UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission
file number
| (Exact name of registrant as specified in its charter) |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(Telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| N/A | N/A | N/A |
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 last 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer, “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of May 15, 2024, there were shares of common stock, par value $0.0001 per share, outstanding.
TABLE OF CONTENTS
| Page | ||
| Part I FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements | 4 |
| Statements of Balance Sheets (unaudited) | 4 | |
| Statements of Operations (unaudited) | 5 | |
| Statements of Cash Flows (unaudited) | 6 | |
| Statements of Stockholders’ Equity (unaudited) | 7 | |
| Notes to Financial Statements (unaudited) | 8 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 14 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 19 |
| Item 4. | Controls and Procedures | 19 |
| Part II OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 20 |
| Item 1A. | Risk Factors | 20 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 20 |
| Item 3. | Defaults Upon Senior Securities | 20 |
| Item 4. | Mine Safety Disclosures | 20 |
| Item 5. | Other Information | 20 |
| Item 6. | Exhibits | 20 |
| SIGNATURE | 21 | |
| 2 |
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains certain forward-looking statements (as such term is defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). The statements herein which are not historical reflect our current expectations and projections about the Company’s future results, performance, liquidity, financial condition, prospects and opportunities and are based upon information currently available to us and our management and our interpretation of what we believe to be significant factors affecting our business, including many assumptions about future events. Such forward-looking statements include statements regarding, among other things:
| ● | our projected revenues, profitability, and other financial metrics; | |
| ● | our future financing plans; | |
| ● | our anticipated needs for working capital; | |
| ● | our ability to expand our sales and marketing capability; | |
| ● | acquisitions of other companies or assets that we might undertake in the future; | |
| ● | competition existing today or that will likely arise in the future; | |
| ● | the impact of the COVID-19 pandemic; and | |
| ● | other factors discussed elsewhere herein. |
Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “should,” “will,” “plan,” “could,” “target,” “contemplate,” “predict,” “potential,” “continue,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “seek,” or “project” or the negative of these words or other variations on these or similar words. Actual results, performance, liquidity, financial condition and results of operations, prospects and opportunities could differ materially from those expressed in, or implied by, these forward-looking statements as a result of various risks, uncertainties and other factors, including the ability to raise sufficient capital to continue the Company’s operations. These statements may be found under Part I, Item 2— “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as elsewhere in this Quarterly Report on Form 10-Q generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, matters described in this Quarterly Report on Form 10-Q.
In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this Quarterly Report on Form 10-Q will in fact occur.
Potential investors should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.
The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Quarterly Report on Form 10-Q. Such statements are presented only as a guide about future possibilities and do not represent assured events, and we anticipate that subsequent events and developments will cause our views to change.
You should, therefore, not rely on these forward-looking statements as representing our views as of any date after the date of this Quarterly Report on Form 10-Q.
Potential investors should not make an investment decision based solely on our projections, estimates or expectations.
| 3 |
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ECOMAX, INC.
BALANCE SHEETS
Balance Sheets as of March 31, 2024 and June 30, 2023
| March 31, | June 30, | |||||||
| 2024 (unaudited) | 2023 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventories | ||||||||
| Total current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable - trade | $ | $ | ||||||
| Note payable - related party | ||||||||
| Accrued interest - related party | ||||||||
| Accured expenses | ||||||||
| Accrued expenses - related party | ||||||||
| Total current liabilities | ||||||||
| Commitment and Contingency | ||||||||
| Total liabilities | ||||||||
| Stockholders’ deficit: | ||||||||
| Preferred stock, $ par value; authorized; issued and outstanding at March 31, 2024 and June 30, 2023 | ||||||||
| Common stock, $ par value; shares authorized; issued and outstanding at March 31, 2024 and June 30, 2023 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | $ | ||||||
See Summary of Significant Accounting Policies and Notes to Financial Statements.
| 4 |
ECOMAX, INC.
STATEMENTS OF OPERATIONS
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||
| 2024 (unaudited) | 2023 (unaudited) | 2024 (unaudited) | 2023 (unaudited) | |||||||||||||
| Revenues | ||||||||||||||||
| Sales | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Cost and expenses: | ||||||||||||||||
| Sales expenses | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Other income and expenses | ||||||||||||||||
| Interest expenses | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Per common share - basic and diluted Basic and diluted net loss | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average shares Outstanding, basic and diluted | ||||||||||||||||
See Summary of Significant Accounting Policies and Notes to Financial Statements.
| 5 |
ECOMAX, INC.
STATEMENTS OF CASH FLOWS
| Nine Months Ended March 31, | ||||||||
| 2024 (unaudited) | 2023 (unaudited) | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to cash used in operating activities: | ||||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Accounts payable and accrued liabilities | ( | ) | ||||||
| Net cash provided(used) by operating activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Advances from or (repayment to) related party | ( | ) | ||||||
| Net cash provided (used) by financing activities | ( | ) | ||||||
| Change in cash | ||||||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Accrued interest to debt | $ | $ | ||||||
See Summary of Significant Accounting Policies and Notes to Financial Statements.
| 6 |
ECOMAX, INC.
STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Unaudited)
| Common stock | Additional | |||||||||||||||||||
| Number of Shares | Stated or Par Value | Paid-in Capital | Accumulated Deficit | Total | ||||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance at September 30, 2022 | ( | ) | ( | ) | ||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||
| Balance at December 31, 2022 | ( | ) | ( | ) | ||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||
| Balance at March 31, 2023 | ( | ) | ( | ) | ||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance at September 30, 2023 | ( | ) | ( | ) | ||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||
| Balance at December 31, 2023 | ( | ) | ( | ) | ||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||
| Balance at March 31, 2024 | ( | ) | ( | ) | ||||||||||||||||
See Summary of Significant Accounting Policies and Notes to Financial Statements.
| 7 |
Ecomax, Inc.
Notes to Financial Statements
March 31, 2024
(Unaudited)
Note 1. Organization and Nature of Business
Ecomax, Inc., formerly Ecomat, Inc. (the “Company”) was incorporated on December 14, 1995 pursuant to the laws of the State of Delaware. On February 9, 2007, the Company completed its change in domicile to Nevada. The Company used to operate a wet-cleaning process which was one of the first environmentally sound solutions to current dry-cleaning methods. Currently, the Company is actively engaging in the distribution of personal healthcare products and nutrition supplements.
On April 13, 2021 the Board of Directors (the “Board”) of the Company filed the following with the State of Nevada:
| ● | ||
| ● | A change in name from Ecomat, Inc. to Ecomax, Inc.; | |
| ● | An
increase in the authorized number of shares of capital stock from |
All share and per share information, including earnings per share, in this Form 10-Q have been retroactively adjusted to reflect this reverse stock split and certain items in prior period financial statements have been revised to conform to the current presentation.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The unaudited financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) applicable to interim financial information and the requirements of Form 10-Q and Rule 8-03 of Regulation S-X of the U.S. Securities and Exchange Commission. Accordingly, they do not include all of the information and disclosure required by accounting principles generally accepted in the United States of America for complete financial statements. Interim results are not necessarily indicative of results for a full year. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial position and the results of operations and cash flows for the interim periods have been included. These financial statements should be read in conjunction with the audited financial statements as of and for the year ended June 30, 2023, as not all disclosures required by generally accepted accounting principles for annual financial statements are presented. The interim financial statements follow the same accounting policies and methods of computations as the audited financial statements as of and for the year ended June 30, 2023.
Significant Accounting Policies:
Use of Estimates:
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates.
Cash and Cash Equivalents:
For
financial statement presentation purposes, the Company considers those short-term, highly liquid investments with original maturities
of three months or less to be cash or cash equivalents. There were
| 8 |
Property and Equipment:
New
property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful
lives of the assets, which is generally
Inventories
Inventories as of March 31, 2024 consist of 565 bottles of Rocitin NMN purchased from our Hong Kong supplier. Inventories are stated at the lower cost (first-in, first-out method) or market. The valuation of inventory requires the Company to estimate obsolescence, excess, and slowing-moving inventories. The Company evaluates the recoverability of the inventory based on expected demand and market conditions. No inventory write down was recorded in the periods presented.
Valuation of Long-Lived Assets:
We review the recoverability of our long-lived assets including equipment, goodwill and other intangible assets, when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on our ability to recover the carrying value of the asset from the expected future pre-tax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying value. Our primary measure of fair value is based on discounted cash flows. The measurement of impairment requires management to make estimates of these cash flows related to long-lived assets, as well as other fair value determinations.
Stock Based Compensation:
Stock-based awards are accounted for using the fair value method in accordance with ASC 718, Share-Based Payments. Our primary type of share-based compensation consists of stock options. We use the Black-Scholes option pricing model in valuing options. The inputs for the valuation analysis of the options include the market value of the Company’s common stock, the estimated volatility of the Company’s common stock, the exercise price of the warrants and the risk-free interest rate.
Fair Value of Financial Instruments:
FASB ASC 825, “Financial Instruments,” requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value. FASB ASC 825 defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. As of March 31, 2024 and June 30, 2023, the carrying value of certain financial instruments (cash and cash equivalents, accounts payable and accrued expenses.) approximates fair value due to the short-term nature of the instruments or interest rates, which are comparable with current rates.
Revenue Recognition
It is the Company’s policy that revenues from product sales are recognized in accordance with Accounting Standards Codification (“ASC 606”) “Revenue Recognition.” Five basic steps must be followed to recognize revenue; (1) Identify contract(s) with a customer that creates enforceable rights and obligations; (2) Identify performance obligations in the contract, such as promises to transfer goods or services to a customer; (3) Determine the transaction price, (i.e. the amount of consideration in a contract to which an entity believes it is entitled in exchange for transferring promised goods or services to a customer); (4) Allocate the transaction price to the performance obligations in the contract, which requires the Company to allocate the transaction price to each performance obligation on the basis of the relative standalone selling prices of each distinct good or services promised in the contract; and (5) Recognize revenue when (or as) the entity satisfies a performance obligation by transferring a promised good or service to a customer. The amount of revenue recognized is the amount allocated to the satisfied performance obligation. Adoption of ASC 606 has not changed the timing and nature of the Company’s revenue recognition and there has been no material effect on the Company’s consolidated financial statements.
The Company has one customer that accounts for all of its sales.
| 9 |
The Company engaged a supplier to purchase inventory. The supplier also stores, sells and distributes the goods on Company’s behalf. The selling price and cost are predetermined between the Company and the supplier. Any profits are shared 50/50 in accordance with the agreement. The Company retains control over the acquired goods, assumes the benefits and risks of the inventory, and has the authority to establish prices. As such, the Company records revenue in gross amount as the principal in the arrangement.
Our revenue (referred to in our financial statements as “Sales”) consists primarily of the sale of Rocitin NMN products for cash or otherwise agreed-upon credit terms. Our customers consist primarily of wholesalers.
Our revenue generating activities have a single performance obligation and are recognized at the point in time when control transfers and our obligation has been fulfilled, which is when the related goods are shipped or delivered to the customer, depending upon the method of distribution, and shipping terms. We have elected to treat shipping as a fulfillment activity.
Revenue is measured as the amount of consideration we expect to receive in exchange for the sale of our product. The Company has no obligation to accept the return of products sold other than for replacement of damaged products. Other than quantity price discounts negotiated with customers prior to billing and delivery (which are reflected as a reduction in sales), the Company does not offer any sales incentives or other rebate arrangements to customers.
We compute net income (loss) per share in accordance with ASC 260, Earning per Share. ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
Income Taxes:
We have adopted ASC 740, Accounting for Income Taxes. Pursuant to ASC 740, we are required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.
We must make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes.
Deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax basis of assets and liabilities using the tax rates and laws in effect when the differences are expected to reverse. ASC 740 provides for the recognition of deferred tax assets if realization of such assets is more likely than not to occur. Realization of our net deferred tax assets is dependent upon our generating sufficient taxable income in future years in appropriate tax jurisdictions to realize benefit from the reversal of temporary differences and from net operating loss, or NOL, carryforwards. We have determined it more likely than not that these timing differences will not materialize and have provided a valuation allowance against substantially all of our net deferred tax asset.
| 10 |
Management will continue to evaluate the realizability of the deferred tax asset and its related valuation allowance. If our assessment of the deferred tax assets or the corresponding valuation allowance were to change, we would record the related adjustment to income during the period in which we make the determination. Our tax rate may also vary based on our results and the mix of income or loss in domestic and foreign tax jurisdictions in which we operate.
In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for anticipated tax audit issues in the U.S. and other tax jurisdictions based on our estimate of whether, and to the extent to which, additional taxes will be due. If we ultimately determine that payment of these amounts is unnecessary, we will reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary. We will record an additional charge in our provision for taxes in the period in which we determine that the recorded tax liability is less than we expect the ultimate assessment to be.
ASC 740 which requires recognition of estimated income taxes payable or refundable on income tax returns for the current year and for the estimated future tax effect attributable to temporary differences and carry-forwards. Measurement of deferred income tax is based on enacted tax laws including tax rates, with the measurement of deferred income tax assets being reduced by available tax benefits not expected to be realized.
Uncertain Tax Positions:
The provisions of ASC 740-10-25, “Accounting for Uncertainty in Income Taxes,” prescribe a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. This ASC also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and related disclosures.
Our federal and state income tax returns are open for fiscal years ending on or after June 30, 2007. We are not under examination by any jurisdiction for any tax year. As of March 31, 2024, we had no material unrecognized tax benefits and no adjustments to liabilities or operations were required under ASC 740.
Recently Issued Accounting Pronouncements:
In December 2019, the FASB issued ASU 2019-12 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU provides an exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. This update also (1) requires an entity to recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax, (2) requires an entity to evaluate when a step-up in the tax basis of goodwill should be considered part of the business combination in which goodwill was originally recognized for accounting purposes and when it should be considered a separate transaction, and (3) requires that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The Company adopted this ASU on July 1, 2021. Upon adoption, there was no effect to the Company.
The Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on results of operations, financial condition, or cash flows, based on current information.
| 11 |
Note 3. Going Concern
The
accompanying financial statements have been prepared assuming the Company will continue as a going concern. As of March 31, 2024, the
Company had cash and negative working capital of $
Currently, the Company obtains capital from a significant shareholder to meet its minimal operating expenses. If the current single business model is not successful, we do not believe that we could succeed in raising additional capital from unrelated parties or to sustain our operations without some strategic transaction, such as a business combination or merger. If we are unable to generate enough revenues to cover the costs of operation, we expect that we would need to either continue to borrow funds from a related party, or cease all operations and wind down. Although we are currently evaluating our strategic alternatives with respect to all aspects of our business, we cannot assure you that any actions that we take would raise or generate sufficient capital to fully address the uncertainties of our financial position.
Note 4. Account Receivables
The carrying value of accounts receivable is reduced by an allowance that reflects the Company’s best estimate of the amounts that will not be collected. The Company makes estimations of the collectability of accounts receivable. Many factors are considered in estimating the general allowance, including reviewing delinquent accounts receivable, performing an aging analysis and a customer credit analysis, and analyzing historical bad debt records and current economic trends.
Our
accounts receivable consisted of $
Note 5. Inventories
Our
inventories consisted of $
Note 6. Related Party Transactions
Advances from related party:
On
March 31, 2021, we entered into a Loan Agreement with New York Listing Management Inc. (“NYLM”), a significant
shareholder of the Company, under which we receive funding for general operating expenses from time-to-time as needed by the Company
(the “Loan Agreement”). The Loan Agreement bears an interest rate of
Since
the Company does not have a bank account, purchases of inventory for sale are financed by the Loan Agreement with its significant shareholder,
NYLM. The Loan Agreement also gives the right to NYLM to collect cash receipts from sales of the inventory on the Company’s behalf
based on a profit-sharing arrangement the Company has with the Distributor. For the nine months ended March 31, 2024, NYLM financed the
purchase of 5,000 bottles of Rocitin NMN for a total of $
As
of March 31, 2024 and June 30, 2023, the outstanding balance on this loan was $
| 12 |
Note 7. Stockholders’ Equity
Common Stock
The certificate of incorporation authorizes the issuance of shares of common stock, par value $. All issued shares of common stock are entitled to one vote per share of common stock. As of March 31, 2024, the Company has shares of common stock issued and outstanding.
During the nine months ended March 31, 2024, and 2023, the Company did t issue any shares of common stock.
Preferred Stock
The certificate of incorporation authorizes the issuance of shares of preferred stock with a par value of $ per share. are issued.
Stock Based Compensation
There were grants of employee or non-employee stock or options in either fiscal period ended March 31, 2024 and 2023.
Note 8. Subsequent Events
The Company’s management has performed subsequent events procedures through the date the financial statements were available to be issued. There were no other subsequent events requiring adjustment to or disclosure in the consolidated financial statements.
| 13 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Some of the statements contained in this quarterly report of Ecomax, Inc. (hereinafter the “Company” or “we”) discuss future expectations, contain projections of our plan of operation or financial condition or state other forward-looking information. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use of words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. From time to time, we also may provide forward-looking statements in other materials we release to the public.
General Background of the Company
Ecomax, Inc. (formerly known as Ecomat Inc.) was incorporated on December 14, 1995 pursuant to the laws of the State of Delaware and was formed to develop the Ecomat concept - an environmentally sound solution to the current standard dry-cleaning method that utilizes perchloroethylene, which has been shown to have various toxic effects.
On March 26, 1999, the Company filed a petition under Chapter 7 for liquidation of the Company’s business. As a result, all of the Company’s properties were transferred to a United States trustee and the Company terminated all of its business operations. The bankruptcy trustee has disposed of all of the assets.
On June 14, 2006, the bankruptcy court granted an order approving the contract and finding that Park Avenue Group was a good faith purchaser within the meaning of 11 USC Section 363(m) of the Bankruptcy Code.
On June 15, 2006, and as a result of the Bankruptcy court’s order, Park Avenue Group appointed Ivo Heiden to the board of directors of the Company and to serve as its Chief Executive Officer, Chief Financial Officer, sole director, and Chairman of the board of directors.
On February 5, 2007, the Company issued 13,230,000 shares of common stock to Ivo Heiden, for services provided valued at $2,500. Since then, Ivo Heiden controlled 78.58% of the issued and outstanding shares of common stock.
On February 9, 2007, the Company completed its change in domicile to Nevada.
On January 5, 2021, the Company entered into a Stock Purchase Agreement (the “SPA”) with Clark Orient (BVI) Limited, (“Clark Orient”), Mr. Heiden, and WWYD, Inc. (WWYD, Inc. was a 5% or more shareholder of the Company. Mr. Heiden and WWYD, Inc. are collectively referred to as the “Sellers”), pursuant to which Clark Orient acquired 20,205,000 shares of common stock of the Company (the “Shares”) from Sellers for an aggregate purchase price of $320,000. The transaction contemplated in the SPA closed on January 7, 2021. The Shares represented approximately 85% of the issued and outstanding common stock of the Company. The transaction resulted in a change in control of the Company.
| 14 |
In connection with the change in control, Mr. Heiden, the then Chief Executive Officer, Chief Financial Officer, sole director, and Chairman of the board of directors of the Company, resigned from all of his positions with the Company and the resignations became effective on January 6, 2021. Ms. Yang Gui was appointed as the Chief Executive Officer, Chief Financial Officer, sole director, and Chairwoman of the board of directors of the Company, effective on January 6, 2021.
On March 11, 2021, upon the departure of Ms. Yang Gui, Mr. Yu Yam Anthony Chau was appointed as the Chief Executive Officer, Chief Financial Officer, sole director, and Chairman of the board of directors of the Company, effective on March 11, 2021.
On March 18, 2021, by unanimous written consent of the board of directors of the Company, the board of directors adopted resolutions approving 1) a reverse split of the Company’s common stock at a ratio of 1-for-10, whereby every 10 shares of the issued and outstanding common stock shall be combined into one share of issued and outstanding common stock (the “Reverse Stock Split”); 2) an increase in the number of the authorized capital stock from 75,000,000 to 500,000,000, with the par value remaining at $0.0001 per share, consisting of 450,000,000 shares of common stock, par value $0.0001 per share and 50,000,000 shares of preferred stock, par value $0.0001 per share (the “Increase of Authorized Stock”); 3) a change of the Company’s name and ticker from “Ecomat, Inc.” and “ECMT,” to “Ecomax, Inc.” and “ECMX” (the “Change of Name,” together with the Reverse Stock Split and the Increase of Authorized Stock, collectively, the “Corporate Actions”); 4) amendments to its articles of incorporation to reflect the Corporate Actions (the “Amendments of Articles of Incorporation”); and 5) a proposal that such resolutions be submitted for a vote of the stockholders of the Company.
On March 18, 2021, the stockholder holding in the aggregate 20,205,000 shares of common stock, or approximately 85% of the common stock outstanding on such date, approved the Corporate Actions.
On April 1, 2021, the Company filed a preliminary information statement on Schedule 14C with the United States Securities and Exchange Commission (the “SEC”).
On April 13, 2021, the Company filed a definitive information statement on Schedule 14C with the SEC.
On April 20 and 21, 2021, the Company filed a certificate of change and a certificate of amendment with the Secretary of State of the State of Nevada with respect to the Corporate Actions.
On April 28, 2021, the Company filed an Issuer Notification Form with the Financial Industry Regulatory Authority (“FINRA”) requesting confirmation of the Change of Name.
The Corporate Actions, as of the date of this report, have all come into effect. As of the date of this report, our ticker symbol on OTC Markets has been changed to EMAX and our name has been changed to Ecomax, Inc.
On September 30, 2022, upon the departure of Mr. Yu Yam Anthony Chau, Mr. Raymond Chen was appointed as the Chief Executive Officer, Chief Financial Officer, sole director, and Chairman of the board of directors of the Company, effective September 30, 2022.
On February 16, 2023 and March 1, 2023, the Company entered into a sale of goods agreement (the “Sale Agreement”) and a distributor agreement (the “Distributor Agreement”), respectively, with Rocitin Company Limited, a Hong Kong company (“Rocitin”), and commenced substantial business operations, and thus ceased being a shell company.
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Business Objectives of the Company
The Distribution Business
On February 16, 2023, the Company entered into the Sale Agreement with Rocitin. Under the terms of the Sale Agreement, the Company agreed to purchase 10,000 bottles of Rocitin NMN, a nutritional supplement manufactured by Pharmazeutische Fabrik Evers GmbH & Co. KG, a German company, in which each bottle contains 60 capsules, 10080 mg of NMN, at HK $500 (approximately $64.01) per bottle (the “Products”), with the initial shipment of 2,000 bottles from Rocitin. Except for the payment of the initial shipment of 2,000 bottles of the Products made on March 1, 2023, the payment of the residual 8,000 bottles of the Products shall be made within 45 days from the date of each invoice from Rocitin to the Company. Pursuant to the Sale Agreement, Rocitin will deliver the Products to the location specified by the Company within 15 days of the payment being made.
On March 1, 2023, the Company entered the Distributor Agreement with Rocitin. Under the terms of the Distributor Agreement, Rocitin shall store the Products purchased by the Company from it pursuant to the Sale Agreement in an appropriate warehouse leased by it in Hong Kong, distribute the Products on a non-exclusive basis, and use its best efforts to promote and maximize the sale of the Products within Hong Kong, Macau, Taiwan and China (collectively, the “Territory”) on behalf of the Company, as well as provide reasonable after-sale support to the purchasers of the Products. In addition, Rocitin shall provide monthly reports to the Company due by the 15th of each month concerning the Products’ sales and the marketing activities of the previous month.
Pursuant to the Distributor Agreement, the Company and Rocitin share any gross profit generated by the distribution of the Products on a 50/50 basis; that is, revenue generated from sales of the Products to third parties minus the original purchase price of the Products paid by the Company to Rocitin, will be shared between the Company and Rocitin on a 50/50 ratio (the “Sharing Ratio”).
For the three months ended March 31, 2024, Rocitin delivered 1,000 bottles of the Products that the Company purchased to the warehouse leased by it in Hong Kong and distributed and sold approximately 1,267 bottles of the Products in the Territory, in accordance with the Distributor Agreement, which generated gross revenue of approximately HK $851,424 (approximately $108,822). The Company was allocated HK $742,462, (approximately $94,896) from the gross profit, which amount represents the Sharing Ratio, as stipulated in the Distributor Agreement.
As the Company intends to further develop the preceding business operation, its management also continues to seek other prospective new business opportunities.
The Company’s common stock is subject to quotation on the OTC Pink Sheets under the symbol EMAX. There is currently only a limited trading market in the Company’s shares and the Company believes that no active trading market has existed for the last 3 years. In the event that an active trading market commences, there can be no assurance as to the market price of our shares of common stock, whether any trading market will provide liquidity to investors, or whether any trading market will be sustained.
The Company’s management has substantial flexibility in identifying and selecting prospective new business opportunities. The Company is dependent on the judgment of its management in connection with this process. In evaluating a prospective business opportunity, we would consider, among other factors, the following:
| ● | costs associated with pursuing a new business opportunity; |
| ● | growth potential of the new business opportunity; |
| ● | experiences, skills and availability of additional personnel necessary to pursue a potential new business opportunity; |
| ● | necessary capital requirements; |
| ● | the competitive position of the new business opportunity; |
| ● | stage of business development; |
| ● | the market acceptance of the potential products and services; |
| ● | proprietary features and degree of intellectual property; and |
| ● | the regulatory environment that may be applicable to any prospective business opportunity. |
The foregoing criteria are not intended to be exhaustive and there may be other criteria that management may deem relevant. In connection with an evaluation of a prospective or potential business opportunity, management may be expected to conduct a due diligence review.
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The time and costs required to pursue new business opportunities, which includes negotiating and documenting relevant agreements and preparing requisite documents for filing pursuant to applicable securities laws, cannot be ascertained with any degree of certainty. In addition, the global COVID-19 pandemic has created significant challenges for us to research for a target and any target business with which we ultimately consummate a business combination, may be materially adversely affected by the COVID-19 pandemic.
Management intends to devote such time as it deems necessary to carry out the Company’s affairs. The exact length of time required for the pursuit of any new potential business opportunities is uncertain. No assurance can be made that we will be successful in our efforts. We cannot project the amount of time that our management will actually devote to the Company’s plan of operation.
The Company’s intends to conduct its activities so as to avoid being classified as an “Investment Company” under the Investment Company Act of 1940, and therefore avoid application of the costly and restrictive registration and other provisions of the Investment Company Act of 1940 and the regulations promulgated thereunder.
The Company’s common stock is “penny stock”
The Company’s common stock is a “penny stock,” as defined in Rule 3a51-1 promulgated by the SEC under the Securities Exchange Act of 1934 (the “Exchange Act”). The penny stock rules require a broker-dealer, prior to a transaction in penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market (the “Penny Stock Rules”). The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its sales person in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the Penny Stock Rules require that the broker-dealer, not otherwise exempt from such rules, must make a special written determination that the penny stock is suitable for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure rules have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the Penny Stock Rules. So long as the common stock of the Company is subject to the Penny Stock Rules, it may be more difficult to sell the Company’s common stock.
Results of Operations during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023
We have generated $108,824 during the three months ended March 31, 2024, and $96,221 during the three months ended March 31, 2023. We had total operating expenses of $39,447, including general and administrative expenses of $25,520, and sales expenses of $13,927 during the three months ended March 31, 2024, compared to $39,154, including general and administrative expenses of $26,840, and sales expenses of $12,314 during the same period in the prior year. We incurred interest expenses of $6,949 during the three months ended March 31, 2024, compared to interest expenses of $5,761 during the three months ended March 31, 2023. During the three months ended March 31, 2024 and 2023, we had a net loss of $18,529 and $20,292, respectively. The decrease in our net loss was due to the combination of the increase in revenues, the increase in operating expenses, the increase in the service fees charged by vendors and the increase in interest expenses generated from the increased loan amount under the Loan Agreement.
Results of Operations during the nine months ended March 31, 2024 as compared to the nine months ended March 31, 2023
We have generated $471,000 during the nine months ended March 31, 2024, and $96,221 during the nine months ended March 31, 2023. We had total operating expenses of $139,546, including general and administrative expenses of $79,269, and sales expenses of $60,277 during the nine months ended March 31, 2024, compared to $90,362, including general and administrative expenses of $78,048, and sales expenses of $12,314 during the same period in the prior year. We incurred interest expenses of $22,507 during the nine months ended March 31, 2024, compared to interest expenses of $14,375 during the nine months ended March 31, 2023. During the nine months ended March 31, 2024 and 2023, we had a net loss of $41,793 and $80,114, respectively. The decrease in our net loss was due to the combination of the increase in revenues, the increase in operating expenses, the increase in the service fees charged by vendors and the increase in interest expenses generated from the increased loan amount under the Loan Agreement.
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Liquidity and Capital Resources
The Company has recently commenced its business operation and has limited cash resources other than advances provided by our majority shareholder or an affiliated party. We are dependent upon interim funding provided by our majority shareholder or an affiliated party to pay operating expenses and professional fees and expenses. Our majority shareholder and an affiliated party have agreed to provide funding as may be required to pay for accounting fees and other administrative expenses of the Company until such time the Company generates sufficient profits to pay these fees. The Company would be unable to continue as a going concern without interim financing provided by our majority shareholder and our affiliated party.
If we require additional financing, we cannot predict whether equity or debt financing will become available at terms acceptable to us, if at all. The Company depends upon services provided by management and funding provided by our majority shareholder or our affiliated party to fulfill its filing obligations under the Exchange Act. At present, the Company has limited financial resources to pay for such services.
The following table shows a summary of our cash flows for the periods presented:
| Nine Months Ended March 31, | ||||||||||||
| 2024 | 2023 | Change ‘24 vs. ‘23 | ||||||||||
| Net cash (used in) provided by | ||||||||||||
| Operating activities | $ | 52,448 | $ | (201,245 | ) | $ | 253,693 | |||||
| Financing activities | (52,448 | ) | 201,245 | (253,693 | ) | |||||||
| Increase (decrease) in cash | $ | 0 | $ | 0 | $ | |||||||
Net cash provided by (used in) our operating activities was $52,448 and $(201,245) for the nine months ended March 31, 2024 and 2023, respectively. The increase of $253,693 was due mainly to a $38,321 decrease in net loss, and a $215,372 decrease in operating assets.
Our financing activities generated a cash outflow of $52,448 and inflow of $201,245 for the nine months ended March 31, 2024 and 2023, respectively, due to the funds repaid and borrowed from NYLM under the Loan Agreement.
During the next 12 months we anticipate incurring costs related to:
| ● | filing of Exchange Act reports, | |
| ● | the current business operation, | |
| ● | registered agent fees and accounting fees, and | |
| ● | investigating, analyzing and consummating an acquisition or business combination. |
As of March 31, 2024, we had current assets of $74,119, and on March 31, 2023, we had current assets of $139,705. As of March 31, 2024, we had $413,552 in liabilities, consisting of accounts payable of $4,750, an advance from a related party of $363,153, accrued interest due to related parties of $30,319 in one loan agreement, and accrued expenses of $15,300. As of March 31, 2023, we had $427,510 in liabilities consisting of accounts payable of $3,890, an advance from a related party of $392,336, accrued interest due to related parties of $17,704 in one loan agreement, and accrued expenses of $13,580.
During the nine months ended March 31, 2024, we had positive cash flow from operating activities of $52,448 due to a net loss of $41,793 and a change in operating assets. We repaid $52,448 debt to New York Listing Management, Inc, an affiliated party, by the positive cash flow from operating. During the nine months ended March 31, 2023, we had negative cash flow from operating activities of $201,245 due to a net loss of $80,114 and a change in operating assets. We financed our negative cash flow from operations and $201,245 in advances from New York Listing Management, Inc, an affiliated party.
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The Company currently plans to satisfy its cash requirements for the next 12 months through borrowings from New York Listing Management, Inc, as well as from the revenue generated from operations, and believes it can satisfy its cash requirements so long as it is able to obtain such financing from New York Listing Management, Inc and the current business operation continues successfully. The Company expects that money borrowed and generated from such sources will be used during the next 12 months to satisfy the Company’s operating costs, professional fees and general corporate purposes.
On March 31, 2021, we entered into the Loan Agreement with NYLM. The Loan Agreement bears an interest rate of 8% per annum and is due and payable on the date that is three hundred sixty-six (366) days from the date of the loan. On March 31, 2022, we extended the Loan Agreement with NYLM and such loan agreement was to mature on March 31, 2023. On April 1, 2023, we re-signed the Loan Agreement with NYLM, and the Loan Agreement has no expiration, is due on demand, and the borrowing limit has been increased to $800,000. As of March 31, 2024 and 2023, the outstanding balance on this loan was $363,153 and $392,336, respectively, with accrued interest of $30,319 and $17,704, respectively. As of March 31, 2024, we expensed interest of $22,507, related to the Loan Agreement.
The Company intends to repay the loan from NYLM at a time when it has the cash resources to do so.
The Company has only limited capital. Additional financing is necessary for the Company to continue as a going concern. Our independent auditors issued an unqualified audit opinion for the years ended June 30, 2023 and 2022 with an explanatory paragraph expressing uncertainty as to the Company’s ability to remain as a going concern.
Off-Balance Sheet Arrangements
As of March 31, 2024, and 2023, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under the Securities Act of 1934.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a small reporting company, we are not required to provide the information required by this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures.
As of March 31, 2024, the Company’s Chief Executive Officer conducted an evaluation regarding the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act. Based upon the evaluation of these controls and procedures as provided under the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013), our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were ineffective because of the identification of material weaknesses, including lack of sufficient internal accounting personnel in order to ensure complete documentation of complex transactions and adequate financial reporting during the period ended March 31, 2024. The Company has no formal control process related to the identification and approval of related party transactions. As a company that has just commenced its business operation, the Company currently has limited personnel, and, as of the date of this report, it has not taken corrective actions to address the ineffective disclosure controls and procedures. The Company intends to take corrective actions in the future when it generates sufficient profits to do so.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting or in other factors identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the third quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Other than ordinary routine litigation (of which the Company is not currently involved), the Company knows of no material, existing or pending legal proceedings against it, nor is the Company involved as a plaintiff in any material proceeding or pending litigation, and there are no proceedings in which any of the Company’s directors or officers is an adverse party or has a material interest adverse to the Company.
ITEM 1A. RISK FACTORS
As a smaller reporting company, we are not required to provide the information otherwise required by this Item.
ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULT UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS
| * | Filed herewith. |
| ** | In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 34-47986, the certification furnished in Exhibit 32 herewith is deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed filed for purposes of Section 18 of the Exchange Act. Such certification will not be deemed to be incorporated by reference into any filings under the Securities Act or the Exchange Act. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 and on the date indicated.
| ECOMAX, INC. | ||
| May 15, 2024 | ||
| By: | /s/ Raymond Chen | |
| Name: | Raymond Chen | |
| Title: | Chief Executive Officer and Chief Financial Officer | |
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