UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended: August 31, 2014

 

OR

 

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

 

For the transition period from ______________ to ______________

 

Commission file number: 333-168413

 

ECOSCIENCES, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Nevada		27-2692640
(State of Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification Number)
420 Jericho Turnpike, Suite 110
Jericho, NY 11753		11753
(Address of Principal Executive Offices)		(Zip Code)

 

(516) 465-3964

(Registrant’s Telephone Number, Including Area Code)

 

With a copy to:

Philip Magri, Esq.

Magri Law, LLC

2642 NE 9th Avenue

Fort Lauderdale, FL 33334

T: (646) 502-5900

F: (646) 826-9200

pmagri@magrilaw.com

www.SEClawyerFL.com

 

N/A

(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

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 the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

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]

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of October 20, 2014, there were 336,751,500 shares of Common Stock, $0.0001 par value per share, issued and outstanding.

 

 

 

TABLE OF CONTENTS

 

				Page
PART I - FINANCIAL INFORMATION
Item 1.		Condensed Consolidated Financial Statements		3
Item 2.		Management’s Discussion and Analysis of Financial Condition and Plan of Operations		9
Item 3.		Quantitative and Qualitative Disclosures About Market Risk		14
Item 4.		Controls and Procedures		14
PART II - OTHER INFORMATION
Item 1.		Legal Proceedings		15
Item 1A.		Risk Factors		15
Item 2.		Unregistered Sale of Equity Securities and Use of Proceeds		15
Item 3.		Defaults Upon Senior Securities		15
Item 5.		Other Information		15
Item 6.		Exhibits		15
SIGNATURES				16

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements (unaudited)

 

Ecosciences, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

 

		August 31, 2014				May 31, 2014
ASSETS
Current Assets
Cash		$	13,256			$	19,238
Accounts receivable - net			4,302				1,298
Inventory			2,437				2,035
Total Assets		$	19,995			$	22,571
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Accounts payable and accrued liabilities		$	47,557			$	39,749
Due to related parties			10,900				10,600
Notes payable			204,232				126,732
Convertible notes payable			6,177				6,177
Total Liabilities			268,866				183,258
Stockholders’ Deficit
Preferred Stock 50,000,000 shares authorized, $0.0001 par value;
Series A Redeemable Preferred Stock 1,518,630 shares issued and outstanding (May 31, 2014 – 1,768,630 shares)			152				177
Series B Preferred Stock 200,000 shares issued and outstanding			20				20
Common Stock 500,000,000 shares authorized, $0.0001 par value; 336,751,500 shares issued and outstanding			33,675				33,675
Accumulated Deficit			(282,718	)			(194,559	)
Total Stockholders’ Deficit			(248,871	)			(160,687	)
Total Liabilities and Stockholders’ Deficit		$	19,995			$	22,571

 

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

 

 

Ecosciences, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

		Three Months				Three Months
		Ended				Ended
		August 31, 2014				August 31, 2013
Revenue		$	3,225			$	12,795
Cost of sales			(1,595	)			(2,906	)
Gross Profit			1,630				9,889
Expenses
Advertising and promotion			–				330
General and administrative			1,684				647
Professional fees			25,280				–
Transfer agent and filing fees			9,422				235
Total Expenses			36,386				1,212
Net (Loss) Income Before Other Expenses			(34,756	)			8,677
Other Expenses
Interest expense			(3,428	)			(501	)
Net (Loss) Income		$	(38,184	)		$	8,176
Net (Loss) Income Per Share		$	–			$	–
Weighted-average Common Shares Outstanding - Basic and Diluted			336,751,500				250,001,500

 

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

 

 

Ecosciences, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

		Three Months Ended August 31, 2014				Three Months Ended August 31, 2013
Cash Flows from Operating Activities
Net (loss) income		$	(38,184	)		$	8,176
Changes in operating assets and liabilities:
Accounts receivable			(3,004	)			(10,312	)
Inventory			(402	)			148
Accounts payable and accrued liabilities			4,379				1,189
Accrued interest			3,429				501
Net Cash Used in Operating Activities			(33,782	)			(298	)
Cash Flows from Financing Activities
Advances from related parties			300				–
Proceeds from notes payable			77,500				–
Proceeds from convertible notes payable			–				–
Redemption of Series A redeemable preferred stock			(50,000	)			–
Net Cash Provided by Financing Activities			27,800				–
Change in Cash			(5,982	)			(298	)
Cash - Beginning of Period			19,238				332
Cash - End of Period		$	13,256			$	34
Supplemental Disclosures of Cash Flow Information:
Interest paid		$	–			$	–
Income taxes paid		$	–			$	–

 

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

 

 

Ecosciences, Inc.

Notes to the Condensed Consolidated Financial Statements

 

1.	Nature of Operations

 

Ecosciences, Inc. (the “Company”) was incorporated in the State of Nevada on May 26, 2010. The Company was a consulting company intending to serve the sports and entertainment industry. On May 9, 2014, the Company entered into a Plan of Merger and Reorganization (“Merger Agreement”) with Eco-logical Concepts, Inc. (“Eco-logical”), a Delaware corporation, whereby every 100 shares of common stock of Eco-logical was converted into 500 shares (1 pre-split share) of common stock of the Company and each share of Series A Convertible preferred stock of Eco-logical was converted into 1 share of Series B non-convertible preferred stock of the Company. As a result of the Merger Agreement, stockholders of Eco-logical received 275,001,500 shares of common stock and 200,000 shares of Series B non-convertible preferred stock of the Company in exchange for all 55,000,250 shares of common stock and 200,000 shares of Series A preferred stock of Eco-Logical. The Merger Agreement was treated as a recapitalization of the Company for financial accounting purposes. Refer to Note 4.

 

The Company’s principal business is now focused on the development, production and sale of environmentally focused wastewater products. It currently produces organic tablets and powders to be used regularly and in lieu of harmful chemical cleaning products in grease trap and septic tank systems. The Company intends to generate revenue through the sale of tablets and powders to domestic and international customers in the food and sanitation industries as well as residential consumers.

 

The accompanying condensed consolidated financial statements of the Company should be read in conjunction with the financial statements and accompanying notes filed with the U.S. Securities and Exchange Commission in the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2014. In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments of a recurring nature considered necessary to present fairly the Company’s financial position and the results of its operations and its cash flows for the periods shown.

 

The preparation of condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those estimates. The results of operations and cash flows for the periods shown are not necessarily indicative of the results to be expected for the full year.

 

2.	Going Concern

 

These condensed consolidated financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated significant revenue since inception and has not generated significant earnings. 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. As of August 31, 2014, the Company has accumulated losses of $282,718 and a working capital deficit of $248,871. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

3.

Inventory

 

Inventory consists of the following:

 

		August 31, 2014				May 31, 2014
Raw Materials		$	81			$	464
Finished Goods			1,512				866
Packaging Supplies			844				705
Total		$	2,437			$	2,035

 

4.	Related Party Transactions

 

At August 31, 2014 and May 31, 2014, the Company was indebted to the President of the Company and a company controlled by the President of the Company for $10,900 and $10,600, respectively, for expenses paid on behalf of the Company. The amount is unsecured, non-interest bearing and due on demand.

 

 

Ecosciences, Inc.

Notes to the Condensed Consolidated Financial Statements

 

5.	Notes Payable

 

Notes payable consist of the following:				August 31, 2014				May 31, 2014
a)		Notes payable that are unsecured, non-guaranteed, non-interest bearing and due on demand.		$	3,732			$	3,732
b)		Note payable which is unsecured, non-guaranteed, and non-interest bearing. The note is due one year following the borrowing date.			8,000				8,000
c)		Note payable which is unsecured, non-guaranteed, and bears interest at 10% per annum. The note is due 60 days following demand. At August 31, 2014, and May 31, 2014, the Company owed accrued interest of $2,773 and $2,159, respectively.			20,000				20,000
d)		Notes payable which is unsecured, non-guaranteed, and bears interest at 8% per annum. The note is due one year following the borrowing date. At August 31, 2014, and May 31, 2014, the Company owed accrued interest of $2,992 and 359, respectively.			170,000	*			95,000	*
e)		Note payable which is unsecured, non-guaranteed, and bears interest at 8% per annum. The note is due one year following the borrowing date. At August 31, 2014, the Company owed accrued interest of $3.			2,500				–
				$	204,232			$	126,732

 

* On May 9, 2014, the Company entered into a Master Loan Agreement (the “Loan Agreement”), whereby the lender agreed, from time to time, to purchase from the Company one or more Promissory Notes for the account of the Company, provided, however, that the aggregate principal amount of all Promissory Notes then outstanding shall not exceed $500,000 and that no Event of Default has occurred and remains uncured. Amounts borrowed under the Loan Agreement are evidenced by an unsecured, non-recourse Promissory Note, bearing interest at a rate of 8% per annum, maturing on the first anniversary date thereof, and may be prepaid by the Company before the maturity date. Amounts borrowed under the Loan Agreement and repaid or prepaid may not be re-borrowed. The Loan Agreement will automatically terminate and be of no further force and effect upon the earlier to occur of (i) the satisfaction of all indebtedness, including the promissory notes and any additional indebtedness issued thereafter, between the Company and the lender and (ii) written termination notice is delivered by the Company or the lender to the other party.

 

6.	Convertible Notes Payable

 

	a)	On December 22, 2011, the Company entered into two Convertible Promissory Note agreements for an aggregate of $4,000. The Notes bear interest at 10% per annum, and the principal amount and any interest thereon are due 60 days following demand. Pursuant to the agreements, the Notes are convertible into shares of common stock at a conversion price equal to $0.01 per share. At August 31, 2014, and May 31, 2014, the Company owed accrued interest of $1,077 and $959, respectively. At August 31, 2014, and May 31, 2014, the balance owing on the two Notes was $4,000.
	b)	On December 22, 2011, the Company entered into a Convertible Promissory Note agreement for $10,000. The Note bears interest at 10% per annum, and the principal amount and any interest thereon are due 60 days following demand. Pursuant to the agreement, the Note is convertible into shares of common stock at a conversion price equal to $0.01 per share. In addition, as a condition precedent to the right to convert the debt to common stock of the Company, the holder must purchase 3,000,000 shares of common stock at $0.01 per share. On December 27, 2012, the Company repaid $4,005 towards the principal balance and $995 towards accrued interest. On April 19, 2013, the Company repaid $4,818 towards the principal balance and $182 towards accrued interest. At August 31, 2014, and May 31, 2014, the Company owed accrued interest of $161 and $129, respectively. At August 31, 2014, and May 31, 2014, the balance owing on the Note was $1,177.
	c)	On December 28, 2011, the Company entered into two Convertible Promissory Note agreements for an aggregate of $6,000. The Notes bear interest at 10% per annum, and the principal amount and any interest thereon are due 60 days following demand. Pursuant to the agreements, the Notes are convertible into shares of common stock at a conversion price equal to $0.0001 per share. On October 27, 2012, the Company issued 50,000,000 shares of common stock of Eco-logical upon the conversion of the principal amount of $5,000. At August 31, 2014, and May 31, 2014, the Company owed accrued interest of $268 and $238, respectively. At August 31, 2014, and May 31, 2014, the balance owing on the two Notes was $1,000.

 

 

Ecosciences, Inc.

Notes to the Condensed Consolidated Financial Statements

 

7.	Common Stock

 

	a)	Effective June 23, 2014, the Articles of Incorporation were amended to increase the number of authorized shares of common stock from 100,000,000 shares to 500,000,000 shares.
	b)	On June 23, 2014, the Company completed a forward stock split of its common stock at a ratio of 500-for-1. All share and per share amounts have been restated retroactively for the stock split.

 

8.	Preferred Stock

 

	a)	On June 9, 2014, the Company redeemed 100,000 shares of Series A redeemable preferred stock in exchange for $20,000.
	b)	Effective June 23, 2014, the Articles of Incorporation were amended to increase the number of authorized shares of preferred stock from 10,000,000 shares to 50,000,000 shares.
	c)	On August 12, 2014, the Company redeemed 100,000 shares of Series A redeemable preferred stock in exchange for $20,000.
	d)	On August 21, 2014, the Company redeemed 50,000 shares of Series A redeemable preferred stock in exchange for $10,000.

 

9.	Concentrations

 

The Company’s revenues and receivables were concentrated among three customers as of August 31, 2014, and May 31, 2014:

 

May 31, 2014:

 

Customer		Revenue				Receivables
1			60	%			65	%
2			29	%			11	%
3			11	%			11	%

 

August 31, 2014:

 

Customer		Revenue				Receivables
1			100	%			52	%
2			*				39	%
3			*				*

 

* not greater than 10%

 

10.	Subsequent Event

 

On September 4, 2014, the Company entered into a Share Redemption Agreement with Edward Whitehouse pursuant to which the Company redeemed 50,000 shares of Series A redeemable preferred stock for $10,000.

 

 

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

 

You should read the following discussion together with our consolidated financial statements and the related notes included elsewhere in this report. This discussion contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ materially from those we currently anticipate as a result of many factors, including the factors we describe under “Risk Factors” and elsewhere in this report.

 

Forward Looking Statements

 

Some of the information in this section contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue,” or similar words. You should read statements that contain these words carefully because they:

 

	●	discuss our future expectations;
	●	contain projections of our future results of operations or of our financial condition; and
	●	state other “forward-looking” information.

 

We believe it is important to communicate our expectations. However, there may be events in the future that we are not able to accurately predict or over which we have no control. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under “Risk Factors,” “Business” and elsewhere in this report.

 

Unless stated otherwise, the words “we,” “us,” “our,” the “Company” or “Ecosciences” in this section collectively refer to Ecosciences, Inc. and its wholly-owned subsidiary, Eco-Logical Concepts, Inc.

 

Corporate History

 

We were formerly known as On-Air Impact, Inc., a Nevada corporation (“On-Air Impact”). From the date of its inception on May 26, 2010 until the consummation of the reverse merger described below on May 9, 2014, On-Air Impact was a “shell company” (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)).

 

On May 9, 2014, On-Air Impact and its wholly-owned subsidiary, Eco Merger Sub, Inc., a Delaware corporation (“Merger Sub”), consummated a reverse merger (the “Merger”) with Eco-Logical Concepts, Inc., a Delaware corporation (“Eco-Logical”), pursuant to the terms and conditions of that certain Agreement and Plan of Merger, dated May 9, 2014 (the “Merger Agreement”), whereby Merger Sub merged with and into Eco-Logical with Eco-Logical being the surviving corporation and replacing Merger Sub as On-Air Impact’s wholly-owned subsidiary. Since the Merger, the business and operations of Eco-Logical have been business and operations of On-Air Impact.

 

At the closing of the Merger:

 

●	Every one hundred (100) shares of common stock, par value $0.0001 per share, of Eco-Logical issued and outstanding immediately prior to the closing of the Merger was converted into one (1) share of common stock, par value $0.0001 per share (the “Common Stock”), of On-Air Impact, rounding up to the nearest whole number for resulting fractional shares; and
●	Each share of Series A Non-Convertible Preferred Stock, par value $0.0001 per share, of Eco-Logical issued and outstanding immediately prior to the closing of the Merger was converted into one share of Series B Non-Convertible Preferred Stock, par value $0.0001 per share (the “Series B Non-Convertible Preferred Stock”), of On-Air Impact.

 

In addition, pursuant to the Merger Agreement, on May 9, 2014, Joel Falitz, the President and Chief Executive Officer of Eco-Logical, was appointed to serve as the Chairman of our Board of Directors for a one-year period until the next annual stockholders’ meeting or until his successor is elected and qualified and as the Chief Executive Officer, President, Secretary and Treasurer of the Company.

 

As a result of the Merger, On-Air Impact ceased to be a shell company. The information contained in our “Super Form 8-K” filed on May 15, 2014 constitutes the current “Form 10 information” necessary to satisfy the conditions contained in Rule 144(i)(2) under the Securities Act of 1933, as amended (the “Securities Act”).

 

 

The Merger was intended to be treated as a tax-free reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended, and has been treated as a recapitalization of the Company for financial accounting purposes. Even though On-Air Impact was the legal acquirer, Eco-Logical is considered to be the acquirer for accounting purposes, and the Company’s historical financial statements before the Merger will be replaced with the historical financial statements of Eco-Logical before the Merger in this Report and all future filings with the SEC.

 

To better reflect our new operations as a result of the Merger, on June 23, 2014, the Company changed its name from “On-Air Impact” to “Ecosciences, Inc.” On June 23, 2014, we also increased our authorized capital stock from 100 million shares of Common Stock to 500 million shares; and from 10 million shares of “blank check” Preferred Stock, par value $0.0001 per share (“Preferred Stock”) to 50 million shares. We also effectuated a 500-for-1 forward stock split of our outstanding Common Stock on June 23, 2014 (the “Forward Stock Split”).

 

Also, on June 23, 2014, Dorothy Whitehouse and Edward Whitehouse each resigned as a member of our Board of Directors. Their resignations were not due to any disagreement with the Company nor were they related to our operations, policies or practices.

 

On July 21, 2014, the ticker symbol of our Common Stock on the OTCQB was changed from “OAIR” to “ECEZ” to better reflect our new name.

 

Overview

 

Eco-Logical Concepts Inc. (hereinafter referred to as the “Company,” “Eco,” “Eco-Logical,” “our,” we,” “us,” and similar terms) was incorporated in the State of Delaware on November 30, 2011.

 

The following discussion highlights Eco-Logical’s results of operations and the principal factors that have affected our consolidated financial condition as well as our liquidity and capital resources for the periods described, and provides information that management believes is relevant for an assessment and understanding of our consolidated financial condition and results of operations presented herein. The following discussion and analysis is based on Eco-Logical’s audited financial statements contained in this Report, which have been prepared in accordance with generally accepted accounting principles in the United States. You should read the discussion and analysis together with such financial statements and the related notes thereto.

 

As a result of the Merger and the change in our business and operations, a discussion of the past financial results of On-Air Impact, Inc. is not pertinent, and under generally accepted accounting principles in the United States, the historical financial results of Eco-Logical, the accounting acquirer, prior to the Merger are considered the historical financial results of the Company.

 

Located in Jericho, New York, Eco-Logical provides bio-remediation services for sewers, sludge ponds, septic tanks, lagoons, farms, car washes, portable sanitation facilities, grease tanks, lakes and ponds. We provide a suite of tablet-based products that can be added to waste systems. The active ingredients in our tablets oxygenate wastewater, remove hydrogen sulfide odors, prevent corrosion in wastewater systems and initiate aerobic biological breakdown of organic sludge including fats, oils and grease. The tablets are non-toxic to the environment, non-caustic and comprised of natural ingredients that do not require any special permitting for use and disposal. The product is simple to use directly by the end consumer.

 

The Company has formulated a business model that management believes can help it grow and achieve economies of scale over time. We have undertaken the necessary due diligence and prepared a business that will enable us to compete in the market for bio-remediation services.

 

The Company is focused on building, acquiring and investing in businesses around ecological and life sciences. From waste water remediation to healthcare and more, Ecosciences is committed to building a better living environment for all people.

 

Growth Strategy of the Company

 

Our mission is to maximize stockholder value through expanding the scope of products offered. We intend to conduct research and development to bring new, improved products to market to ensure we are competitive in our market space. We intend to focus on growing our distribution channels using master-distributor relationships, full-line distributors and other similar sales channels. We intend to build product and brand awareness through a direct retail channel using online marketing and info-commercials, which we believe will provide a feedback benefit for the growth of our other distribution channels as well as to establish opportunities for indirect retail sales channels, such as through chain stores and small retailers.

 

We have been working to set up regional distributors in several different market segments, such as septic systems, grease traps, ponds, agricultural and wastewater. Sales this fiscal year have primarily been to Mexico, and we are currently finalizing more orders locally in New Jersey. All sales were completed in US dollars and have not been subject to any foreign taxes.

 

 

Critical Accounting Policies, Estimates, and Judgments

 

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, 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. We continually evaluate our estimates and judgments, our commitments to strategic alliance partners and the timing of the achievement of collaboration milestones. We base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known. Besides the estimates identified above that are considered critical, we make many other accounting estimates in preparing our financial statements and related disclosures. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenues and expenses, as well as disclosures of contingent assets and liabilities. These estimates and judgments are also based on historical experience and other factors that are believed to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known, even for estimates and judgments that are not deemed critical.

 

Results of Operations

 

The following table presents Eco-Logical’s results of operations for the periods indicated and as a percentage of total revenue. Historical results are not necessarily indicative of results for future periods.

 

 

		Three-Month Period Ended August 31,
		2014								2013
		$				% of Revenue				$				% of Revenue
Revenue:		$	3,225				-	%		$	12,795				-
Cost of sales:			(1,595	)			(49.46	)%			(2,906	)			(22.71	)%
Gross profit			1,630				50.54	%			9,889				77.29	%
Operating expenses:
Advertising and Promotion			-				-	%			330				2.58	%
General and administrative			1,684				52.21	%			647				5.06	%
Professional fees			25,280				783.88	%			-				-	%
Transfer agent and filing fees			9,422				292.16	%			235				1.84	%
Total Expenses			36,386				1,128.24	%			1,212				9.47	%
Net loss before other expenses:			(34,756	)			(1,077.71	)%			8,667				67.74	%
Other expenses:
Interest expense			3,428				106.29	%			501				3.92	%
Net (loss) income		$	(38,184	)			(1,184.00	)%			8,176				63.90	%

 

⁽¹⁾ Amounts may not sum due to rounding.

 

The following tables present our revenue and operating expenses for the periods indicated.

 

Revenue

 

		Three-Month Period Ended August 31,
		2014				2013				% Change
Revenue		$	3,225			$	12,795				(74.79	)%

 

Our Revenue decreased 74.79% for the three months ended August 31, 2014 as compared to the three months ended August 31, 2013. The decrease is attributable to the timing of limited annual sales orders closing outside of the three months ended August 31, 2014. Each sales order represents a significant portion of the total annual sales.

 

 

Costs and Expenses

 

Cost of Sales

 

		Three-Month Period Ended August 31,
		2014				2013				% Change
Costs of Sales		$	1,595			$	2,906				(45.11	)%

 

Our Costs of Sales decreased 45.11% for the three months ended August 31, 2014 as compared to the three months ended August 31, 2013. The decrease is attributable to the timing of limited annual sales orders closing outside of the three months ended August 31, 2014. Each sales order represents a significant portion of the total annual sales.

 

Operating Expenses

 

		Three-Month Period Ended August 31,
		2014				2013				% Change
Operating Expenses		$	36,386			$	1,212				2,902.15	%

 

Our Operating Expenses increased 2,902.15% for three months ended August 31, 2014 as compared to the three months ended August 31, 2013. The increase is attributable to an increase in Professional Fees consisting of legal, accounting and consulting fees. Prior to the reverse merger on May 9, 2014 between the Company’s (then known as On-Air Impact, Inc.) then wholly-owned subsidiary, Eco Merger Sub, Inc., with Eco-Logical Concepts, Inc., the Company had no operations.

 

Interest Expense

 

		Three-Month Period Ended August 31,
		2014				2013				% Change
Interest Expense		$	3,428			$	501				584.23	%

 

Our Interest Expense increased 584.23% for the three months ended August 31, 2014 as compared to the three months ended August 31, 2013. The increase is attributable to the Company selling $170,000 in notes pursuant to the Loan Agreement with Bacarat from May 9, 2014 through to August 25, 2014.

 

Financial Condition, Liquidity and Capital Resources

 

At August 31, 2014, we had $13,256 in cash on hand and an accumulated deficit of $248,871; and had $3,225 in revenues for the three month period ended August 31, 2014. In their report for the five months ended May 31, 2014, our auditors have expressed that there is substantial doubt as to our ability to continue as a going concern. We have incurred operating losses since our formation and expect to incur losses and negative operating cash flows for the foreseeable future. We expect to incur substantial losses for the foreseeable future and may never become profitable. We also expect to continue to incur significant operating and capital expenditures for the next several years and anticipate that our expenses will increase substantially in the foreseeable future. We also expect to experience negative cash flow for the foreseeable future as we fund our operating losses and capital expenditures. As a result, we will need to generate significant revenues in order to achieve and maintain profitability. We may not be able to generate these revenues or achieve profitability in the future. Our failure to achieve or maintain profitability could negatively impact the value of our Common Stock.

 

To date, we have financed our operations primarily through the sale of Convertible Promissory Notes to Joel Falitz and other non-affiliated third parties and the issuance and sale of equity securities for cash consideration. As of August 31, 2014, we have financed our operations by the following:

 

 

●

On May 9, 2014, the Company entered into that certain Master Loan Agreement, dated May 9, 2014 (the “Loan Agreement”), with Bacarat Holdings, Inc., an unaffiliated third party lender (“Bacarat” or the “Lender”). Subject to the terms and conditions set forth in the Loan Agreement, Bacarat agreed, from time to time to purchase from the Company, and the Company agreed to sell and issue to Bacarat, one or more Promissory Notes for the account of the Company, provided, however, that the aggregate principal amount of all Promissory Notes then outstanding shall not exceed the $500,000 and that no Event of Default has occurred and has remained uncured. Amounts borrowed under the Loan Agreement shall be evidenced by an unsecured, non-recourse Promissory Note, bear interest at a rate of 8% per annum, mature on the first anniversary date thereof, and may be prepaid by the Company before the maturity date thereof. Amounts borrowed under the Loan Agreement and repaid or prepaid may not be re-borrowed. The Loan Agreement shall automatically terminate and be of no further force and effect upon the earlier to occur of (i) the satisfaction of all indebtedness, including the promissory notes and any additional indebtedness issued thereafter, between the Company and Bacarat and (ii) written termination notice is delivered by the Company or Bacarat to the other party. There can be no assurances that any additional funds will be available to us under the Loan Agreement since it provides that the Lender may terminate this Agreement at any time.

 

As of August 31, 2014, the Company sold the following promissory notes to Bacarat pursuant to the Loan Agreement:

 

Issue Date:		Maturity Date:				Interest Rate:				Principal:
5/9/2014			5/9/2015				8	%		$	50,000
5/19/2014			5/19/2015				8	%			45,000
6/6/2014			6/6/2015				8	%			30,000
8/11/2014			8/11/2014				8	%			25,000
8/18/2014			8/18/2015				8	%			10,000
8/25/2014			8/25/2015				8	%			10,000
TOTAL:			-				-			$	170,000

 

●	On June 9, 2014, the Company entered into a third Share Redemption Agreement with Edward Whitehouse pursuant to which the Company redeemed 100,000 shares of Series A Convertible Preferred Stock for $20,000.
●	On August 12, 2014, the Company entered into a fourth Share Redemption Agreement with Edward Whitehouse pursuant to which the Company redeemed 100,000 shares of Series A Convertible Preferred Stock for $20,000.
●	On August 21, 2014, the Company entered into a fifth Share Redemption Agreement with Edward Whitehouse pursuant to which the Company redeemed 50,000 shares of Series A Convertible Preferred Stock for $10,000. As of August 31, 2014, the Company redeemed an aggregate of 481,370 shares of Series A Convertible Preferred Stock from Edward Whitehouse for an aggregate of $96,274. See “Subsequent Events” below.

 

Working Capital

 

The consolidated financial statements filed with this Report have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated significant revenue since inception and has not generated significant earnings. 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. As of August 31, 2014, the Company has accumulated losses of $282,718 and a working capital deficit of $248,871. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. Our financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Notwithstanding our Loan Agreement with Bacarat that may be terminated upon an uncured Event of Default or by Bacarat at any time, we do not believe our cash resources are sufficient to implement our current business plan, support operations and meet current obligations for the next 12 months. We plan to raise additional capital to finance our operations. There can be no assurance that financing will be available when required in sufficient amounts, on acceptable terms or at all. In the event that the necessary additional financing is not obtained, we may be required to reduce our discretionary overhead costs substantially, including research and development, general and administrative and sales and marketing expenses or otherwise curtail operations.

 

 

Cash and Cash Equivalents

 

The following table summarizes the sources and uses of cash for the periods stated. The Company held no cash equivalents for any of the periods presented.

 

		Three Month Period Ended August 31,
		2014				2013
Cash, beginning of period		$	19,238			$	332
Net cash provided by (used in) operating activities			(33,782	)			(298	)
Net cash provided by investing activities			0				0
Net cash provided by financing activities			27,800				0
Cash, end of period		$	13,256			$	34

 

Off-Balance Sheet Operations

 

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

 

Subsequent Events

 

On September 4, 2014, the Company entered into a sixth Share Redemption Agreement with Edward Whitehouse pursuant to which the Company redeemed 50,000 shares of Series A Convertible Preferred Stock for $10,000.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

N/A

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures.

 

In accordance with Exchange Act Rules 13a-15 and 15d-15, our management is required to perform an evaluation under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period.

 

Based upon that evaluation, our management has concluded that, as of August 31, 2014, our disclosure controls and procedures were not effective.

 

Changes in Internal Control over Financial Reporting

 

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended August 31, 2014 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 

PART II

OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

None

 

Item 1A. Risk Factors.

 

N/A

 

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

 

The Company issued the following unregistered securities during the quarter ended August 31, 2014:

 

●	On June 6, 2014, the Company sold a one-year promissory note to Bacarat under the Loan Agreement for the principal amount of $30,000, bearing interest at the rate of 8% per annum and maturing on the one year anniversary of the date thereof. The Company may prepay all or any portion of the promissory note at any time and form time without premium or penalty. Any such prepayment shall first be applied against the installments of principal due under the note in the inverse order of their maturity and shall be accompanied by payment of accrued interest on the amount prepaid to the date of prepayment.
●	On August 11, 2014, the Company sold a one-year promissory note to Bacarat under the Loan Agreement for the principal amount of $25,000, bearing interest at the rate of 8% per annum and maturing on the one year anniversary of the date thereof. The Company may prepay all or any portion of the promissory note at any time and form time without premium or penalty. Any such prepayment shall first be applied against the installments of principal due under the note in the inverse order of their maturity and shall be accompanied by payment of accrued interest on the amount prepaid to the date of prepayment.
●	On August 18, 2014, the Company sold a one-year promissory note to Bacarat under the Loan Agreement for the principal amount of $10,000, bearing interest at the rate of 8% per annum and maturing on the one year anniversary of the date thereof. The Company may prepay all or any portion of the promissory note at any time and form time without premium or penalty. Any such prepayment shall first be applied against the installments of principal due under the note in the inverse order of their maturity and shall be accompanied by payment of accrued interest on the amount prepaid to the date of prepayment.
●	On August 25, 2014, the Company sold a one-year promissory note to Bacarat under the Loan Agreement for the principal amount of $10,000, bearing interest at the rate of 8% per annum and maturing on the one year anniversary of the date thereof. The Company may prepay all or any portion of the promissory note at any time and form time without premium or penalty. Any such prepayment shall first be applied against the installments of principal due under the note in the inverse order of their maturity and shall be accompanied by payment of accrued interest on the amount prepaid to the date of prepayment.

 

Unless otherwise noted, the above securities qualified for exemption under Section 4(a)(2) of the Securities Act since the issuance securities by us did not involve a public offering. The offering was not a “public offering” as defined in Section 4(a)(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of securities offered. The Company did not undertake an offering in which we sold a high number of securities to a high number of investors. In addition, these stockholders had the necessary investment intent as required by Section 4(a)(2) since they agreed to and received share certificates bearing a legend stating that such securities are restricted pursuant to Rule 144 of the Securities Act. This restriction ensures that these securities would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, the Company has met the requirements to qualify for exemption under Section 4(a)(2) of the Securities Act for this transaction.

 

Item 3. Defaults Upon Senior Securities.

 

N/A

 

Item 5. Other Information.

 

Item 6. Exhibits.

 

Index to Exhibits

 

Exhibit:		Description:
31.1**		Certification of Principal Executive Officer/Principal Financial and Accounting Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**		Certification of Principal Executive Officer/Principal Financial and Accounting Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase
101.DEF*		XBRL Taxonomy Extension Definition Linkbase
101.LAB*		XBRL Taxonomy Extension Label Linkbase
101.PRE*		XBRL Taxonomy Presentation Linkbase

 

*	Furnished herewith. Users of this data are advised that, pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Exchange Act of 1934 and otherwise are not subject to liability.
**	Filed herewith.

 

 

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.

 

Date: October 20, 2014	By:	/s/ JOEL FALITZ
	Name:	Joel Falitz
	Title:	President, Chief Executive Officer, Secretary and Treasurer
		(Principal Executive Officer)
		(Principal Financial and Accounting Officer)