UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 July 31, 2014
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from [ ] to [ ]
Commission file number 000-54803
ECO SCIENCE SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
Nevada | 46-4199032 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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3250 NE 1st Avenue, Suite 305, Miami FL | 33137 |
(Address of principal executive offices) | (Zip Code) |
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Registrant's telephone number: | 305-460-2259 |
N/A
(Former name, former address and former fiscal year, if changed since last report)
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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. | Yes þ No ¨ | |||||
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Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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 registration statement was required to submit and post such files). | Yes þ No ¨ | |||||
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. | ||||||
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| Large accelerated filer | ¨ |
| Accelerated filer | ¨ |
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| Non-accelerated filer | ¨ |
| Smaller reporting company | þ |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). | Yes ¨ No þ |
Indicate the number of shares outstanding of each of the registrants
classes of common stock as of the latest practicable date.
28,893,001 Common Shares issued and outstanding as of September 15, 2014
DOCUMENTS INCORPORATED BY REFERENCE: None
PART I-FINANCIAL INORMATION
ITEM 1. | FINANCIAL STATEMENTS |
The Companys unaudited interim consolidated financial statements for the six month period ended July 31, 2014 form a part of this quarterly report. They are stated in United States Dollars (US$) and are prepared in accordance with United States generally accepted accounting principles.
These financial statements should be read in conjunction with the audited financial statements and notes included thereto for the year ended January 31, 2014 on Form 10-K, as filed with the Securities and Exchange Commission on May 14, 2014.
2
The accompanying notes are an integral part of these financial statements
3
ECO SCIENCE SOLUTIONS, INC. | |||||||||||||||
(formerly Eaton Scientific Systems, Inc.) | |||||||||||||||
(A DEVELOPMENT STAGE COMPANY) | |||||||||||||||
CONSOLIDATED INCOME STATEMENTS | |||||||||||||||
(Unaudited) | |||||||||||||||
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| Cumulative from |
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| December 8, 2009 |
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| For the three months ended |
| For the six months ended |
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| July 31, 2014 |
| July 31, 2013 |
| July 31, 2014 |
| July 31, 2013 |
| July 31, 2014 |
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Revenue | $ | |
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Cost of revenues |
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Gross profit |
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General and administrative expenses |
| 16,390 |
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| 18,000 |
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| 40,607 |
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| 36,000 |
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| 159,770 |
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Net operating loss |
| (16,390 | ) |
| (18,000 | ) |
| (40,607 | ) |
| (36,000 | ) |
| (159,770 | ) |
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Other income (expenses) |
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Interest expense |
| (4,605 | ) |
| (3,781 | ) |
| (8,737 | ) |
| (7,439 | ) |
| (24,988 | ) |
Amortization of stock options/compensation |
| (211,250 | ) |
| (222,083 | ) |
| (582,500 | ) |
| (444,166 | ) |
| (2,888,750 | ) |
Gain on foreign currency exchange |
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| 783 |
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Impairment loss |
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| (5,265,000 | ) |
Total other income (expenses) |
| (215,855 | ) |
| (225,864 | ) |
| (591,237 | ) |
| (451,605 | ) |
| (8,177,955 | ) |
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Net loss - continuing operations |
| (232,245 | ) |
| (243,864 | ) |
| (631,844 | ) |
| (487,605 | ) |
| (8,337,725 | ) |
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Net loss - discontinued operations |
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| (111,124 | ) |
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| (223,249 | ) |
| (780,211 | ) |
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Net loss | $ | (232,245 | ) | $ | (354,988 | ) | $ | (631,844 | ) | $ | (710,854 | ) | $ | (9,117,936 | ) |
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Net loss per common share - basic and diluted |
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Continuing operations | $ | (0.01 | ) | $ | (0.55 | ) | $ | (0.03 | ) | $ | (1.10 | ) |
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Discontinued operations | $ | |
| $ | (0.25 | ) | $ | |
| $ | (0.50 | ) |
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Weighted average common shares outstanding - basic and diluted |
| 28,831,044 |
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| 443,001 |
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| 18,680,017 |
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| 443,001 |
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The accompanying notes are an integral part of these financial statements
4
ECO SCIENCE SOLUTIONS, INC. | |||||||||
(formerly Eaton Scientific Systems, Inc.) | |||||||||
(A DEVELOPMENT STAGE COMPANY) | |||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
(Unaudited) | |||||||||
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| Cumulative from |
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| December 8, 2009 |
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| For the six months ended |
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| July 31, 2014 |
| July 31, 2013 |
| July 31, 2014 |
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Cash flows from operating activities: |
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Net loss | $ | (631,844 | ) | $ | (710,854 | ) | $ | (9,117,936 | ) |
Net loss - discontinued operations |
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| (223,249 | ) |
| (780,211 | ) |
Net loss - continuing operations |
| (631,844 | ) |
| (487,605 | ) |
| (8,337,725 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Amortization of stock options/stock compensation |
| 582,500 |
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| 444,166 |
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| 2,888,750 |
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Impairment loss |
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| 5,265,000 |
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Changes in operating assets and liabilities: |
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Increase (decrease) in accounts payable and accrued expenses |
| (8,483 | ) |
| 7,439 |
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| 29,374 |
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Increase in related party payables |
| 1,414 |
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| 32,000 |
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| 59,664 |
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Net cash used in operating activities |
| (56,413 | ) |
| (4,000 | ) |
| (94,937 | ) |
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Cash flows from financing activities: |
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Proceeds from related party loans |
| 52,578 |
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| 91,569 |
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Proceeds from notes payable |
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| 250,000 |
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Subscriptions received |
| 300 |
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| 300 |
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Net cash provided by financing activities |
| 52,878 |
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| 341,869 |
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Net cash provided by continuing operations |
| (3,535 | ) |
| (4,000 | ) |
| 246,932 |
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Cash flows from discontinued operations |
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Net cash used in operating activities |
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| (97,650 | ) |
| (284,645 | ) |
Net cash used in investing activities |
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| (21,837 | ) |
| (40,113 | ) |
Net cash (used in) provided by financing activities |
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| (133,455 | ) |
| 79,975 |
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Net cash used in discontinued operations |
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| (252,942 | ) |
| (244,783 | ) |
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Net increase (decrease) in cash |
| (3,535 | ) |
| (256,942 | ) |
| 2,149 |
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Cash-beginning of period |
| 5,684 |
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| 287,421 |
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Cash-end of period | $ | 2,149 |
| $ | 30,479 |
| $ | 2,149 |
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NON-CASH ACTIVITIES |
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Recapitalization due to share exchange | $ | |
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| $ | (108,622 | ) |
Preferred stock issued for patent license | $ | |
| $ | |
| $ | 5,265,000 |
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Conversion of preferred stock to common stock | $ | 5,265,000 |
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| $ | 5,265,000 |
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Conversion of debt to common stock | $ | 9,450 |
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| $ | 9,450 |
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Distribution of assets upon spin off | $ | |
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| $ | (15,013 | ) |
Distribution of liabilities upon spin off | $ | |
| $ | |
| $ | 608,564 |
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Subscriptions receivable | $ | (300 | ) | $ | |
| $ | (300 | ) |
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SUPPLEMENTAL DISCLOSURES |
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Interest paid | $ | |
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| $ | |
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Income taxes paid | $ | |
| $ | |
| $ | |
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The accompanying notes are an integral part of these financial statements
5
ECO SCIENCE SOLUTIONS, INC.
(formerly Eaton Scientific Systems, Inc.)
A DEVELOPMENT STAGE COMPANY
NOTES TO THE FINANCIAL STATEMENTS
JULY 31, 2014
NOTE 1: NATURE OF BUSINESS AND CONTINUANCE OF OPERATIONS
The Company was incorporated in the state of Nevada on December 8, 2009 under the name Pristine Solutions, Inc. The Companys wholly owned subsidiary, Pristine Solutions Limited, was incorporated under the laws of Jamaica. The Companys original business plan focused on developing a network of sales points for the sale and service of tankless water heaters in Jamaica, through Pristine Solutions Limited.
On August 22, 2012, Christine Buchanan-McKenzie resigned from all positions with the Company, including, but not limited to that of President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer, and a member of the Board of Directors. The resignation did not involve any disagreement with the Company on any matter relating to the Companys operations, policies or practices. On the same day, Mr. Michael Borkowski was appointed as President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer, and a member of the Board of Directors of the Company.
On August 23, 2012, the Company and its controlling stockholders entered into a Share Exchange Agreement (the Share Exchange) with Eaton Scientific Systems, Ltd., a Nevada corporation (ESSL) and the shareholders of ESSL (the ESSL Shareholders), whereby the Company acquired 25,000,000 shares of common stock (100%) of ESSL (the ESSL Stock) from the ESSL Shareholders. In exchange for the ESSL Stock, the Company issued 25,000,000 shares of its common stock to the ESSL Shareholders (the Share Exchange).
The Companys Chief Executive Officer, Mr. Michael J. Borkowski, and the Companys controlling shareholder and former President, Ms. Christine Buchanan-McKenzie, entered into a Common Stock Purchase Agreement, whereby Mr. Borkowski would purchase one hundred (100%) percent of the Companys common shares owned by Mrs. Buchanan-McKenzie, or 240,000,000 shares, at par value $.0001, representing approximately 54.1% of the Companys total issued and outstanding shares. The Common Stock Purchase Agreement, and subsequent transaction closing, was completed on October 22, 2012. On October 23, 2012, the Common Stock Purchase Agreement was finalized, and a change in control of the Company took place.
In conjunction with the Share Exchange and Common Stock Purchase Agreement, the total shares held by the ESSL Shareholders are 265,000,000, or approximately 59.8% of the issued and outstanding common stock of the Company as of October 30, 2012. In addition, certain ESSL shareholders owning a total of 135,779,375 shares of the Companys common stock, representing approximately 30.64% of the issued and outstanding common stock of the Company, entered into three (3) separate twenty-four (24) month Lock-Up Agreements.
As a result of the Share Exchange and Common Stock Purchase Agreement, (i) there was a change in control of the Company; (ii) ESSL became the Companys wholly owned subsidiary; and (iii) the ESSL operations continued as its primary business. In addition, on November 27, 2012, the Company changed its name to Eaton Scientific Systems, Inc.
In October, 2013, the Companys Management was introduced to Domenic Marciano (Marciano). Marciano represented that he intended to acquire an exclusive license to a unique automotive product, the EcoFlora Spark Plug, with a proprietary technology, and that EcoFlora has the potential to be uniquely positioned in the automotive parts business in the United States and International automotive parts marketplace.
The Majority Shareholders acknowledge that the Company has not been able to attract investment capital sufficient to execute its business plan because of its Share price. Further, Management believes that the potential success of the EcoFlora technology could potentially provide value to the Company and its shareholders. As a result, on November 26, 2013, the Company and its Majority Shareholders (the Majority Stockholders) entered into an Agreement for the Purchase of Common Stock (the Stock Purchase Agreement) with Marciano whereby Marciano acquired 227,370,000 shares of the Companys common stock from the Majority Stockholders at par value $.0001, representing approximately 51.3% of the Companys total issued and outstanding shares, in exchange for cash in the amount of $22,737 (the Cash Proceeds). The Stock Purchase Agreement, and subsequent transaction closing, was completed on November 26, 2013, and a change in control of the Company took place.
The Majority Shareholders and the Companys Management also believe it is in the best interest of the Companys Shareholders to operate Eaton Scientific Systems, Ltd. (Eaton Sub) a Nevada corporation and wholly owned subsidiary of the Company, as a privately held Company, until such time where it is sufficiently capitalized to increase the probability for its Clinical Trials of Homatropine (Tropine 3) in oral suspension for the treatment of hot flash symptoms in pre-menopausal, menopausal and post menopausal women, to be in a position to yield results that may provide the opportunity for a potential FDA approval for marketing to consumers in the US.
In connection with the terms and conditions of the Stock Purchase Agreement and sale of 227,370,000 shares held by the Majority Stockholders:
1.
Marciano appointed two new directors to the Companys board of directors; and
2.
The Lock-Up-Leak-Out Agreements executed in October 2012 were cancelled by mutual agreement between the Board and the Companys Shareholders who were party to the Agreements.
3.
The Majority Shareholders of the Company have voted to Spin-out to its Shareholders, one hundred percent (100%) of the issued and outstanding shares of Eaton Scientific Systems Ltd., its operating subsidiary, as of the record date of November 25, 2013, on a one-for-one basis within sixty-days (60) of the Change of Control of the Company, or by January 25, 2014.
On January 9, 2014, the Spin-out was complete, and Eaton Scientific Systems, Ltd. was no longer a subsidiary of the Company.
On February 14, 2014, the Company changed its name to Eco Science Solutions, Inc. (OTCQB.ESSI).
NOTE: The following notes and any further reference made to the Company, "we", "us", "our" and "ESSI" shall mean Eco Science Solutions, Inc. (formerly Eaton Scientific Systems, Inc.), unless otherwise indicated.
Headquartered in Miami, Florida, Eco Science Solutions, Inc., a Nevada corporation, is charged with the origination, development and commercialization of innovative aftermarket automotive parts.
6
On December 4, 2013, the Company (the Company) executed an Agreement of the License of Intellectual Property (the License Agreement) dated November 4, 2013 with Eco Science Solutions International, Inc., a Canadian corporation (ESS International), for the exclusive license to a revolutionary Spark Plug technology, the EcoFlora Spark Plug, that has filed for Patent protection in Canada and the United States based on its "Internal Pre-Combustion Chamber High Efficiency Spark Plug" technology. In connection with the License Agreement, the Company issued ESS International 2,500,000 shares of the Companys Series A Convertible Preferred Stock (Preferred Stock), in exchange for the exclusive license of the Patent Applications, in perpetuity. The Preferred Stock is convertible into common stock at a conversion rate of 10 common shares for each preferred share.
On February 14, 2014, the Company effected a 1000-to-1 reverse stock split. As a result, the total shares of common stock issued and outstanding was adjusted to 443,001 shares with a par value of $0.10.
On April 4, 2014, the Company received notice from Eco Science Solutions International, Inc. to convert 100% of the Series A preferred shares into restricted common shares on a 10 for 1 basis. As a result, on April 9, 2014, 25,000,000 shares of the Companys restricted common stock was issued, of which 19,866,668 shares were issued to the Companys chairman, Domenic Marciano, and 5,133,332 shares were issued to non-related parties. Subsequent to the conversion, Eco Science Solutions International, Inc. no longer holds any shares of the Companys capital stock, and Mr. Marciano holds 20,094,038 shares of the Companys common stock, which represents 62.13% of the total issued and outstanding shares of the Companys common stock on a fully diluted basis.
The Company is currently in the testing and development stages, and intends to validate its technology and then and manufacture and sell the technology.
Going Concern
These 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 revenues to date and has never paid any dividends and is unlikely to pay dividends or generate significant earnings in the immediate or foreseeable future. As at July 31, 2014, the Company had a working capital deficit from continuing operations of $349,438, and an accumulated deficit of $8,524,385. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability to raise equity or debt financing, and the attainment of profitable operations from the Company's future business. These factors raise substantial doubt regarding the Companys ability to continue as a going concern.
The financial statements reflect all adjustments consisting of normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of the results for the periods shown. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies is presented to assist in understanding the Companys financial statements. These accounting policies conform to accounting principles, generally accepted in the United States of America, and have been consistently applied in the preparation of the financial statements.
Basis of Presentation
These consolidated financial statements and related notes are prepared in accordance with generally accepted accounting principles in the United States and are expressed in US dollars. The Companys fiscal year end is January 31.
Development Stage Company
The Company is a development stage company as defined by ASC 915-10-05, Development Stage Entity. The Company is still devoting substantially all of its efforts on establishing the business, and its planned principal operations have not commenced. All losses accumulated, since inception, have been considered as part of the Companys development stage activities.
Use of Estimates
The preparation of consolidated financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to long-lived assets and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Companys estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with maturity of three months or less at the time of purchase to be cash equivalents. As of July 31, 2014 and January 31, 2014, the Company had no cash equivalents.
Intangible Assets
Intangible assets consist of licensing and other direct costs incurred in connection with the license rights of pending patents, and are capitalized and amortized over the shorter of the economic or legal life of the patent. During the six months ended July 31, 2014 and the year ended January 31, 2014, respectively, $0 and $5,265,000 were capitalized to patent development costs.
Impairment of Long-Lived Assets
The Companys long-lived assets, including intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the historical-cost carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the asset by comparing the undiscounted future net cash flows expected to result from the asset to its carrying value. If the carrying value exceeds the undiscounted future net cash flows of the asset, an impairment loss is measured and recognized. An impairment loss is measured as the difference between the net book value and the fair value of the long-lived asset.
Due to the Companys recurring losses, the costs related to its patents were evaluated for impairment and it was determined that there were no sufficient estimated future cash flows for the recoverability of the asset. As a result, an impairment loss of $5,265,000 was recorded for the year ended January 31, 2014.
7
Fair Value Measurements
Pursuant to ASC 820, Fair Value Measurements and Disclosures and ASC 825, Financial Instruments, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 and 825 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instruments categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 and 825 prioritizes the inputs into three levels that may be used to measure fair value:
= | Level 1 | Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. |
= | Level 2 | Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. |
= | Level 3 | Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. |
The Company’s financial instruments consist principally of cash, accounts payable, and accrued liabilities. Pursuant to ASC 820 and 825, the fair value of cash is determined based on Level 1 inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
Revenue Recognition
The Company recognizes revenue in accordance with ASC 605, Revenue Recognition. Revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service has been provided, and collectability is reasonably assured. As of July 31, 2014, no revenue has been recognized, as the Company has not commenced operations.
Stock-Based Compensation
The Company records stock-based compensation in accordance with ASC 718, Share-Based Payments, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.
Basic and Diluted Net Income (Loss) Per Share
The Company computes 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.
Discontinued Operations
In accordance with ASC 205-20 and ASU 2014-08, Presentation of Financial Statements - Discontinued Operations, the Company reported the results of its former subsidiary, Eaton Scientific Solutions, Ltd. (Eaton Sub), as a discontinued operation in the Companys annual financial statements for the year ended January 31, 2014. The application of ASC 205-20 and the adoption of ASU 2014-08 are discussed therein.
Comprehensive Loss
ASC 220, Comprehensive Income, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at July 31, 2014, the Company has no items that represent comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.
Recently Adopted Accounting Standards:
The Company evaluates the pronouncements of various authoritative accounting organizations, primarily the Financial Accounting Standards Board (FASB), the US Securities and Exchange Commission (SEC), and the Emerging Issues Task Force (EITF), to determine the impact of new pronouncements on US GAAP and the impact on the Company. The Company has recently adopted the following new accounting standards:
Adopted:
Effective January 2012, the Company adopted ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (ASU 2011-04). ASU 2011-04 represents the converged guidance of the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) on fair value measurement. A variety of measures are included in the update intended to either clarify existing fair value measurement requirements, change particular principles requirements for measuring fair value or for disclosing information about fair value measurements. For many of the requirements, the FASB does not intend to change the application of existing requirements under Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements. ASU 2011-04 was effective for interim and annual periods beginning after December 15, 2011. The adoption of this update did not have a material impact on the consolidated financial statements.
Effective January 2012, the Company adopted ASU No. 2011-05, Presentation of Comprehensive Income (ASU 2011-05). ASU 2011-05 is intended to increase the prominence of items reported in other comprehensive income and to facilitate convergence of accounting guidance in this area with that of the IASB. The amendments require that all non-owner changes in shareholders equity be presented in a single continuous statement of comprehensive income or in two separate but consecutive statements. In December 2011, the FASB issued ASU No. 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 (ASU 2011-12). ASU 2011-12 defers the provisions of ASU 2011-05 that require the presentation of reclassification adjustments on the face of both the statement of income and statement of other comprehensive income. Amendments under ASU 2011-05 that were not deferred under ASU 2011-12 will be applied retrospectively for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of this update did not have a material impact on the consolidated financial statements.
8
In April 2013, the FASB issued ASU No. 2013-07, Presentation of Financial Statements (Top 205): Liquidation Basis of Accounting. The objective of ASU No. 2013-07 is to clarify when an entity should apply the liquidation basis of accounting and to provide principles for the measurement of assets and liabilities under the liquidation basis of accounting, as well as any required disclosures. The amendments in this standard is effective prospectively for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. The Company is evaluating the effect, if any, the adoption of ASU No. 2013-07 may have on its consolidated financial statements.
In April 2014, the FASB issued ASU No. 2014-08 Presentation of Financial Statements (Top 205): Reporting Discontinued Operations and Disclosure of Disposals of Components of an Entity. The objective of ASU No. 2014-08 is to clarify the criteria for determining which disposals can be presented as discontinued operations and also modifies related disclosure requirements. The standard is required to be adopted by public business entities in annual periods beginning on or after December 15, 2014, and interim periods within those annual periods. Early adoption is permitted for new disposals beginning in the first quarter of 2014, provided financial statements have not been issued before the release of this standard.
Not Yet Adopted:
In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive (ASU 2013-02). This guidance is the culmination of the FASBs deliberation on reporting reclassification adjustments from accumulated other comprehensive income (AOCI). The amendments in ASU 2013-02 do not change the current requirements for reporting net income or other comprehensive income. However, the amendments require disclosure of amounts reclassified out of AOCI in its entirety, by component, on the face of the statement of operations or in the notes thereto. Amounts that are not required to be reclassified in their entirety to net income must be cross-referenced to other disclosures that provide additional detail. This standard is effective prospectively for annual and interim reporting periods beginning after December 15, 2012. The Company is evaluating the effect, if any, the adoption of ASU 2013-02 may have on its consolidated financial statements.
In July 2013, the FASB issued ASU No 2013-11, Presentation of an Unrecognized Tax Benefit When Net Operating Loss Carryforward Exists. The objective of ASU 2013-11 is to reduce diversity in practice by providing guidance on the presentation of unrecognized tax benefits, and will better reflect the manner in which an entity would settle at the reporting date any additional income taxes that would result from the disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist. The amendments in this Update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013, and interim reporting periods therein. Early adoption is permitted. The Company is evaluating the effect, if any, adoption of ASU No. 2013-11 will have on its consolidated financial statements.
Recently Issued Accounting Standards Updates:
There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries. None of the updates are expected to a have a material impact on the Company's consolidated financial position, results of operations or cash flows.
9
NOTE 3: NOTES AND LOANS PAYABLE-CONVERTIBLE
On January 7, 2013, the Company issued a Convertible Promissory Note in the amount of $250,000 to a non-related party (the Convertible Note). The Convertible Note and accrued interest was subsequently purchased and assigned to another non-related party as part of a Convertible Note Assignment and Purchase Agreement (the Assignment) dated August 18, 2013. The Convertible Note is payable within two years, or by January 31, 2015, accrues interest at a rate of 6% per annum, and is convertible into the Companys common stock at a rate of $0.003 per share. In accordance with certain Assignment of Debt agreements dated April 16, 2014, April 29, 2014, and June 27, 2014, total principal in the amount of $9,450 was assigned to three non-related parties (the Assignees), transferring all the rights of the original Convertible Note. Interest in the amount of $23,310 and $15,986 has been accrued as of July 31, 2014 and January 31, 2014, respectively, and is included as an accrued expense on the accompanying balance sheets.
On April 29, 2014, the Company received notice from an Assignee to convert 100% of the Assignees $3,000 note into the Companys common stock at the conversion rate of $0.003 per share. As a result, 1,000,000 unrestricted shares of the Companys common stock were issued to the Assignee.
On April 29, 2014, the Company received notice from an Assignee to convert 100% of the Assignees $3,450 note into the Companys common stock at the conversion rate of $0.003 per share. As a result, 1,150,000 unrestricted shares of the Companys common stock were issued to the Assignee.
On June 27, 2014, the Company received notice from an Assignee to convert 100% of the Assignees $3,000 note into the Companys common stock at the conversion rate of $0.003 per share. As a result, 1,000,000 unrestricted shares of the Companys common stock were issued to the Assignee.
In connection with the Assignments of Debt and subsequent conversions of debt, the principal balance of the Convertible Note was reduced to $240,550.
As of July 31, 2014 and January 31, 2014, respectively, the Company has accrued $23,310 and $15,986 in interest on notes and loans payable.
NOTE 4: RELATED PARTY TRANSACTIONS
As of July 31, 2014, related parties are due a total of $149,819, which is comprised of $91,569 in cash loans to the Company, and $58,250 in accrued compensation.
Related party transactions consist of the following:
| July 31, 2014 |
| January 31, 2014 |
| ||
Related party payable-compensation | $ | 58,250 |
| $ | 58,250 |
|
|
|
|
|
|
|
|
Notes payable for loans to the Company |
| 22,000 |
|
| 22,000 |
|
Convertible notes payable for loans to the Company |
| 69,569 |
|
| 16,991 |
|
Total related party loans |
| 149,819 |
|
| 38,991 |
|
Total related party transactions | $ | 149,819 |
| $ | 97,241 |
|
On September 1, 2012, the Company entered into an employment agreement with Mr. Michael J. Borkowski (the 2012 Employment Agreement) to serve as the Companys President, CEO, and Director. The Employment Agreement was for a term of three (3) years, and included compensation in the amount of $72,000 per year, bonus compensation in the amount of $100,000 contingent upon the Company meeting certain goals, 5,000,000 stock options, and certain other benefits in the event they are offered by the Company in the future. As a result of the change in control of the Company in November 2013, the 5,000,000 stock options granted under the 2012 Employment Agreement became fully vested (see Note 9). As of July 31, 2014 and January 31, 2014, $59,000 has been recorded as a related party payable for unpaid compensation under the 2012 Employment Agreement.
On November 15, 2013, the Company entered into a new employment agreement with Mr. Michael J. Borkowski (the 2013 Employment Agreement) to serve under new management as the Companys President, CEO, and Director. The Employment Agreement, which replaces the 2012 Employment Agreement, is for a term of one (1) year, and includes compensation in the amount of $18,000 per year, compensation for certain travel expenses, and grants to purchase 400,000 shares of the Companys common stock at par, which vest periodically beginning February 15, 2014, at 100,000 shares per vesting period through November 15, 2014 (the Stock Award). In connection with the Stock Award, $640,000 has been recorded as deferred compensation, of which $480,000 has been expensed in the current year. There remains $160,000 in deferred compensation to be amortized over the next 4 months. As of July 31, 2014 and January 31, 2014, $750 has been recorded as prepaid related party compensation under the 2013 Employment Agreement.
On November 4, 2013, the Company issued a Promissory Note (the Note) in the amount of $22,000 to Eco Science Solutions International, Inc., a company controlled by Domenic Marciano, the Companys chairman, for cash loans made to the Company. The Note bears interest at a rate of 5% per annum and is due within ninety (90) days of written demand. As of July 31, 2014, the Note remains unpaid, and no demand has been made. Interest in the amount of $811 and $265 has been accrued as of July 31, 2014 and January 31, 2014, respectively, and is included as an accrued expense on the accompanying balance sheets.
10
On January 31, 2014, the Company issued a Convertible Promissory Note (the Convertible Note) in the amount of $16,991 to Eco Science Solutions International, Inc., a company controlled by Domenic Marciano, the Companys chairman, for cash loans made to the Company. Modifications to the Convertible Note have been made through July 31, 2014to increase the principal by $52,578, representing additional cash loans made to the Company for overhead advances. The Convertible Note bears interest at a rate of 5% per annum, is due within two (2) years, or January 31, 2016, and is convertible into the Companys common stock at a rate equal to the fair market value on the date of conversion. As of July 31, 2014, the Note remains unpaid, and no demand has been made. Interest in the amount of $869 and $0 has been accrued as of July 31, 2014 and January 31, 2014, respectively, and is included as an accrued expense on the accompanying balance sheets.
On April 9, 2014, in connection with the conversion of certain preferred stock, Domenic Marciano, the Companys chairman, was issued 19,866,668 of the Companys common stock (see Note 6).
As of July 31, 2014 and January 31, 2014, respectively, the Company has accrued $1,680 and $265 in interest on related party loans.
NOTE 5: COMMITMENTS AND CONTINGENCIES
On December 4, 2013, the Company (the Company, the Licensee) executed an Agreement of the License of Intellectual Property (License Agreement) dated November 4, 2013 with Eco Science Solutions International, Inc., a Canadian corporation (Licensor), for the license of certain US and Canadian Patent Pending Applications in perpetuity. In connection with the terms and conditions of the License Agreement, the Company will pay Licensor a royalty equal to three percent (3%) of Gross Revenues (the Gross Revenues) earned in connection with the Patent License, payable on a quarterly basis. As of July 31, 2014, no Gross Revenues have been earned.
NOTE 6: PREFERRED STOCK
The total number of authorized shares of preferred stock that may be issued by the Company is 50,000,000 shares with a par value of $0.001.
On December 4, 2013, in connection with the Agreement of the License of Intellectual Property dated November, 4, 3013, the Company issued 2,500,000 shares of Series A Convertible Preferred Stock to Eco Science Solutions International, Inc., a company controlled by Domenic Marciano, the Companys chairman, valued at $5,265,000. As a result, $5,262,500 was recorded as preferred additional paid in capital. The Preferred Stock is convertible into the Companys common stock at a rate of 10 shares of common stock for each share of Preferred Stock.
On April 4, 2014, the Company received notice from Eco Science Solutions International, Inc. to convert 100% of the Series A preferred shares into restricted common shares on a 10 for 1 basis. As a result, on April 9, 2014, 25,000,000 shares of the Companys restricted common stock were issued, and preferred additional paid in capital was reduced by $5,262,500.
As of July 31, 2014, no shares of the Companys preferred stock were issued and outstanding.
NOTE 7: COMMON STOCK
The following reflects the common stock transactions as adjusted for the change in par value, and the effects of the 1000-to-1 reverse stock-split that occurred on February 14, 2014.
The total number of authorized shares of common stock that may be issued by the Company is 650,000,000 shares with a par value of $0.10.
On April 29, 2014, the Company received notice from the holder of a $3,450 Convertible Note Payable to convert 100% of principal into the Companys common stock at the conversion rate of $0.003 per share. As a result, 1,150,000 unrestricted shares of the Companys common stock, with a par value of $115,000, were issued to the note holder, and additional paid in capital was reduced by $111,550.
On June 27, 2014, the Company received notice from the holder of a $3,000 Convertible Note Payable to convert 100% of principal into the Companys common stock at the conversion rate of $0.003 per share. As a result, 1,000,000 unrestricted shares of the Companys common stock, with a par value of $100,000, were issued to the note holder, and additional paid in capital was reduced by $97,000.
On July 15, 2014, in accordance with his Employment Agreement, the Company issued 100,000 shares of restricted common stock, valued at $160,000, to its President for cash in the amount of $100. As a result, additional paid in capital was reduced by $9,900.
As of July 31, 2014 and January 31, 2014, respectively, 28,893,001 and 443,001 shares of the Companys common stock were issued and outstanding.
NOTE 8: WARRANTS AND OPTIONS
On September 1, 2012, the Company, under its 2012 Plan, granted qualified stock options to purchase 6,500,000 shares of its common stock. Of the total options granted, 5,000,000 were granted to the President of the Company (the Executive Options) at $0.10 per share, and 1,500,000 were granted to a consultant at $0.25 per share (collectively, the Options). The Options are exercisable for a period of five years, vest quarterly over a period of three years, and were valued using the Black-Scholes valuation method at $0.41 per share, or $2,665,000, to be amortized over a 36-month period.
11
Options Outstanding |
|
|
|
|
|
|
|
|
| |
|
|
|
| Remaining |
| Exercise Price |
| Weighted |
| |
|
| Number of |
| Contractual Life |
| times Number |
| Average |
| |
Exercise Price |
| Shares |
| (in years) |
| of Shares |
| Exercise Price |
| |
$0.10 |
| 5,000,000 |
| 3.25 |
| $ | 500,000 |
| $0.10 |
|
$0.25 |
| 1,500,000 |
| 3.25 |
|
| 375,000 |
| $0.25 |
|
|
| 6,500,000 |
|
|
| $ | 875,000 |
| $0.20 |
|
Options Activity |
|
| Weighted |
|
| Number |
| Average |
|
| of Shares |
| Exercise Price |
|
Outstanding at January 31, 2014 | 6,500,000 |
| $0.20 |
|
Issued | |
| |
|
Exercised | |
| |
|
Expired / Cancelled | |
| |
|
Outstanding at July 31, 2014 | 6,500,000 |
| $0.20 |
|
As of July 31, 2014 and January 31, 2014, the Company has granted a total of 6,500,000 options to purchase common stock shares. In connection with the options granted, a total of $2,665,000 has been recorded as deferred compensation, of which $102,500 and $2,084,617 has been expensed during the six months ended July 31, 2014 and the year ended January 31, 2014, respectively. There remains $256,250 and $358,750 of deferred compensation as of July 31, 2014 and January 31, 2014, respectively.
NOTE 9: RESTRICTED STOCK AWARDS
On February 15, 2014, in connection with a certain Employment Agreement dated November 15, 2013, its President was awarded the right to purchase 400,000 shares of the Companys restricted common stock (the Restricted Stock Units, RSUs) at a per share price of $0.001 (the Stock Award). The Stock Award, valued at $640,000, vests periodically over the period beginning February 15, 2014 through November 15, 2014, at 100,000 RSUs per vesting period. During the six month period ended July 31, 2014, the Company recorded deferred compensation in the amount of $640,000, of which $480,000 has been expensed in the current year for the 300,000 RSUs vested through July 15, 2014. There remains $160,000 in deferred compensation to be amortized over the next 4 months.
Restricted Stock Units Activity |
|
| Weighted |
|
| Number |
| Average |
|
| of RSUs |
| Exercise Price |
|
Outstanding at January 31, 2014 | |
| |
|
Awarded | 400,000 |
| $0.001 |
|
Exercised / Vested | (300,000 | ) | $0.001 |
|
Expired / Cancelled | |
| |
|
Outstanding at July 31, 2014 | 100,000 |
| $0.001 |
|
As of July 31, 2014, the Company has awarded a total of 400,000 Restricted Stock Units. In connection with the Stock Award, a total of $640,000 has been recorded as deferred compensation, of which $480,000 has been expensed as of July 31, 2014. There remains $160,000 of deferred compensation as of July 31, 2014.
NOTE 10: INCOME TAXES
The components of the net change in deferred tax asset at July 31, 2014 and January 31, 2014, the statutory tax rate, the effective tax rate and the amount of the valuation allowance are indicated below:
| July 31, 2014 |
| January 31, 2014 |
| ||
|
|
|
|
|
|
|
Income (loss) before taxes: |
|
|
|
|
|
|
Continuing operations | $ | (631,844 | ) | $ | (7,452,402 | ) |
Discontinued operations |
| |
|
| (384,505 | ) |
Total income (loss) before taxes |
| (631,844 | ) |
| (7,836,907 | ) |
Statutory rate |
| 34% |
|
| 34% |
|
|
|
|
|
|
|
|
Computed expected tax payable (recovery) | $ | (214,800 | ) | $ | (2,664,400 | ) |
Non-deductible expenses |
| |
|
| 1,000 |
|
Change in valuation allowance |
| 214,800 |
|
| 2,663,400 |
|
Reported income taxes | $ | |
| $ | |
|
The significant components of the cumulative deferred income tax assets and liabilities at July 31, 2014 and January 31, 2014, are as follows:
Deferred tax assets: | July 31, 2014 |
| January 31, 2014 |
| ||
Continuing operations: |
|
|
|
|
|
|
Net operating loss carry forward | $ | 2,834,800 |
| $ | 2,620,000 |
|
Less valuation allowance |
| (2,834,800 | ) |
| (2,620,000 | ) |
Net deferred tax asset - continuing operations | $ | |
| $ | |
|
|
|
|
|
|
|
|
Discontinued operations: |
|
|
|
|
|
|
Net operating loss carry forward | $ | 263,700 |
| $ | 263,700 |
|
Less valuation allowance |
| (263,700 | ) |
| (263,700 | ) |
Net deferred tax asset - discontinued operations | $ | |
| $ | |
|
12
NOTE 11: SUBSEQUENT EVENTS
The Company has evaluated the events and transactions for recognition or disclosure subsequent to July 31, 2014 and through September 15, 2014, and has determined that there have been no events that would require disclosure.
ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Forward Looking Statements
This quarterly report contains forward-looking statements. These statements relate to future events or the Companys future financial performance. In some cases, forward-looking statements can be identified by terminology such as may, should, expects, plans, anticipates, believes, estimates, predicts, potential or continue or negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause the Companys or its industrys actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.
The Companys unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with the Companys financial statements and the related notes that appear elsewhere in this quarterly report.
The following discussion contains forward-looking statements that reflect the Companys plans, estimates and beliefs. The Companys actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this quarterly report. All adjustments necessary for a fair statement of the results for the interim periods have been made, and all adjustments are of a normal recurring nature.
In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States Dollars and all references to common shares refer to the common shares in the Companys capital stock.
As used in this annual report, the terms "we", "us", "our" and "ESSI" mean Eco Science Solutions, Inc. (formerly Eaton Scientific Systems, Inc.), unless otherwise indicated.
Overview
The Company was incorporated in the state of Nevada on December 8, 2009, under the name Pristine Solutions, Inc. The Companys wholly owned subsidiary, Pristine Solutions Limited, was incorporated under the laws of Jamaica. The Companys original business plan focused on developing a network of sales points for the sale and service of tankless water heaters in Jamaica, through Pristine Solutions Limited.
On August 22, 2012, Christine Buchanan-McKenzie resigned from all positions with the Company, including, but not limited to that of President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer, and a member of the Board of Directors. The resignation did not involve any disagreement with the Company on any matter relating to the Companys operations, policies or practices. On the same day, Mr. Michael Borkowski was appointed as President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer, and the sole member of the Board of Directors of the Company.
On August 23, 2012, the Company and its controlling stockholders entered into a Share Exchange Agreement (the Share Exchange) with Eaton Scientific Systems, Ltd., a Nevada corporation (ESSL) and the shareholders of ESSL (the ESSL Shareholders), whereby the Company acquired 25,000,000 shares of common stock (100%) of ESSL (the ESSL Stock) from the ESSL Shareholders. In exchange for the ESSL Stock, the Company issued 25,000,000 shares of its common stock to the ESSL Shareholders. In addition, the Companys Chief Executive Officer, Mr. Michael J. Borkowski, and the Companys controlling shareholder and former President, Ms. Christine Buchanan-McKenzie, entered into a Common Stock Purchase Agreement, whereby Mr. Borkowski would purchase one hundred (100%) percent of the Companys common shares owned by Mrs. Buchanan-McKenzie, or 240,000,000 shares, at par value $.0001, representing approximately 54.1% of the Companys total issued and outstanding shares. The Common Stock Purchase Agreement and Share Exchange, was completed on October 22, 2012. On October 23, 2012, the Common Stock Purchase Agreement was finalized, and a change in control of the Registrant took place.
In conjunction with the Share Exchange and Common Stock Purchase Agreement, the total shares held by the ESSL Shareholders are 265,000,000, or approximately 59.8% of the issued and outstanding common stock of the Company as of October 30, 2012. Certain ESSL shareholders owning a total of 135,779,375 shares of the Companys common stock, representing approximately 30.64% of the issued and outstanding common stock of the Company, entered into three (3) separate twenty-four (24) month Lock-Up Agreements.
As a result of the Share Exchange and Common Stock Purchase Agreement, (i) there was a change in control of the Registrant; (ii) ESSL became the Companys wholly owned subsidiary; and (iii) the ESSL operations will continue as the Companys primary business. In addition, on November 27, 2012, the Company changed its name to Eaton Scientific Systems, Inc.
In October, 2013, the Companys Management was introduced to Domenic Marciano (Marciano). Marciano represented that he intended to acquire an exclusive license to a unique automotive product, the EcoFlora Spark Plug, with a proprietary technology, and that EcoFlora has the potential to be uniquely positioned in the automotive parts business in the United States and International automotive parts marketplace.
The Majority Shareholders acknowledge that the Company has not been able to attract investment capital sufficient to execute its business plan because of its Share price. Further, Management believes that the potential success of the EcoFlora technology could potentially provide value to the Company and its shareholders. As a result, on November 26, 2013, the Company and its Majority Shareholders (the Majority Stockholders) entered into an Agreement for the Purchase of Common Stock (the Stock Purchase Agreement) with Marciano whereby Marciano acquired 227,370,000 shares of the Companys common stock from the Majority Stockholders at par value $.0001, representing approximately 51.3% of the Companys total issued and outstanding shares, in exchange for cash in the amount of $22,737 (the Cash Proceeds). The Stock Purchase Agreement, and subsequent transaction closing, was completed on November 26, 2013, and a change in control of the Company took place.
13
The Majority Shareholders and the Companys Management also believe it is in the best interest of the Companys Shareholders to operate Eaton Scientific Systems, Ltd. (Eaton Sub) a Nevada corporation and wholly owned subsidiary of the Company, as a privately held Company, until such time where it is sufficiently capitalized to increase the probability for its Clinical Trials of Homatropine (Tropine 3) in oral suspension for the treatment of hot flash symptoms in pre-menopausal, menopausal and post menopausal women, to be in a position to yield results that may provide the opportunity for a potential FDA approval for marketing to consumers in the US.
In connection with the terms and conditions of the Stock Purchase Agreement and sale of 227,370,000 shares held by the Majority Stockholders:
1.
Marciano appointed two new directors to the Companys board of directors; and
2.
The Lock-Up-Leak-Out Agreements executed in October 2012 were cancelled by mutual agreement between the Board and the Companys Shareholders who were party to the Agreements.
3.
The Majority Shareholders of the Company have voted to Spin-out to its Shareholders, one hundred percent (100%) of the issued and outstanding shares of Eaton Scientific Systems Ltd., its operating subsidiary, as of the record date of November 25, 2013, on a one-for-one basis within sixty-days (60) of the Change of Control of the Company, or by January 25, 2014.
On January 9, 2014, the Spin-out was complete, and Eaton Scientific Systems, Ltd. was no longer a subsidiary of the Company.
On February 14, 2014, the Company changed its name to Eco Science Solutions, Inc. (OTCQB.ESSI).
NOTE: The following notes and any further reference made to the Company, "we", "us", "our" and "ESSI" shall mean Eco Science Solutions, Inc. (formerly Eaton Scientific Systems, Inc.), unless otherwise indicated.
Description of Business
Headquartered in Miami, Florida, Eco Science Solutions, Inc., a Nevada corporation, is charged with the origination, development and commercialization of innovative aftermarket automotive parts.
On December 4, 2013, the Company (the Company) executed an Agreement of the License of Intellectual Property (the License Agreement) dated November 4, 2013 with Eco Science Solutions International, Inc., a Canadian corporation (ESS International), for the exclusive license to a revolutionary Spark Plug technology, the EcoFlora Spark Plug, that has filed for Patent protection in Canada and the United States based on its "Internal Pre-Combustion Chamber High Efficiency Spark Plug" technology. In connection with the License Agreement, the Company issued ESS International 2,500,000 shares of the Companys Series A Convertible Preferred Stock (Preferred Stock), in exchange for the exclusive license of the Patent Applications, in perpetuity. The Preferred Stock is convertible into common stock at a conversion rate of 10 common shares for each preferred share.
On February 14, 2014, the Company effected a 1000-to-1 reverse stock split. As a result, the total shares of common stock issued and outstanding was adjusted to 443,001 shares with a par value of $0.10.
On April 4, 2014, the Company received notice from Eco Science Solutions International, Inc. to convert 100% of the Series A preferred shares into restricted common shares on a 10 for 1 basis. As a result, on April 9, 2014, 25,000,000 shares of the Companys restricted common stock was issued, of which 19,866,668 shares were issued to the Companys chairman, Domenic Marciano, and 5,133,332 shares were issued to non-related parties. Subsequent to the conversion, Eco Science Solutions International, Inc. no longer holds any shares of the Companys capital stock, and Mr. Marciano holds 20,094,038 shares of the Companys common stock, which represents 62.13% of the total issued and outstanding shares of the Companys common stock on a fully diluted basis.
The Company is a development stage company as defined by ASC 915-10, Accounting and Reporting by Development Stage Enterprises. A development stage enterprise is one in which planned principal operations have not commenced or if its operations have commenced, there has been no significant revenues there from. The Company is currently in the testing and development stages, and intends to validate its technology and then and manufacture and sell the technology. At January 31, 2014, the Company has not yet commenced its principal operations.
14
Results of Operations
The following summary of the Companys results of operations should be read in conjunction with the Companys audited consolidated financial statements for the years ended January 31, 2014 and 2013, which are included herein. The financial information provided includes the continuing operations of the Company and the discontinued operations of its former wholly owned subsidiaries, Pristine Solutions, Ltd. and Eaton Scientific Systems, Ltd.
.
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| Cumulative from |
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|
|
| December 8, 2009 |
| |||||||||
| For the three months ended |
| For the six months ended |
| (Inception) to |
| |||||||||
| July 31, 2014 |
| July 31, 2013 |
| July 31, 2014 |
| July 31, 2013 |
| July 31, 2014 |
| |||||
Continuing operations: |
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|
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|
|
|
|
|
|
|
|
|
|
|
|
Revenue | $ | |
| $ | |
| $ | |
| $ | |
| $ | |
|
Cost of revenues | $ | |
| $ | |
| $ | |
| $ | |
| $ | |
|
Gross profit | $ | |
| $ | |
| $ | |
| $ | |
| $ | |
|
General and administrative expenses | $ | 16,390 |
| $ | 18,000 |
| $ | 40,607 |
| $ | 36,000 |
| $ | 159,770 |
|
Operating (loss) | $ | (16,390 | ) | $ | (18,000 | ) | $ | (40,607 | ) | $ | (36,000 | ) | $ | (159,770 | ) |
Interest expense | $ | (4,605 | ) | $ | (3,781 | ) | $ | (8,737 | ) | $ | (7,439 | ) | $ | (24,988 | ) |
Amortization of stock options/compensation | $ | (211,250 | ) | $ | (222,083 | ) | $ | (582,500 | ) | $ | (444,166 | ) | $ | (2,888,750 | ) |
Foreign currency exchange | $ | |
| $ | |
| $ | |
| $ | |
| $ | 783 |
|
Impairment loss | $ | |
| $ | |
| $ | |
| $ | |
| $ | (5,265,000 | ) |
Net loss - continuing operations | $ | (232,245 | ) | $ | (243,864 | ) | $ | (631,844 | ) | $ | (487,605 | ) | $ | (8,337,725 | ) |
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue | $ | |
| $ | |
| $ | |
| $ | |
| $ | 4,243 |
|
Cost of sales | $ | |
| $ | |
| $ | |
| $ | |
| $ | (1,428 | ) |
Gross profit (loss) | $ | |
| $ | |
| $ | |
| $ | |
| $ |
|
|
General and administrative expenses | $ | |
| $ | (103,388 | ) | $ | |
| $ | (207,541 | ) | $ | (703,178 | ) |
Operating (loss) | $ | |
| $ | |
| $ | |
| $ | |
| $ |
|
|
Foreign currency exchange | $ | |
| $ | |
| $ | |
| $ | |
| $ | 1,716 |
|
Impairment loss | $ | |
| $ | |
| $ | |
| $ | |
| $ | (34,433 | ) |
Interest expense | $ | |
| $ | (6,198 | ) | $ | |
| $ | (13,171 | ) | $ | (37,374 | ) |
Depreciation and amortization | $ | |
| $ | (1,538 | ) | $ | |
| $ | (2,537 | ) | $ | (9,757 | ) |
Net loss-discontinued operations | $ | |
| $ | (111,124 | ) | $ | |
| $ | (223,249 | ) | $ | (780,211 | ) |
Net loss | $ | (232,245 | ) | $ | (354,988 | ) | $ | (631,844 | ) | $ | (710,854 | ) | $ | (9,117,936 | ) |
Revenue
As a development stage company, the Company has not yet launched its major business activity, which is automotive spark plug manufacturing and distribution.
Cost of sales
As a development stage company, the Company has not yet launched its major business activity, which is automotive spark plug manufacturing and distribution.
General and Administrative Expenses
| For the three months ended |
| For the six months ended |
|
|
|
|
|
| |||||||||
Continuing operations | July 31, |
| July 31, |
| Variances |
| ||||||||||||
| 2014 |
| 2013 |
| 2014 |
| 2013 |
| 3-month |
| 6-month |
| ||||||
Legal, accounting and audit fees | $ | 7,236 |
| $ | |
| $ | 16,792 |
| $ | |
| $ | 7,236 |
| $ | 16,792 |
|
Management and consulting fees |
| 4,500 |
|
| 18,000 |
|
| 9,000 |
|
| 36,000 |
|
| (13,500 | ) |
| (27,000 | ) |
Transfer agent and filing fees |
| 1,971 |
|
| |
|
| 3,470 |
|
| |
|
| 1,971 |
|
| 3,470 |
|
Research and development |
| |
|
| |
|
| 4,000 |
|
| |
|
| |
|
| 4,000 |
|
Office supplies and other general expenses |
| 2,683 |
|
| |
|
| 7,345 |
|
| |
|
| 2,683 |
|
| 7,345 |
|
Total general and administrative expenses | $ | 16,390 |
| $ | 18,000 |
| $ | 40,607 |
| $ | 36,000 |
| $ | (1,610 | ) | $ | 4,067 |
|
General and administrative expenses from continuing operations in the amount of $16,390 for the three months ended July 31, 2014, were comprised of $7,236 of legal and accounting fees, $4,500 of management and consulting fees, $1,971 in transfer agent and filing fees, and $2,683 of office, overhead and other general and administrative expenses.
General and administrative expenses from continuing operations in the amount of $18,000 for the three months ended July 31, 2013, were comprised of $18,000 in management and consulting fees.
General and administrative expenses from continuing operations for the three months ended July 31, 2014, were $16,390 as compared to $18,000 for the three months ended July 31, 2013, which resulted in an decrease in general and administrative expenses for the current period of $1,610.
General and administrative expenses from continuing operations in the amount of $40,607 for the six months ended July 31, 2014, were comprised of $16,792 of legal and accounting fees, $9,000 of management and consulting fees, $3,470 in transfer agent and filing fees, $4,000 in research and development, and $7,345 of office, overhead and other general and administrative expenses.
General and administrative expenses from continuing operations in the amount of $36,000 for the six months ended July 31, 2013, were comprised of $36,000 in management and consulting fees.
General and administrative expenses from continuing operations for the six months ended July 31, 2014, were $40,607 as compared to $36,000 for the six months ended July 31, 2013, which resulted in an increase in general and administrative expenses for the current period of $4,067.
Significant changes in general and administrative expenses from continuing operations for the three months ended July 31, 2014, compared to the three months ended July 31, 2013, resulting in a decrease of $1,610, were attributable to the following items:
15
·
an increase in legal, accounting and audit fees of $7,236, due to legal fees of $3,692 in connection with recent equity transactions, accounting fees of $1,544 for quarterly accounting and tax preparation fees, and auditor fees of $2,000 for quarterly review services, compared to no expense for the same period in the prior year;
·
a decrease in management fees of $13,500 due to a reduction in Executive compensation;
·
an increase in transfer agent and filing fees of $1,971, due to costs incurred in connection with recent equity transactions during the current period of $1,971, compared to none in for the same period in the prior year;
·
an increase in office supplies and other general expenses of $2,683, resulting from $1,281 in rent expense and $1,402 in other general office expenses incurred during the current period, compared to none for the same period in the prior year.
Significant changes in general and administrative expenses from continuing operations for the six months ended July 31, 2014, compared to the six months ended July 31, 2013, resulting in an increase of $40,607, were attributable to the following items:
·
an increase in legal, accounting and audit fees of $16,792, due to legal fees of $9,448 in connection with the change in control and other recent equity transactions, accounting fees of $3,344 for quarterly accounting and tax preparation fees, and auditor fees of $4,000 for quarterly review services, compared to no expense for the same period in the prior year;
·
a decrease in management fees of $27,000 due to a reduction in Executive compensation;
·
an increase in transfer agent and filing fees of $3,470, due to $3,470 incurred in connection with recent equity transactions during the current period, compared to none in for the same period in the prior year;
·
an increase in research and development of $4,000 due to product development costs incurred during the current period, compared to none for the same period in the prior year; and
·
an increase in office supplies and other general expenses of $7,345, resulting from $2,562 in rent expense, $2,689 in travel expenses and $2,094 in other general office expenses incurred during the current period, compared to none for the same period in the prior year.
General and administrative expenses from continuing operations for the three months and six months ended July 31, 2014, were incurred primarily for the purpose of advancing the Company closer to its goal of the manufacturing and distribution of its high-efficiency spark plug product.
Net Loss
During the six months ended July 31, 2014, the Company incurred a net loss from continuing operations of $631,844 compared with a net loss of $487,605 for the six months ended July 31, 2013. The increase in net loss of $144,239 is attributable to an increase in general and administrative expenses of $4,607; an increase in interest expense of $1,298, resulting from an increase in notes payable; and an increase in amortization of deferred stock option compensation of $138,334.
Liquidity and Capital Resources
Working Capital | July 31, 2014 |
| January 31, 2014 |
| Increase (Decrease) |
| |||
|
|
|
|
|
|
|
|
|
|
Current assets | $ | 2,149 |
| $ | 5,684 |
| $ | (3,535 | ) |
Current liabilities |
| 351,587 |
|
| 96,106 |
|
| 255,481 |
|
Working capital (deficit) | $ | (349,438 | ) | $ | (90,422 | ) | $ | (259,016 | ) |
As at July 31, 2014, the Company had cash from continuing operations in the amount of $2,149, compared to $5,684 as of January 31, 2014.
The Company had a working capital deficit of $349,438 as of July 31, 2014, compared to a working capital deficit of $90,422 as of January 31, 2014. The increase in working capital of $259,016 is primarily attributable to a decrease in cash of $3,535; a decrease in accounts payable and accrued expenses of $7,069; related party loans reclassified from long-term liabilities of $22,000; and convertible notes payable reclassified from long-term liabilities of $240,550.
Cash Flows | For the six months ended |
|
|
| |||||
| July 31, 2014 |
| July 31, 2013 |
| Increase (Decrease) |
| |||
Continuing operations: |
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities | $ | (56,413 | ) | $ | (4,000 | ) | $ | (52,413 | ) |
Net cash provided by investing activities |
| |
|
| |
|
| |
|
Net cash provided by financing activities |
| 52,878 |
|
| |
|
| 52,878 |
|
Net cash provided by (used in) continuing operations |
| (3,535 | ) |
| (4,000 | ) |
| 465 |
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations: |
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
| |
|
| (97,650 | ) |
| 97,650 |
|
Net cash provided by (used in) investing activities |
| |
|
| (21,837 | ) |
| 21,837 |
|
Net cash provided by (used in) financing activities |
| |
|
| (133,455 | ) |
| 133,455 |
|
Net cash provided by (used in) discontinued operations |
| |
|
| (252,942 | ) |
| 252,942 |
|
Net increase (decrease) in cash | $ | (3,535 | ) | $ | (256,942 | ) | $ | 253,407 |
|
Cash flows from operating activities-continuing operations
During the six months ended July 31, 2014, the Company used $56,413 of cash flow for operating activities, compared with $4,000 for the six months ended July 31, 2013. The increase in cash used in operating activities of $52,413 is primarily attributable to an increase in the net loss from operations of $144,239, an increase on deferred stock compensation amortization of $138,334, a decrease in accounts payable and accrued expenses of $15,922, and a decrease in related party payables of $30,586.
Cash flows from investing activities-continuing operations
During the six months ended July 31, 2014 and 2013, the Company used no funds for investing activities.
Cash flows from financing activities-continuing operations
During the six months ended July 31, 2014, the Company was provided with $52,878 of cash flow from financing activities compared with none during the six months ended July 31, 2013. The increase in cash flows provided from financing activities of $52,878 is attributable to an increase in related party loans of $52,578, and subscriptions received of $300.
16
Future Financings
The Company will require additional financing in order to proceed with its plan of operations, including approximately $1,000,000 over the next 12 months to pay for its ongoing expenses. These cash requirements include working capital, general and administrative expenses, the development of the Companys product line, and the pursuit of acquisitions. These cash requirements are in excess of the Companys current cash and working capital resources. Accordingly, the Company will require additional financing in order to continue operations and to repay its liabilities. There is no assurance that any party will advance additional funds to the Company in order to enable the Company to sustain its plan of operations or to repay its liabilities. There can be no assurance that raising the desired amount of financing will enable the Company successfully to complete its plan of operations.
The Company anticipates continuing to rely on equity sales of its common stock in order to continue to fund its business operations. Issuances of additional shares will result in dilution to the Companys existing stockholders. There is no assurance that the Company will achieve any additional sales of its equity securities or arrange for debt or other financing to fund its planned business activities.
Contractual Obligations
As a smaller reporting company, the Company is not required to provide tabular disclosure obligations.
Going Concern
These 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 as a going concern in the normal course of business. The Company has not generated significant revenues to date and has never paid any dividends and is unlikely to pay dividends or generate significant earnings in the immediate or foreseeable future. As at July 31, 2014, the Company had a working capital deficit from continuing operations of $349,438, and an accumulated deficit of $8,524,385. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability to raise equity or debt financing, and the attainment of profitable operations from the Company's future business. These factors raise substantial doubt regarding the Companys ability to continue as a going concern.
Off-Balance Sheet Arrangements
The Company has no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Companys financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Critical Accounting Policies
The discussion and analysis of the Companys financial condition and results of operations are based upon the Companys consolidated audited financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by managements application of accounting policies. The Company believes that understanding the basis and nature of the estimates and assumptions involved with the following aspects of the Companys financial statements is critical to an understanding of its consolidated financial statements.
Development Stage Company
The Company is a development stage company as defined by ASC 915-10-05, Development Stage Entity. The Company is still devoting substantially all of its efforts on establishing the business, and its planned principal operations have not commenced. All losses accumulated, since inception, have been considered as part of the Companys development stage activities.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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. The Company regularly evaluates estimates and assumptions, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Companys estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Revenue Recognition
The Company recognizes revenue in accordance with ASC 605, Revenue Recognition. Revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service has been provided, and collectability is reasonably assured. As of July 31, 2014, no revenue has been recognized, as the Company has not commenced operations.
Stock-Based Compensation
The Company records stock-based compensation in accordance with ASC 718, Share-Based Payments, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.
Impairment of Long-Lived Assets
The Companys long-lived assets, including intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the historical-cost carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the asset by comparing the undiscounted future net cash flows expected to result from the asset to its carrying value. If the carrying value exceeds the undiscounted future net cash flows of the asset, an impairment loss is measured and recognized. An impairment loss is measured as the difference between the net book value and the fair value of the long-lived asset.
Due to the Companys recurring losses, the costs related to its patents were evaluated for impairment and it was determined that there were no sufficient estimated future cash flows for the recoverability of the asset. As a result, an impairment loss of $5,265,000 was recorded for the year ended January 31, 2014.
17
Recently Adopted Accounting Standards:
The Company evaluates the pronouncements of various authoritative accounting organizations, primarily the Financial Accounting Standards Board (FASB), the US Securities and Exchange Commission (SEC), and the Emerging Issues Task Force (EITF), to determine the impact of new pronouncements on US GAAP and the impact on the Company. The Company has recently adopted the following new accounting standards:
Adopted:
Effective January 2012, the Company adopted ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (ASU 2011-04). ASU 2011-04 represents the converged guidance of the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) on fair value measurement. A variety of measures are included in the update intended to either clarify existing fair value measurement requirements, change particular principles requirements for measuring fair value or for disclosing information about fair value measurements. For many of the requirements, the FASB does not intend to change the application of existing requirements under Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements. ASU 2011-04 was effective for interim and annual periods beginning after December 15, 2011. The adoption of this update did not have a material impact on the consolidated financial statements.
Effective January 2012, the Company adopted ASU No. 2011-05, Presentation of Comprehensive Income (ASU 2011-05). ASU 2011-05 is intended to increase the prominence of items reported in other comprehensive income and to facilitate convergence of accounting guidance in this area with that of the IASB. The amendments require that all non-owner changes in shareholders equity be presented in a single continuous statement of comprehensive income or in two separate but consecutive statements. In December 2011, the FASB issued ASU No. 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 (ASU 2011-12). ASU 2011-12 defers the provisions of ASU 2011-05 that require the presentation of reclassification adjustments on the face of both the statement of income and statement of other comprehensive income. Amendments under ASU 2011-05 that were not deferred under ASU 2011-12 will be applied retrospectively for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of this update did not have a material impact on the consolidated financial statements.
In April 2013, the FASB issued ASU No. 2013-07, Presentation of Financial Statements (Top 205): Liquidation Basis of Accounting. The objective of ASU No. 2013-07 is to clarify when an entity should apply the liquidation basis of accounting and to provide principles for the measurement of assets and liabilities under the liquidation basis of accounting, as well as any required disclosures. The amendments in this standard is effective prospectively for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. The Company is evaluating the effect, if any, the adoption of ASU No. 2013-07 may have on its consolidated financial statements.
Not Yet Adopted:
In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive (ASU 2013-02). This guidance is the culmination of the FASBs deliberation on reporting reclassification adjustments from accumulated other comprehensive income (AOCI). The amendments in ASU 2013-02 do not change the current requirements for reporting net income or other comprehensive income. However, the amendments require disclosure of amounts reclassified out of AOCI in its entirety, by component, on the face of the statement of operations or in the notes thereto. Amounts that are not required to be reclassified in their entirety to net income must be cross-referenced to other disclosures that provide additional detail. This standard is effective prospectively for annual and interim reporting periods beginning after December 15, 2012. The Company is evaluating the effect, if any, the adoption of ASU 2013-02 may have on its consolidated financial statements.
In July 2013, the FASB issued ASU No 2013-11, Presentation of an Unrecognized Tax Benefit When Net Operating Loss Carryforward Exists. The objective of ASU 2013-11 is to reduce diversity in practice by providing guidance on the presentation of unrecognized tax benefits, and will better reflect the manner in which an entity would settle at the reporting date any additional income taxes that would result from the disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist. The amendments in this Update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013, and interim reporting periods therein. Early adoption is permitted. The Company is evaluating the effect, if any, adoption of ASU No. 2013-11 will have on its consolidated financial statements.
Recently Issued Accounting Standards Updates:
There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries. None of the updates are expected to a have a material impact on the Company's consolidated financial position, results of operations or cash flows.
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
As a smaller reporting company, the Company is not required to provide the information required by this Item.
18
ITEM 4. | CONTROLS AND PROCEDURES |
Managements Report on Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Companys reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to the Companys management, including the Companys president, chief executive officer and chief financial officer to allow for timely decisions regarding required disclosure. In designing and evaluating the Companys disclosure controls and procedures, the Companys management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and the Companys management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As of July 31, 2014, the end of the Companys quarterly period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Companys president, chief executive officer and chief financial officer of the effectiveness of the design and operation of the Companys disclosure controls and procedures. Based on the foregoing, the Companys president, chief executive officer and chief financial officer concluded that the Companys disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.
Changes in Internal Control over Financial Reporting
There have been no changes in the Companys internal controls over financial reporting that occurred during the six months ended July 31, 2014, that have materially or are reasonably likely to materially affect, the Companys internal controls over financial reporting.
PART II
ITEM 1. | LEGAL PROCEEDINGS |
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. There are no proceedings in which its director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to its interest.
ITEM 1A. | RISK FACTORS |
The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item.
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Recent Sales of Unregistered Securities
On April 29, 2014, the Company received notice from the holder of a $3,450 Convertible Note Payable to convert 100% of the principal into the Companys common stock at the conversion rate of $0.003 per share. As a result, 1,150,000 unrestricted shares of the Companys common stock were issued to the note holder.
On June 27, 2014, the Company received notice from the holder of a $3,000 Convertible Note Payable to convert 100% of the principal into the Companys common stock at the conversion rate of $0.003 per share. As a result, 1,000,000 unrestricted shares of the Companys common stock were issued to the note holder.
On July 15, 2014, in accordance with his Employment Agreement, the Company issued 100,000 shares of restricted common stock to its President for cash in the amount of $100. As a result, additional paid in capital was reduced by $9,900.
Exemption From Registration. The shares of Common Stock referenced herein were issued in reliance upon an exemption from registration afforded either under Section 4(2) of the Securities Act for transactions by an issuer not involving a public offering, or Regulation D promulgated thereunder, or Regulation S for offers and sales of securities outside the U.S.
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
None.
ITEM 4. | MINE SAFETY STANDARDS |
Not applicable.
ITEM 5. | OTHER INFORMATION |
None.
19
ITEM 6. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES |
Exhibits required by Item 601 of Regulation S-B
*
Filed herewith.
**
Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.
20
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ECO SCIENCE SOLUTIONS, INC. |
|
|
|
|
Dated: September 15, 2014 | /s/ Michael J. Borkowski |
| Michael J. Borkowski |
| President, Chief Executive Officer, Chief Financial Officer and Director |
21
EXHIBIT 31.1
CERTIFICATION PURSUANT TO
18 U.S.C. ss 1350, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael J. Borkowski, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Eco Science Solutions, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
/s/ Michael J. Borkowski
Michael J. Borkowski
President and CEO
September 15, 2014
EXHIBIT 31.2
CERTIFICATION PURSUANT TO
18 U.S.C. ss 1350, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael J. Borkowski, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Eco Science Solutions, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
/s/ Michael J. Borkowski
Michael J. Borkowski
Chief Financial Officer
September 15, 2014
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael J. Borkowski, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
the Quarterly Report on Form 10-Q of Eco Science Solutions, Inc. for the period ended July 31, 2014 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Eco Science Solutions, Inc.
/s/ Michael J. Borkowski
Michael J. Borkowski
President and CEO
September 15, 2014
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Eco Science Solutions, Inc. and will be retained by Eco Science Solutions, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael J. Borkowski, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
the Quarterly Report on Form 10-Q of Eco Science Solutions, Inc. for the period ended July 31, 2014 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Eco Science Solutions, Inc.
/s/ Michael J. Borkowski
Michael J. Borkowski
Chief Financial Officer
September 15, 2014
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Eco Science Solutions, Inc. and will be retained by Eco Science Solutions, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Related Party Transactions: Accrued Interest (Details) (USD $)
|
6 Months Ended | 12 Months Ended |
---|---|---|
Jul. 31, 2014
|
Jan. 31, 2014
|
|
Details | ||
Related Party Transaction, Accrued Interest | $ 1,680 | $ 265 |
Warrants and Options: Schedule of Options Activity (Details) (Employee Stock Option, USD $)
|
Jul. 31, 2014
|
---|---|
Employee Stock Option
|
|
ESOP Options, Beginning | 6,500,000 |
ESOP Options, Beginning, Weighted Avg Exercise Price | $ 0.20 |
ESOP Options, Ending | 6,500,000 |
ESOP Options, Ending, Weighted Avg Exercise Price | $ 0.20 |
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