UNITED STATES­­­­­

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2014

[] 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: 000-53489

Ecrypt Technologies, Inc.

 (Exact name of registrant as specified in its charter)

Colorado		32-0201472
(State or other jurisdiction of incorporation)		(IRS Employer Identification Number)
4750 Table Mesa Dr. Boulder CO, 80305
(Address of principal executive offices)
1.866.204.6703
(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 shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  [ X ] Yes   [ ] No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

[ X ] Yes   [ ] No

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

Large accelerated filer [ ]	Accelerated filer [ ]
Non-accelerated filer [ ]  (Do not check if a smaller reporting company)	Smaller reporting company [ X ]

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

As of August 18, 2014, the Company had 128,238,890 shares issued and outstanding.

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PART I-FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS.

The financial statements of Ecrypt Technologies, Inc. (the "Company" or “Ecrypt”), a Colorado corporation, included herein were prepared, without audit, pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”).  Because certain information and notes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America were condensed or omitted pursuant to such rules and regulations, these financial statements should be read in conjunction with the financial statements and notes thereto included in the audited financial statements of the Company in the Company's Form 10-K for the fiscal year ended March 31, 2014, and all amendments thereto.

ECRYPT TECHNOLOGIES, INC.

FINANCIAL STATEMENTS

JUNE 30, 2014

INDEX TO FINANCIAL STATEMENTS:	Page
Balance Sheets	3
Statements of Operations	5
Statement of Stockholders’ Deficit	6
Statements of Cash Flows	7
Notes to Unaudited Financial Statements	8 - 14

  

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Ecrypt Technologies, Inc.
BALANCE SHEETS (Unaudited)
			June 30		March 31,
			2014		2014
ASSETS
CURRENT ASSETS
	Cash		$         29,408		$       15,504
	TOTAL CURRENT ASSETS		29,408		15,504
Property and equipment, net			6,892		7,826
TOTAL ASSETS			$         36,300		$       23,330
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
	Accounts payable and accrued liabilities		$         47,976		$       26,180
	Accounts payable-related party		-		13,200
	Accrued interest on loan		99,933		85,816
	Accrued interest on loan-related party		211,282		193,764
	Notes payable-related party		553,000		553,000
	Notes payable		744,854		659,854
TOTAL CURRENT LIABILITIES			1,657,045		1,531,814
LONG TERM LIABILITIES
	Notes payable		100,000		100,000
	Notes payable-related party		5,500		5,500
	Accrued interest on loan		11,318		8,913
	Accrued interest on loan-related party		555		417
	TOTAL LONG TERM LIABILITIES		117,373		114,830
TOTAL LIABILITIES			1,774,418		1,646,642
STOCKHOLDERS' DEFICIT
	Preferred stock (10,000,000 Shares Authorized; Par Value $.0001
		5,000,000 and 0 shares issued and outstanding as at June 30, 2014 and March 31, 2014)	500		500
	Common stock (500,000,000 Shares Authorized; No Par Value;
		126,436,052 and 135,979,802 shares issued and outstanding as at June 30, 2014 and March 31, 2014)	1,037,973		1,029,161
	Additional paid in capital		6,429,500		6,429,500
	Stock subscription payable		150,417		8,812
	Accumulated deficit		(9,356,508)		(9,091,287)
TOTAL STOCKHOLDERS' DEFICIT			(1,738,119)		(1,623,314)

  

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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT			$         36,300		$       23,328
The accompanying notes are an integral part of these financial statements.

  

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Ecrypt Technologies, Inc.
STATEMENTS OF OPERATIONS
(Unaudited)
			For the three months ended June 30,		For the three months ended June 30,
			2014		2013
REVENUES
	Sales		$                    -		$           1,213
OPERATING EXPENSES
	Amortization and depreciation		935		1,021
	Advertisement and promotion		4,577		5,111
	General and administrative		196,317		123,526
	Professional fees		29,215		26,008
TOTAL OPERATING EXPENSES			231,044		155,666
OPERATING LOSS			(231,044)		(154,453)
OTHER EXPENSES
	Interest expense		(16,519)		(11,671)
	Interest expense related party		(17,658)		(16,543)
	TOTAL OTHER EXPENSES		(34,177)		(28,214)
NET LOSS			$      (265,221)		$    (182,667)
WEIGHTED AVERAGE SHARES OUTSTANDING
	Basic		134,109,802		135,923,552
Loss per share
	Basic		(0.00)		(0.00)
The accompanying notes are an integral part of these financial statements.

  

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Ecrypt Technologies, Inc.
STATEMENTS OF CASH FLOWS
(Unaudited)
			For the three months ended June 30,		For the three months ended June 30,
			2014		2013
CASH FLOWS FROM OPERATING ACTIVITIES
	Net Loss		$       (265,221)		$       (182,667)
	Adjustments for non-cash items:
		Amortization and depreciation	935		1,021
		Stock issued for compensation	150,417		4,500
		Interest on loan	16,521		11,672
		Interest on loan-related party	17,656		16,543
	Changes in operating assets and liabilities:
		Accounts payable and accrued liabilities	21,796		39,289
		Accounts payable-related party	(13,200)		8,700
NET CASH USED IN OPERATING ACTIVITIES			(71,096)		(100,942)
CASH FLOWS FROM FINANCING ACTIVITIES
	Proceeds from loan		85,000		100,000
	Proceeds from loan-related party		-		5,500
NET CASH PROVIDED BY FINANCING ACTIVITIES			85,000		105,500
NET INCREASE IN CASH AND CASH EQUIVALENTS			13,904		4,558
CASH AND CASH EQUIVALENTS
Beginning of period			15,504		10,863
End of period			$            29,408		$            15,421
Supplemental disclosures of cash flow information:
	Common stock issued to satisfy common stock payable		$              8,812		$            14,625
The accompanying notes are an integral part of these financial statements.

  

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ECRYPT TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

 (UNAUDITED)

1.

Nature of Operations

Ecrypt Technologies Inc. a Colorado corporation (“the Company”), was incorporated on April 19, 2007.  The Company’s business operations are oriented around the marketing and distribution of proprietary and allied security, defense and information security software, hardware and services.  Products include software, hardware and services, and span a diverse variety of industries including, but not limited to, email security, user authentication, robotics, and cyber breach protection.

2.

Significant Accounting Policies   

Basis of Presentation

The financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles of the United States of America (“US GAAP”).

In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position as of June 30, 2014, and the results of operations and cash flows presented herein have been included in the financial statements. The financial statements should be read in conjunction with the Form 10-K for the year ended March 31, 2014, filed with the SEC on July 14, 2014.

 

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that impact the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as at the date of the financial statements and the reported amounts of revenue and expense during the reporting period.  Actual results could differ from those estimates.

Uncertainty as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has suffered recurring losses from operations since inception (April 19, 2007) up to June 30, 2014 of $9,356,508 which raises substantial doubt about its ability to continue as a going concern.

The Company’s ability to continue as a going concern is dependent upon its ability to generate profitable operations in the future and/or obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has plans to seek additional capital through a private placement and public offering of its common stock. These plans, if successful, will mitigate the factors which raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

Stock-Based Compensation

The Company accounts for share based payments in accordance with ASC 718, Compensation - Stock Compensation, which requires all share-based payments to employees, including grants of employee

  

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ECRYPT TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

 (UNAUDITED)

stock options, to be recognized in the financial statements based on the grant date fair value of the award. In accordance with ASC 718-10-30-9, Measurement Objective – Fair Value at Grant Date, the Company estimates the fair value of the award using a valuation technique. For this purpose, the Company uses the Black-Scholes option pricing model. The Company believes this model provides the best estimate of fair value due to its ability to incorporate inputs that change over time, such as volatility and interest rates, and to allow for actual exercise behavior of option holders.

Compensation cost is recognized over the requisite service period which is generally equal to the vesting period. Upon exercise, shares issued will be newly issued shares from authorized common stock.

ASC 505, "Compensation-Stock Compensation", establishes standards for the accounting for transactions in which an entity exchanges its equity instruments to non employees for goods or services. Under this transition method, stock compensation expense includes compensation expense for all stock-based compensation awards granted on or after January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of ASC 505.

Related Parties

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions.  Parties are also considered to be related if they are subject to common control or common significant influence.

Foreign Currency Translation

The measurement currency of the Company is the U.S. dollar. Transactions in foreign currencies are translated at the exchange rate in effect at the transaction date.  Monetary assets and liabilities denominated in other than the measurement currency are translated at the exchange rates in effect at the balance sheet date.  The resulting exchange gains and losses are recognized in earnings.

Net Earnings (Loss) per Share

Basic and diluted net loss per share information is presented under the requirements of ASC Topic 260, Earnings per Share. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period, less shares subject to repurchase. Diluted net loss per share reflects the potential dilution of securities by adding other common stock equivalents, including stock options, shares subject to repurchase, warrants and convertible notes in the weighted-average number of common shares outstanding for a period, if dilutive.

3.

Recent Accounting Pronouncements

The Company has adopted all recently issued accounting pronouncements. The adoption of the accounting pronouncements, including those not yet effective, is not anticipated to have a material effect on the financial position or results of operations of the Company.

4.

Stockholders’ Deficit

a)

Authorized:

  

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ECRYPT TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

 (UNAUDITED)

500,000,000 Common shares with no par value; 126,436,052 Common shares issued and outstanding;

10,000,000 Preferred shares with $0.0001 par value; 5,000,000 Preferred shares issued and outstanding:

During the period ended June 30, 2014, the Company effected the following stock transactions:

On February 18, 2014, the Company issued 18,750 shares of common stock for compensation for a value of $2,437.  The share price is valued at the adjusted closing price on the date of vesting of the shares which was $0.13 per share.  The compensation agreement calls for a total of 75,000 shares to be issued during a 12 month period. These shares were recorded as stock payable as of March 31, 2014. These shares were issued out of stock payable on April 11, 2014.

On March 27, 2014, the Company issued 37,500 shares of common stock for director compensation for a value of $6,375.  The share price is valued at the adjusted closing price on the date of vesting of the shares which was $0.17 per share.  The compensation agreement calls for a total of 150,000 shares to be issued during a 12 month period. These shares were recorded as stock payable as of March 31, 2014. These shares were issued out of stock payable on April 11, 2014

On June 12, 2014 the Company entered into an agreement with Gabriel Rosu for the surrender and cancellation of 9,600,000 restricted shares of common stock issued to Gabriel Rosu. The Company did not receive any consideration for the cancellation.

On June 16, 2014 the Company issued 1,185,338 shares of common stock for officer compensation for a value of $148,167.  The share price is valued at the adjusted closing price on the date of vesting of the shares which was $0.125 per share.  The compensation agreement calls for a total of 9,482,704 shares to be issued during a 28 month period.  The shares were recorded as stock payable as of June 30, 2014.

On June 18, 2014, the Company issued 18,750 shares of common stock for compensation for a value of $2,250.  The share price is valued at the adjusted closing price on the date of vesting of the shares which was $0.12 per share.  The compensation agreement calls for a total of 75,000 shares to be issued during a 12 month period. These shares were recorded as stock payable as of June 30, 2014.

5.

Stock options

On February 16, 2012 the company granted a non-qualified stock option to its newly appointed director, Thomas Trkla as compensation for his services. The director is entitled to purchase a total of three hundred thousand (300,000) shares of restricted common stock for a price equal to $0.30 per share (Exercise Price), exercisable over a ten-year period thereafter. The option shall be vested during the 12 month period. As to the total number of Shares with respect to which the Option is granted, the Option

shall be exercisable as follows: (i) 25% of the Option in the aggregate may be exercised upon the mutual execution of this Agreement (ii) 50% of the Option in the aggregate may be exercised on or after the four month anniversary of the Grant Date; (iii) 75% of the Option in the aggregate may be exercised on or after the eight month anniversary of the Grant Date; and (iv) 100% of the Option in the aggregate may be exercised on or after the twelve month anniversary of the Grant Date (the twelve month period commencing on the Grant Date and ending on the twelve month anniversary of the Grant Date being referred to as the “Vesting Period”). As of June 30, 2014, the director has not exercised any rights. The total fair value of these options at the date of grant was estimated to be $180,000 and was determined using the Black-Scholes option pricing model with an expected life of 10 years, a risk free interest rate of

  

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ECRYPT TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

 (UNAUDITED)

1.99%, a dividend yield of 0% and expected volatility of 419%. Out of this $180,000 was recorded as stock based compensation expense through June 30, 2014 based on three hundred thousand (300,000) options vested.

	Number of Options	Weighted-Average Exercise Price per share	Weighted- Average Remaining Life (Years)
Outstanding at as at 06.30.2013	300,000	$      0.30	9.88
Granted	-	$            -	-
Exercised	-	$        NA	NA
Cancelled	-	$        NA	NA
Outstanding as at 06.30.2014	300,000	$      0.30	8.88
Exercisable at 06.30.2014	300,000	$      0.30

6.

Loan-Related Party

As of June 30, 2014 and March 31, 2014, the balance of loans due to a related party was $558,500 and $558,500, respectively.

The Company issued on June 27, 2013 a $5,500 unsecured note payable to a shareholder.  The note bears interest at 10%, compounded annually, matures in two years on June 27, 2015.

The Company issued on January 11, 2012 a $38,000 unsecured note payable to a shareholder.  The note bears interest at 10%, compounded annually, matures in two years on January 11, 2014.  On February 5, 2014 the Company secured a note payable extension through May 31, 2014.  On June 26, 2014, the Company secured a note payable extension through November 30, 2014 with no change in original terms of the agreement.

 

The Company issued on December 6, 2011 a $20,000 unsecured note payable to a shareholder.  The note bears interest at 10%, compounded annually, matures in two years on December 6, 2013.  On February 5, 2014 the Company secured a note payable extension through May 31, 2014. On June 26, 2014, the Company secured a note payable extension through November 30, 2014 with no change in original terms of the agreement.

The Company issued on October 19, 2011 a $25,000 unsecured note payable to a shareholder.  The note bears interest at 10%, compounded annually, matures in two years on October 19, 2013.  On October 17, 2013, the Company secured a note payable extension through January 31, 2014.  On February 5, 2014 the Company secured a note payable extension through May 31, 2014. On June 26, 2014, the Company secured a note payable extension through November 30, 2014 with no change in original terms of the agreement.

The Company issued on September 30, 2011 a $20,000 unsecured note payable to a shareholder.  The note bears interest at 10%, compounded annually, matures in two years on September 30, 2013.   On October 17, 2013the Company secured a note payable extension through January 31, 2014.  On February

  

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ECRYPT TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

 (UNAUDITED)

5, 2014 the Company secured a note payable extension through May 31, 2014. On June 26, 2014, the Company secured a note payable extension through November 30, 2014 with no change in original terms of the agreement.

The Company issued on September 2, 2011 a $20,000 unsecured note payable to a shareholder.  The note bears interest at 10%, compounded annually, matures in two years on September 2, 2013. On October 17, 2013, the Company secured a note payable extension through January 31, 2014. On February 5, 2014 the Company secured a note payable extension through May 31, 2014. On June 26, 2014, the Company secured a note payable extension through November 30, 2014 with no change in original terms of the agreement.

The Company issued on August 5, 2011 a $24,000 unsecured note payable to a shareholder.  The note bears interest at 10%, compounded annually, matures in two years on August 5, 2013.  On October 17, 2013, the Company secured a note payable extension through January 31, 2014. On February 5, 2014 the Company secured a note payable extension through May 31, 2014. On June 26, 2014, the Company secured a note payable extension through November 30, 2014 with no change in original terms of the agreement.

The Company issued on July 7, 2011 a $40,000 unsecured note payable to a shareholder.  The note bears interest at 10%, compounded annually, matures in two years on July 7, 2013.  On July 17, 2013, the note was extended to mature in fifty-five (55) days on August 31, 2013.  On October 17, 2013, the Company secured a note payable extension through January 31, 2014.  On February 5, 2014 the Company secured a note payable extension through May 31, 2014. On June 26, 2014, the Company secured a note payable extension through November 30, 2014 with no change in original terms of the agreement.

The Company issued on May 9, 2011 a $36,000 unsecured note payable to a shareholder.  The note bears interest at 10%, compounded annually, matures in two years on May 9, 2013.  On July 17, 2013 the note was extended to mature in one hundred and fourteen (114) days on August 31, 2013.  On October 17, 2013, the Company secured a note payable extension through January 31, 2014.  On February 5, 2014 the Company secured a note payable extension through May 31, 2014. On June 26, 2014, the Company secured a note payable extension through November 30, 2014 with no change in original terms of the agreement.

The Company issued on April 29, 2011 a $15,000 unsecured note payable to a shareholder.  The note bears interest at 10%, compounded annually, matures in two years on April 29, 2013.  On April 29, 2013, the Company secured a one year note payable extension through April 29, 2014. On June 26, 2014, the Company secured a note payable extension through November 30, 2014 with no change in original terms of the agreement.

The Company acquired a $100,000 advance during the month of January 2011 from shareholder.  The advance was unsecured, non-interest bearing and due in six months. On June 24, 2011 the loan was modified to bear interest at 10%, compounded annually, and extended to mature in two years on June 24, 2013.  On July 17, 2013, the note was extended to mature on August 31, 2013.  On October 17, 2013, the Company secured a note payable extension through January 31, 2014.  On February 5, 2014 the Company secured a note payable extension through May 31, 2014. On June 26, 2014, the Company secured a note payable extension through November 30, 2014 with no change in original terms of the agreement.

  

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ECRYPT TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

 (UNAUDITED)

The Company issued on May 18, 2010 a $215,000 unsecured note payable to a shareholder.  The note bears interest at 10%, compounded annually, matures in two years on May 18, 2012.  On July 17, 2013, the note was extended to mature on August 31, 2013.  On October 17, 2013, the Company secured a note payable extension through January 31, 2014.  On February 5, 2014 the Company secured a note payable extension through May 31, 2014. On June 26, 2014, the Company secured a note payable extension through November 30, 2014 with no change in original terms of the agreement.

Interest expense for the three months ended June 30, 2014, and 2013, was $17,658 and $16,543, respectively.

7.

Note Payable

As of June 30, 2014 and March 31, 2014, the balance of loans due to third parties was $844,854 and $759,854 respectively.

The Company issued on February 21, 2012 a $99,964 unsecured note payable to a third party.  The note bears interest at 10%, compounded annually, matures in two years on February 21, 2014.  On May 8, 2014 the Company secured a note payable extension through June 21, 2014.  On June 26, 2014, the Company secured a note payable extension through November 30, 2014 with no change in original terms of the agreement.

The Company issued on June 13, 2012 a $99,970 unsecured note payable to a third party.  The note bears interest at 10%, compounded annually, matures in two years on June 13, 2014. On June 26, 2014, the Company secured a note payable extension through November 30, 2014 with no change in original terms of the agreement.

The Company issued on April 23, 2014 a $40,000 unsecured note payable to a third party.  The note bears interest at 10% compounded annually and matures on November 30, 2014.

The Company issued on June 16, 2014 a $45,000 unsecured note payable to a third party.  The note bears interest at 10% compounded annually and matures on February 5, 2015.

Interest expense for the three months ended June 30, 2014, and 2013, was $16,519 and $11,671, respectively.

8.

Subsequent Events

On June 16, 2014 the Company issued 1,185,338 shares of common stock for officer compensation for a value of $148,167.  The share price is valued at the adjusted closing price on the date of vesting of the shares which was $0.125 per share.  The compensation agreement calls for a total of 9,482,704 shares to be issued during a 28 month period.  The shares were recorded as stock payable as of June 30, 2014.  The shares where subsequently issued out of stock payable on August 13, 2014.

On July 7, 2014, the Company entered into a private placement subscription agreement that offers a total of 100,000 units for a value of $10,000, or $0.10 per unit.  Each unit consists of one (1) share of the Company’s common stock, and one-half (1/2) common stock purchase Warrant.  One full warrant entitles the holder to purchase one (1) share of the Corporation’s common stock at a price of $0.15 per share at any time within a 12 month period from the date of closing.

  

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ECRYPT TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

 (UNAUDITED)

On July 7, 2014, the Company entered into a private placement subscription agreement that offers a total of 105,000 units for a value of $10,500, or $0.10 per unit.  Each unit consists of one (1) share of the Company’s common stock, and one-half (1/2) common stock purchase Warrant.  One full warrant entitles the holder to purchase one (1) share of the Corporation’s common stock at a price of $0.15 per share at any time within a 12 month period from the date of closing.

On July 7, 2014, the Company entered into a private placement subscription agreement that offers a total of 200,000 units for a value of $20,000, or $0.10 per unit.  Each unit consists of one (1) share of the Company’s common stock, and one-half (1/2) common stock purchase Warrant.  One full warrant entitles the holder to purchase one (1) share of the Corporation’s common stock at a price of $0.15 per share at any time within a 12 month period from the date of closing.

On July 9, 2014, the Company entered into a private placement subscription agreement that offers a total of 125,000 units for a value of $12,500, or $0.10 per unit.  Each unit consists of one (1) share of the Company’s common stock, and one-half (1/2) common stock purchase Warrant.  One full warrant entitles the holder to purchase one (1) share of the Corporation’s common stock at a price of $0.15 per share at any time within a 12 month period from the date of closing.

On July 10, 2014, the Company entered into a private placement subscription agreement that offers a total of 50,000 units for a value of $5,000, or $0.10 per unit.  Each unit consists of one (1) share of the Company’s common stock, and one-half (1/2) common stock purchase Warrant.  One full warrant entitles the holder to purchase one (1) share of the Corporation’s common stock at a price of $0.15 per share at any time within a 12 month period from the date of closing.

On July 27, 2014, the Company issued 37,500 shares of common stock for director compensation for a value of $6,000.  The share price is valued at the adjusted closing price on the date of vesting of the shares which was $0.16 per share.  The compensation agreement calls for a total of 150,000 shares to be issued during a 12 month period.

  

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ITEM 2.

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

SPECIAL NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS

CERTAIN STATEMENTS IN THIS REPORT, INCLUDING STATEMENTS IN THE FOLLOWING DISCUSSION, ARE WHAT ARE KNOWN AS "FORWARD LOOKING STATEMENTS", WHICH ARE BASICALLY STATEMENTS ABOUT THE FUTURE. FOR THAT REASON, THESE STATEMENTS INVOLVE RISK AND UNCERTAINTY SINCE NO ONE CAN ACCURATELY PREDICT THE FUTURE. WORDS SUCH AS "PLANS," "INTENDS," "WILL," "HOPES," "SEEKS," "ANTICIPATES," "EXPECTS "AND THE LIKE OFTEN IDENTIFY SUCH FORWARD LOOKING STATEMENTS, BUT ARE NOT THE ONLY INDICATION THAT A STATEMENT IS A FORWARD LOOKING STATEMENT. SUCH FORWARD LOOKING STATEMENTS INCLUDE STATEMENTS CONCERNING OUR PLANS AND OBJECTIVES WITH RESPECT TO THE PRESENT AND FUTURE OPERATIONS OF THE COMPANY, AND STATEMENTS WHICH EXPRESS OR IMPLY THAT SUCH PRESENT AND FUTURE OPERATIONS WILL OR MAY PRODUCE REVENUES, INCOME OR PROFITS. NUMEROUS FACTORS AND FUTURE EVENTS COULD CAUSE THE COMPANY TO CHANGE SUCH PLANS AND OBJECTIVES OR FAIL TO SUCCESSFULLY IMPLEMENT SUCH PLANS OR ACHIEVE SUCH OBJECTIVES, OR CAUSE SUCH PRESENT AND FUTURE OPERATIONS TO FAIL TO PRODUCE REVENUES, INCOME OR PROFITS. THEREFORE, THE READER IS ADVISED THAT THE FOLLOWING DISCUSSION SHOULD BE CONSIDERED IN LIGHT OF THE DISCUSSION OF RISKS AND OTHER FACTORS CONTAINED IN THIS REPORT ON FORM 10-Q AND IN THE COMPANY'S OTHER FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. NO STATEMENTS CONTAINED IN THE FOLLOWING DISCUSSION SHOULD BE CONSTRUED AS A GUARANTEE OR ASSURANCE OF FUTURE PERFORMANCE OR FUTURE RESULTS.

Overview & Plan of Operation

Ecrypt Technologies, Inc., a Colorado corporation, was incorporated in the State of Colorado, on April 19, 2007.  The Company provides security, defense, and information security solutions, which assist corporate entities, governments and individuals in protecting their organizations and/or critical infrastructures against error, and physical and cyber attack. The Company’s business operations are oriented around the marketing and distribution of proprietary and allied security, defense and information security software, hardware and services.  

Currently, the Company’s primary business operations are focused on establishing a strategic marketing program of allied products and services of which the Company is designated as the exclusive, or non-exclusive, marketing and distribution agent within the USA and abroad.

Additionally, the Company has developed and plans to sell an enterprise-level secure email software appliance named Ecrypt One. Ecrypt One is an email server with integrated security technology.  It was designed to protect email and attachments in transit and at rest.  It incorporates multiple security technologies and techniques, such as encryption, role based access controls, server rules that enforce security, and multi-factor authentication.  It was designed to assist organizations and governments to meet and maintain compliance with information security regulations such as HIPAA.

The Company filed a patent application for multiple processes in Ecrypt One, with a request for non-publication, on April 22, 2014.

  

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In addition to the foregoing, in an effort to advance the business operations of the Company, over the next twelve (12) months the Company plans to undertake the following actions in the order in which they are listed:

1.

Continue developing its strategic marketing alliance program;

2.

Commence distribution of allied products and services;

3.

Complete development of Ecrypt One;

4.

Complete testing of Ecrypt One;

5.

Commence distribution on Ecrypt One.

The foregoing business actions are goals of the Company.  There is no assurance that the Company will be able to complete any, or all, of the foregoing actions.

Results of Operations

The following discussion and analysis provides information that we believe is relevant to an assessment and understanding of our results of operation and financial condition for the three months ended June 30, 2014, as compared to the three months ended June 30, 2013. The following discussion should be read in conjunction with the Financial Statements and related Notes appearing elsewhere in this Form 10-Q.

Our financial statements are stated in US Dollars and are prepared in accordance with generally accepted accounting principles of the United States (“GAAP”).

Results of Operations for Ecrypt Technologies, Inc. for the Three Months Ended June 30, 2014 Compared to the Three Months Ended June 30, 2013.

Revenue

During the three months ended June 30, 2014, the Company had revenues of $0 as compared to revenues of $1,213 during the three months ended June 30, 2013, a decrease of $1,213, or approximately 100%. The decrease in revenue experienced by the Company was primarily attributable to the fact that the Company discontinued sales of One on One and Ecrypt Me on June 30, 2013.

Operating Expenses

During the three months ended June 30, 2014 the Company had operating expenses of $231,044 as compared to operating expenses of $155,666 during the three months ended June 30, 2013, an increase of $75,378 or approximately 48.423%. The increase in operating expenses experienced by the Company was primarily attributable to an increase in amortization and depreciation expenses, an increase in general and administrative expenses, and an increase in professional fees.

Net Loss

The Company had a net loss of $(265,221) for the three months ended June 30, 2014, as compared to a net loss of $(182,667) for the three months ended June 30, 2013, a change of $82,554 or approximately 45.194%.  The change in net loss experienced by the Company was primarily attributable to the fact that the Company experienced an increase in operating expenses, and an increase in interest expense during the three months ended June 30, 2014.

  

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Liquidity and Capital Resources

Currently, we have limited operating capital.  The Company anticipates that it will require approximately $5,000,000 of working capital to complete all of its desired business activity during the next twelve months.  The Company has earned limited revenue from its business operations.  Our current capital and our other existing resources will be sufficient only to provide a limited amount of working capital, and, to date, the revenues generated from our business operations have not been sufficient to fund our operations or planned growth.  As noted above, we will likely require additional capital to continue to operate our business, and to further expand our business.   We may be unable to obtain the additional capital required.   Our inability to generate capital or raise additional funds when required will have a negative impact on our operations, business development and financial results.   

During the next twelve months, we plan to seek to generate the necessary capital to fund our business operations and complete our desired business activity through sales Ecrypt One and strategic marketing affiliate products and services.  If we are unable to generate the necessary capital through the sales of these products, we may conduct a private placement offering to seek to raise the necessary working capital to fund our business operations, or continue to rely on related party loans to fund our business operations.

The following discussion outlines the state of our liquidity and capital resources as of June 30, 2014:

Total Current Assets & Total Assets

Our unaudited balance sheet reflects that: i) as of June 30, 2014, we have total current assets of $29,408 as compared to total current assets of $15,504 at March 31, 2014, an increase of $13,904, or approximately 89.68%; and ii) as of June 30, 2014, we have total assets of $36,300, compared to total assets of $23,330 as of March 31, 2014, an increase of $12,970, or approximately 55.594%.  The increase in the Company’s total current assets and total assets from June 30, 2014 to March 31, 2014 was primarily attributable to the fact that the Company obtained more cash via loans from third parties during the period ended June 30, 2014.

Cash: As of June 30, 2014, our unaudited balance sheet reflects that we have cash of $29,408 as compared to $15,504 at March 31, 2014, an increase of $13,904, or approximately 89.68%.  The increase in the Company’s cash from March 31, 2014 to June 30, 2014 to was primarily attributable to the fact that the Company obtained more cash via loans from third parties during the period ended June 30, 2014.

Total Current Liabilities

Our unaudited balance sheet reflects that: i) as of June 30, 2014, we have total current liabilities of $1,657,045 as compared to total current liabilities of $1,531,814 at March 31, 2014, an increase of $125,231 or approximately 8.18%; and ii) as of June 30, 2014, we have total liabilities of $1,774,418 as compared to total liabilities of $1,646,644 at March 31, 2014, an increase of $127,774 or approximately 7.76%.  The increase in the Company’s total current liabilities and total liabilities from June 30, 2014 to March 31, 2014 was primarily attributable to the fact that the Company received loans from a third party, realized an increase in the accrued interest on loans payable to related and third parties, and realized an increase in accounts payable and accrued liabilities.

Cash Flow for the Company for the Three Month Period Ended June 30, 2014 as Compared to the Three Month Period Ended June 30, 2013

  

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Operating Activities During the three month period ended June 30, 2014, the net cash used by the Company in operating activities was $(71,096) as compared to net cash used in operating activities of $(100,942) during the three month period ended June 30, 2013, a change of $29,846 or approximately 29.57%.  The decrease in our net cash used in operating activities was primarily attributable to net loss adjusted by a decrease in amortization and depreciation, a decrease in accounts payable and accrued liabilities, and a decrease in accounts payable due to a related party.

Financing Activities During the three month period ended June 30, 2014, the net cash provided by financing activities was $85,000 as compared to net cash provided by financing activities of $105,500 during the three month period ended June 30, 2013, a decrease of $20,500, or approximately 19.431%. The change in net cash provided by financing activities was primarily attributable to the fact that the Company received less cash via loans from third and related parties.

Investing Activities During the three month period ended June 30, 2014, and the three month period ended June 30, 2013, the net cash used in investing activities was $nil.

 

Off Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements.

Subsequent Events

Subsequent to the three months ended June 30, 2014, the Company sold a total of 580,000 units for a total of $58,000, or $0.10 per unit.  Each unit consists of one (1) share of the Company’s common stock, and one-half (1/2) common stock purchase Warrant.  One full warrant entitles the holder to purchase one (1) share of the Corporation’s common stock at a price of $0.15 per share at any time within a 12 month period from the date of closing.  The securities were sold to a total of five (5) different purchasers as part of a private placement offering being conducted by the Company.  The sales of securities were made in reliance upon exemptions for registration provided by Regulation S under the Securities Act of 1933.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET

RISK.

Not Applicable.

ITEM 4.

CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean the company's controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely

  

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decisions regarding required disclosure.  The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to principal executive and principal financial officers to allow timely decisions regarding disclosure.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures.  Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are not designed to provide reasonable assurance of achieving the objectives of timely alerting them to material information required to be included in our periodic SEC reports and of ensuring that such information is recorded, processed, summarized and reported within the time periods specified.  Our chief executive officer and chief financial officer also concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report to provide reasonable assurance of the achievement of these objectives.  Based on that evaluation, our management has concluded that, as of June 30, 2014, the Company's internal control over financial reporting contained a material weakness due to a failure by the Company to properly value a stock transaction issued by the Company, and as a result of such material weakness, our internal controls over financial reporting were not effective as of June 30, 2014.  To remediate the weakness in our internal controls over financial reporting, we intend to: i) reconcile stock issuance transactions against the agreements underlying such stock issuance transactions to ensure that equity issuances are properly accounted for; and ii) implement a review board to review the stock issuance transactions to ensure that they are properly valued and accounted for.

Changes in Internal Control over Financial Reporting

There was no change in the Company's internal control over financial reporting during the period ended June 30, 2014, that has materially affected, or is likely to materially affect, the Company's internal control over financial reporting.

PART II-OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS.

The Company is not a party to any pending legal proceedings, and no such proceedings are known to be contemplated. No director, officer or affiliate of the Company and no owner of record or beneficial owner of more than 5.0% of the securities of the Company, or any associate of any such director, officer or security holder is a party adverse to the Company or has a material interest adverse to the Company in reference to pending litigation.

ITEM 1A.

 RISK FACTORS.

Not Applicable.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

On October 18, 2013, the Company entered into an Advisory Board Agreement with Ian Treleaven. Pursuant to the terms of the Advisory Board Agreement, as consideration for Mr. Treleaven’s services as

  

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Advisor, Mr. Treleaven was granted a total of up to seventy five thousand (75,000) shares of common stock in the Registrant, which shares shall be issued as follows: (i) eighteen thousand seven hundred and fifty (18,750) shares of common stock pursuant to the terms and conditions of a Restricted Shares Agreement attached to the Advisory Board Agreement as Exhibit A.  As of June 30, 2014, the Registrant had issued a total of thirty seven thousand and five hundred (37,500) shares of restricted common stock to Mr. Treleaven.  For the above share issuances, the shares were not registered under the Securities Act of 1933 (the “Securities Act”) in reliance upon the exemptions from registration contained in Section 4(2) of the Securities Act.

As previously disclosed on Form 8-K filed on April 1, 2014, on March 27, 2014, the Registrant entered into a Director Agreement with Mr. Celluci.  Pursuant to the terms of the Director Agreement, as consideration for Mr. Celluci’s services as a Director, Mr. Celluci was granted a total of up to one hundred and fifty thousand (150,000) shares of common stock in the Registrant, which shares shall be issued pursuant to the terms and conditions of a Restricted Shares Agreement attached to the Director Agreement as Exhibit A.  As of June 30, 2014, the Registrant had issued a total of seventy five thousand (75,000) shares of restricted common stock to Mr. Celluci.  For the above share issuances, the shares were not registered under the Securities Act of 1933 (the “Securities Act”) in reliance upon the exemptions from registration contained in Section 4(2) of the Securities Act.

As previously disclosed on Form 8-K filed on June 18, 2014, in conjunction with the Registrant’s engagement of Mr. Thomas Celluci as the Chief Executive Officer of the Company, on June 16, 2014, the Registrant entered into an employment agreement (the “Employment Agreement”) with Mr. Celluci for an unfixed term, pursuant to which the Registrant agreed to employ Mr. Celluci as the Chief Executive Officer of the Registrant.  Pursuant to the terms of the Employment Agreement, as consideration for Mr. Celluci’s services as the Chief Executive Officer, Mr. Celluci was granted up to a total of up to eighteen million nine hundred and sixty five thousand and four hundred and eight (18,965,408) shares of common stock in the Registrant, which shares shall be issued as follows: (i) nine million four hundred and eighty two thousand and seven hundred and four (9,482,704) shares of common stock pursuant to the terms and conditions of a Restricted Shares Agreement attached to the Employment Agreement as Exhibit A; and (ii) nine million four hundred and eighty two thousand and seven hundred and four (9,482,704) of common stock pursuant to a restricted shares agreement once the Registrant either (a) amends its existing Stock Compensation Program (the “Program”) to increase the number of maximum authorized shares which may be issued under the Program, or (b) adopts a new stock compensation program.  As of June 30, 2014, the Registrant had recorded a total of one million one hundred and eighty five thousand and three hundred thirty eight (1,185,338) shares of restricted common stock payable to Mr. Celluci as stock payable.  For the above share issuances, the shares were not registered under the Securities Act of 1933 (the “Securities Act”) in reliance upon the exemptions from registration contained in Section 4(2) of the Securities Act.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.

MINE SAFETY DISCLOSURES.

None.

  

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ITEM 5.    

OTHER INFORMATION.

None.

 

ITEM 6.

EXHIBITS.

(a)

The following exhibits are filed herewith:

31.1

Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101

SCH XBRL Schema Document.

101

INS XBRL Instance Document.

101

CAL XBRL Taxonomy Extension Calculation Linkbase Document.

101

LAB XBRL Taxonomy Extension Label Linkbase Document.

101

PRE XBRL Taxonomy Extension Presentation Linkbase Document.

101

DEF XBRL Taxonomy Extension Definition Linkbase Document.

  

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ECRYPT TECHNOLOGIES, INC.

By:  /S/ Thomas A. Cellucci

Thomas A. Cellucci, Chief Executive Officer

August 19, 2014

By:  /S/ Brad Lever

Brad Lever, Chief Financial Officer

August 19, 2014

  

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