Slater, which closed in May 2012 in consideration for $5,600 ($1,400 to each seller) and all 1,000 shares of the Series A Preferred Stock which he held (with 250 shares of Series A Preferred Stock being transferred to each seller). Subsequent to the closing of the purchase of the shares by Mr. Morris, Mr. Morris entered into a Cancellation of Shares Agreement with the Company and cancelled 1,070,000,000 of the shares purchased in consideration for $20,000 (the “Cancellation”).

Pursuant to the Share Exchange Agreement, which closed on June 29, 2012, the Company acquired 100% of the outstanding shares of common stock of Eco-Tek in consideration for an aggregate of 125,000,000 shares of the Company’s common stock which have been issued to the shareholders of Eco-Tek.

As a result of the Cancellation and the Share Exchange Agreement, the Company has 250,819,800 shares of common stock issued and outstanding.

As described above, effective June 29, 2012, the Company, Eco-Tek and the Eco-Tek Shareholders closed the transactions contemplated by the Share Exchange Agreement, and Eco-Tek became a wholly-owned subsidiary of the Company.

Eco-Tek blends and sells oil lubrication products.  Concurrently with the closing of the Share Exchange Agreement, the Company changed its business focus to that of Eco-Tek and ceased undertaking any mineral exploration activities.  In connection with this change in business focus, the Company let the rights to its Sandalwood 1 Lode Claim expire in September 2012.  Eco-Tek is dedicated to the development and marketing of innovative and cost effective “green” products to the automotive and industrial sectors. Currently Eco-Tek is a distributor of products and does not have any exclusive rights to the products it distributes other than the Clik Bypass And Magnetic Oil Filtration For Trucks, described below. Eco-Tek’s products are the result of ongoing research and development by chemists and engineers with extensive knowledge and experience in the lubrication and related automotive fields. Approximately 85% of Eco-Tek’s sales are generated in Canada, with the other 15% coming from overseas markets such as Ecuador, Argentina and Chile. Eco-Tek manufactures (through the blending of various ingredients) and distributes Clik synthetic lubricants, filtration systems and other products, described in greater detail below. Eco-Tek maintains websites at www.eco-tekgroup.net and www.cliktech.com and is currently in the process of creating a new website at www.ecotekworldwide.com.  The information on, or that may be accessed through, Eco-Tek’s websites is not incorporated by reference into this report and should not be considered a part of this report.

 
3

 
More information on Eco-Tek’s business operations, plan of operations, risk factors regarding Eco-Tek’s operations, and the Company’s securities can be found in the Form 8-K/A filed by the Company on September 21, 2012 (the “From 8-K”), which information readers are encouraged to read and review.

Additionally, the Company filed an Information Statement on Schedule 14C with the SEC on October 24, 2012 and began mailing the Information Statement to shareholders shortly thereafter, setting forth information regarding the planned filing of a Certificate of Amendment to the Company’s Articles of Incorporation to affect a name change to “Eco-Tek Group Inc.”, which name change the Company plans to affect in the fourth quarter of 2012.  The Company plans to file a Current Report on Form 8-K disclosing the name change and related information once completed.

Series A Preferred Stock/Change in Control

On April 13, 2012, the Company filed a Certificate of Designation of a series of 1,000 shares of Series A Preferred Stock of the Company with the Secretary of State of Nevada (the “Series A Preferred Stock”).  The holders of the Series A Preferred Stock, voting separately as a class are entitled to vote in aggregate, on all shareholders matters, 51% of the total vote on such shareholder matters, no matter how many shares of common stock or other voting stock of the Company are issued or outstanding in the future (the “Super Majority Voting Rights”).  

On May 3, 2012, the Company agreed to issue Ira Morris 1,000 shares of the Company’s Series A Preferred Stock in consideration for services rendered to the Company.  Upon such issuance, Mr. Morris became the majority shareholder of the Company and a change in control of the Company was deemed to have occurred as a result of the Super Majority Voting Rights.  

As described above, in June 2012, as part of a Stock Purchase Agreement, Mr. Morris transferred ownership of the Series A Preferred Stock and voting control over the Company to Luciana D’Alessandris, Jim Vogiatzis, Michael Zitser and Sergey Kartsev (250 shares each).

Technology Agreement
 
The Company entered into a Technology co-operation Agreement (the “Technology Agreement”) with Dr. Sabatino Nacson, PHD on August 23, 2012, which was amended and restated on September 14, 2012, and further amended on November 12, 2012 (the discussion of the Technology Agreement below affects and reflects the amendments and restatements). The Technology Agreement provides for Dr. Nacson to collaborate with the Company on the development of various products used in the automotive industry, including fuel injector formulation, fuel treatment, diesel fuel enhancement, lubricating oils, and penetrating lubricant formulation.  

Pursuant to the Technology Agreement, as amended, Dr. Nacson agreed to provide consulting services to the Company and assist in patent writing to protect new products and technology developed for the Company in the automotive market.  the Company agreed to compensate Dr. Nacson (i) CDN$100 per hour for the development of products up to a maximum of CDN$5,000 per product upon release and acceptance of formula to the Company; (ii)  1% of total sales of new products sold which were exclusively developed by Dr. Nacson or in collaboration with the Company; and (iii) to repay Dr. Nacson for all expenses associated with the U.S. and Canadian patents on the lubricant oil formation, which total $30,000, and all expenses moving forward, which will be paid quarterly.  Dr. Nacson agreed not to develop end user products in the automotive industry, which compete with the Company.  The Company received the exclusive rights to market and sell products developed by Dr. Nacson in the automotive market.  All products and formulae will be provided to the Company and remain the sole property of the Company.   The Company will manufacture, package and market products developed by Dr. Nacson at its sole discretion.  Dr. Nacson agreed to assign all patent rights associated with the oil lubricant technology to the Company after the issuance of shares described above.  The Company agreed to indemnify and hold Dr. Nacson harmless against any claims or actions arising out of the use of any product developed by Dr. Nacson.

 
4

 
The Technology Agreement has a term of seven years, extendable for up to another seven years thereafter, provided that the Technology Agreement can be terminated by either party after the expiration of the first seven year period with 90 days written notice from either party. Although the provisional patent application relating to the formula used in the Company’s products is registered in Dr. Nacson’s name, the Company has the exclusive rights to use such formula and any other products and intellectual property associated therewith created by Dr. Nacson for use in the automotive industry and during the term of the Technology Agreement.

Products

Currently the Company sells the following products, which are currently commercially available, which it either manufactures (through the blending of various ingredients) or distributes on behalf of third parties under its own “Clik” brand:

“Clik 3000 Super Synthetic 100% API Approved HP Motor Oil”

Synthetic base motor oil with anti-friction technology, high viscosity and TBN quality (additive package) has been shown to improve performance, extend the life of the oil and the engine, improve fuel economy and reduce emissions. “TBN” stands for total base number, which relates to the quality and/or strength of the additive package found in every motor oil.  The Company’s motor oil and lubricant is zinc free.  Zinc is currently being regulated by governments when used in motor oil, and as such, the Company believes that its motor oil is better for the environment.  Additionally, as higher rates of friction result in hotter engines, which increase fuel consumption and create higher emissions, the Company’s oil and lubricant, which reduce the friction in an engine when compared to traditional motor oils, has been shown to reduce fuel consumption and lower emissions.
 
“CLIK 4 In 1 Fuel Treatments”

Fuel treatment to clean and lubricate fuel injectors, fuel pump and valves, has been shown to reduce wear and extend the life of mechanical parts, reduce fuel consumption, increase horsepower (HP) and torque, prevent freezing/gelling in winter and reduce emissions. One of the reasons for this is because a clean engine is more efficient and less prone to breakdown (the “Black Death of Sludge”, ConsumerReports.Org, last updated February 2012).  The Company’s fuel treatment product is a mild engine oil gallery cleaner, which is added to the used oil before the oil is changed and circulated throughout the system for approximately ten minutes while the engine idles, before the used oil and cleaner is drained and replaced with new oil.
 
“Clik Engine Flush”

A flush for engines which cleans internal engine components, extends engine life and restores lost performance due to sludge and buildup.

“Clik Heavy Duty Synthetic Oil Stabilizer”

An oil stabilizer which is added to engine oil used in engines and differentials to increase viscosity and also reduce friction. This results in lower running temperatures which equates to a longer engine life. The higher viscosity also increases compression in diesel engines and worn or older gasoline engines. This higher compression results in increased horsepower and torque. The reduced friction equates to more efficiency. This in turn results in better fuel consumption and increased horsepower and torque.
 
 
5

 
“Clik Bypass And Magnetic Oil Filtration For Trucks”

Keeps oil cleaner by drawing out metals down to 3 microns in size, therefore working to eliminate moisture, extending the life of the oil, reducing friction and improving performance, fuel economy, equipment life and emission.  The Company’s oil filtration product is an add-on bypass oil filter system that is installed on an engine in addition to the OEM oil filter.  It filters particulates in the oil to a much smaller micron size (i.e., approximately 3 microns versus 50 microns on average without the additional filter) to help eliminate metal wear, moisture and keep the engine oil cleaner.    The Company has the exclusive distributor rights in North America to these products.

“Clik Premium Orange Hand Cleaner”

Hand cleaner, which contains pumice to clean, aloe and lanolin to moisturize.

“Clik Non-Toxic Super Lubricant”

Reduces friction, fuel consumption, harmful contaminants in oil, reduces smoke, vibration and noise.   This is an oil additive, which end-users can add directly to the oil in their engines.
 
Future Planned Products and Expansion

Funding permitting, the Company plans to expand its product line with the following additional products:

-  
“Clik Fuel Saving Package” which will combine the Clik Non Toxic Super Lubricant and the Clik 4 in 1 Fuel Treatment, and is planned to also be marketed on the internet. This product has been developed, but needs to be packaged. The Company believes that this product could be ready for commercial sale in the next three months.

-  
“Clik Non Toxic Windshield Washer Fluid”, for which a prototype currently exists, and which is in the final testing phase of development.  The Company estimates this product is approximately sixty percent (60%) complete. The Company believes that this product could be ready for commercial sale in approximately six months.

-  
“Clik Non Toxic Multi-Purpose Spray Lubricant” which will come with a non-pressurized spray applicator, which we believe will have several uses similar to WD 40, but will be “green” and nontoxic. A prototype currently exists for this product, which the Company estimates is approximately ninety-nine percent (99%) complete and needs to be packaged and labeled to be ready for commercial sale which is anticipated to happen in approximately the next three months.
  
Moving forward, the Company plans to add on-line product ordering and fulfillment in conjunction with TV advertising and infomercials for its products.  The Company plans to begin television advertising as soon as possible and anticipates the cost of producing an infomercial at $1,000 per minute.

Plan of Operations For the Next 12 Months
 
Planned Actions
 
 
Total Estimated Expenses
 
Implement an internet sales strategy for Clik Multi-Purpose Lubricant and Fuel Savings Package.
 
$
5,000
 
         
Maintain active research and development program for new or improved engine treatment performance products.
 
$
25,000
 
         
Introduce the eco-friendly windshield washer fluid to the market.
 
$
50,000
 
         
Introduce a household lubricant to the market.
 
$
50,000
 
         
Recruit, train and establish two additional corporate sales agents in Ontario.
 
$
40,000
 
         
Create infomercial for television advertising.
 
$
50,000
 
         
General product advertising – magazines, internet advertising, trade shows, free samples and promotional packages.
 
$
125,000
 
         
Increase retail outlets in Ontario and throughout Canada.
 
$
50,000
 
         
Increase international distributors.
 
$
2,400
 
         
Convert a pre-existing service center into an Eco-Tek Lube Center in Ontario, Canada.
 
$
50,000
 
         
Establish up to two more Eco-Tek Lube Centers in Ontario, Canada.
 
$
100,000
 
         
Expenses associated with our SEC filings including, filing, legal, accounting, and auditing fees.
 
$
75,000
 
TOTAL
 
$
 
622,400
 
 
 
6

 
COMPARISON OF OPERATING RESULTS

Comparison of Three Months Ended September 30, 2012 to Three Months Ended September 30, 2011

Revenue. Revenue increased $18,462 to $70,749 for the three months ended September 30, 2012 from $52,287 for the three months ended September 30, 2011. The increase is mainly due to an increase in demand for the products offered by the Company, especially two of its products (Click 5W-20 and Click 5W-30) due to management’s marketing efforts during the three months ended September 30, 2012.  The sales of these two products totalled $23,276 for the three months ended September 30, 2011 as compared to $37,895 for the three months ended September 30, 2012.
 
Cost of Goods Sold.  Cost of goods sold was $48,788 for the three months ended September 30, 2012, compared to $36,638 for the three months ended September 30, 2011, an increase of $12,150 from the prior period, which increase was mainly associated with the increase in revenues for the three months ended September 30, 2012 as compared to the three months ended September 30, 2011.

Operating Expenses. Operating expenses increased to $138,131 for the three months ended September 30, 2012 from $30,068 for the three months ended September 30, 2011. The increase in operating expenses was mainly due to an increase of $67,867 in general and administrative expenses, to $82,126 for the three months ended September 30, 2012, compared to $14,259 for the three months ended September 30, 2011. Operating expenses for the three months ended September 30, 2011 include expenses of Eco-Tek only, whereas operating expenses for the three months ended September 30, 2012 included expenses of Eco-Tek and the Company (i.e., its public reporting company expenses).  The main components of the Company’s operating expenses for the three months ended September 30, 2012 were legal and professional expenses of $67,254, management remuneration of $7,797 and marketing expenses of $30,000.

Interest Expense.  We had interest expense of $52,190 for the three months ended September 30, 2012, compared to interest expense of $863 for the three months ended September 30, 2011, an increase of $51,327 from the prior period, which was mainly due to interest accrued on the Convertible Promissory Notes and Promissory Notes, described below.

Net loss. During the three months ended September 30, 2012, we incurred a net loss of $168,360 as compared to a net loss of $15,282 during the three months ended September 30, 2011, an increase of $153,078 from the prior period.  The major reason for the increase in net loss in the current period as compared to the previous period is primarily due to the increase in total operating expenses of $108,063 and more specifically the increase in general and administrative expenses of $67,867, which was mainly due to the closing of the Share Exchange Agreement on June 29, 2012.
 
 
 
 
 

 
 
7

 
Comparison of Nine Months Ended September 30, 2012 to Nine Months Ended September 30, 2011

Revenue. Revenue increased to $220,890 for the nine months ended September 30, 2012 from $173,480 for the nine months ended September 30, 2011, an increase of $47,410 from the prior period. The main reason for the increase in revenue was due to a large one-time customer order of $28,800 and an increase in demand for the Company’s products, especially two of its products (Click 5W-20 and Click 5W-30) by $23,276 due to management’s marketing efforts during the nine months ended September 30, 2012.
 
Cost of Goods Sold.  Cost of goods sold was $153,925 for the nine months ended September 30, 2012, compared to $99,574 for the nine months ended September 30, 2011, an increase of $54,351 from the prior period, which increase was mainly associated with the increase in revenues and increase in purchase price of the products sold during the nine months ended September 30, 2012, compared to the nine months ended September 30, 2011.

Operating Expenses. Operating expenses increased to $217,834 for the nine months ended September 30, 2012 from $129,351 for the nine months ended September 30, 2011. The increase in operating expenses was mainly due to an increase of $58,168 in general and administrative expenses, to $126,843 for the nine months ended September 30, 2012, compared to $68,675 for the nine months ended September 30, 2011, an increase of $19,591 in selling and delivery expenses to $32,102 for the nine months ended September 30, 2012, compared to $12,511 for the nine months ended September 30, 2011, and an increase of $10,560 in salaries and wages to $56,973 for the nine months ended September 30, 2012, compared to $46,413 for the nine months ended September 30, 2011.  Operating expenses for the nine months ended September 30, 2011 include expenses of Eco-Tek only, whereas operating expenses for the nine months ended September 30, 2012, include expenses of Eco-Tek and the Company (i.e., its public reporting company expenses).  The main components of operating expenses for the nine months ended September 30, 2012 included legal and professional expenses of $67,254, management remuneration expenses of $7,797 and marketing expenses of $30,000.

Interest Expense.  We had interest expense of $52,854 for the nine months ended September 30, 2012, compared to interest expense of $2,078 for the nine months ended September 30, 2011, an increase of $50,776 from the prior period, which was mainly due to interest accrued on the Convertible Promissory Notes and Promissory Notes, described below.

Net loss. During the nine months ended September 30, 2012, we incurred a net loss of $203,723 as compared to a net loss of $57,523 during the nine months ended September 30, 2011, an increase in net loss of $146,200 from the prior period.  The major reason for the increase in net loss was the increase in total operating expenses of $88,483 and more specifically the increase of $58,168 of general and administrative expenses.

Liquidity and Capital Resources

As of September 30, 2012, the Company had total assets of $121,258, which included total current assets of $113,189, consisting of cash of $765, restricted cash of $9,144, accounts receivable of $58,320, inventory of $27,520, investment tax credit recoverable of $16,830, prepaid and sundry assets of $610, and long-term assets of $8,069 representing equipment, net of depreciation.

The Company had total liabilities of $839,869 as of September 30, 2012, which consisted solely of current liabilities, consisting of accounts payable of $61,284, accrued liabilities of $64,417, notes payable of $75,000, convertible notes payable of $164,374 and advances from stockholders of $474,794.
 
The Company had a working capital deficit of $726,680 and an accumulated deficit of $1,081,061 as of September 30, 2012.
 
Net cash used in operating activities. During the nine months ended September 30, 2012, the Company had net cash used in operating activities of $171,301 compared with $37,344 for the nine months ended June 30, 2011. The $133,957 increase in net cash used in operating activities is mainly due to an increase in net loss of $146,200 and an increase in accounts payable and accrued expenses of $31,297, which was offset by a $46,250 increase in amortization of debt discount.

 
8

 

Net cash used in investing activities. Net cash used in investing activities for the nine months ended September 30, 2011 of $5,267 was for the purchase of equipment. Net cash used in investing activities for the nine months ended September 30, 2012 of $29,749 included $302 for the purchase of equipment and a decrease of $30,051 in restricted cash, due to the payment of Company expenses.

Net cash provided by financing activities. During the nine months ended September 30, 2012, net cash provided by financing activities consisted of advances from shareholders of $69,999 and convertible notes of $75,000 for a total of $144,999 of net cash provided by financing activities, compared with $3,457 of net cash provided by financing activities for the nine months ended September 30, 2011, due solely to advances from shareholders.

Convertible Notes:

On October 26, 2010 and November 4, 2010, we entered into Convertible Promissory Notes with Cornerstone Global Investments (“Cornerstone”) and Gordon Douglas King and Jay Louise King (the “Kings”), respectively, each in the amount of $5,000. The Convertible Promissory Notes matured on October 26 and November 4, 2011, respectively, and have not been repaid or extended to date.  If converted into shares of our common stock, the convertible notes would each convert into 14,000,000 shares of our common stock (subject in the case of Cornerstone to the Conversion Limitation, described below).

The Convertible Promissory Note described above and all of the Convertible Promissory Notes described below (the “Convertible Notes”)bear interest at the rate of 8% per annum, and are due and payable twelve months from their respective effective dates, unless otherwise described.  Additionally, the principal and interest due under such Convertible Notes is convertible into shares of the Company’s common stock at a conversion price of $0.0003571 per share at the option of the respective holders thereof, as provided in such Convertible Notes.

On January 31, 2011, February 2, 2011 and February 3, 2011, we entered into Convertible Promissory Notes with Cornerstone, the Kings, and Translink Communications, respectively, each in the amount of $5,000. The Convertible Promissory Notes matured on January 31, February 2 and February 3, 2012, respectively, and have not been repaid or extended to date. If converted into shares of our common stock, the convertible notes would each convert into 14,000,000 shares of our common stock (provided that the Translink note has a Conversion Limitation, as described below).

Additionally, in February 2011, the Company entered into Amended and Restated Convertible Promissory Notes with Morgarlan Limited (“Morgarlan”), in the amount of $12,500, and Little Bay Consulting SA (“Little Bay” and together with Morgarlan, the “Note Holders”), in the amount of $12,500, which amended and replaced the prior Convertible Promissory Notes entered into with such entities in February 2010, and which extended the due date of such Convertible Promissory Notes to February 10, 2012, which notes have matured to date and have not been repaid or extended to date.  If converted into shares of our common stock, the convertible notes would each convert into 35,000,000 shares of our common stock (subject in the case of Little Bay to the Conversion Limitation, described below).
  
In April and June 2011, the Company entered into two Convertible Promissory Notes with Cornerstone in the aggregate amount of $20,000. If converted into shares of our common stock, the convertible notes would convert into 56,000,000 shares of our common stock (subject to the Conversion Limitation, described below). In May 2011, the Company entered into a Convertible Promissory Note with MIH Holdings Ltd. in the amount of $10,000. If converted into shares of our common stock, the convertible note would convert into 28,000,000 shares of our common stock (subject to the Conversion Limitation, described below).  The April 2011 note with Cornerstone and the May 2011 note with MIH Holdings Ltd. have matured and have not been repaid or extended to date.

Effective October 27, 2011 and December 22, 2011, the Company entered into two Convertible Promissory Notes with MIH Holdings Ltd., in the amounts of $5,000 and $10,000, respectively.  If converted into shares of our common stock, the convertible notes would convert into 14,000,000 and 28,000,000 shares of our common stock, respectively (subject to the Conversion Limitation, described below).  The October 2011 note has matured and has not been repaid or extended to date.

 
9

 
Effective November 4, 2011, the Company entered into a Convertible Promissory Note with Little Bay in the amount of $5,000.  If converted into shares of our common stock, the convertible note would convert into 14,000,000 shares of our common stock (subject to the Conversion Limitation, described below).   The November 2011 note has matured and has not been repaid or extended to date.In February and March 2012, we issued three Convertible Promissory Notes. A note dated February 3, 2012 in the principal amount of $5,000 was issued to Little Bay in connection with a loan of $5,000 made to the Company by Little Bay, which note matures in February 2013, and bears interest at the rate of 8% per annum. A note dated February 17, 2012 in the principal amount of $5,000 was issued to MIH Holdings Ltd. (“MIH”) in connection with a loan of $5,000 made to the Company by MIH, which note matures in February 2013, and bears interest at the rate of 8% per annum.  The third note dated March 6, 2012, in the principal amount of $10,000 was issued to MIH in connection with a loan of $10,000 made to the Company by MIH, which note matures in March 2013, and bears interest at the rate of 8% per annum. If converted into shares of our common stock, the convertible notes would convert into 14,000,000, 14,000,000, and 28,000,000 shares of the Company’s common stock, respectively (not including the conversion of any accrued and unpaid interest and notwithstanding the Conversion Limitation as such relates to Little Bay and MIH as described below).

Effective April 20, 2012, Talon International Corp. (“Talon”) loaned the Company $115,000 (the “Talon Loan”), which was evidenced by a Convertible Promissory Note (as amended and restated, which amendment and restatement are reflected in the discussion below). The note bears interest at the rate of 8% per annum and matures on April 20, 2013.  If converted into shares of our common stock, the convertible note would convert into 322,128,851 shares of the Company’s common stock (not including the conversion of any accrued and unpaid interest) provided that the promissory note included a Conversion Limitation (as defined below).
 
In May 2012 and effective as of June 2, 2011, February 2, 2011 and December 21, 2011, the Company entered into amendments to the outstanding Convertible Promissory Notes with Cornerstone, Little Bay and MIH, respectively.  The amendments added a provision to the convertible notes which prohibited the holder thereof from converting such note into shares of the Company’s common stock if such conversion would result in the holder holding more than 4.99% of the Company’s common stock, subject to each holder’s ability to waive such limitation with not less than 61 days prior written notice to the Company (the “Conversion Limitation”).  Additionally, in October 2012, but effective in February 2011, the Company entered into an amendment to the outstanding Convertible Promissory Note with Translink to add a Conversion Limitation.

Effective June 26, 2012, Little Bay loaned the Company $30,000, which was evidenced by a convertible promissory note which bears interest at the rate of 8% per annum and matures on June 26, 2013. If converted into shares of our common stock, the convertible note would convert into 84,033,613 shares of the Company’s common stock (not including the conversion of any accrued and unpaid interest) provided that the promissory note included a Conversion Limitation (as defined above).

The Company evaluated the terms of the Convertible Notes in accordance with ASC 815-40, Contracts in Entity’s Own Equity, and concluded that the Convertible Notes did not result in a derivative. The Company evaluated the terms of the Convertible Notes and concluded that there was a beneficial conversion feature since the Convertible Notes were convertible into shares of common stock at a discount to the market value of the common stock.  The beneficial conversion feature is recorded as a discount to the notes and is amortized over the term of the debt.

Promissory Notes

Effective August 22, 2012, Fayt Investments Ltd. (“Fayt Investments”), loaned the Company $50,000, which was evidenced by a Promissory Note, which bears interest at the rate of 8% per annum and matures on August 22, 2013.  Upon an event of default (as described in the note), Fayt Investments has the option of converting the unpaid principal and interest owed under the Promissory Note into shares of the Company’s common stock at a conversion price equal to 70% of the volume weighted average of the closing prices of the Company’s common stock on the Over-The-Counter Bulletin Board or Pink Sheets trading market or on the principal securities exchange or other securities market on which the Company’s common stock is then being traded, for the ten prior trading days.

Effective September 7, 2012, Little Bay, loaned the Company $25,000, which was evidenced by a Promissory Note, which bears interest at the rate of 8% per annum and matures on September 7, 2013.  Upon an event of default (as described in the note), Little Bay has the option of converting the unpaid principal and interest owed under the Promissory Note into shares of the Company’s common stock at a conversion price equal to 70% of the volume weighted average of the closing prices of the Company’s common stock on the Over-The-Counter Bulletin Board or Pink Sheets trading market or on the principal securities exchange or other securities market on which the Company’s common stock is then being traded, for the ten prior trading days.

 
10

 
Need For Additional Funding:

The Company will require approximately $75,000 in the next twelve months to support its operations and to pay costs and expenses associated with its filing requirements with the Securities and Exchange Commission.  The Company’s operations do not currently produce sufficient operating cash to support the Company’s operations without additional funding.

The Company’s financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. As shown in the accompanying financial statements, the Company has experienced losses from operations and has negative working capital as of September 30, 2012.  These factors raise substantial doubt regarding the Company's ability to continue as a going concern. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. These financial statements do not include any adjustments related to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue as a going concern.

The Company will need to raise additional funding to complete the Plan of Operations set forth above.  The Company has budgeted the need for approximately $622,400 of additional funding during the next 12 months to affect the Plan of Operations set forth above and pay costs and expenses associated with the filing requirements with the Securities and Exchange Commission, which funding may not be available on favorable terms, if at all.  If the Company is unable to raise adequate working capital it will be restricted in the implementation of its business plan.
 
 
Moving forward, we plan to seek out additional debt and/or equity financing (similar to the Convertible Notes and Promissory Notes, described above) to pay costs and expenses associated with our filing requirements with the Securities and Exchange Commission and undertake our planned operations during the next 12 months (as described above); however, we do not currently have any specific plans to raise such additional financing at this time.  The sale of additional equity securities, if undertaken by the Company and if accomplished, may result in dilution to our shareholders. We cannot assure you, however, that future financing will be available in amounts or on terms acceptable to us, or at all.

ITEM 3.   Quantitative and Qualitative Disclosures About Market Risk

Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), we are not required to provide the information required by this Item as we are a “smaller reporting company,” as defined by Rule 229.10(f)(1).

ITEM 4.   Controls and Procedures

(a)           Evaluation of disclosure controls and procedures. Our Principal Executive Officer and Principal Financial Officer, after evaluating the effectiveness of our "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q (the "Evaluation Date"), has concluded that as of the Evaluation Date, our disclosure controls and procedures were not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.  This conclusion was based on the existence of the material weaknesses in our internal control over financial reporting previously disclosed and discussed below.
 
 
11

 
A material weakness 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 the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. We identified and continue to have the following material weaknesses in our internal controls over financial reporting: we currently do not have an internal audit group, and we will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. Additionally, due to the fact that we have only three officers and Directors who have no experience as officers or Directors of a reporting company, such lack of experienced personnel may impair our ability to maintain effective internal controls over financial reporting and disclosure controls and procedures, which may result in material misstatements to our financial statements and an inability to provide accurate and timely financial information to our stockholders.  

To address the need for more effective internal controls, management has plans to improve the existing controls and implement new controls as our financial position and capital availability improves.  
 
(b)           Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting during our most recent fiscal quarter that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.
 
Limitations on the Effectiveness of Internal Controls

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.
 
 
 
 
 
 
 
 
 
 
 

 
 
12

 
 
PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may become party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business. We are not currently involved in legal proceedings that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations. We may become involved in material legal proceedings in the future.

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors previously disclosed in the Company’s Form 8-K/A filed with the Commission on September 21, 2012 disclosing the closing of the Share Exchange Agreement and the operations of Eco-Tek. Investors are encouraged to read and review the risk factors included in the Form 8-K/A prior to making an investment in the Company.
 
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Effective August 22, 2012, Fayt Investments Ltd. (“Fayt Investments”), loaned the Company $50,000, which was evidenced by a Promissory Note, which bears interest at the rate of 8% per annum and matures on August 22, 2013.  Upon an event of default (as described in the note), Fayt Investments has the option of converting the unpaid principal and interest owed under the Promissory Note into shares of the Company’s common stock at a conversion price equal to 70% of the volume weighted average of the closing prices of the Company’s common stock on the Over-The-Counter Bulletin Board or Pink Sheets trading market or on the principal securities exchange or other securities market on which the Company’s common stock is then being traded, for the ten prior trading days.

Effective September 7, 2012, Little Bay, loaned the Company $25,000, which was evidenced by a Promissory Note, which bears interest at the rate of 8% per annum and matures on September 7, 2013.  Upon an event of default (as described in the note), Little Bay has the option of converting the unpaid principal and interest owed under the Promissory Note into shares of the Company’s common stock at a conversion price equal to 70% of the volume weighted average of the closing prices of the Company’s common stock on the Over-The-Counter Bulletin Board or Pink Sheets trading market or on the principal securities exchange or other securities market on which the Company’s common stock is then being traded, for the ten prior trading days.
 
We claim an exemption from registration afforded by Section 4(2) and/or Regulation S of the Securities Act of 1933, as amended ("Regulation S") for the sale of the above securities, since the sale of the securities were made to non-U.S. persons (as defined under Rule 902 section (k)(2)(i) of Regulation S), pursuant to offshore transactions, and no directed selling efforts were made in the United States by the issuer, a distributor, any of their respective affiliates, or any person acting on behalf of any of the foregoing.
 
ITEM 6. EXHIBITS

Exhibit Number
Description of Exhibit
   
3.1(1)
Articles of Incorporation
   
3.2(5)
Certificate of Change Pursuant to NRS 78.209
   
3.2(7)
Series A Preferred Stock Designation
   
3.3(1)
Bylaws
   
10.1(2)
Convertible Promissory Note with Morgarlan Limited
   
10.2(2)
Convertible Promissory Note with Little Bay Consulting SA
   
 
 
 
 
13

 
 
 
10.3(3)
Amended and Restated Convertible Promissory Note with Morgarlan Limited
   
10.4(3)
Amended and Restated Convertible Promissory Note with Little Bay Consulting SA

10.5(3)
Convertible Promissory Note with Cornerstone Global Investments (Effective October 26, 2010)
   
10.6(3)
Convertible Promissory Note with Gordon Douglas King and Jay Louise King (Effective November 4, 2010)
   
10.7(3)
Convertible Promissory Note with Cornerstone Global Investments (Effective January 31, 2011)
   
10.8(3)
Convertible Promissory Note with Gordon Douglas King and Jay Louise King (Effective February 2, 2011)
   
10.9(3)
Convertible Promissory Note with Translink Communications (Effective February 3, 2011)
   
10.10(4)
Convertible Promissory Note with Cornerstone Global Investments (Effective April 19, 2011)
   
10.11(4)
Convertible Promissory Note with MIH Holdings Ltd. (Effective May 25, 2011)
   
10.12(4)
Convertible Promissory Note with Cornerstone Global Investments (Effective June 3, 2011)
   
10.13(6)
Convertible Promissory Note With MIH Holdings Ltd. (Effective October 27, 2011)
   
10.14(6)
Convertible Promissory Note With Little Bay Consulting SA (Effective November 4, 2011)
   
10.15(6)
Convertible Promissory Note With MIH Holdings Ltd. (Effective December 22, 2011)
   
10.16(7)
Stock Purchase Agreement (April 2012)
   
10.17(8)
$5,000 Convertible Promissory Note with Little Bay Consulting SA (effective February 3, 2012)
   
10.18(8)
$5,000 Convertible Promissory Note with MIH Holdings Ltd. (effective February 17, 2012)
   
10.19(8)
$10,000 Convertible Promissory Note with MIH Holdings Ltd. (effective March 6, 2012)
   
10.20(8)
$115,000 Amended and Restated Convertible Promissory Note with Talon International Corp. (effective April 20, 2012)
   
10.21(8)
Amendment to Convertible Promissory Note with Cornerstone Global Investments
 
10.22(8)
Amendment to Convertible Promissory Note with Little Bay Consulting SA
   
10.23(8)
Amendment to Convertible Promissory Note with MIH Holdings Ltd.
   
10.24(9)
Amended and Restated Stock Purchase Agreement (June 2012)
   
10.25(9)
Cancellation of Shares Agreement
   
10.26(9)
Share Exchange Agreement – Eco-Tek Group Inc., the Company and the Eco-Tek Shareholders
   
10.27(9)
Form of Distribution Agreement
   
10.28(9)
$30,000 Convertible Promissory Note with Little Bay Consulting SA (effective June 26, 2012)
 
 
 
14

 
 
 
   
10.29(9)
Exclusive Distribution Letter Agreement Regarding Oil Cleaner and Filter
   
10.30(10)
Commercial Lease Agreement for 15-65 Woodstream Blvd, Woodbridge, Ontario, Canada L4L 7X6
   
10.31(10)
Technology co-operation Agreement
   
10.32(11)
Amended and Restated Technology co-operation Agreement
   
10.33(11)
Non-Disclosure Agreement with Kleen Flow Tumbler
   
10.34*
Promissory Note With Fayt Investments Ltd. (August 2012)($50,000)
   
10.35*
Promissory Note With Little Bay Consulting SA (September 2012)($25,000)
   
10.36*
First Amendment to Technology co-operation Agreement
   
10.37*
Amendment to Convertible Promissory Note With Translink Communications
   
31*
Certificate of the Principal Executive Officer and Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
32* 
Certificate of the Principal Executive Officer and Principal Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
   
99.1(11)
Audited Financial Statements of Eco-Tek Group Inc.
   
99.2(9)
Unaudited Interim Financial Statements of Eco-Tek Group Inc.
   
99.3(9)
Pro Forma Information
   
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

*   Attached hereto.
 
(1) Filed as an exhibit to the Company’s Form S-1 Registration Statement, filed with the Commission on October 19, 2009, and incorporated by reference herein.

(2) Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on February 22, 2010, and incorporated by reference herein.

(3) Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on February 23, 2011, and incorporated by reference herein.

(4) Filed as an exhibit to the Company’s Annual Report on Form 10-K, filed with the Commission on October 11, 2011, and incorporated by reference herein.
 
 
15

 
 
(5) Filed as an exhibit to the Company’s Current Report on Form 8-K, filed with the Commission on January 26, 2012, and incorporated reference herein.

(6) Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on February 14, 2012, and incorporated herein by reference.

(7) Filed as exhibits to the Company’s Form 8-K current report, filed with the Commission on April 20, 2012, and incorporated herein by reference.

(8) Filed as exhibits to the Company’s Form 8-K current report, filed with the Commission on May 10, 2012, and incorporated herein by reference.

(9) Filed as exhibits to the Company’s Form 8-K current report, filed with the Commission on July 6, 2012, and incorporated herein by reference.

(10) Filed as exhibits to the Company’s Form 8-K/A Amendment No. 1, filed with the Commission on August 27, 2012, and incorporated herein by reference.

(11) Filed as exhibits to the Company’s Form 8-K/A Amendment No. 2, filed with the Commission on September 21, 2012, and incorporated herein by reference.

** 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.

 
 
 
 
 
 
 
 
 
 
 

 
 
16

 
 
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.

 
SANDALWOOD VENTURES, LTD.
   
DATED: November 16, 2012
By: /s/ Ronald Kopman
 
Ronald Kopman
 
President (Principal Executive Officer)
 
and Chief Financial Officer (Principal Financial Officer/Principal Accounting Officer)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
17

 

 
EXHIBIT INDEX
 
Exhibit Number
Description of Exhibit
   
3.1(1)
Articles of Incorporation
   
3.2(5)
Certificate of Change Pursuant to NRS 78.209
   
3.2(7)
Series A Preferred Stock Designation
   
3.3(1)
Bylaws
   
10.1(2)
Convertible Promissory Note with Morgarlan Limited
   
10.2(2)
Convertible Promissory Note with Little Bay Consulting SA
   
10.3(3)
Amended and Restated Convertible Promissory Note with Morgarlan Limited
   
10.4(3)
Amended and Restated Convertible Promissory Note with Little Bay Consulting SA

10.5(3)
Convertible Promissory Note with Cornerstone Global Investments (Effective October 26, 2010)
   
10.6(3)
Convertible Promissory Note with Gordon Douglas King and Jay Louise King (Effective November 4, 2010)
   
10.7(3)
Convertible Promissory Note with Cornerstone Global Investments (Effective January 31, 2011)
   
10.8(3)
Convertible Promissory Note with Gordon Douglas King and Jay Louise King (Effective February 2, 2011)
   
10.9(3)
Convertible Promissory Note with Translink Communications (Effective February 3, 2011)
   
10.10(4)
Convertible Promissory Note with Cornerstone Global Investments (Effective April 19, 2011)
   
10.11(4)
Convertible Promissory Note with MIH Holdings Ltd. (Effective May 25, 2011)
   
10.12(4)
Convertible Promissory Note with Cornerstone Global Investments (Effective June 3, 2011)
   
10.13(6)
Convertible Promissory Note With MIH Holdings Ltd. (Effective October 27, 2011)
   
10.14(6)
Convertible Promissory Note With Little Bay Consulting SA (Effective November 4, 2011)
   
10.15(6)
Convertible Promissory Note With MIH Holdings Ltd. (Effective December 22, 2011)
   
10.16(7)
Stock Purchase Agreement (April 2012)
   
10.17(8)
$5,000 Convertible Promissory Note with Little Bay Consulting SA (effective February 3, 2012)
   
10.18(8)
$5,000 Convertible Promissory Note with MIH Holdings Ltd. (effective February 17, 2012)
   
10.19(8)
$10,000 Convertible Promissory Note with MIH Holdings Ltd. (effective March 6, 2012)
   
10.20(8)
$115,000 Amended and Restated Convertible Promissory Note with Talon International Corp. (effective April 20, 2012)
 
 
18

 
 
 
   
10.21(8)
Amendment to Convertible Promissory Note with Cornerstone Global Investments
 
10.22(8)
Amendment to Convertible Promissory Note with Little Bay Consulting SA
   
10.23(8)
Amendment to Convertible Promissory Note with MIH Holdings Ltd.
   
10.24(9)
Amended and Restated Stock Purchase Agreement (June 2012)
   
10.25(9)
Cancellation of Shares Agreement
   
10.26(9)
Share Exchange Agreement – Eco-Tek Group Inc., the Company and the Eco-Tek Shareholders
   
10.27(9)
Form of Distribution Agreement
   
10.28(9)
$30,000 Convertible Promissory Note with Little Bay Consulting SA (effective June 26, 2012)
   
10.29(9)
Exclusive Distribution Letter Agreement Regarding Oil Cleaner and Filter
   
10.30(10)
Commercial Lease Agreement for 15-65 Woodstream Blvd, Woodbridge, Ontario, Canada L4L 7X6
   
10.31(10)
Technology co-operation Agreement
   
10.32(11)
Amended and Restated Technology co-operation Agreement
   
10.33(11)
Non-Disclosure Agreement with Kleen Flow Tumbler
   
10.34*
Promissory Note With Fayt Investments Ltd. (August 2012)($50,000)
   
10.35*
Promissory Note With Little Bay Consulting SA (September 2012)($25,000)
   
10.36*
First Amendment to Technology co-operation Agreement
   
10.37*
Amendment to Convertible Promissory Note With Translink Communications
   
31*
Certificate of the Principal Executive Officer and Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
32* 
Certificate of the Principal Executive Officer and Principal Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
99.1(11)
Audited Financial Statements of Eco-Tek Group Inc.
   
99.2(9)
Unaudited Interim Financial Statements of Eco-Tek Group Inc.
   
99.3(9)
Pro Forma Information
   
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

*   Attached hereto.
 
 
19

 
(1) Filed as an exhibit to the Company’s Form S-1 Registration Statement, filed with the Commission on October 19, 2009, and incorporated by reference herein.

(2) Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on February 22, 2010, and incorporated by reference herein.

(3) Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on February 23, 2011, and incorporated by reference herein.

(4) Filed as an exhibit to the Company’s Annual Report on Form 10-K, filed with the Commission on October 11, 2011, and incorporated by reference herein.
 
(5) Filed as an exhibit to the Company’s Current Report on Form 8-K, filed with the Commission on January 26, 2012, and incorporated reference herein.

(6) Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on February 14, 2012, and incorporated herein by reference.

(7) Filed as exhibits to the Company’s Form 8-K current report, filed with the Commission on April 20, 2012, and incorporated herein by reference.

(8) Filed as exhibits to the Company’s Form 8-K current report, filed with the Commission on May 10, 2012, and incorporated herein by reference.

(9) Filed as exhibits to the Company’s Form 8-K current report, filed with the Commission on July 6, 2012, and incorporated herein by reference.

(10) Filed as exhibits to the Company’s Form 8-K/A Amendment No. 1, filed with the Commission on August 27, 2012, and incorporated herein by reference.

(11) Filed as exhibits to the Company’s Form 8-K/A Amendment No. 2, filed with the Commission on September 21, 2012, and incorporated herein by reference.

** 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.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
20