UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X]
QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2017
   
 
OR
   
[   ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 000-51213

ECOLOCAP SOLUTIONS INC.
(Exact name of registrant as specified in its charter)

NEVADA
(State or other jurisdiction of incorporation or organization)

20-0909393
(I.R.S. Employer Identification Number)

6240. Oakton Street
Morton Grove, IL   60053
 (Address of principal executive offices, including Zip Code)

312-585-6670
 (Registrant's telephone number, including area code)

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days.     YES [X]     NO [   ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (SS 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   YES [X]     NO [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of "large accelerated filer, "accelerated filer," "non-accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

 
Large Accelerated Filer
[   ]
 
Accelerated Filer
[   ]
 
Non-accelerated Filer
[   ]
 
Smaller Reporting Company
[X]
 
Emerging Growth Company
[   ]
     
 
(Do not check if smaller reporting company)
       

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES [   ]     NO [X]

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
The Issuer had 10,922,710,977 shares of Common Stock, par value $0.00001, outstanding as of December 5, 2017.
 
 


TABLE OF CONTENTS

 
Page
   
  3
     
Financial Statements.
3
     
   
Unaudited Consolidated Balance Sheets
3
   
Unaudited Consolidated Statements of Operations
4
   
Unaudited Consolidated Statements of Cash Flows
5
   
Notes to Consolidated Financial Statements (Unaudited)
6
     
Management's Discussion and Analysis of Financial Condition and Results of Operations.
12
     
Quantitative and Qualitative Disclosures About Market Risk.
14
     
Controls and Procedures.
14
     
  15
     
Legal Proceedings.
15
     
Risk Factors.
15
     
Exhibits.
16
     
17
   
18











PART I: FINANCIAL INFORMATION

ITEM 1.                      FINANCIAL STATEMENTS.

ECOLOCAP SOLUTIONS INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)


 
 
September 30,
2017
   
December 31,
2016
(Restated)
 
ASSETS 
           
             
CURRENT ASSETS: 
           
Cash 
 
$
9,008
   
$
698
 
Inventory
   
595,815
         
Prepaid expenses and sundry current assets
   
3,269
     
-
 
                 
TOTAL CURRENT ASSETS AND TOTAL ASSETS
 
$
608,092
   
$
698
 
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
                 
CURRENT LIABILITIES: 
               
Customer deposits
 
$
175,000
   
$
175,000
 
Convertible notes payable
   
896,666
     
1,040,838
 
Notes payable-related parties  
   
2,773,623
     
2,335,959
 
Long term debt
   
1,016
     
-
 
Derivative liabilities
   
1,842,555
     
10,174,203
 
Accrued expenses and sundry current liabilities - related parties
   
1,847,267
     
1,178,411
 
Accrued expenses and sundry current liabilities
   
1,132,457
     
1,113,887
 
 
               
TOTAL CURRENT LIABILITIES 
   
8,668,584
     
16,018,298
 
                 
Long term debt
   
73,984
     
-
 
                 
TOTAL LIABILITIES
   
8,742,568
     
16,018,298
 
                 
STOCKHOLDERS' DEFICIT
               
Preferred stock
100,000,000 shares authorized, par value $0.00001, 10,250,000 and 750,000 shares, respectively issued and outstanding
   
103
     
7
 
Common stock 
10,000,000,000 shares authorized, par value $0.00001, 8,737,765,985 and 3,249,327,026 shares, respectively issued and outstanding
   
87,377
     
32,493
 
Additional paid in capital 
   
57,138,928
     
55,983,849
 
Common stock to be issued
   
240,000
     
-
 
Accumulated deficit 
   
(67,877,322
)
   
(74,638,068
)
                 
TOTAL STOCKHOLDERS' DEFICIT-Ecolocap Solutions Inc.
   
(10,410,914
)
   
(18,621,719
)
                 
Non-controlling interest
   
2,276,438
     
2,604,119
 
                 
TOTAL STOCKHOLDERS' DEFICIT
   
(8,134,476
)
   
(16,017,600
)
                 
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT 
 
$
608,092
   
$
698
 

See Notes to Unaudited Financial Statements

ECOLOCAP SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)


   
For the Nine
Months ended
September 30,
2017
   
For the Nine
Months ended
September 30,
2016
   
For the Three
Months ended
September 30,
2017
   
For the Three
Months ended
September 30,
2016
 
                         
                         
COSTS AND EXPENSES: 
                       
 
   
-
     
-
     
-
     
-
 
Selling, general and administrative 
 
$
901,938
   
$
627,446
   
$
284,165
   
$
213,139
 
                                 
TOTAL OPERATING EXPENSES 
   
901,938
     
627,446
     
284,165
     
213,139
 
                                 
Loss from operations
   
(901,938
)
   
(627,446
)
   
(284,165
)
   
(213,139
)
                                 
OTHER INCOME (EXPENSES)
                               
Gain (loss) on derivative liabilities at market
   
7,724,510
     
(420,239
)
   
(374,653
)
   
70,826
 
Interest expense-related parties
   
(131,290
)
   
(91,378
)
   
(45,913
)
   
(32,121
)
Interest expense
   
(258,217
)
   
(141,374
)
   
(100,186
)
   
(42,417
)
                                 
TOTAL OTHER INCOME (EXPENSES)
   
7,335,003
     
(652,991
)
   
(520,752
)
   
(3,712
)
                                 
                                 
                                 
Net income (loss) before non-controlling interest
 
$
6,433,065
   
$
(1,280,437
)
 
$
(804,917
)
 
$
(216,851
)
                                 
Non-controlling interest
 
$
(327,681
)
 
$
(286,412
)
 
$
(100,685
)
 
$
(95,551
)
                                 
Ner income (loss) attributable to Ecolocap Solutions Inc
 
$
6,760,746
   
$
(994,025
)
 
$
(704,232
)
 
$
(121,300
)
                                 
                                 
                                 
Income (Loss) Per Common Share-basic and diluted 
 
$
0.00
   
$
(0.00
)
 
$
(0.00
)
 
$
(0.00
)
                                 
Average weighted Number of Shares-basic and diluted  
   
5,802,520,669
     
3,249,327,026
     
8,177,122,076
     
3,249,327,026
 













See Notes to Unaudited Financial Statements
ECOLOCAP SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)


 
 
For the Nine
Months ended
September 30,
2017
   
For the Nine
Months ended
September 30,
2016
 
Net income (loss) 
 
$
6,433,065
   
$
(1,280,437
)
 
               
Adjustment to reconcile net income (loss) to net cash provided by (used in) operating activities
               
Imputed interests of shareholders loans 
   
74,287
     
51,994
 
Stock base compensation
   
102,810
     
-
 
Non-cash interests in cash flows
   
33,865
     
-
 
(Gain) loss on derivatives liabilities at market
   
(7,724,510
)
   
420,239
 
Unpaid penalty interest added to debt principal
   
16,500
     
14,653
 
Closing fees added to debt principal
   
3,000
     
-
 
Changes in operating assets and liabilities: 
               
Inventory
   
(595,815
)
   
-
 
Prepaid expenses and sundry current assets 
   
(3,269
)
   
-
 
Stock subscription payable
   
240,000
     
-
 
Changes in operating assets and liabilities 
   
1,488,727
     
790,823
 
 
               
Net cash provided by (used in) operating activities 
 
$
68,660
   
$
(2,728
)
 
               
 
               
Financing activities 
               
Proceeds of loans payable
   
119,000
     
-
 
Payments of loans from shareholder 
   
(179,350
)
   
7,000
 
                 
Net cash (used in) provided by financing activities 
 
$
(60,350
)
 
$
7,000
 
                 
Change in cash 
   
8,310
     
4,272
 
 
               
Cash-beginning of period 
   
698
     
-
 
                 
Cash-end of period 
 
$
9,008
   
$
4,272
 
                 
Supplemental Disclosure of Cash Flow information
               
Non cash items:
               
Conversion of current liabilities, convertible notes payable, notes payable stockholders to common stock
 
$
347,959
   
$
-
 
Reclassification of derivative to APIC
 
$
685,003
   
$
-
 
Expenses paid by a related party on behalf of the Company
 
$
284,924
   
$
102,876
 
Non-cash additions of loans from shareholders
 
$
337,500
   
$
337,500
 








See Notes to Unaudited Financial Statements

ECOLOCAP SOLUTIONS INC.
NOTES TO FINANCIAL STATEMENTS
(unaudited)


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

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

M-Fuel

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

ECOS/BIO-ART

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

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies followed by the Company for interim reporting are consistent with those included in the Company's Annual Report on Form 10-K for the year ended December 31, 2016. There were no material changes to our significant accounting policies during the interim period ended September 30, 2017.

The Company's inventory consists of equipment purchased for resale and is valued at the lower of cost or net realizable value.  Cost is principally determined using the first in, first out method.

Reclassifications

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


NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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

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

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

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


NOTE 3 – ACCRUED EXPENSES AND SUNDRY CURRENT LIABILITIES

Accrued expenses consisted of the following at:

   
September 30
2017
   
December 31
2016
 
Accrued interest
 
$
574,280
   
$
545,378
 
Accrued interest-related parties
   
240,669
     
185,401
 
Accrued compensation-related parties
   
762,432
     
652,844
 
Accounts payable
   
240,000
     
240,000
 
Accrued operating expenses-related parties
   
844,166
     
340,166
 
Accrued operating expenses
   
318,177
     
328,509
 
   
$
2,979,724
   
$
2,292,298
 


NOTE 4 – CONVERTIBLE NOTES PAYABLE

Loans are convertible at amounts ranging from 40% to 60% of the market price of the common shares of the Company at the time of conversion and bear interest rates ranging from 8% to 22% per annum.  The amounts received during the nine months period ended September 30, 2017 and 2016 are $44,000 and $0 in new loans and $19,500 and $14,653 in non-cash borrowings related to the default on Tonaquint and GSM GSM loans, respectively. During the period ended September 30, 2017, the Company was in default on its convertible notes due to non-repayment of the outstanding balances.

The convertible feature of these loans, due to their potential settlement in an indeterminable number of shares of the Company's common stock has been identified as a derivative. The derivative component is fair valued at the date of issuance of the obligation and the amount is marked to market at each reporting period. All the convertible notes are in default as of September 30, 2017.

During the nine months period ended September 30, 2017 notes payable of $163,672 plus accrued interests of $178,876 were converted into 4,947,338,959 shares.

There were no conversions of convertible debts in 2016.

A summary of the amounts outstanding as of September 30, 2017 and December 31, 2016 are as follows:

   
Loans
2017
   
Debt discount
2017
   
Balance
September 30,
2017
   
Balance
December 31,
2016
 
                         
Tonaquint
 
$
532,179
   
$
44,000
   
$
488,179
   
$
585,846
 
Redwood Management, LLC
   
372,992
     
-
     
372,992
     
372,992
 
Proteus Capital
   
32,500
     
-
     
32,500
     
32,500
 
LG Capital
   
-
     
-
     
-
     
19,500
 
GSM Capital Group LLC
   
2,995
     
-
     
2,995
     
30,000
 
   
$
940,666
   
$
44,000
   
$
896,666
   
$
1, 040,838
 


NOTE 5 – NOTES PAYABLE – RELATED PARTIES

During the nine months period ended September 30, 2017, notes payable to stockholders increased by $262,090 of which $337,500 resulted from conversion of accrued salaries, net of $70,000 in payments made during the period to stockholders and $5,410 from conversions into shares. The additions are for accrual of unpaid salaries and not actual cash proceeds. The amount owed to stockholders at September 30, 2017 is $2,115,769. These loans are non-interest bearing but interest is being imputed at 5.00% per annum and are payable on demand. An interest amount of $74,287 has been imputed in 2017. During the nine months period ended September 30, 2017, total loans conversions of $5,410 were made into 541,100,000 shares and there were no conversions in the year ended December 31, 2016.

During the nine months period ended September 30, 2017, the Company received $284,924 and made payments of $109,350 to Hanscom K Inc. The amount owed to Hanscom K. Inc. at September 30, 2017 is $629,354. These loans are non-interest bearing and are payable on demand.

During the nine months period ended September 30, 2017, the Company did not receive any loans from RCO Group Inc. The amount owed to RCO Group Inc. at September 30, 2017 is $28,500. These loans bear interest at 8.00% per annum and are payable on demand.

A summary of the amounts outstanding as of September 30, 2017 and December 31, 2016 are as follows:

   
Balance
September 30, 2017
   
Balance
December 31, 2016
 
             
Stockholders
 
$
2,115,769
   
$
1,853,679
 
Hanscom K. Inc.
   
629,354
     
453,780
 
RCO Group Inc.
   
28,500
     
28,500
 
   
$
2,773,623
   
$
2,335,959
 


NOTE 6 – LONG TERM DEBT

Long term debt consists of

   
Balance
September 30, 2017
   
Balance
December 31, 2016
 
Note payable to a bank in monthly installments of approximately $2,491 inclusive of interest at 39.00% per annum.
 
$
75,000
   
$
-
 
                 
Less current portion
   
1,016
     
-
 
   
$
73,984
   
$
-
 

The above obligation is personally guaranteed by an officer of the Company.


Principal payments due on long-term debt as of September 30, 2017 for each of the next five fiscal years are:

Year
 
Amount
 
       
2018
 
$
1,016
 
2019
   
1,248
 
2020
   
1,832
 
2021
   
2,688
 
2022
   
3,946
 
Thereafter
   
64,270
 
         
   
$
75,000
 


NOTE 7 – DERIVATIVE LIABILITIES

During the nine months period ended September 30, 2017, the Company recorded various derivative liabilities associated with the convertible debts discussed in Note 4 and warrants. 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 each reporting period using the Black Scholes Method using a risk free rate ranging of 0.14%, volatility rates ranging between 361.00% and 477.00% and a forfeiture rate of 0.00%.  The derivative liability at September 30, 2017 and December 31, 2016 are as follows:

   
2017
   
2016
 
             
Tonaquint
 
$
856,641
   
$
4,799,461
 
Proteus Capital Group LLC
   
142,161
     
356,835
 
GSM Capital Group LLC
   
11,992
     
324,662
 
LG Capital
   
-
     
231,059
 
Redwood Management, LLC
   
727,848
     
3,682,835
 
Total
 
$
1,738,642
   
$
9,394,852
 

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 481.00% and a forfeiture rate of 0.00%. The derivative liability at September 30, 2017 and December 31, 2016 is as follows:

   
2017
   
2016
 
             
Lakeshore Recycling Systems LLC
 
$
103,913
   
$
779,351
 
                 
Total
 
$
103,913
   
$
779,351
 

The following table summarizes the derivative liabilities at September 30, 2017 and December 31, 2016;

   
2017
   
2016
 
             
Tonaquint
 
$
856,641
   
$
4,799,461
 
Proteus Capital Group LLC
   
142,161
     
356,835
 
GSM Capital Group LLC
   
11,992
     
324,662
 
LG Capital
   
-
     
231,059
 
Redwood Management, LLC
   
727,848
     
3,682,835
 
Lakeshore Recycling Systems LLC
   
103,913
     
779,351
 
Total
 
$
1,842,555
   
$
10,174,203
 

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

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 period ended September 30, 2017.

   
Level 1
   
Level 2
   
Level 3
   
Total
 
 
                       
Derivative Financial Instruments 
 
$
-
   
$
-
   
$
1,842,555
   
$
1,842,555
 

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
 

The following table summarizes the derivatives liability from January 1 st through September 30, 2017:

   
Derivative liabilities
 
       
Balance December 31, 2016
 
$
10,174,203
 
Addition of new derivative
   
44,000
 
Day one loss due to derivative
   
33,865
 
Settled upon conversion of debt
   
(685,003
)
Loss on change in fair value of the derivative
   
(7,724,510
)
Balance September 30, 2017
 
$
1,842,555
 


NOTE 8 – CAPITAL STOCK

The Company is authorized to issue 10,000,000,000 shares of common stock (par value $0.00001) of which 8,737,765,985 were issued and outstanding as of September 30, 2017 and 3,249,327,026 as of December 31, 2016.

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 $0.00001) of which 10,250,000 were issued and outstanding as of September 30, 2017 and 750,000 as of December 31, 2016, respectively. Each share of Series A Preferred Stock has 100,000 vote per share.


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 September 2017, the Company issued 9,250,000 preferred shares to related parties' stockholders. The fair value of the preferred shares issued was determined to be zero.

During the nine months period ended September 30, 2017, the following convertible debt owners converted loans plus accrued interests into common shares of the Company. There were no conversions of convertible debts into common shares of the Company during the year ended December 31, 2016.

   
Loans
converted
   
Interest
converted
   
Common shares
Of the Company
 
                   
Tonaquint (Note 4)
 
$
97,667
   
$
171,432
   
$
3,605,081,573
 
GSM Capital Group LLC (Note 4)
   
46,505
     
-
     
1,145,140,658
 
LG Capital (Note 4)
   
19,500
     
7,444
     
197,116,728
 
Stockholders (Note 5)
   
5,410
     
-
     
541,100,000
 
Total
 
$
169,082
   
$
178,876
   
$
5,488,438,959
 

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, 2016
   
519,567,390
 
Warrants granted – Lakeshore Recycling Systems, LLC due to increase in outstanding shares
   
877,601,391
 
Balance September 30, 2017
   
1,397,168,781
 

As of September 31, 2017, the warrants have an intrinsic value of $0.


NOTE 9 – COMMITMENTS

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


NOTE 10 – SUBSEQUENT EVENTS

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

   
Loans
converted
   
Interest
converted
   
Common shares
Of the Company
 
                   
Tonaquint
 
$
-
   
$
73,899
   
$
1,231,656,499
 
GSM Capital Group LLC
   
2,995
     
20,838
     
953,288,093
 
Total
 
$
2,995
   
$
94,737
   
$
2,184,944,592
 



ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Operations

The following discussion of the financial condition and results of our operations should be read in conjunction with the unaudited consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q for the period ended September 30, 2017 (this "Report"). This Report contains certain forward-looking statements and our future operating results could differ materially from those discussed herein. Certain statements contained in this Report, including, without limitation, statements containing the words "believes", "anticipates," "expects" and the like, constitute "forward-looking statements". Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. We disclaim any obligation to update any such factors or to announce publicly the results of any revisions of the forward-looking statements contained or incorporated by reference herein to reflect future events or developments.

Business Plan

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

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

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

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

Results of Operations

For the Three and Nine Months Periods ended September 30, 2017

Overview

 We incurred net loss of $804,917 and net income $6,433,065 for the three and nine months periods ended September 30, 2017 as compared to net loss of $216,851 and net loss $1,280,437 for the comparable periods of 2016. There has been an increase of $ 274,492 in selling, general and administrative expenses, an increase in the gain on derivatives of $8,144,749 and an increase in interest expense of $ 156,755 mainly attributable to the interest expense resulting from derivative liabilities.

Sales

For the three and nine months periods ended September 30, 2017 and 2016 we had no sales.



Total Cost and Expenses

For the three and nine months periods ended September 30, 2017, we incurred Total Costs and Expenses of $284,165 and $901,938, an increase of 33% from the three months period from the same period of 2016 and an increase of 44% for the nine months period from the same period of 2016.

Selling, General and Administrative

For the three and nine months periods ended September 30, 2017, we incurred selling, general and administration expenses of $ 284,165 and $901,938, an increase of 33% from the three months period from the same period of 2016 and an increase of 44% for the nine months period from the same period of 2016. The increase resulted from the consulting and professional fees.

Interest

We calculate interest in accordance with the respective note payable. For the three and nine months periods ended September 30, 2017, we incurred a charge of $ 146,099 and $389,507 including related party interest. This compared to $74,538 and $232,752 for the same periods of the previous year. The interests increase is attributable to interest rate increase due to default on convertible debts.

The interest expenses on related parties increased by $39,912 due to increases in debt balance and the interest expenses on convertible loans increased by $ 116,843 because of interest rate and loans balance increases due to default on GSM loans so globally the interest expense increased by $156,755.

Liquidity and Capital Resources

At September 30, 2017, we had $9,008 in cash, as opposed to $698 in cash at December 31, 2016. Total cash generated by operations for the nine months period ended September 30, 2017 was $68,660. As a result of certain measures implemented to reduce corporate overhead, management estimates that cash requirements through the end of the fiscal year ended December 31, 2017 will be between $1.0 million to $3.5 million. As of the date of this Report, we do not have available resources sufficient to cover the expected cash requirements through the end of 2017 or the balance of the year. As a result, there is substantial doubt that we can continue as an ongoing business without obtaining additional financing. Management's plans for maintaining our operations and continued existence include selling additional equity securities and borrowing additional funds to pay operational expenses. There is no assurance we will be able to generate sufficient cash from operations, sell additional shares of Common Stock or borrow additional funds. Our inability to obtain additional cash could have a material adverse effect on our financial position, results of operations and our ability to continue its existence. If our losses continue and we are unable to secure additional financing, we may ultimately be required to seek protection from creditors under applicable bankruptcy laws.

We had total assets of $608,092 as of September 30, 2017 . This was a change of $607,394 as compared to total assets of $698 as of December 31, 2016 .

We had total current liabilities of $8,668,584 as of September 30, 2017. This was a decrease of $7,349,714, or 46%, as compared to current liabilities of $ 16,018,298 as of December 31, 2016. The net decrease was attributable to a decrease in derivative liabilities due to the gain on derivatives at market value and decrease in notes payable.


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

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

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

Contractual Obligations

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

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

Off-Balance Sheet Arrangements

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


ITEM 3.                       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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


ITEM 4.                       EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.

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

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

Changes in Internal Control over Financial Reporting

We have not made a change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended September 30, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


PART II OTHER INFORMATION

ITEM 1.                       LEGAL PROCEEDINGS.

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


ITEM 1A.                  RISK FACTORS.

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




 
ITEM 6.                       EXHIBITS.

Exhibit
 
Incorporated by reference
Filed
Number
Document Description
Form
Date
Number
herewith
Articles of Incorporation, as amended.
SB-2
5/28/04
3.1
 
           
Bylaws.
SB-2
5/28/04
3.2
 
           
Certificate of Amendment to Articles of Incorporation.
10-QSB
12/30/05
3.3
 
           
Bylaws, as amended on March 17, 2006.
10-KSB
4/13/06
3.4
 
           
2006 Equity Incentive Plan.
10-KSB
4/13/06
10.39
 
           
Agreement with United Best Technology Limited.
8-K
12/24/08
10.7
 
           
Escrow Agreement with United Best Technology Limited.
8-K
12/24/08
10.8
 
           
Standstill Agreement.
8-K
3/23/12
10.1
 
           
Second Standstill Agreement.
8-K
3/23/12
10.2
 
           
Code of Ethics.
10-KSB
3/31/08
14.1
 
           
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
X
           
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
X
           
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Chief Executive Officer.
     
X
           
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Chief Financial Officer.
     
X
           
Audit Committee Charter.
10-KSB
3/31/08
99.1
 
           
Executive Committee Charter.
10-KSB
3/31/08
99.2
 
           
Nominating and Corporate Governance Committee Charter.
10-KSB
3/31/08
99.3
 
           
Stock Option Plan.
10-KSB
3/31/08
99.4
 
           
101.INS
XBRL Instance Document.
     
X
           
101.SCH
XBRL Taxonomy Extension – Schema.
     
X
           
101.CAL
XBRL Taxonomy Extension – Calculations.
     
X
           
101.DEF
XBRL Taxonomy Extension – Definitions.
     
X
           
101.LAB
XBRL Taxonomy Extension – Labels.
     
X
           
101.PRE
XBRL Taxonomy Extension – Presentation.
     
X


 


 


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Registrant and in the capacities on this 22 nd day of December 2017.

 
ECOLOCAP SOLUTIONS INC.
     
 
BY:
JAMES KWAK
   
James Kwak
   
Principal Executive Officer and a member of the Board of Directors
     
 
BY:
MICHEL ST-PIERRE
   
Michel St-Pierre
   
Principal Financial Officer and Principal Accounting Officer






 
 
EXHIBIT INDEX

Exhibit
 
Incorporated by reference
Filed
Number
Document Description
Form
Date
Number
herewith
Articles of Incorporation, as amended.
SB-2
5/28/04
3.1
 
           
Bylaws.
SB-2
5/28/04
3.2
 
           
Certificate of Amendment to Articles of Incorporation.
10-QSB
12/30/05
3.3
 
           
Bylaws, as amended on March 17, 2006.
10-KSB
4/13/06
3.4
 
           
2006 Equity Incentive Plan.
10-KSB
4/13/06
10.39
 
           
Agreement with United Best Technology Limited.
8-K
12/24/08
10.7
 
           
Escrow Agreement with United Best Technology Limited.
8-K
12/24/08
10.8
 
           
Standstill Agreement.
8-K
3/23/12
10.1
 
           
Second Standstill Agreement.
8-K
3/23/12
10.2
 
           
Code of Ethics.
10-KSB
3/31/08
14.1
 
           
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
X
           
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
X
           
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Chief Executive Officer.
     
X
           
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Chief Financial Officer.
     
X
           
Audit Committee Charter.
10-KSB
3/31/08
99.1
 
           
Executive Committee Charter.
10-KSB
3/31/08
99.2
 
           
Nominating and Corporate Governance Committee Charter.
10-KSB
3/31/08
99.3
 
           
Stock Option Plan.
10-KSB
3/31/08
99.4
 
           
101.INS
XBRL Instance Document.
     
X
           
101.SCH
XBRL Taxonomy Extension – Schema.
     
X
           
101.CAL
XBRL Taxonomy Extension – Calculations.
     
X
           
101.DEF
XBRL Taxonomy Extension – Definitions.
     
X
           
101.LAB
XBRL Taxonomy Extension – Labels.
     
X
           
101.PRE
XBRL Taxonomy Extension – Presentation.
     
X


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