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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Commission file number 000-51213

ECOLOCAP SOLUTIONS INC.

(Exact name of registrant as specified in its charter)

NEVADA

(State or other jurisdiction of incorporation or organization)

20-0909393

(I.R.S. Employer Identification Number)

6240. Oakton Street

Morton Grove, IL   60053

(Address of principal executive offices, including Zip Code)

312-585-6670

(Registrant's telephone number, including area code)

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 last 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 (SS 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 [X]     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," "non-accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

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:

The Issuer had 10,922,710,577 shares of Common Stock, par value $0.00001, outstanding as of December 5, 2017.

 

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TABLE OF CONTENTS

PART I: FINANCIAL INFORMATION

ECOLOCAP SOLUTIONS INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

See Notes to Unaudited Consolidated Financial Statements

ECOLOCAP SOLUTIONS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

See Notes to Unaudited Consolidated Financial Statements

ECOLOCAP SOLUTIONS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

See Notes to Unaudited Consolidated Financial Statements

ECOLOCAP SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Ecolocap Solutions Inc ("we", "our" and the "Company") is an integrated and complementary network of environmentally focused technology companies that utilize advanced nanotechnology to design, develop and sell cleaner alternative energy products.  Our business approach combines science, innovation, and market-ready solutions to achieve environmentally sustainable and economically advantageous, power and energy management practices in the following areas: 

M-Fuel

The Company, through its subsidiary Micro Bubble Technologies Inc. (MBT), developed M-Fuel, an innovative suspension fuel that is designed to offer fully scalable and customizable fuel solutions that will increase efficiency, lower operating costs, and reduce emissions. M -Fuel is a suspension mixture of 60% heavy oil, 40% H plus O2 molecules, and a 0.3% stabilizing additive. The production of M-Fuel takes place in our Nano Processing Units (NPU), a self contained device that is sized for output. The NPU's can be configured to operate in conjunction with an engine or burner to sully M-Fuel on demand, or pre-manufactured for delivery.

ECOS/BIO-ART

ECOS/Bio-ART is a patented air injected high-speed aerobic biological fermentation technology, utilizing uniquely cultured Bacillus, and incorporated into a specifically designed in-vessel unit. The remediation process takes seven days and reduces moisture content to an average between 12%-25% on an output equal to 1/3 the input. The output can be used as organic fertilizer, animal feed, animal bedding or biomass. The computer controlled process monitors the temperature on 3 different levels. The technology is designed to reduce the costs associated with food waste disposal and in the process will reduce the environmental impact or methane greenhouse gas production.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies followed by the Company for interim reporting are consistent with those included in the Company's Annual Report on Form 10-K for the year ended December 31, 2016. There were no material changes to our significant accounting policies during the interim period ended March 31, 2017.

Reclassifications

Certain reclassifications of amounts previously reported have been made to the accompanying financial statements in order to maintain consistency and comparability between the periods presented, primarily related to preferred shares stock on the balance sheet.

NOTE 2 - BASIS OF PRESENTATION AND GOING CONCERN

The accompanying unaudited interim consolidated financial statements of the Company, have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), and rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company's annual report on Form 10-K for the year ended December 31, 2016 as filed with the SEC. In the opinion of management, all adjustments, consisting of recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements as reported in the annual report on Form 10-K have been omitted.

Going Concern

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. The Company has had recurring losses, negative working capital, is dependent on its shareholders to provide additional funding for operating expenses and has no recurring revenues. These items raise substantial doubts about the Company's ability to continue as a going concern.

Management's plan for the Company's continued existence include selling additional common stock of the Company and borrowing additional funds to pay overhead expenses.

With the opportunities created by the ECOS BIO-ART and M Fuel, management has begun the process of redeploying its assets, identifying business strategies that offers above average profit potential and identifying the resources necessary to successfully execute it new strategic direction.

Recognizing the opportunity this new market represents; the Company has developed an integrated development approach that focuses upon both existing and needed infrastructure facilities to produce substantial new value.

The Company's future success is dependent upon its ability to achieve profitable operations, generate cash from operating activities and obtain additional financing. There is no assurance that the Company will be able to generate sufficient cash from operations, sell additional shares of common stock or borrow additional funds.

The Company's inability to obtain additional cash could have a material adverse effect on its financial position, results of operations and its ability to continue in existence. The unaudited consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

NOTE 3 – ACCRUED EXPENSES AND SUNDRY CURRENT LIABILITIES

Accrued expenses consisted of the following at:

NOTE 4 – CONVERTIBLE NOTES PAYABLE

Loans are convertible at amounts ranging from 40% to 60% of the market price of the common shares of the Company at the time of conversion and bear interest rates ranging from 8% to 22% per annum.  The amounts received during the three months period ended March 31, 2017 and 2016 are $19,500 and $14,653 in non-cash borrowings related to the default on Tonaquint loans, respectively. During the period ended March 31, 2017, the Company was in default on its convertible notes due to non-repayment of the outstanding balances.

The convertible feature of these loans, due to their potential settlement in an indeterminable number of shares of the Company's common stock has been identified as a derivative. The derivative component is fair valued at the date of issuance of the obligation and the amount is marked to market at each reporting period. The Redwood Management, LLC, Proteus Capital Corp. and Tonaquint notes are in default as of March 31, 2017.

During the period ended March 31, 2017 notes payable of $47,630 plus accrued interests of $88,485 were converted into 1,035,097,703 shares.

There were no conversions of convertible debts in 2016.

A summary of the amounts outstanding as of March 31, 2017 and December 31, 2016 are as follows:

NOTE 5 – NOTES PAYABLE – RELATED PARTIES

During the three months period ended March 31, 2017, notes payable stockholders increased by $85,500 of which $112,500 resulted from conversion of accrued salaries, net of $27,000 in payments made during the period to stockholders. The additions are for accrual of unpaid salaries and not actual cash proceeds. The amount owed to stockholders at March 31, 2017 is $1,939,179. These loans are non-interest bearing but interest is being imputed at 5.00% per annum and are payable on demand. An interest amount of $23,672 has been imputed in 2017. There were no conversions during the three months period ended March 31, 2017. There were no conversions during the year ended December 31, 2016.

During the three months period ended March 31, 2017, the Company received $211,310 in loans from Hanscom K Inc. The amount owed to Hanscom K. Inc. at March 31, 2017 is $665,090. These loans are non-interest bearing and are payable on demand.

During the three months period ended March 31, 2017, the Company did not receive any loans from RCO Group Inc. The amount owed to RCO Group Inc. at March 31, 2017 is $28,500. These loans bear interest at 8.00% per annum and are payable on demand.

A summary of the amounts outstanding as of March 31, 2017 and December 31, 2016 are as follows:

NOTE 6 – DERIVATIVE LIABILITIES

During the three months period ended March 31, 2017, the Company recorded various derivative liabilities associated with the convertible notes payable discussed in Note 4. The Company computes the value of the derivative liability at each reporting period using the Black Scholes Method using a risk free rate of 0.14%, volatility rates ranging between 398.00% and 431.00% and a forfeiture rate of 0.00%. The derivative liability at March 31, 2017 and December 31, 2016 are as follows:

During the three months period ended March 31, 2017, the Company recorded various derivative liabilities associated with the warrants discussed in Notes 7. The Company computes the value of the derivative liability at the issuance of the related obligation and at each reporting period using the Black Scholes Method which includes the following assumptions:  a risk free rate of 0.14%, volatility rates of 495.00% and a forfeiture rate of 0.00%.  The derivative liability at March 31, 2017 and December 31, 2016 is as follows:

The following table summarizes the derivative liabilities at March 31, 2017 and December 31, 2016;

Financial assets and liabilities recorded at fair value in our unaudited consolidated balance sheets are categorized based upon a fair value hierarchy established by GAAP, which prioritizes the inputs used to measure fair value into the following levels:

Level 1— Quoted market prices in active markets for identical assets or liabilities at the measurement date.

Level 2— Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable and can be corroborated by observable market data.

Level 3— Inputs reflecting management's best estimates and assumptions of what market participants would use in pricing assets or liabilities at the measurement date. The inputs are unobservable in the market and significant to the valuation of the instruments.

A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Financial assets and liabilities measured at fair value on a recurring basis are summarized below for the period ended March 31, 2017

Financial assets and liabilities measured at fair value on a recurring basis are summarized below for the year ended December 31, 2016

The following table summarizes the derivatives liability from January 1^st through March 31, 2017

NOTE 7 – CAPITAL STOCK

The Company is authorized to issue 10,000,000,000 shares of common stock (par value $0.00001) of which 4,284,424,729 were issued and outstanding as of March 31, 2017 and 3,249,327,026 as of December 31, 2016.

The Company is authorized to issue 100,000,000 shares of preferred stock (par value $0.00001) of which 750,000 were issued and outstanding as of March 31, 2017 and December 31, 2016, respectively. Each share of Series A Preferred Stock has 100,000 vote per share.

On December 19, 2016, the Company issued three warrants to Lakeshore Recycling Systems, LLC (LRS). The first warrant allows LRS to purchase up to five and one third percent of issued and outstanding shares of common stock of the Company at the time of exercise of the warrant at a price of $0.0003. The second warrant allows LRS to purchase up to five and one third percent of issued and outstanding shares of common stock of the Company at the time of exercise of the warrant at a price of $0.0025. The third warrant allows LRS to purchase up to five and one third percent of issued and outstanding shares of common stock of the Company at the time of exercise of the warrant at a price of $0.005. The exercise time of the warrants is the period between March 15, 2017 and December 15, 2026.

During the first quarter of 2017, the following convertible debt owners converted loans plus accrued interests into common shares of the Company. There were no conversions of convertible debts into common shares of the Company during 2016.

NOTE 8 – COMMITMENTS

In July 2017, the Company signed a lease for the Company's Morton Grove office, at a minimum annual rent of approximately $70,000 per year. The Morton Grove lease expires in August 2018.

NOTE 9 – SUBSEQUENT EVENTS

The following convertible debt owners converted loans plus accrued interests into common shares of the Company

During May 2017, an aggregate of $5,410 in loans from stockholders were converted into 541,100,000 shares of the common stock.

ITEM 2.

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

Operations

The following discussion of the financial condition and results of our operations should be read in conjunction with the unaudited consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q for the period ended March 31, 2017 (this "Report"). This Report contains certain forward-looking statements and our future operating results could differ materially from those discussed herein. Certain statements contained in this Report, including, without limitation, statements containing the words "believes", "anticipates," "expects" and the like, constitute "forward-looking statements". Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. We disclaim any obligation to update any such factors or to announce publicly the results of any revisions of the forward-looking statements contained or incorporated by reference herein to reflect future events or developments.

Business Plan

Our business approach combines science, innovation and market-ready solutions to achieve environmentally and economically beneficial energy and energy management practices.

The Company's first objective is to provide its full turn-key solution at lower cost. The Company technology reduces the costs associated with food waste disposal and in the process, reduces the environmental impact or methane greenhouse gas production, provide a healthier life for all and create viable organic byproducts.

The first target market is the Municipal solid waste industry (MSW), grow the number of customer and expand ECOS BIO ART brand presence.

Discussions are also underway with a number of prospective customers and the Company is confident it will enter into a number of sales agreements as soon as it can demonstrate its product with all the proprietary features. The   Company is confident it will provide such demos in the next months.

Results of Operations

For the Three Months Periods ended March 31, 2017 and 2016

Overview

We incurred net income of $7,821,142 for the three months period ended March 31, 2017 as compared to net losses of $1,468,288 for the comparable period of 2016. There has been an increase of $95,546 in selling, general and administrative expenses, an increase in gain on derivatives at market of $9,310,661 and an increase in interest expenses of $49,382 mainly attributable to the interest expense resulting from our outstanding notes.

Sales

For the three months periods ended March 31, 2017 and 2016 we had no sales.

Selling, General and Administrative

For the three months period ended March 31, 2017, we incurred selling, general and administration expenses of $297,487, an increase of 47% from the same period last year. The increase resulted from the increase in professional fees.

Interest

We calculate interest in accordance with the respective note payable. For the three months period ended March 31, 2017, we incurred a charge of $134,686. This compared to $85,304 for the same period of the previous year. The interests increase is attributable to interest rate increase due to default on convertible debts.

Liquidity and Capital Resources

At March 31, 2017, we had $58,491 in cash, as opposed to $698 in cash at December 31, 2016. Total cash provided by operations for the three months period ended March 31, 2016 was $112,537. As a result of certain measures implemented to reduce corporate overhead, management estimates that cash requirements through the end of the fiscal year ended December 31, 2017 will be between $2.0 million to $5.5 million. As of the date of this Report, we do not have available resources sufficient to cover the expected cash requirements through the end of the second quarter of 2017 or the balance of the year. As a result, there is substantial doubt that we can continue as an ongoing business without obtaining additional financing. Management's plans for maintaining our operations and continued existence include selling additional equity securities and borrowing additional funds to pay operational expenses. There is no assurance we will be able to generate sufficient cash from operations, sell additional shares of Common Stock or borrow additional funds. Our inability to obtain additional cash could have a material adverse effect on our financial position, results of operations and our ability to continue its existence. If our losses continue and we are unable to secure additional financing, we may ultimately be required to seek protection from creditors under applicable bankruptcy laws.

We had total current assets and assets of $58,491 as of March 31, 2017. This was a change of $57,793 as compared to total assets of $698 as of December 31, 2016.

We had total current liabilities of $8,011,964 as of March 31, 2017. This was a decrease of $8,006,334, or 50%, as compared to current liabilities of $16,018,298 as of December 31, 2016. The net decrease was attributable to a decrease in derivative liabilities due to the gain on derivatives at market value.

Our financial condition raises substantial doubt about our ability to continue as a going concern. Management's plan for our continued existence includes selling additional stock through private placements and borrowing additional funds to pay overhead expenses while maintaining marketing efforts to raise our sales volume. Our future success is dependent upon our ability to achieve profitable operations, generate cash from operating activities and obtain additional financing. There is no assurance that we will be able to generate sufficient cash from operations, sell additional shares of common stock or borrow additional funds. Our inability to obtain additional cash could have a material adverse effect on our financial position, results of operations and our ability to continue as a going concern.

This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this Memorandum. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.

We have only had operating losses which raise substantial doubts about our viability to continue our business and our auditors have issued an opinion expressing the uncertainty of our company to continue as a going concern. If we are not able to continue operations, investors could lose their entire investment in our company.

Contractual Obligations

The Company was party to a lease for the Company's Barrington office, at a minimum annual rent of approximately $16,800 per year. The Barrington lease expired in May 2013 and the Company remained in these premises on a month to month basis until the Company moved to its new offices.

In July 2017, the Company signed a lease for the Company's Morton Grove office, at a minimum annual rent of approximately $70,000 per year. The Morton Grove lease expires in August 2018.

Off-Balance Sheet Arrangements

The Company is not a party to any off-balance sheet arrangements.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

The Company's Principal Executive Officer and Principal Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (the "Exchange Act"). Based on that evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are not effective in ensuring that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the periods specified in the Commission's rules and forms, and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The conclusion that our disclosure controls and procedures were not effective was due to the presence of the following material weaknesses in internal control over financial reporting which are indicative of many small companies with small staff: the lack of a functioning audit committee, lack of multiple levels of review over the financial reporting process and segregation of duties, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures.

Management believes that the material weaknesses set forth above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of director results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

Changes in Internal Control over Financial Reporting

We have not made a change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended March 31, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II OTHER INFORMATION

As of the date of this report, the Company is not currently involved in any legal proceedings.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Registrant and in the capacities on this 15^th day of December 2017.

EXHIBIT INDEX