See Summary of Significant Accounting Policies and Notes to Financial Statements.
Note
1. The Company and Significant Accounting Policies
Ecomat,
Inc. (the “Company”) was incorporated on December 14, 1995 pursuant to the laws of the State of Delaware. On February
9, 2007, the Company completed its change in domicile to Nevada. The Company used to operate a wet-cleaning process which was
one of the first environmentally sound solution to current dry-cleaning methods.
Basis
of Presentation:
We
adopted “fresh-start” accounting as of June 15, 2006 in accordance with procedures specified by AICPA Statement of
Position (“SOP”) No. 90-7, “Financial Reporting by Entities in Reorganization under the Bankruptcy Code.
The
Financial Statements presented herein have been prepared by us in accordance with the accounting policies described in our June
30, 2019 audited financial statements and should be read in conjunction with the notes to financial statements which appear as
part of those financial statements.
The
preparation of these financial statements in conformity with accounting principles generally accepted in the United States of
America requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses,
and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related
to intangible assets, income taxes, insurance obligations and contingencies and litigation. We base our estimates on historical
experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other resources.
Actual results may differ from these estimates under different assumptions or conditions.
In
the opinion of Management, the information furnished in these interim financial statements reflects all adjustments necessary
for a fair statement of the financial position and results of operations and cash flows as of and for the three-month periods
ended September 30, 2019 and 2018. All such adjustments are of a normal recurring nature. The Financial Statements have been prepared
in accordance with the instructions to Form 10-Q and therefore do not include some information and notes necessary to conform
with annual reporting requirements.
Recently
Issued Accounting Pronouncements
In
July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases. The amendments in ASU 2018-10 provide
additional clarification and implementation guidance on certain aspects of the previously issued ASU No. 2016-02, Leases (Topic
842) (“ASU 2016-02”) and have the same effective and transition requirements as ASU 2016-02. Upon the effective date,
ASU 2018-10 will supersede the current lease guidance in ASC Topic 840, Leases. Under the new guidance, lessees will be required
to recognize for all leases, with the exception of short-term leases, a lease liability, which is a lessee’s obligation
to make lease payments arising from a lease, measured on a discounted basis. Concurrently, lessees will be required to recognize
a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset
for the lease term. ASU 2018-10 is effective for private companies and emerging growth public companies for interim and annual
reporting periods beginning after December 15, 2019, with early adoption permitted. The guidance is required to be applied using
a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative
periods presented in the financial statements. During the three months ended September 30, 2019, the Company assessed the impact
this guidance had on its financial statements and concluded that at present ASU No. 2018-10 has no impact on its financial statements.
In
August, 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and
Cash Payments (a consensus of the Emerging Issues Task Force). Effective for public business entities for fiscal years beginning
after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for
fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early
adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period,
any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects
early adoption must adopt all of the amendments in the same period.
In
May, 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical
Expedients. The amendments in this Update affect the guidance in Accounting Standards Update 2014-09, Revenue from Contracts with
Customers (Topic 606), which became effective. The effective date and transition requirements for the amendments in this Update
are the same as the effective date and transition requirements for Topic 606 (and any other Topic amended by Update 2014-09).
Accounting Standards Update 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers
the effective date of Update 2014-09 by one year.
In
April, 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations
and Licensing. The amendments in this Update affect the guidance in Accounting Standards Update 2014-09, Revenue from Contracts
with Customers (Topic 606), which became effective. The effective date and transition requirements for the amendments in this
Update are the same as the effective date and transition requirements in Topic 606 (and any other Topic amended by Update 2014-09).
Accounting Standards Update 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers
the effective date of Update 2014-09 by one year.
The
Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have
a material impact on results of operations, financial condition, or cash flows, based on current information.
Note
2. Going Concern
The
accompanying financial statements have been prepared assuming the Company will continue as a going concern The Company has incurred
losses, has negative operational cash flows and has no revenues. The future of the Company is dependent upon Management success
in its efforts and limited resources to pursue and effect a business combination. These conditions raise substantial doubt about
the Company’s ability to continue as a going concern. These financial statements do not include any adjustments that might
arise from this uncertainty.
If
a business combination transaction is not consummated, we do not believe that we could succeed in raising additional capital,
from unrelated parties, needed to sustain our operations without some strategic transaction, such as a business combination or
merger. If we are unable to consummate such a transaction, we expect that we would need to cease all operations and wind down.
Although we are currently evaluating our strategic alternatives with respect to all aspects of our business, we cannot assure
you that any actions that we take would raise or generate sufficient capital to fully address the uncertainties of our financial
position.
Note
3. Convertible Note
On
July 8, 2017, we issued a convertible promissory note in the principal amount of $50,000 to Securitis Compliacne and subsequently
assigned this note to WWYD, Inc., bearing interest at 1% per annum until paid or converted. The conversion price of the note is
$0.008 per share. The closing price of the Company’s common stock on July 7, 2017 was $0.007 per share. Interest will be
payable upon the maturity date at July 7, 2018. On October 1, 2018, the Company agreed to adjust the interest rate, effective
July 1, 2018, on this convertible note from 1% to 8%. During the periods ended September 30, 2019 and 2018, the Company recorded
$997 and $997 in interest, respectively. As of June 30, 2018, all services had been provided and no additional services are due
under this note. As of September 30, 2019 and 2018, the accrued interest for this convertible note was $5,262 and $1,306, respectively.
As of September 30, 2019 and June 30, 2019, the principal amount of this not is $50,000.
On
September 1, 2017, we entered into a Loan Agreement with Ivo Heiden, our sole officer and director, under which we receive funding
for general operating expenses from time-to-time as needed by the Company. The Loan Agreement bears interest of 8% per annum and
shall be due and payable on a date 366 days from the date of the loan. On June 28, 2019, the Loan Agreement was extended to September
1, 2020. As of September 30, 2019, the outstanding balance on this loan was $23,565 with accrued interest of $5,417. During the
three months ended September 30, 2019 and 2018, the Company borrowed $3,734 and $2,500, respectively, under this Loan Agreement.
During the three months ended September 30, 2019 and 2018, the Company expensed interest of $470 and $299, respectively related
to this note.
On
October 12, 2018, we issued a $75,000 convertible promissory note to Ivo Heiden. The convertible note bears interest at 8% per
annum until paid or converted. The conversion price of the note is $0.034 per share, the closing price of the Company’s
common stock on the date of issuance. Interest will be payable upon the maturity date at October 12, 2020. During the three months
ended September 30 2019 and 2018, the Company expensed interest of $1,496 and $0, respectively, related to this note. As of September
30, 2019, the Company has recorded $5,753 in accrued interest with respect to this convertible note.
In
accordance with ASC # 815, Accounting for Derivative Instruments and Hedging Activities, we evaluated the note holder’s
non-detachable conversion right provision and liquidated damages clause, contained in the terms governing the Convertible Note
to determine whether the features qualify as an embedded derivative instrument at issuance. Such non-detachable conversion right
provision and liquidated damages clause did not need to be accounted as derivative financial instruments.
Note
4. Related Party Transactions
Due
to Related Parties:
As
of September 30, 2019 and June 30, 2019, our CEO has made advances of $23,565 and $19,831, respectively.
As
of September 30, 2019 and June 30, 2019, accrued interest due to our CEO was 11,170 and $9,203, respectively.
As
of September 30, 2019 and June 30, 2019, accrued compensation due to our CEO was $60,000 and $45,000, respectively.
On
October 12, 2018, the Company issued a convertible note of $75,000 to our CEO evidencing previously accrued compensation.
As
of September 30, 2019 and June 30, 2019, the Company owed a $50,000 convertible note and accrued interest of $5,262 and $4,266,
respectively, to WWYD, Inc., a related party.
During
the three months ended September 30, 2019 and 2018, the Company did not issue any shares of common stock.
Note
5. Subsequent Events
The
Company had no subsequent events after September 30, 2018 to the date the financial statements were issued.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION Back to Table of Contents
Some
of the statements contained in this quarterly report of Ecomat, Inc. (hereinafter the “Company”, “We”
or the “Registrant”) discuss future expectations, contain projections of our plan of operation or financial condition
or state other forward-looking information. Forward-looking statements give our current expectations or forecasts of future events.
You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use of words
such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,”
“believe,” and other words and terms of similar meaning in connection with any discussion of future operating or financial
performance. From time to time, we also may provide forward-looking statements in other materials we release to the public.
Overview
The
Company’s current business objective is to seek a business combination with an operating company. We intend to use the Company’s
limited personnel and financial resources in connection with such activities. The Company will utilize its capital stock, debt
or a combination of capital stock and debt, in effecting a business combination. It may be expected that entering into a business
combination will involve the issuance of restricted shares of capital stock. The issuance of additional shares of our capital
stock:
●
may significantly reduce the equity interest of our stockholders;
● will likely cause a change in control if a substantial number of our shares of capital stock are issued, and most likely
will also result in the resignation or removal of our present officer and director; and
● may adversely affect the prevailing market price for our common stock.
Similarly,
if we issued debt securities, it could result in:
●
default and foreclosure on our assets if our operating revenues after a business combination were insufficient to pay our debt
obligations;
● acceleration of our obligations to repay the indebtedness even if we have made all principal and interest payments when
due if the debt security contained covenants that required the maintenance of certain financial ratios or reserves and any such
covenants were breached without a waiver or renegotiations of such covenants;
● our inability to obtain additional financing, if necessary, if the debt security contained covenants restricting our ability
to obtain additional financing while such security was outstanding.
Results
of Operations during the three months ended September 30, 2019 as compared to the three months ended September 30, 2018
We
have not generated any revenues during the three months ended September 30, 2019 and 2018. We had total operating expenses of
$19,859 related to general and administrative expenses during the three months ended September 30, 2019 compared to $17,500 during
the same period in the prior year. We incurred interest expense of $2,963 during three months ended September 30, 2019 compared
to interest expense of $1,296 during the three months ended September 30, 2018. During the three months ended September 30, 2019
and 2018, we had a net loss of $22,822 and $18,796, respectively.
Liquidity
and Capital Resources
At
present, the Company has no business operations and no cash resources other than advances provided by our CEO. Our CEO and/or
an affiliated party have agreed to provide funding as may be required to pay for accounting fees and other administrative expenses
of the Company until such time the Company enters into a business combination. The Company would be unable to continue as a going
concern without interim financing provided by our CEO. If we require additional financing, we cannot predict whether equity or
debt financing will become available at terms acceptable to us, if at all. At present, the Company has no financial resources
to pay for such services and may be required to issue restricted shares in lieu of cash or, in the alternative, issue debt instruments
evidencing financial obligations if and when they arise.
During
the next 12 months we anticipate incurring costs related to:
●
filing of Exchange Act reports.
● franchise fees, registered agent fees and accounting fees, and
● investigating, analyzing and consummating an acquisition or business combination.
On
September 30, 2019 and June 30, 2019, we have had no current assets. As of September 30, 2019, we had $226,122 in liabilities
consisting of accounts payable of $1,125, advance from a related party of $23,565, accrued compensation of $60,000, accrued interest
due to related parties of $16,432 and $125,000 in two convertible notes. As of June 30, 2019, we had $203,300 in current liabilities
consisting of advance from a related party of $19,831, accrued compensation of $45,000, accrued interest due to related parties
of $13,469 and $125,000 in two convertible notes.
During
the three months ended September 30, 2019, we had negative cash flow from operating activities of $3,734 due to a net loss of
$22,822. We financed our negative cash flow from operations through $3,734 in advances from our CEO. During the three months ended
September 30, 2018, we had negative cash flow from operating activities of $2,500 due to a net loss of $18,796. We financed our
negative cash flow from operations through $2,500 in advances from our CEO.
The
Company currently plans to satisfy its cash requirements for the next 12 months through borrowings from its CEO and believes it
can satisfy its cash requirements so long as it is able to obtain financing from him. The Company expects that money borrowed
will be used during the next 12 months to satisfy the Company’s operating costs, professional fees and for general corporate
purposes. On September 1, 2017, we formalized a verbal funding agreement and entered into a Loan Agreement with Ivo Heiden, our
sole officer and director, under which we receive funding of up to $100,000 for general operating expenses from time-to-time as
needed by the Company. The loan bears an interest rate of 8% per annum and shall be due and payable on a date three hundred sixty-six
(366) days from the date of the Loan Agreement. On June 28, 2019, the Loan Agreement was extended to September 1, 2020. As of
September 30, 2019, the Company has received a total of $23,565 under this Loan Agreement.
The
Company intends to repay these advances at a time when it has the cash resources to do so.
The
Company has only limited capital. Additional financing is necessary for the Company to continue as a going concern. Our independent
auditors have unqualified audit opinion for the years ended June 30, 2019 and 2018 with an explanatory paragraph on going concern.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Back to Table of Contents
We
have not entered into, and do not expect to enter into, financial instruments for trading or hedging purposes.
ITEM
4. CONTROLS AND PROCEDURES Back to Table of Contents
Evaluation
of disclosure controls and procedures.
As
of September 30, 2019, the Company’s chief executive officer and chief financial officer conducted an evaluation regarding
the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under
the Exchange Act. Based upon the evaluation of these controls and procedures as provided under the Committee of Sponsoring Organizations
of the Treadway Commission in Internal Control-Integrated Framework (2013), our chief executive officer and chief financial officer
concluded that our disclosure controls and procedures were ineffective because of the identification of material weaknesses including
lack of sufficient internal accounting personnel in order to ensure complete documentation of complex transactions and adequate
financial reporting during the period ended September 30, 2019. The Company has no formal control process related to the identification
and approval of related party transactions. Management has identified corrective actions for the weaknesses and intends to implement
accounting procedures to address before mentioned material weaknesses during the fiscal year 2020.
Changes
in internal controls.
During
the quarterly period covered by this report, no changes occurred in our internal control over financial reporting that materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.