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 September
30, 2015
o TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
For the transition period from _____________
to _______________
Commission File Number: 000-53875
Eco
Building Products, Inc.
(Exact name of registrant as specified in
its charter)
Colorado |
20-8677788 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
909 West Vista Way
Vista, California 92083
(Address of principal executive offices)(Zip
Code)
(760) 732-5826
(Registrant’s telephone number, including
area code)
____________________________________________________________
(Former name, former address and former
fiscal year, if changed since last report)
Indicate
by check mark whether the issuer (1) 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 past 90 days. x
Yes o 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 (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). x
Yes o 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; as defined within Rule 12b-2 of the Exchange
Act.
o
Large accelerated filer o
Accelerated filer o
Non-accelerated filer x
Smaller reporting company
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o
Yes x No
The number of shares outstanding of each of the issuer's classes
of common equity as of November 23, 2015: 2,448,797,627 shares of common stock.
Table of Contents
PART I - FINANCIAL INFORMATION
Item
1. Financial Statements.
ECO BUILDING PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| |
September 30 | | |
June 30 | |
| |
2015 | | |
2015 | |
ASSETS | |
(unaudited) | | |
| |
CURRENT ASSETS | |
| | |
| |
Cash | |
$ | 188,846 | | |
$ | 40,306 | |
Accounts receivable, net of allowance for doubtful accounts of $1,607 | |
| | | |
| | |
and $1,607, respectively | |
| 78,137 | | |
| 14,042 | |
Inventories, net | |
| 133,613 | | |
| 171,631 | |
Prepaid expenses | |
| 3,000 | | |
| 3,000 | |
Other current assets | |
| 43,888 | | |
| 58,089 | |
Total current assets | |
| 447,484 | | |
| 287,068 | |
| |
| | | |
| | |
PROPERTY AND EQUIPMENT, net | |
| 732,560 | | |
| 592,679 | |
| |
| | | |
| | |
TOTAL ASSETS | |
$ | 1,180,044 | | |
$ | 879,747 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS' DEFICIT | |
| | | |
| | |
CURRENT LIABILITIES | |
| | | |
| | |
Accounts payable | |
$ | 1,436,494 | | |
$ | 1,256,160 | |
Payroll and taxes payable | |
| 1,563,257 | | |
| 1,571,786 | |
Accrued interest | |
| 330,047 | | |
| 237,907 | |
Other payables and accrued expenses | |
| 146,041 | | |
| 167,565 | |
Derivative Liability | |
| 20,989,224 | | |
| 14,198,848 | |
Convertible notes payable, net of debt discount | |
| 985,841 | | |
| 759,956 | |
Current maturities of notes payable | |
| 27,064 | | |
| 23,916 | |
Loans payable - other | |
| 1,185,335 | | |
| 718,245 | |
Loans payable - related parties | |
| 122,000 | | |
| 165,000 | |
Total current liabilities | |
| 26,785,303 | | |
| 19,099,383 | |
| |
| | | |
| | |
LONG TERM LIABILITIES | |
| | | |
| | |
Notes payable, less current maturities | |
| 60,262 | | |
| 69,778 | |
Total long term liabilities | |
| 60,262 | | |
| 69,778 | |
| |
| | | |
| | |
TOTAL LIABILITIES | |
$ | 26,845,565 | | |
$ | 19,169,161 | |
| |
| | | |
| | |
LIABILITIES RELATED TO DISCONTINUED OPERATIONS | |
| 1,148,229 | | |
| 1,148,229 | |
| |
| | | |
| | |
COMMITMENTS AND CONTINGENCIES | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
STOCKHOLDERS' DEFICIT | |
| | | |
| | |
Preferred stock, Series A, $0.001 par value, 30,000 shares authorized, | |
| | | |
| | |
-0- shares issued and outstanding at September 30, 2015 and June 30, 2015 | |
$ | - | | |
$ | - | |
Preferred stock, Series B, $0.001 par value, 9,250 shares authorized, | |
| | | |
| | |
-0- shares issued and outstanding at September 30, 2015 and June 30, 2015 | |
| - | | |
| - | |
Preferred stock, Series C, $0.001 par value, 120,000 shares authorized, | |
| | | |
| | |
101,889 and 104,440 shares issued and outstanding at September 30, 2015 | |
| | | |
| | |
and June 30, 2015, respectively | |
| 102 | | |
| 104 | |
Preferred stock, Series D, $0.001 par value, 20,000 shares authorized, | |
| | | |
| | |
14,134 and 9,979 shares issued and outstanding at September 30, 2015 | |
| 14 | | |
| 10 | |
and June 30, 2015, respectively | |
| | | |
| | |
Common stock, $0.001 par value, 10,000,000,000 shares authorized, | |
| | | |
| | |
1,652,857,629 and 608,622,815 shares issued and 1,651,424,582 and | |
| | | |
| | |
607,184,768 outstanding at September 30, 2015 and June 30, 2015, respectively | |
| 1,652,858 | | |
| 608,623 | |
Treasury Stock | |
| (1,434 | ) | |
| (1,434 | ) |
Additional paid-in capital | |
| 54,388,459 | | |
| 54,831,568 | |
Accumulated deficit | |
| (82,853,747 | ) | |
| (74,876,514 | ) |
Total stockholders' deficit | |
| (26,813,748 | ) | |
| (19,437,643 | ) |
| |
| | | |
| | |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | |
$ | 1,180,044 | | |
$ | 879,750 | |
See accompanying notes to condensed consolidated financial statements
ECO BUILDING PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
| |
Three Months Ended September 30 | |
| |
| | |
| |
| |
2015 | | |
2014 | |
| |
| | |
| |
REVENUE | |
$ | 275,751 | | |
$ | 803,759 | |
| |
| | | |
| | |
COST OF SALES | |
| 379,591 | | |
| 981,597 | |
| |
| | | |
| | |
GROSS LOSS | |
| (103,840 | ) | |
| (177,838 | ) |
| |
| | | |
| | |
OPERATING EXPENSES | |
| | | |
| | |
Research and development | |
| 79,973 | | |
| 34,198 | |
Marketing | |
| 31,924 | | |
| 29,724 | |
Compensation and related expenses | |
| 110,361 | | |
| 543,669 | |
Rent - facilities | |
| 20,763 | | |
| 46,707 | |
Professional and consulting fees | |
| 129,575 | | |
| 184,531 | |
Other general and administrative expenses | |
| 148,256 | | |
| 112,047 | |
| |
| | | |
| | |
Total operating expenses | |
| 520,851 | | |
| 950,876 | |
| |
| | | |
| | |
LOSS FROM OPERATIONS | |
| (624,691 | ) | |
| (1,128,714 | ) |
| |
| | | |
| | |
OTHER INCOME (EXPENSE) | |
| | | |
| | |
Interest expense | |
| (434,091 | ) | |
| (1,026,458 | ) |
Gain (loss) on derivative liability | |
| (6,634,847 | ) | |
| 5,062,206 | |
Gain (loss) on settlement of debt | |
| - | | |
| 70,985 | |
Loss on extinguishment of debt | |
| - | | |
| (243,496 | ) |
Derivative expense | |
| (283,603 | ) | |
| (2,056,916 | ) |
| |
| | | |
| | |
Total other income | |
| (7,352,541 | ) | |
| 1,806,321 | |
| |
| | | |
| | |
NET INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES | |
| (7,977,233 | ) | |
| 677,607 | |
| |
| | | |
| | |
NET LOSS FROM DISCONTINUED OPERATIONS | |
| - | | |
| (145,547 | ) |
| |
| | | |
| | |
NET INCOME (LOSS) | |
$ | (7,977,233 | ) | |
$ | 532,060 | |
| |
| | | |
| | |
| |
| | | |
| | |
NET INCOME (LOSS) PER COMMON SHARE, FROM CONTINUING OPERATIONS - Basic & Diluted | |
$ | (0.01 | ) | |
$ | 0.00 | ) |
NET INCOME (LOSS) PER COMMON SHARE, FROM DISCONTINUED OPERATIONS - Basic & Diluted | |
$ | (0.00 | ) | |
$ | 0.00 | |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | |
| | | |
| | |
Basic - | |
| 938,360,716 | | |
| 179,258,644 | |
Diluted - | |
| 938,360,716 | | |
| 1,716,166,839 | |
See accompanying notes to condensed consolidated financial statements
ECO BUILDING PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
| |
Three Months Ended September 30, | |
Cash flows from operating activities | |
2015 | | |
2014 | |
Net Income (Loss) | |
$ | (7,977,233 | ) | |
| 532,060 | |
Adjustments
to reconcile net income (loss) to net cash used
by operating activities: | |
| | | |
| | |
Depreciation and amortization expense | |
| 52,679 | | |
| 42,305 | |
Financing Costs | |
| 34,943 | | |
| 26,008 | |
Amortization of debt discount & deferred financing costs | |
| 271,689 | | |
| 570,306 | |
Initial interest expense on value of derivative (excess) | |
| - | | |
| 439,248 | |
Derivative expense | |
| 283,603 | | |
| 2,056,916 | |
Stock Based Compensation | |
| - | | |
| 27,292 | |
Common Stock issuance for interest and OID | |
| 11,750 | | |
| - | |
Common Stock issuance for services | |
| - | | |
| - | |
Preferred shares issuance for services | |
| - | | |
| - | |
Loss on derivative liability fair value adjustment | |
| 6,634,847 | | |
| (5,062,206 | ) |
Loss on extinguishment of Convertible Notes and Accounts Payable | |
| - | | |
| 243,496 | |
Gain on settlement of notes payable | |
| - | | |
| (70,985 | ) |
Expense paid on behalf of the Company | |
| - | | |
| 511,223 | |
Assignment of accounts receivable to note payable holder | |
| - | | |
| (257,908 | ) |
Changes in assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| (64,095 | ) | |
| (161,931 | ) |
Inventory | |
| 38,018 | | |
| 146,010 | |
Prepaid expenses | |
| (2,150 | ) | |
| - | |
Accounts payable | |
| 180,334 | | |
| (55,512 | ) |
Payroll and taxes payable | |
| (8,531 | ) | |
| (15,246 | ) |
Other payable and accrued expenses | |
| (21,524 | ) | |
| (30,028 | ) |
Accrued interest | |
| 92,140 | | |
| 18,522 | |
Net cash from continuing operations | |
| (473,530 | ) | |
| (1,040,430 | ) |
Net cash from discontinued operations | |
| - | | |
| - | |
Net cash from operating activities | |
| (473,530 | ) | |
| - | |
| |
| | | |
| | |
Cash flows from investing activities | |
| | | |
| | |
Purchase of property and equipment | |
| (176,209 | ) | |
| (4,349 | ) |
Notes receivable payments | |
| - | | |
| - | |
Net cash used by investing activities | |
| (176,209 | ) | |
| (4,349 | ) |
| |
| | | |
| | |
Cash flows from financing activities | |
| | | |
| | |
Payments on related party notes | |
| (43,000 | ) | |
| (52,977 | ) |
Proceeds from issuances of series C convertible preferred stock | |
| - | | |
| 900,000 | |
Proceeds from issuances of series D convertible preferred stock | |
| 415,500 | | |
| - | |
Proceeds notes payable | |
| 542,500 | | |
| - | |
Payments on convertible notes payable - non-related parties | |
| - | | |
| (45,855 | ) |
Payments on notes payable | |
| (110,353 | ) | |
| - | |
Payments on notes payable - vehicles loan | |
| (6,368 | ) | |
| (3,534 | ) |
Net cash provided by financing activities | |
| 798,279 | | |
| 797,634 | |
| |
| | | |
| | |
Net change in cash and cash equivalent | |
| 148,540 | | |
| (247,145 | ) |
Cash and cash equivalent at the beginning of year | |
| 40,306 | | |
| 375,066 | |
| |
| | | |
| | |
Cash and cash equivalent at the end of year | |
$ | 188,846 | | |
| 127,921 | |
| |
| | | |
| | |
Supplemental disclosures of cash flow Information: | |
| | | |
| | |
Cash Paid for Interest | |
$ | 15,000 | | |
| - | |
| |
| | | |
| | |
Supplemental disclosure of non-cash investing and financing activities: | |
| | | |
| | |
Common shares issued for conversion of notes payable | |
$ | 200,759 | | |
| 168,024 | |
Preferred shares issued for extinguishment of convertible notes payable & A/P | |
$ | - | | |
| 2,199,315 | |
Shares issued for conversion of Pref C convertible preferred stock | |
$ | 1,372,050 | | |
| 1,064,676 | |
Convertible notes issued for assumption of notes payable | |
$ | - | | |
| 410,000 | |
Declared dividends | |
$ | - | | |
| 25,851 | |
Purchase of property & equipment with loans payable | |
$ | - | | |
| 105,284 | |
Debt Discount on convertible notes | |
$ | - | | |
| 696,085 | |
Reclassification of Notes Payable - Related Party to Notes Payable | |
$ | 1,299,690 | | |
| - | |
Reclassification of Related Party Debt Discount to Debt Discount | |
$ | 230,905 | | |
| - | |
See accompanying notes to condensed consolidated financial statements
1. Organization and Basis of Presentation
Basis of Presentation
The accompanying
condensed consolidated financial statements as of September 30, 2015, and for the three months ended September 30, 2015 and 2014
have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission
(“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations.
However, the Company believes that the disclosures are adequate to make the information presented not misleading. These condensed
consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto,
included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2015. In the opinion of management,
all adjustments (primarily consisting of normal recurring adjustments) considered necessary for a fair statement have been included.
The condensed
consolidated balance sheet at September 30, 2015 has been derived from the unaudited consolidated financial statements as of that
date but does not include all of the information and footnotes included in the Company’s Annual Report on Form 10-K
for the year ended June 30, 2015. The results of operations for the three months ended September 30, 2015 are not necessarily indicative
of the operating results to be expected for the full fiscal year or any future periods.
Going Concern
The Company’s financial statements
are prepared using the accrual method of accounting in accordance with accounting principles generally accepted in the United
States of America and have been prepared on a going concern basis, which contemplates the realization of assets and the settlement
of liabilities in the normal course of business. To date the Company has recorded an accumulated deficit of $82,853,747 in recurring
losses from operations and significant cash used in operating activities over the last two years, and is dependent upon its ability
to obtain future financing and successful operations.
Our continuation
as a going concern is dependent upon obtaining the additional working capital necessary to sustain our operations. Our future is
dependent upon our ability to obtain financing and upon future profitable operations. The Company estimates the current operational
expenses of approximately three hundred thousand dollars a month is required to continue to operate. This is achieved either through
profit from sales; or by management seeking additional financing through the sale of its common stock, and/or through private placements.
The minimum operational expenses must be met in order to relive the threat of the company’s ability to continue as a going
concern. There is no assurance that our current operations will be profitable or that we will raise sufficient funds to continue
operating. The Company continues to trim overhead expenses to meet revenues. 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 we cannot continue in existence. These factors raise substantial doubt about the Company’s
ability to continue as a going concern.
2.
Summary of Significant Accounting Policies
Loss Per
Share
Basic
net loss per share is determined by dividing net loss by the weighted average number of common shares outstanding during the period.
Diluted net loss per share is determined by dividing net loss by the weighted average number of common shares used in the basic
loss per share calculation plus the number of common shares that would be issued assuming conversion of all potentially dilutive
securities outstanding under the treasury stock method. Potential common shares at September 30, 2015 from preferred
C and D shares convertible into 95.6 billion shares of common stock and convertible notes convertible into 8.6 billion shares of
common stock (September 30, 2014 –1.5 billion and 35,800, respectively). Accordingly, total
common share equivalents of 105.2 billion were
excluded in the computation of diluted net loss per share for the three months ended September 30, 2015, because the effect would
be anti-dilutive.
Use of Estimates
The preparation
of financial statements in conformity with accounting principles generally accepted in the United States of America requires management
to make estimates and assumptions that affects 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. Actual results could differ from those estimates.
Recent Accounting Pronouncements
Management has determined that no new
accounting pronouncements during the period that would affect the condensed consolidated financial statements.
3.
Balance Sheet Details
As of September
30, 2015, inventories consisted of the following:
Chemicals | |
$ | 101,804 | |
Lumber | |
$ | 31,809 | |
| |
$ | 133,613 | |
All of the Company’s inventories
are pledged as collateral for the Company’s Senior Secured Notes (see Note 4). In addition, inventory is considered finished
goods as the Company sells and markets the chemical and treatment of lumber. The chemicals and lumber include a $47,264 reserve
for obsolete inventory.
Property and Equipment
Property and equipment is stated at cost. Property
and equipment-related expenditures for items with useful lives exceeding one year and major renewals and improvements are recorded
as assets, while replacements and maintenance and repairs that do not improve or extend the lives of the respective assets are
expensed. At the time property and equipment are retired or otherwise disposed of, the asset and related accumulated
depreciation accounts are relieved of the applicable amounts. Gains or losses from retirements or sales are credited
or charged to income. Depreciation expense is recorded on a straight-line basis over the estimated useful lives of the
assets, ranging from (3) to seven (7) years. Leasehold improvements are depreciated over their useful life or the term
of the related lease, whichever is shorter. Depreciation expense is not recorded on idle property and equipment until
such time as it is placed into service. During the period, the Company purchased property and equipment of $176,210. Depreciation
expense for the three months ending September 30, 2015 was $36,329.
Accrued Liabilities
As of September 30, 2015, the Company owed
$888,145 in past due payroll taxes and accrued penalties. The Company has made an arrangement with the IRS for monthly payments
for a $740,000 portion of the liability. However, the Company is in default with this agreement. These amounts are recorded within
payroll and taxes payable on the accompanying consolidated balance sheet. Also at June 30, 2015, the Company owed $21,397 in past
due sales tax in which it has filed the appropriate reports and is making periodic payments.
Derivative Liabilities
During the three
months ended September 30, 2015, the Company issued convertible preferred stock that can be converted to common stock in connection
with raising equity and debt financing. As of September 30, 2015, the Company’s number of potential common shares plus the
number of actual common shares outstanding (“Committed Shares”) exceeded the number of common shares authorized to
issue in accordance with ASC 815-40-19 “Contracts in Entity’s Own Equity”. The number of outstanding common shares
plus the potential common share liability has exceeded the amount of authorized shares, therefore the Company has to employ ASC
815-40-19 (“ASC 815”) to value common share equivalents potentially issuable to settle conversions of convertible notes,
convertible preferred shares and exercise of warrants and options.
The Company values
its derivative financial instruments, consisting primarily of embedded conversion features for its stock options, warrants, convertible
debt, and convertible preferred stock at issuance at fair value and revalues its derivative financial instruments at the end of
each reporting period or in the case of any conversion or modification of terms, at the date of any such modification or conversion.
Any change in fair value is charged to earnings of the period where the derivative financial instrument is modified or converted.
The fair values of the embedded conversion features for the stock options, warrants, convertible debt, and convertible preferred
stock were determined using the Black-Scholes option pricing model.
The ranges of
inputs (or assumptions) the Company used to value the derivative liabilities at respective issuances, conversion or exercise dates,
and at period end during the period ended September 30, 2015 were as follows:
(1) dividend yield of 0% |
(2) expected daily volatility of 15.77% to 34.93% |
(3) risk-free interest rate of 0.21% 1.10% |
(4) expected life of 7.5 months to 3 years, and |
(5) estimated fair value of the Company’s common stock of $0.0002 to $0.0021 to per share. |
For the three
months ended September 30, 2015, the Company issued an aggregate of 4,155 convertible preferred D series shares with a stated value
of $100 per share as further described below in Note 7 for cash proceeds of $415,500 and recorded additional derivative liabilities
of $699,103 for the conversion features included therein. The Preferred D shares are convertible into the Company’s common
shares, at the holder’s option, at conversion prices equal to 60% of the lowest VWAP closing price for the previous 30 days.
For all convertible
notes described in the following paragraphs and for the options, warrants, and convertible preferred Series C and Series D shares
described in Note 7, the fair value of the resulting derivative liability was $20,989,224 and $14,198,848 as of September 30, 2015
and June 30, 2015 and, respectively.
A reconciliation
of the derivative liabilities from June 30, 2015 to September 30, 2015 is:
| |
Derivative Liabilities | |
| |
| |
Balance as of June 30, 2015 | |
| 14,198,848 | |
Additions related to embedded conversion features Preferred Series D issued | |
| 699,103 | |
Conversion of convertible debt and Preferred Series C to common stock | |
| (543,574 | ) |
Loss on increase in value of derivative liabilities | |
| 6,634,847 | |
Balance as of September 30, 2015 | |
$ | 20,989,224 | |
4.
Notes Payable
The following table summarizes the
notes payable as of September 30 2015.
| |
As of September 30, 2015 | |
Description | |
Short term | | |
Long term | |
| |
| | | |
| | |
| |
| | | |
| -- | |
Convertible notes | |
| 1,014,975 | | |
| -- | |
Less discount to notes payable | |
| (29,134 | ) | |
| -- | |
Convertible notes, net | |
| 985,841 | | |
| -- | |
| |
| | | |
| -- | |
| |
| | | |
| | |
| |
| | | |
| | |
Auto notes payable | |
| 27,064 | | |
| 60,262 | |
Loans payable – related party | |
| 122,000 | | |
| -- | |
Loans payable – other | |
| 1,185,335 | | |
| -- | |
| |
| | | |
| | |
| |
$ | 2,320,240 | | |
$ | 60,262 | |
Convertible Notes Payable
Inventory
Note Payable - $833,333
On September 16,
2014, the Company entered into a Securities Purchase Agreement with Dominion Capital, LLC, whereby Dominion agreed to fund the
Company with an aggregate of up to $750,000 in Subscription Amount corresponding to an aggregate of up to $833,333 in the form
of a 10% Original Issue Discount Senior Secured Convertible Promissory Note due September 16, 2015 and a Common Stock Purchase
Warrant for up to 20,000,000 shares. This funding will be used exclusively to purchase lumber and chemicals and is to be dispersed
from an escrow account. On September 29, 2014, Dominion transferred and assigned the Note and the Warrant to M2B Funding Corporation.
The Note has a fixed conversion price of $0.20 subject to certain adjustments. The Company is scheduled to repay the Note in monthly
installments, the final payment was due on October 16, 2015. The Company is in default on this note. The Company plans on using
the receivables from the sale of lumber and chemicals to comply with the terms of the repayment schedule. In the event of default,
the Note is subject to an increase in the interest rate to eighteen percent (18%) per annum. In accordance with the Agreement,
the Company issued a Common stock Purchase Warrant, allowing M2B Funding Corporation the right to purchase up to 20,000,000 shares
of Common Stock on September 16, 2015 and expiring on September 16, 2019. The Company purchased all of the 20,000,000 available
warrants under this agreement. The exercise price per share of the Common Stock under this Warrant is $0.02 subject to certain
adjustments. The Warrant may be exercised in whole or in part, at such time by means of a cashless exercise (see Note 7). The Common
Shares cannot be sold and or assigned for a period of one year from the original Warrant issue date. The Company initially recorded
discounts totaling $1,001,326 representing the fair value of the warrants issued. During the three months ended September 30, 2015
the Company amortized the remaining discount balance of $230,905. During the three months ended September 30, 2015 this investor
converted $26,304 into 59,767,042 shares of common stock. The balance of this note at September 30, 2015 is $954,475, inclusive
of original issue discount of $76,515. Accrued interest at September 30, 2015 is $193,554.
Loans Payable – Other
Note Payable
- $100,000
On November 12,
2014, the Company entered into, with a private investor, a Promissory Note for $100,000, with an original issue discount of $20,000,
for net proceeds to the Company of $80,000 for the purpose of funding operations and for general working capital. In
addition the Company issued 12,500,000 restricted common shares. On May 14, 2015, the holder converted $20,000 of this note into
10,000,000 shares of common stock. The conversion represented a substantial modification of the note’s original terms and
as a result the Company recognized a loss of $47,000. The note was in default on May 15, 2015. Default provisions included additional
interest at 18%. During the three months ended September 30, 2015 this investor converted $19,500 into 60,000,000 shares of common
stock. The Company recorded amortization of discounts totaling $40,784 during the three months ended September 30, 2015 and the
discount balance is $29,134 at September 30, 2015. The balance of this note at September 30, 2015 is $60,500 plus accrued interest
of $4,967.
Auto Loan
The Company entered
in an auto loan agreement on July 21, 2014 to purchase a vehicle. The principal amount of the loan is $83,821 and the interest
rate 5.49%. The loan is due on November 13, 2019. The Company is currently paying auto payments of $1,671 per month. Future short
term minimum payments due total $27,064 and future long term minimum payments total $60,262 for fiscal years 2016 through 2020.
Secured
Promissory Note - $44,500
At
June 30, 2012, the Company was indebted for $44,500 for amounts received in prior years for operating expenses in exchange for
a secured promissory note from a third party entered into during 2010. This amount was due on demand and non-interest bearing.
No payments were made on this note during the three months ending September 30, 2015, leaving a balance due of $44,500 at September
30, 2015.
Inventory
Note Payable – up to $1,200,000
On
July 18, 2014, the Company signed a Secured Revolving Promissory Note for up to One Million Two Hundred Thousand Dollars ($1,200,000)
with an investor to facilitate purchase of inventory for orders from the Company’s material customer. The note is secured
by the inventory. Repayment of the note is facilitated by the assignment of the accounts receivable directly from the Company’s
material customer to the investor. The initial term of the note is for six months with an option to extend for an additional six
month period. The note will bear an 18% interest rate per annum with a maximum default interest of 24% per annum. Within three
(3) Business Days after the date of this Note, the Company shall deliver to Payee a Warrant, in a form acceptable to Payee, exercisable
for 900,000 shares of the Company’s Common Stock at a price per share equal to the closing price of the Common Stock on the
trading day prior to the date of such Warrant. Upon receipt of such Warrant, Payee shall execute a 12-month lock-up agreement in
customary form and reasonably acceptable to Payee; currently no warrant or lock-up agreements have been issued or executed. The
Company made no additional borrowings or payments on this note during the three months ended September 30, 2015. The
balance of the note as of September 30, 2015 is $ 183,456 plus accrued default interest of $26,794. This note has not been renewed
at the six month anniversary. No payments have been made after September 30, 2015.
Lease in
Default - $151,275
Effective April
1, 2015 and up through September 30, 2015, the Company has incurred $151,275 in a default on their facilities lease. The default
rate on the lease is 10%. No repayments have been made during the three months from June 30, 2015 to September 30, 2015, leaving
a balance of $151,275 due at September 30, 2015 plus accrued default interest of $3,813.
Note Payable-$500,000
On February 14,
2014 the Company entered into a Note agreement in the amount of $500,000 for the purpose of purchasing inventory. The note is secured
by the Company’s inventory and is to be repaid out of the proceeds of the subsequent inventory sales. The note was due May
14, 2014 and was extended until March 31, 2015. The Note carries minimum interest of $45,000 for the initial term and an additional
$45,000 of interest for the extension of the due date. The balance due is $85,911 at September
30, 2015 plus the additional $45,000 as accrued interest. No payments have been made after September 30, 2015.
Note Payable-$250,000
On April 11, 2014,
the Company entered into a Note agreement in the amount of $250,000 for the purpose of funding operations and for general working
capital. The Note carries minimum interest of $22,500 and the note was due July 1, 2014 and
was extended until March 31, 2015. The Company made no draw-downs or payments on this note during the three months
ended September 30, 2015. The balance due is $150,000 at September 30, 2015 plus the
additional $22,500 as accrued interest. No payments have been made after September 30, 2015.
Note Payable-$20,000
On March 25, 2015,
the Company entered into a Promissory Note agreement in the amount of $20,000 with annual interest of 6% for the purpose of funding
operations and for general working capital. The note was due on April 24, 2015. Default interest of an additional 10%
per annum on the original loan amount accrues if the repayment term goes beyond 30 days. The balance
due is $20,000 at September 30, 2015 plus $970 of accrued interest. No payments
have been made after September 30, 2015. Additionally, the Company borrowed an additional $3,000 from this same party
at 0% and no terms of repayment.
Note Payable-$60,000
On April 2, 2015,
a shareholder loaned the company $60,000 on a secured promissory note with a 6% per annum interest rate and a 30 day maturity date. Default
interest of an additional 10% per annum is incurred on this note if repayment is not made by July 2, 2015. The
balance due is $60,000 at September 30, 2015 plus $2,778 of accrued interest. No
payments have been made after September 30, 2015.
Future Receivables Sale Agreement
Effective March 6, 2015, the Company entered
into an agreement whereby it sold a percentage of its future receivables in exchange for $75,000. Per the terms of this agreement,
the Company would repay a total of $102,750 via daily remittance of twelve percent (12%) of its accounts receivable collections
and other receipts from the sale of its products and services. Alternatively, the Company could elect to repay $120,750 total via
a flat daily remittance of $1,038 (“Alternative Daily Amount”) until that amount is repaid in full. The Company elected
to repay $120,750 at the Alternative Daily Amount of $1,038, which gives the agreement the character of a $73,500 note. The interest
rate was imputed at 184.23% and the $102,750 purchase price was paid off in July 2015.
Future Receivables Sale Agreement
- $225,000
Effective July 29, 2015, the Company entered
into an agreement whereby it sold a percentage of its future receivables in exchange for $220,500 ($225,000 less a $4,500 setup
fee). The Company is to repay $309,375 via daily remittance of a percentage of its accounts receivable collections and other receipts
from the sale of its products and services. Per the terms of the agreement, the Company made an alternative election to repay the
$309,375 via a flat daily remittance of $2,163 until that amount is repaid in full. The Company has accounted for this agreement
as a note payable with a maturity date of March 9, 2016 and an imputed interest rate of 123%. The balance of the note is $180,193
at September 30, 2015.
Future Receivables Sale Agreement
- $70,000
Effective September 16, 2015, the Company
entered into a second similar agreement whereby it sold a percentage of its future receivables in exchange for $70,000. Per the
terms of the agreement, the Company elected to repay $96,250 via a flat daily remittance of $1,019 until that amount is repaid
in full. The Company has accounted for this agreement as a note payable with a maturity date of February 18, 2016 and an imputed
interest rate of 177%. The balance of the note is $70,000 at September 30, 2015.
Future Receivables Sale Agreement
- $120,000
Effective September 28, 2015, the Company
entered into a third similar agreement whereby it sold a percentage of its future receivables in exchange for $120,000. Per the
terms of the agreement, the Company is to repay $153,000 via a flat daily remittance of $1,196 until that amount is repaid in in
full. The Company has accounted for this agreement as a note payable with a maturity date of April 5, 2016 and an imputed interest
rate of 98%. The balance of the note is $120,000 at September 30, 2015.
Settlement and Release Agreement
- $100,000
In July 2015,
the Company entered into a Settlement and Release Agreement (the “Settlement Agreement”) with Eco Prime, LLC. The Settlement
Agreement resolves any disputes arising from the Limited Asset Purchase Agreement entered into between the parties on March 19,
2014. Pursuant to the terms of the Settlement Agreement, the Company paid One Hundred Thousand Dollars ($100,000) to acquire the
assets from EcoPrime and released each party from any liability under the March 2014 agreement. In order to fund the $100,000 payment,
the Company entered into a Promissory Note with Redwood Management LLC dated July 14, 2015. Pursuant to the terms of the note,
it had a 60-day maturity and a flat 25% interest rate. The note was due on September 14, 2015 but, to date, has not been paid off
and is currently in default. The note incurs additional default interest of 6%. The balance of the note at September 30, 2015 is
$85,000 plus accrued interest of $10,182.
In connection
with this agreement, the Company borrowed an additional $32,000 from this same party at 0% in a short-term bridge financing arrangement.
The Company repaid the $32,000 subsequent to period end.
Loans Payable – Related
Party
At September 30,
2015, the Company had interest bearing notes payable due to its Chief Technical Officer with a balance of $2,000 plus accrued interest
of $10,934. During the three months ending September 30, 2015, the Company made payments totaling $43,000 under this note.
On November 19,
2014, the Company entered into, with a greater-than 10% investor who is considered a related party, a Promissory Note for $100,000
with annual interest of 6% for the purpose of funding operations and for general working capital. In addition the Company
issued 12,500,000 restricted common shares. The note was due on February 19, 2015. As of May 18, 2015 the Company has extended
the note to August 21, 2015 with the agreement to issue, prior to the new maturity date, an additional 25,000,000 common shares.
Pursuant to the default provisions of the note, the Company issued an additional 15,000,000 common shares during the three months
ended September 30, 2015. The balance due is $100,000 at September 30, 2015 plus $7,315
of accrued interest. No payments have been made after September 30, 2015.
On
January 16, 2015 the Company entered into an additional promissory note with greater-than 10% investor noted above for
$20,000 with annual interest of 6%. This note was due on July 16, 2015. In addition the Company issued 30,000,000 restricted
common shares. The balance due is $20,000 at September 30, 2015 plus $1,239 of accrued
interest. No payments have been made after September 30, 2015.
5.
Related
Party Transactions
See Note 4 for Loans payable – related parties and equity issuances in Note 7.
6.
Fair Value of Assets and Liabilities
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal market (or most advantageous market, in the absence of a principal market) for the asset or liability in an orderly transaction between market participants at the measurement date. Further, entities are required to maximize the use of observable inputs and minimize the use of unobservable inputs in measuring fair value, and to utilize a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The three levels of inputs used to measure fair value are as follows:
Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Observable inputs other than quoted prices included within Level 1, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and inputs other than quoted prices that are observable or are derived principally from, or corroborated by, observable market data by correlation or other means.
Level
3 — Unobservable inputs that are supported by little or no market activity, are significant to the fair value of the assets
or liabilities, and reflect the Company’s own assumptions about the assumptions market participants would use in pricing
the asset or liability developed based on the best information available in the circumstances.
Application of Valuation Hierarchy
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. The following is a description of the valuation methodology used to measure fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy.
Notes Payable – Related Party. The
Company assessed that the fair value of this liability to approximate its carrying value based on the effective yields of similar
obligations.
Convertible
Notes Payable. The Company assessed that the fair value of this liability approximates its carrying value due to
its short-term nature.
Loans Payable - Related Party. The
Company assessed that the fair value of this liability approximates its carrying value due to its short-term nature.
Loans Payable - Other. The
Company assessed that the fair value of this liability approximates its carrying value due to its short-term nature.
Derivative Liabilities. The Company assessed that the fair value of these liabilities using observable inputs described in level 2 above. The methodology described above may produce a current fair value calculation that may not be indicative of net realizable value or reflective of future fair values. If readily determined market values became available or if actual performance were to vary appreciably from assumptions used, assumptions may need to be adjusted, which could result in material differences from the recorded carrying amounts. The Company believes its method of determining fair value is appropriate and consistent with other market participants. However, the use of different methodologies or different assumptions to value certain financial instruments could result in a different estimate of fair value
7. Stockholders'
Deficit
Preferred
Stock
Series A
Preferred Stocks:
On January 27,
2014 the Board of Directors authorized 30,000 shares of Class A Preferred Stock with a par value of $0.001 per share.
The terms of the
preferred series A shares are as follows:
|
● |
Series A Preferred stock is not convertible. |
|
● |
Each share of Series A Preferred stock is entitled to 100,000 votes on matters that the holders of the Company's common stock may vote. |
|
● |
The Series A Preferred stock is redeemable by the company for no consideration at any time. |
|
● |
The Series A Preferred stock cannot vote on election or removal of directors. |
|
● |
The Series A Preferred stock has no stated dividend rate and has no liquidation preference. |
Effective with
the Chief Executive Officer’s termination on June 15, 2015, all 30,000 Series A preferred shares were cancelled. There were
no issuances of Series Preferred A stock during the three months ended September 30, 2015. There were no Series preferred A shares
outstanding at September 30, 2015.
Series B
12% Convertible Preferred Stock:
$925,000
Series B Preferred Stock Financing
On February 26,
2014 the Board of Directors authorized 6,750 shares of Class B Preferred Stock (“Preferred B Stock”) with a par value
of $0.001. On April 17, 2014, an additional 2,500 shares of Preferred B Stock was authorized with a par value of $0.001, for a
total authorized amount of 9,250.
The terms of the
Series B Preferred Stock (“Preferred B”) are as follows:
|
● |
The Preferred B Stock shall have no voting rights. |
|
● |
The Preferred B Stock is convertible at any time at 60% of the lowest VWAP of the 20 days leading up to conversion multiplied by the stated value of $100. |
|
● |
The Preferred B Stock has a 12% per annum stated dividend rate, which is calculated daily on a 360 day year. |
|
● |
The Preferred B Stock shall have a liquidation preference equal to the stated value of each share of Preferred Stock or $100 per share. |
On June 3, 2014,
all shares of the Preferred B Stock were converted into an equal number of shares of the Company’s Series C Convertible Preferred
Stock as described below. There were no Preferred B shares outstanding at September 30, 2015 or June 30, 2015.
Series C
12% Convertible Preferred Stock:
On May 30, 2014,
the Company authorized 120,000 shares of a newly-created Series C 12% Convertible Preferred Stock, par value $0.001 per share (the
“Preferred C Stock”).
The terms of the
Preferred C Stock are as follows:
|
● |
The Preferred C Stock shall have no voting rights. |
|
● |
The Preferred C Stock is convertible at any time at 60% of the lowest VWAP of the 20 days leading up to conversion multiplied by the stated value of $100. |
|
● |
The Preferred C Stock has a 12% per annum stated dividend rate, which is calculated daily on a 360 day year. Any dividends, whether paid in cash or shares of Common Stock, that are not paid within five trading days following a dividend payment date shall continue to accrue and shall entail a late fee at 18% per annum. In addition, the dividend rate of 12% is subject to an adjustment up to 18% if at any time the Company does not have an amount equal to or greater than 150% of the authorized but unissued common shares that would be required (on an “if converted” basis) to settle the conversion of Preferred C Stock outstanding. As of September 30, 2015, the Company has accrued dividends on Preferred C Stock in the amount of $970,803. The amount of dividends has not yet been determined by the Company and the holders whether to be payable in cash, common stock or additional shares of Preferred C Stock. |
|
● |
The Preferred C Stock shall have a liquidation preference equal to the stated value of each share of Preferred Stock or $100 per share. |
The following
table provides the activity of the Company’s Preferred C stock for the three months ended September 30, 2015:
Balance as of June 30, 2015 | |
| 104,440 | |
Preferred C Stock issued for cash | |
| -- | |
Preferred C Stock converted into Common Stock | |
| (2,551 | ) |
Balance as of September 30, 2015 | |
| 101,889 | |
Preferred C
Stock converted to Common Stock
During the three
months ended September 30, 2015, according to the conversion terms described above, the investors converted 2,551 shares of Preferred
C Stock representing value of $255,042 into 909,467,772 shares of the Company’s Common Stock.
Series D
12% Convertible Preferred Stock:
On
March 31, 2015, the Company authorized 10,000 shares of a newly-created Series D 12% Convertible Preferred Stock, par value $0.001
per share (the “Preferred D Stock”). Effective July 2, 2015, the Company increased the number of authorized shares
to 20,000.
|
● |
The Preferred D Stock shall have no voting rights. |
|
● |
The Preferred D Stock is convertible at any time at 60% of the lowest VWAP of the 30 days leading up to conversion multiplied by the stated value of $100. |
|
● |
The Preferred D Stock has a 12% per annum stated dividend rate, which is calculated daily on a 360 day year. Any dividends, whether paid in cash or shares of Common Stock, that not paid within five trading days following a dividend payment date shall continue to accrue and shall entail a late fee at 18% per annum. In addition, the dividend rate of 12% is subject to an adjustment up to 18% if at any time the Company does not have an amount equal to or greater than 150% of the authorized but unissued common shares that would be required (on an “if converted” basis) to settle the conversion of Preferred C Stock outstanding. As of September 30, 2015, the Company has accrued dividends on Preferred D Stock in the amount of $83,294. The amount of dividends has not yet been determined by the Company and the holders whether to be payable in cash, common stock or additional shares of Preferred D Stock. |
|
● |
The Preferred D Stock shall have a liquidation preference equal to the stated value of each share of Preferred Stock or $100 per share. |
Preferred D Stock issued for cash
During the three
months ended September 30, 2015, investors purchased 4,155 shares of Preferred D Stock for $415,500 of cash.
Common Stock
Issuances
During the three
months ended September 30, 2015, the Company issued a total of 1,044,234,814 shares of its common stock as follows:
119,767,042 shares
were issued for conversion of convertible debt and accrued interest with an aggregate value of $45,804;
15,000,000 shares
were issued pursuant to default provisions of a note payable with an aggregate value of $11,750; and
909,467,772 shares
were issued for conversion of 2,551 shares of convertible Preferred C stock as described above.
Treasury Stock
There were no
treasury stock transactions during the three months ended September 30, 2015. The Company held 1,433,047 shares of common stock
as treasury stock at September 30, 2015.
Warrants
As discussed in
Note 4, the Company issued a Common Stock Purchase Warrant, allowing M2B Funding Corporation the right to purchase up to 20,000,000
shares of Common Stock on September 16, 2014 and expiring on September 16, 2019. The exercise price per share of the Common Stock
under these warrants is $0.02 subject to certain adjustments. The 20,000,000 warrants were valued at $438,590 using the Black-Scholes
Option Model with a risk free interest rate of 1.78%, volatility of 261.05%, and trading price of $0.022 per share.
The following
is a schedule of warrants outstanding as of September 30, 2015:
| |
Warrants Outstanding | | |
Weighted Average
Exercise Price | | |
Weighted Average
Remaining Life | |
| |
| | |
| | |
| |
Balance, June 30, 2015 | |
| 20,000,000 | | |
$ | 0.02 | | |
| 4.21 Years | |
Warrants issued | |
| - | | |
| - | | |
| | |
Warrants expired | |
| - | | |
| - | | |
| | |
Warrants cancelled | |
| - | | |
| - | | |
| - | |
Balance, September 30, 2015 | |
| 20,000,000 | | |
$ | 0.02 | | |
| 3.96 Years | |
Options
In April 2011,
the Company granted options to its President to Chief Technical Officer to purchase 400,000 shares of its common stock. The 400,000
options have an exercise price of $0.10 per share and expire in five years.
In November 2013,
the Company granted options to its Chief Technical Officer to purchase 800,000 shares of its common stock. The 800,000 options
have an exercise price of $0.10 per share and expire in 5 years.
The Company granted
options to its former Chief Executive Officer as in connection with his termination agreement that was effective June 15, 2015.
A total of 5,786,227 options were granted based on the number of shares of Common Stock equal to one percent (1%) of the total
number of shares outstanding on the date of grant. The options have an exercise price equal to the closing bid price on the date
of grant ($0.0038 per share) and an expiration date of ten (10) years from the date of issuance. A total of 5,786,227 options
were granted under these terms. The options vest fifty percent (50%) on the effective date of the agreement, with the remaining
fifty percent (50%) vesting six (6) months after the effective date of the agreement. The options were valued at $21,987, as determined
using the Black-Scholes option-pricing model using a risk free rate of 2.35%, volatility of 257% and a trading price of the underlying
shares of $0.038.
The following
is a schedule of options outstanding as of September 30, 2015:
| |
Options Outstanding | | |
Weighted Average
Exercise Price | | |
Weighted Average
Remaining Life | | |
Aggregate
Intrinsic Value | |
| |
| | |
| | |
| | |
| |
Balance, June 30, 2015 | |
| 6,986,227 | | |
$ | 0.0089 | | |
| 9.98 Years | | |
$ | - | |
Options granted | |
| - | | |
| - | | |
| | | |
| - | |
Options cancellation/expired | |
| - | | |
| - | | |
| - | | |
| - | |
Balance, September 30, 2015 | |
| 6,986,227 | | |
$ | 0.06 | | |
| 8.37 Years | | |
$ | - | |
As of September
30, 2015, 4,093,114 of the 6,986,227 options are exercisable. Compensation expense of $10,994 remaining, will be recognized
over the remaining vesting period.
8. Commitments and Contingencies
Purchase commitments
On January 18, 2011, the Company entered
into an AF21 Product, Purchase, Sales, Distribution & Service Agreement, (the “Agreement”), with Newstar Holdings
Pte Ltd inventors and owners of technical data and intellectual property for a protective coating in order to obtain an exclusive
supply, marketing and distribution rights of the coating product. The product is a non-toxic non-corrosive fire inhibitor. Pursuant
to the Agreement, the Company guaranteed it will purchase a minimum of nine hundred fifty (650) gallon totes of product in the
first two-year period at a cost of $1,815,450 for the first two years. The Company is required to increase the minimum quantities
in the third year to 842 totes making the total purchase commitment $2,351,706 for year three. In the fourth year the Company is
required to increase the minimum quantities to 1,264 totes making the total purchase commitment $3,530,352 for year four. There
are no penalty clauses other than cancellation of the agreement if the minimum purchase commitments are not met. The Company and
Newstar Holdings are currently in negotiations to modify the current contract to accurately reflect the anticipated future business
volumes. Both parties have engaged in the efforts to manufacture additional product to optimize supply chain and meet Company demands.
Albeit the Company has not met the stated quantity purchases both parties have reaffirmed their intent to continue the business
relationship and confirm the current contract is still in effect and a default situation does not exist. If the agreement were
to be cancelled it would have a significant impact on the Company’s operations until a replacement product could be arranged.
On March 5, 2014, the Company entered into
a first amendment to the AF21 Product, Purchase, Sales, Distribution & Service Agreement, (the “Agreement”), with
Newstar Holdings Pte Ltd inventors and owners of technical data. The amendment modified the current agreement in the following
manner;
All parties agree;
The “Buyer” has changed their
corporate name from EcoBlu Products, Inc. to Eco Building Products, Inc. and this change has no impact on the validity or assignment
of the contract other than a corporate name change.
To modify section 1.3 Rights to use Product
Technology - sub section (A) to substitute the sentence defining “of and rights within the USA and Canada to use the Product
as a component of the Enhanced Products” to now state “of and rights within the Entire World to use the Product as
a component of the Enhanced Products” the change from USA and Canada to Entire World or Worldwide also effects language in
section D.
All parties agree that the original agreement
referenced hereto and the modifications as defined in this Amendment are in good standing.
Legal Proceedings
On June 4, 2013, Trical Construction, Inc.
filed a complaint against the Company in Superior Court of California, County of Los Angeles. The nature of the litigation involved
Trical’s claim that it suffered various construction delays and other damages from Eco Building Products in connection with
the construction of a 77 unit apartment building. The matter was ultimately resolved by settlement on August 1, 2014 in the amount
of $180,564.50, with payment of $30,000.00 by Eco Building Products to Trical on that date and scheduled payments of $10,000 each
month beginning on November 1, 2014 through February 1, 2016. This was amended on April 15, 2015, extending payments to October
2016 and reducing the payment amount to $2,500 per month. The balance on this settlement is $123,065 at September 30, 2015 and
no payments have been made since June 15, 2015. The Company is in default on this settlement agreement.
On October 6, 2015, the landlord for the
Vista, CA location filed a complaint against us in the Superior Court of California, County of San Diego for a Breach of Contract
for a Promissory Note that we issued to him in connection with unpaid lease payments that we owed in the amount of $151,273 under
the terms of the lease that we entered into for our Vista, CA location.
The Company is a co-defendant in a legal
action filed October 22, 2015 for past-due fees for professional services in the amount of $194,569. Due to the early stage of
this suit, the outcome cannot be determined at this time.
From time to time
the Company may be named in claims arising in the ordinary course of business. Currently, no legal proceedings or claims, other
than those disclosed above, are pending against or involve the Company that, in the opinion of management, could reasonably be
expected to have a material adverse effect on its business and financial condition.
9.
Subsequent Events
From October 1, 2015 to November 19,
2015, the Company issued to investors a total of 1,333 Preferred D shares for total cash of $133,333.
From October 1,
2015 to November 19, 2015, the Company issued to investors a total of 729,999,998 common shares converted from 438 preferred C
shares.
From October 1,
2015 to November 19, 2015, the Company issued 65,940,000 of common shares from conversions of debt amounting $3,956.
10.
Discontinued
Operations
On April 15, 2015,
the company completed the sale of E Build & Truss to former employees of the company. In exchange for certain assets, the purchaser
accepted $112,102 of liabilities related to E Build and Truss. As such, this has been accounted for as a discontinued operation
in the June 30, 2015 financial statements. The company has recorded a loss from discontinued operations of $216,164 as a result
of this transaction, which is comprised of $363,500 in revenues, $44,702 in gain on asset sale and $624,366 in costs and expense.
Included in the $1,148,229 of liabilities from discontinued operations in 2015 are $205,113 in accounts payable and $943,116 in
accrued expenses related to E Build and Truss. For the three months ended September 30, 2014, revenues were $71,990 and costs and
expenses were $217,000.
Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations.
The following management's discussion and analysis should
be read in connection with the information presented in our unaudited condensed consolidated financial statements and related notes
for the three and nine months ended September 30, 2015 included in this report and our audited consolidated financial statements
and related notes for the year ended June 30, 2015 included in our Annual Report on Form 10-K filed on November 6, 2015 with the
Securities and Exchange Commission.
Forward-Looking Statements
Certain statements concerning our plans and intentions included
herein may constitute forward-looking statements. There are a number of factors that may affect our future results, including,
but not limited to, (a) our ability to obtain additional funding for operations, (b) the continued availability of management to
develop the business plan and (c) continued cease of the labor portion of our business with E Build & Truss and focus on ramping
the supply side which yields higher profits (d) successful development and market acceptance of our products.
This quarterly report may contain both historical facts and
forward-looking statements. Any forward-looking statements involve risks and uncertainties, including, but not limited to, those
mentioned above. Moreover, future revenue and margin trends cannot be reliably predicted.
Overview
Eco Building Products, Inc., or "ECOB",
has developed a line of eco-friendly protective wood coatings, Eco Red Shield TM and Eco Clear Shield TM
, that extend the lifecycle of framing lumber and other wood products used in the construction of single-family homes and multi-story
buildings. The Company has expanded its’ product offering to include Eco Fire Break TM , Eco Disaster Break TM
, Eco Armor Paint TM , Eco D-Fence TM , Eco Disaster Cleaner TM , Eco Flood Caulk TM
, Eco Trim TM , and Eco Christmas Tree Protection TM .
Eco Building Products wood coatings are
topically applied to a wide range of lumber products providing protection from mold, mildew, fungus, decay, wood rot, wood ingesting
insects, including Formosan termites. Eco Red Shield™ also serves as a fire inhibitor; significantly increasing treated lumber’s
resistance to fire, by way of decreasing the smoke (fire gases) index, slowing ignition time and flame spread.
The ECOB system of coatings is eco-friendly
and remains chemically stable over time. The coatings emit virtually zero volatile organic compounds (VOCs), do not leech heavy
metals or toxins into groundwater, and do not allow for the growth and propagation of various molds on the cured film surface,
that have the potential to contaminate occupant indoor air quality. More importantly, ECOB coatings prevent the degradation of
structural lumber that potentially requires existing homes to be periodically renovated resultant of rot and/or insect damage,
thereby indirectly preserving our forests.
In 2015, the Company changed its business
model to focus on coating services only and chemical sales. The Company no longer purchases lumber for coating and resells the
treated lumber. Customers have their lumber shipped to one of three facilities: (i) Fair Lawn, New Jersey, (ii) Tacoma, Washington;
or (iii) Augusta, Georgia. These sites were selected for geographical efficiency, reducing shipping costs as well as, the types
of lumber used in different areas of the country.
Critical Accounting Policies
The preparation of our financial statements
and related disclosures in conformity with generally accepted accounting principles in the United States of America, or GAAP, requires
us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. These estimates
and assumptions are based on historical experience and various other factors that we believe are reasonable under the circumstances.
We consider our accounting policies related to revenue recognition, stock-based compensation, goodwill and purchased-intangible
assets and accounting for income taxes to be critical accounting policies. A number of significant estimates, assumptions, and
judgments are inherent in our determination of when to recognize revenue, how to estimate the best evidence of selling price for
revenue recognition, the calculation of stock-based compensation expense, evaluation of the potential impairment of goodwill and
purchased-intangible assets and the income tax related balances. We base our estimates and judgments on historical experience and
on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from
these estimates.
Fair Value Policy
Management believes there have been no significant changes during
the three months ended September 30, 2015 to the items that we disclosed as our critical accounting policies and estimates in Management’s
Discussion and Analysis of Financial Condition and Results of Operations in our 2015 Annual Report on Form 10-K filed with the
Securities and Exchange Commission. For a description of those accounting policies, please refer to our 2015 Annual Report on Form
10-K.
Going Concern
The Company's financial statements are
prepared using the accrual method of accounting in accordance with accounting principles generally accepted in the United States
of America and have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of
liabilities in the normal course of business. To date the Company has generated minimal operating revenues, losses from operations,
significant cash used in operating activities, and is dependent upon its ability to obtain future financing and successful operations.
Our continuation as a going concern is
dependent upon obtaining the additional working capital necessary to sustain our operations. Our future is dependent upon our ability
to obtain financing and upon future profitable operations. The Company estimates the current operational expenses of approximately
three hundred thousand dollars a month is required to continue to operate. This is achieved either through profit from sales; or
by management seeking additional financing through the sale of its common stock, and/or through private placements the minimum
operational expenses must be met in order to relive the threat of the company’s ability to continue as a going concern. There
is no assurance that our current operations will be profitable or we will raise sufficient funds to continue operating. The Company
continues to trim overhead expenses to meet revenues. 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
we cannot continue in existence. These factors raise substantial doubt about the Company’s ability to continue as a going
concern.
Financial Condition and Results of Operations
Results of Operations for the Three Months Ended September
30, 2015 as Compared to the Three Months Ended September 30, 2014
Revenues - For the three months ended September 30, 2015,
we had total revenues of $275,571 of which $165,111 was to one customer, as compared to $803,759 in revenues for the three month
period ended September 30, 2014. The decrease in revenue is mainly attributed to the loss of a large, unprofitable customer
and the discontinuance of lumber sales as a product line.
Cost of Sales and Gross Loss-The gross loss for the three
months ended September 30, 2015 and September 30, 2014 was $103,840 and $177,838, respectively. The gross loss for both years can
be attributed to pricing products below cost, production worker over-staffing, plant consolidation and closing costs and excess
capacity in all of our production facilities
Operating Expenses - For the three
months ended September 30, 2015, our total operating expenses were $520,851. This is compared to $950,876 for the three
months period ended September 30, 2014. Included in our operating expenses for the three months ended September 30, 2015 were compensation
and related costs of $110,361. Professional fees included in our operating expenses for the three months ended September 30, 2015
amounted to $129,575. Other significant operating costs we incurred during the three months ended September 30, 2015
included marketing of $31,924, research and development of $79,973, and other general and administrative costs of $148,255. Our
operating expenses for the three months ended September 30, 2014 consisted of $543,669 of compensation and related costs, $184,531
of professional and consulting fees, $34,198 of research and development expense, $29,724 of marketing expense, and $112,047 of
other general and administrative expenses. The significant reduction in expenses year over year can be attributed to a reduction
in head count and other expense reductions by the new management.
Other Income and Expenses - For
the three months ended September 30, 2015, we had other expenses that included interest expense of $434,091. We incurred
$6,634,847 for the loss on derivative of our convertible notes payable and convertible Preferred C stock, significantly due to
the conversion to common shares and the decrease in the stock price from $.002 as of June 30, 2015 to $0.0002 as of September
30, 2015. This is compared to the three months ended September 30, 2014, in which our other income and expenses included
interest expense of $1,026,458 and gain on derivative liability of $5,062,206.
Liquidity and Capital Resources
On September 30, 2015, we had $188,846
in cash on hand. During the three months ended Septmber 30, 2015, net cash used in our operating activities amounted
to$473,530. Net cash used during the same period for our investing activities totaled $176,209. During the same period, we received
proceeds resulting in net cash from financing activities of $798,279 of which $415,500.
The following
table sets forth selected cash flow information for the year ended September 30, 2015:
Net cash used in operating activities | |
$ | (473,530 | ) |
Net cash used in investing activities | |
| (176,209 | ) |
Net cash provided by financing activities | |
| 798,279 | |
| |
| | |
Net change in cash | |
$ | 148,540 | |
If current and projected revenue growth does not meet management
estimates or alternative business such as the move away from The Home Depot and increase in our CSO business and/or proceeds received
from future financing are insufficient, we may choose to raise additional capital through debt and/or equity transactions, reduce
certain overhead costs through the deferral of salaries and other means, and settle liabilities through negotiation. Currently,
we do not have any commitments or assurances for additional capital, nor can we provide assurance that such financing will be available
to us on favorable terms, or at all. If, after utilizing the existing sources of capital available to us, further capital needs
are identified and we are not successful in obtaining the financing, we may be forced to curtail our existing or planned future
operations.
We may continue to incur operating losses over the next three
months. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in
our stage of development. Such risks include, but are not limited to, an evolving and unpredictable business model and the management
of growth. To address these risks we must, among other things, continue to grow our customer base, implement and successfully execute
our business and marketing strategy, continue to develop and upgrade technology and products, respond to competitive developments,
and attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks,
and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations.
Off Balance Sheet Arrangements
We have no off-balance sheet arrangements or financing activities
with special purpose entities.
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. Controls
and Procedures.
Evaluation of Disclosure Controls
and Procedures
Regulations under the Securities Exchange
Act of 1934 (the “Exchange Act”) require public companies to maintain “disclosure controls and procedures,”
which are defined as controls and other procedures that are designed to ensure that information required to be disclosed by the
issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the
time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer
in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including
its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure. A material weakness is a control deficiency (within the meaning of the Public Company
Accounting Oversight Board (PCAOB) Auditing Standard No. 2) or combination of control deficiencies, that result in more than a
remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.
The Company carried out an evaluation,
with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”),
of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange
Act) as of September 30, 2015, the end of the period covered by this report. Based upon that evaluation, the Company’s CEO
concluded that the Company’s disclosure controls and procedures are not effective at the reasonable assurance level due to
the material weaknesses described below:
1. |
Up until June 15, 2015, the Company’s board of directors did not have an audit committee, independent director or member with financial expertise which causes ineffective oversight of the Company’s external financial reporting and internal control over financial reporting. |
2. |
The Company does not have sufficient segregation of duties within its accounting functions, which is a basic internal control. Due to its size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. |
3. |
Manual process of the tracking and process of our inventory. |
In light of the material weaknesses, the
management of the Company performed additional analysis and other post-closing procedures to ensure our consolidated financial
statements were prepared in accordance with the accounting principles generally accepted in the United States of America. Accordingly,
we believe that our consolidated financial statements included herein fairly present, in all material respects, our consolidated
financial condition, consolidated results of operations and cash flows as of and for the reporting periods then ended.
Remediation of Material Weaknesses
We intend to remediate the material weaknesses
in our disclosure controls and procedures identified above. We have already adopted an Audit Committee Charter and appointed independent
members from our Board to an Audit Committee and our Chairman of the Audit Committee has sufficient financial expertise. In addition,
we have hired a part-time CFO with SEC reporting experience.
Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. 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. All internal control systems, no matter how well designed,
have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance
with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control,
there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial
reporting. However, these inherent limitations are known features of the financial reporting process. Therefore,
it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
This annual report does not include an
attestation report of the Company's independent registered public accounting firm regarding internal control over financial reporting. Management's
report was not subject to attestation by the Company's independent registered public accounting firm pursuant to the rules of the
SEC that permit the Company to provide only the management's report in this annual report.
Changes in Internal Controls over Financial
Reporting
We have hired a part-time Chief Financial
Officer and appointed independent members to our Board of Directors to oversee the financial reporting of our operations. Other
than these two items, there were no significant changes in the Company’s internal controls or in other factors that could
significantly affect these controls subsequent to the evaluation date.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Except as disclosed below, we are currently
not involved in any litigation that we believe could have a materially adverse effect on our financial condition or results of
operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries,
threatened against or affecting our company, our common stock, any of our subsidiaries or of our company’s or our company’s
subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse
effect.
On June 4, 2013, Trical Construction, Inc.
filed a complaint against the Company in Superior Court of California, County of Los Angeles. The nature of the litigation involved
Trical’s claim that it suffered various construction delays and other damages from Eco Building Products in connection with
the construction of a 77 unit apartment building. The matter was ultimately resolved by settlement on August 1, 2014 in the amount
of $180,564.50, with payment of $30,000.00 by Eco Building Products to Trical on that date and scheduled payments of $10,000 each
month beginning on November 1, 2014 through February 1, 2016. This was amended on April 15, 2015, extending payments to October
2016 and reducing the payment amount to $2,500 per month. The balance on this settlement is $123,065 at September 30, 2015 and
no payments have been made since June 15, 2015. The Company is in default on this settlement agreement.
At September 30, 2015, the Company owed
approximately $730,000 in past due federal and state payroll taxes, of which approximately $660,000 is due to the Internal Revenue
Service (IRS). The Company subsequently paid $25,000 to the IRS under a $20,000 per month payment arrangement which the Company
is in default. The Company is currently is in negotiations with the IRS to re-establish a payment plan for past due taxes. No such
arrangement exists for State tax purposes.
On October 6, 2015, the landlord for the
Vista, CA location filed a complaint against us in the Superior Court of California, County of San Diego for a Breach of Contract
for a Promissory Note that we issued to him in connection with unpaid lease payments that we owed in the amount of $151,273 under
the terms of the lease that we entered into for our Vista, CA location.
The Company is a co-defendant in a legal
action filed October 22, 2015 for past-due fees for professional services in the amount of $194,569. Due to the early stage of
this suit, the outcome cannot be determined at this time.
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 2. Unregistered
Sales of Equity Securities and Use of Proceeds.
During the three months ended September
30, 2015, there were 2,551 shares of Preferred C shares converted into 909,467,772 shares of common stock.
In addition, during this same period, there
were 4,155 shares of Preferred D stock issued.
The
issuance of the securities described above were completed in accordance with the exemption provided by Section 4(a)(2) of the
Securities Act of 1933, as amended.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other information
None.
Item 6. Exhibits.
Number |
|
Exhibit
Title |
|
Filing
Method |
|
|
|
|
|
31.1 |
|
Certification of Principal Executive Officer pursuant
to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
Filed
herewith |
|
|
|
|
|
31.2 |
|
Certification of Principal Financial Officer pursuant
to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
Filed
herewith |
|
|
|
|
|
32.1 |
|
Certification of Principal Executive Officer pursuant
to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
Furnished
herewith |
|
|
|
|
|
32.2 |
|
Certification of Principal Financial Officer pursuant
to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
Furnished
herewith |
|
|
|
|
|
101.INS |
|
XBRL Instance Document |
|
Filed herewith |
|
|
|
|
|
101.SCH |
|
XBRL Taxonomy Schema |
|
Filed herewith |
|
|
|
|
|
101.CAL |
|
XBRL Taxonomy Calculation Linkbase |
|
Filed herewith |
|
|
|
|
|
101.DEF |
|
XBRL Taxonomy Definition Linkbase |
|
Filed herewith |
|
|
|
|
|
101.LAB |
|
XBRL Taxonomy Label Linkbase |
|
Filed herewith |
|
|
|
|
|
101.PRE |
|
XBRL Taxonomy Presentation Linkbase |
|
Filed herewith |
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this reported to be signed on its behalf by the undersigned thereunto duly
authorized.
|
ECO BUILDING PRODUCTS, INC. |
|
|
|
|
|
Date: November 23, 2015 |
By: |
/s/ Tom Comery |
|
|
|
Tom Comery, President, Chief Executive Officer and Director |
|
|
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(Principal Executive Officer)
|
|
|
|
|
|
Date: November 23, 2015 |
By: |
/s/ Randall Smith |
|
|
|
Randall Smith, Chief Financial Officer |
|
|
|
(Principal Financial and Accounting Officer) |
|
Exhibit 31.1
CERTIFICATION
OF PRINCIPAL
EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT
TO SECTION 302 OF
THE SARBANES-OXLEY
ACT OF 2002
I, Tom Comery, certify that:
1. |
I have reviewed this Form 10-Q of Eco Building Products, 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 present 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 13-a-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 financing 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 involved management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 23, 2015 |
|
|
|
/s/ Tom Comery |
|
Tom Comery
(Principal Executive Officer) |
|
Exhibit 31.2
CERTIFICATION
OF PRINCIPAL
FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT
TO SECTION 302 OF
THE SARBANES-OXLEY
ACT OF 2002
I, Randall Smith, certify that:
1. |
I have reviewed this Form 10-Q of Eco Building Products, 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 present 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 13-a-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 financing 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 involved management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 23, 2015 |
|
|
|
/s/ Randall Smith |
|
Randall Smith
(Principal Financial Officer) |
|
Exhibit 32.1
CERTIFICATION OF
PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
In connection with this Quarterly Report of Eco Building Products,
Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2015, as filed with the Securities
and Exchange Commission on the date hereof, I, Tom Comery, Chief Executive Officer of the Company, certifies to the best of his
knowledge, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:
1. Such Quarterly Report on Form 10-Q for the quarter ended September
30, 2015, 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 such Quarterly Report on Form
10-Q for the quarter ended September 30, 2015, fairly presents, in all material respects, the financial condition and
results of operations of Eco Building Products, Inc.
Date: November 23, 2015
/s/ Tom Comery |
|
Tom Comery |
|
(Principal Executive Officer) |
|
Exhibit 32.2
CERTIFICATION OF
PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
In connection with this Quarterly Report of Eco Building Products,
Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2015, as filed with the Securities
and Exchange Commission on the date hereof, I, Randall Smith, Chief Financial Officer of the Company, certifies to the best of
his knowledge, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:
1. Such Quarterly Report on Form 10-Q for the quarter ended September
30, 2015, 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 such Quarterly Report on Form
10-Q for the quarter ended September 30, 2015, fairly presents, in all material respects, the financial condition and
results of operations of Eco Building Products, Inc.
Date: November 23, 2015
/s/ Randall Smith |
|
Randall Smith |
|
(Principal Financial Officer) |
|