CONSOLIDATED STATEMENTS OF OPERATIONS
For the year ended December 31, 2016
|
|
2016
(As Previously Reported)
|
|
|
Adjustment
|
|
|
2016
(As Restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
$
|
860,256
|
|
|
$
|
155,871
|
|
|
$
|
1,016,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL OPERATING EXPENSES
|
|
|
860,256
|
|
|
|
155,871
|
|
|
|
1,016,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSES)
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on derivatives liabilities at market
|
|
|
(8,019,275
|
)
|
|
|
(623,480
|
)
|
|
|
(8,642,755
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL OTHER (EXPENSES)
|
|
|
(8,414,287
|
)
|
|
|
(623,480
|
)
|
|
|
(9,037,767
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Loss) before non-controlling interest
|
|
$
|
(9,274,543
|
)
|
|
$
|
(779,351
|
)
|
|
$
|
(10,053,894
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Loss) attributable to Ecolocap Solutions Inc
|
|
$
|
(8,851,672
|
)
|
|
$
|
(779,351
|
)
|
|
$
|
(9,631,023
|
)
|
NOTE 5
–
ACCRUED EXPENSES AND SUNDRY CURRENT LIABILITIES
Accrued expenses and sundry current liabilities consisted of the following at December 31:
|
|
2016
|
|
|
2015
|
|
Accrued interest
|
|
$
|
545,378
|
|
|
$
|
290,114
|
|
Accrued interest-related parties
|
|
|
185,401
|
|
|
|
131,543
|
|
Accrued compensation-related parties
|
|
|
652,844
|
|
|
|
502,844
|
|
Accounts payable
|
|
|
240,000
|
|
|
|
240,000
|
|
Accrued operating expenses-related parties
|
|
|
340,166
|
|
|
|
250,166
|
|
Accrued operating expenses
|
|
|
328,509
|
|
|
|
306,812
|
|
|
|
$
|
2,292,298
|
|
|
$
|
1,721,479
|
|
NOTE 6
– CONVERTIBLE
NOTES PAYABLE
During the years ended December 31, 2016 and 2015, the Company is in default of its convertible notes due to non-repayment which triggered an increase of the outstanding balances. Loans are convertible at amounts of 40% to 60% of the market price of the common shares of the Company at the time of conversion and bear interest rates ranging between 8% and 22% per annum. The increases during the years ended December 31, 2016 and 2015 of $14,653 and $18,500 in non-cash borrowings are related to the default penalty on Tonaquint loans, respectively.
The convertible feature of these loans, due to their potential settlement in an indeterminable number of shares of the Company's common stock has been identified as a derivative. The derivative component is fair valued at the date of issuance of the obligation and this amount is marked to market at each reporting period. All of the convertible notes are in default as of December 31, 2016.
There were no conversions of convertible debts in 2016. During the year ended December 31, 2015 note payable of $1,973 plus accrued interests of $0 were converted into 393,000 shares.
A summary of the amounts outstanding as of December 31, 2016 and 2015 is as follows:
|
|
Balance
December 31, 2016
|
|
|
Balance
December 31, 2015
|
|
|
|
|
|
|
|
|
Tonaquint
|
|
$
|
585,846
|
|
|
$
|
571,193
|
|
Redwood Management, LLC
|
|
|
372,992
|
|
|
|
372,992
|
|
Proteus Capital Corp.
|
|
|
32,500
|
|
|
|
32,500
|
|
LG Capital
|
|
|
19,500
|
|
|
|
19,500
|
|
GSM Capital Group LLC
|
|
|
30,000
|
|
|
|
30,000
|
|
|
|
$
|
1,040,838
|
|
|
$
|
1,026,185
|
|
NOTE 7 – NOTES PAYABLE – RELATED PARTIES
During the year ended December 31, 2016 notes payable to related parties increased by $457,000, of which $450,000 resulted from conversion of accrued salaries, net of payments made during the year to notes payable and $7,000 from cash proceeds. The amount owed to stockholders at December 31, 2016 is $1,853,679. These loans are non interest bearing but interest is being imputed at 5.00% per annum and are payable on demand. Amounts of $71,201 and 66,280 has been imputed in 2016 and 2015 respectively. During the years ended December 31, 2016 and 2015, total loan conversions of $0 and $274,500 were made into 0 and 2,745,000,000 shares respectively.
The amount owed to Hanscom K. Inc. at December 31, 2016 is $453,780. During 2016, the Company received loans of $142,293 from Hanscom K. Inc. These loans are non-interest bearing and are payable on demand. Hanscom K Inc. is acting as a consultant for the Company.
During 2016, the Company did not receive any loans from RCO Group Inc. The amount owed to RCO Group Inc. at December 31, 2016 is $28,500. These loans are non-interest bearing and are payable on demand. These loans bear interest at 8.00% per annum and are payable on demand. RCO Group Inc. is acting as a financial consultant for the Company.
A summary of the amounts outstanding as of December 31, 2016 and 2015 is as follows:
|
|
Balance
December 31, 2016
|
|
|
Balance
December 31, 2015
|
|
|
|
|
|
|
|
|
Stockholders
|
|
$
|
1,853,679
|
|
|
$
|
1,396,679
|
|
Hanscom K. Inc.
|
|
|
453,780
|
|
|
|
311,487
|
|
RCO Group Inc.
|
|
|
28,500
|
|
|
|
28,500
|
|
|
|
$
|
2,335,959
|
|
|
$
|
1,736,666
|
|
NOTE 8 – DERIVATIVE LIABILITIES
During the years ended December 31, 2016 and 2015, the Company recorded various derivative liabilities associated with the convertible debts discussed in Notes 6 and warrants discussed in Note 4.
The Company has determined that the features associated with the embedded conversion option on the notes should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions. This also tainted the Company's existing warrants thus requiring derivative accounting treatment for these instruments.
The Company computes the value of the derivative liability at the issuance of the related obligation and at each reporting period using the Black Scholes Method which includes the following assumptions: a risk free rate of 0.14%, volatility rates ranging between 401.00% and 1,319.00% and a forfeiture rate of 0.00%. The derivative liability at December 31, 2016 and 2015 is as follows:
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Tonaquint
|
|
$
|
4,799,461
|
|
|
$
|
815,979
|
|
Proteus Capital Group LLC
|
|
|
356,835
|
|
|
|
72,221
|
|
GSM Capital Group LLC
|
|
|
324,662
|
|
|
|
66,162
|
|
LG Capital
|
|
|
231,059
|
|
|
|
48,221
|
|
Redwood Management, LLC
|
|
|
3,682,835
|
|
|
|
372,994
|
|
Total
|
|
$
|
9,394,852
|
|
|
$
|
1,375,577
|
|
For the warrants discussed above, the Company computes the value of the derivative liability at the issuance of the related obligation and at each reporting period using the Black Scholes Method which includes the following assumptions: a risk free rate of 0.14%, volatility rates of 495.00% and a forfeiture rate of 0.00%. The derivative liability at December 31, 2016 and 2015 is as follows:
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Lakeshore Recycling Systems LLC
|
|
$
|
779,351
|
|
|
$
|
-
|
|
Total
|
|
$
|
779,351
|
|
|
$
|
-
|
|
The following table summarizes the derivative liabilities at the end of the years ended December 31, 2016 and 2015;
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Tonaquint
|
|
$
|
4,799,461
|
|
|
$
|
815,979
|
|
Proteus Capital Group LLC
|
|
|
356,835
|
|
|
|
72,221
|
|
GSM Capital Group LLC
|
|
|
324,662
|
|
|
|
66,162
|
|
LG Capital
|
|
|
231,059
|
|
|
|
48,221
|
|
Redwood Management, LLC
|
|
|
3,682,835
|
|
|
|
372,994
|
|
Lakeshore Recycling Systems LLC
|
|
|
779,351
|
|
|
|
-
|
|
Total
|
|
$
|
10,174,203
|
|
|
$
|
1,375,577
|
|
Financial assets and liabilities recorded at fair value in our consolidated balance sheets are categorized based upon a fair value hierarchy established by GAAP, which prioritizes the inputs used to measure fair value into the following levels:
Fair Value of Financial Instruments
Level 1— Quoted market prices in active markets for identical assets or liabilities at the measurement date.
Level 2— Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable and can be corroborated by observable market data.
Level 3— Inputs reflecting management's best estimates and assumptions of what market participants would use in pricing assets or liabilities at the measurement date. The inputs are unobservable in the market and significant to the valuation of the instruments.
A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Financial assets and liabilities measured at fair value on a recurring basis are summarized below for the year ended December 31, 2016.
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Financial Instruments
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
10,174,203
|
|
|
$
|
10,174,203
|
|
Financial assets and liabilities measured at fair value on a recurring basis are summarized below for the year ended December 31, 2015.
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Financial Instruments
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,375,577
|
|
|
$
|
1,375,577
|
|
The following table summarizes the change in the fair value of the derivative liability during the year ended December 31, 2016.
|
|
Derivative liabilities
|
|
|
|
|
|
Balance December 31, 2015
|
|
$
|
1,375,577
|
|
Derivative liability related to issuance of stock warrants
|
|
|
155,871
|
|
Loss on change in fair value of the derivative
|
|
|
8,642,755
|
|
Balance December 31, 2016
|
|
$
|
10,174,203
|
|
NOTE 9 – CAPITAL STOCK EQUITY
Common and preferred stock
The Company is authorized to issue 10,000,000,000 shares of common stock (par value $0.00001) of which 3,249,327,026 were issued and outstanding as of December 31, 2016 and 2015.
In October 2017, the Company amended its Articles of Incorporation to increase its authorized capital to 25,000,000,000 shares of common stock (par value $0.00001).
The Company is authorized to issue 100,000,000 shares of preferred stock (par value $0.0001) of which 750,000 were issued and outstanding as of December 31, 2016. Each share of Series A Preferred Stock has voting rights at 100,000 votes per share.
In December 2013, the Company issued 750,000 preferred shares to certain officers and stockholders of the Company. The fair value of the preferred shares issued was determined to be zero.
There were no share issuances during the year ended December 31, 2016.
During 2015, the following convertible debt owners converted loans plus accrued interests into common shares of the Company:
|
|
Loans
converted
|
|
|
Interests
converted
|
|
|
Common shares
of the Company
|
|
|
|
|
|
|
|
|
|
|
|
Tonaquint (Note 6)
|
|
$
|
1,973
|
|
|
$
|
-
|
|
|
|
393,000
|
|
Accrued compensation
|
|
|
50,000
|
|
|
|
-
|
|
|
|
500,000,000
|
|
Stockholders (Note 7)
|
|
|
274,500
|
|
|
|
-
|
|
|
|
2,745,000,000
|
|
Total
|
|
$
|
326,473
|
|
|
$
|
-
|
|
|
|
3,245,393,000
|
|
-24-
Warrants
On December 19, 2016, the Company issued three warrants to Lakeshore Recycling Systems, LLC (LRS). The first warrant allows LRS to purchase up to five and one third percent of issued and outstanding shares of common stock of the Company at the time of exercise of the warrant at a price of $0.0003. The second warrant allows LRS to purchase up to five and one third percent of issued and outstanding shares of common stock of the Company at the time of exercise of the warrant at a price of $0.0025. The third warrant allows LRS to purchase up to five and one third percent of issued and outstanding shares of common stock of the Company at the time of exercise of the warrant at a price of $0.005. The exercise time of the warrants is the period between March 15, 2017 and December 15, 2026.
|
|
Warrants
|
|
Balance December 31, 2015
|
|
|
-
|
|
Warrants granted – Lakeshore Recycling Systems, LLC
|
|
|
519,567,390
|
|
Balance December 31, 2016
|
|
|
519,567,390
|
|
As of December 31, 2016, the warrants have an intrinsic value of $207,827.
NOTE 10 – INCOME TAXES
The Company recognizes deferred income tax liabilities and assets for the expected future tax consequences of events that have been recognized in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial statement and income tax purposes under enacted tax laws and rates.
The tax effects of temporary differences that give rise to deferred tax assets are presented below:
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
Statutory tax rate
|
|
|
34.0
|
%
|
|
|
34.0
|
%
|
Net operating loss carryforwards
|
|
|
(34.0
|
%)
|
|
|
(34.0
|
%)
|
Income tax provision
|
|
|
0
|
%
|
|
|
0
|
%
|
Components of the Company's deferred tax liabilities and assets are as follows:
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
Deferred tax asset
|
|
$
|
14,857,426
|
|
|
$
|
11,439,102
|
|
Valuation allowance
|
|
|
(14,857,426
|
)
|
|
|
(11,439,102
|
)
|
Deferred tax asset net of valuation allowance
|
|
$
|
-
|
|
|
$
|
-
|
|
Changes in valuation allowance
|
|
$
|
0
|
|
|
$
|
0
|
|
The income tax provision (benefit) consists of the following:
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
Federal:
|
|
|
|
|
|
|
Current
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred
|
|
|
3,418,324
|
|
|
|
380,573
|
|
|
|
|
|
|
|
|
|
|
State and local:
|
|
|
|
|
|
|
|
|
Current
|
|
|
-
|
|
|
|
-
|
|
Deferred
|
|
|
-
|
|
|
|
-
|
|
|
|
|
3,418,324
|
|
|
|
380,573
|
|
Change in valuation allowance
|
|
|
(3,418,324
|
)
|
|
|
(380,573
|
)
|
Income tax provision (benefit)
|
|
$
|
-
|
|
|
$
|
-
|
|
As of December 31, 2016, the Company had net operating loss carry forwards of approximately $
14,857,426
which are being carried forward for subsequent years. Such net operating loss carry forwards expire as follows:
|
2024-2028
|
|
|
$
|
3,401,000
|
|
|
2029-2031
|
|
|
$
|
5,717,000
|
|
|
2032-2036
|
|
|
$
|
5,739,426
|
|
The Company's federal and state income tax returns for the tax years 2013 and forward remain subject to examination.
NOTE 11
–
COMMITMENTS AND CONTINGENCIES
The Company was party to a lease for its Barrington office, at a minimum annual rent of approximately $24,000 per year. The Barrington lease expired in May 2013 and the Company remains in these premises on a month to month basis. The rent expense charged to operations for the year ended December 31, 2016 and 2015 was $26,012 and $24,012, respectively.
NOTE 12
–
RELATED PARTY TRANSACTIONS
During the year ended December 31, 2016 notes payable to stockholders increased by $457,000, of which $450,000 resulted from conversion of accrued salaries, net of payments made during the year to notes payable and $7,000 from cash proceeds. The amount owed to stockholders at December 31, 2016 is $1,853,679. These loans are non interest bearing but interest is being imputed at 5.00% per annum and are payable on demand.
For the years ended December 31, 2016 and 2015, interest accrued to related parties totaled $125,059 and $111,498.
During 2016, the Company received loans of $142,293 from Hanscom K. Inc. These loans are non-interest bearing and are payable on demand. The amount owed to Hanscom K. Inc. at December 31, 2016 is $453,780. Hanscom K Inc. is acting as a consultant for the Company.
During the year ended December 31, 2015, the Company settled loans with stockholders and accrued compensation totaling $324,500 through issuance of 3,245,000,000 shares. The Company recognized settlement expense for the loss incurred of $19,145,500.
On December 19, 2016,
the Company
entered into a Limited Liability Company Agreement (the "Agreement") with Lakeshore Recycling Systems LLC located in Morton Grove, Illinois ("Lakeshore"), creating ECOS BIO-ART LLC, a Delaware Limited Liability Company ("LLC"). ECOS BIO-ART LLC will sell biofermentation systems. The biofermentation systems turn organic waste into a byproduct which can be processed into a high quality organic fertilizer.
On the same date,
the Company
entered into a Supply Agreement (the "Supply Agreement") with LLC wherein we agreed to manufacture and supply equipment and products to LLC for resale or lease to Lakeshore and LLC's customers.
NOTE 13 – SUBSEQUENT EVENTS
The following convertible debt owners converted loans plus accrued interests into common shares of the Company:
|
|
Loans
|
|
|
Interest
|
|
|
Common shares
|
|
|
|
converted
|
|
|
converted
|
|
|
of the Company
|
|
|
|
|
|
|
|
|
|
|
|
Tonaquint (Note 6)
|
|
$
|
96,259
|
|
|
$
|
246,740
|
|
|
|
4,836,738,072
|
|
GSM Capital Group LLC (Note 6)
|
|
|
31,785
|
|
|
|
25,599
|
|
|
|
1,580,281,452
|
|
LG Capital (Note 6)
|
|
|
19,500
|
|
|
|
7,444
|
|
|
|
197,116,728
|
|
Total
|
|
$
|
147,544
|
|
|
$
|
279,782
|
|
|
|
6,614,136,252
|
|
In February 2017, the Company and Hanscom K Inc. jointly and severally entered into a loan agreement for an amount of $485,000 which is subject to annual interest of 16% and matures on November 1, 2017.
During May 2017, an aggregate of $108,220 in loans from stockholders were converted into 541,100,000 shares of the common stock.
In August 2017, the Company issued 250,000 preferred shares to an officer. The fair value of the preferred shares issued was determined to be zero.
In October 2017, the Company increased its authorized capital to 25,000,000,000 shares of common stock (par value $0.00001).