NOTES
TO FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED MARCH 31, 2021 AND 2020
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:
The
Company 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 the Company in accordance with the accounting policies
described in its June 30, 2020 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 the Company 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, the Company evaluates our
estimates, including those related to intangible assets, income taxes, insurance obligations and contingencies and litigation.
The Company bases its 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 nine-month periods ended
March 31, 2021 and 2020. 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 Financial Accounting Standards Board (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 nine-month
period ended March 31, 2021, 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. The Company has adopted ASU No. 2016-15 and concluded that
at present ASU No. 2016-15 has no impact on its statement of cash flows.
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 adopted ASU No. 2016-12 and ASU No. 2016-10, and concluded
that at present ASU No. 2016-12 and ASU No. 2016-10 have no impact on its revenue.
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, the Company does not believe that it could succeed in raising additional capital, from unrelated parties,
needed to sustain its operations without some strategic transaction, such as a business combination or merger. If the
Company is unable to consummate such a transaction, it expects that it would need to cease all operations and
wind down. Although the Company is currently evaluating its strategic alternatives with respect to all aspects of
its business, it cannot assure you that any actions that it takes would raise or generate sufficient capital
to fully address the uncertainties of its financial position.
Note
3. Convertible Note
On
October 12, 2018, the Company issued a $75,000 convertible promissory note to Ivo Heiden, the then CEO and the then
sole officer and director. 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 would
be payable upon the maturity date at October 12, 2020. On May 1, 2020, the convertible promissory note was extended to April
30, 2022. On January 6, 2021, the note holder waived interests and liability of the Company and terminated this note. During the
three-month periods ended March 31, 2021 and 2020 the Company expensed interest of $0 and $1,496, respectively, related to this
note. As of March 31, 2021, and June 30, 2020, the Company has recorded $0 and $10,241, respectively, in accrued interest with
respect to this convertible note.
On
May 1, 2020, the Company issued a $90,000 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 $0.04 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 May 1, 2022. On January 6, 2021, the
note holder waived interests and liability of the Company and terminated this note. During the three-month period ended March
31, 2021, the Company expensed interest of $0 related to this note. As of March 31, 2021 and June 30, 2020, the Company has recorded
$0 and $1,203, respectively, in accrued interest with respect to this convertible note.
In
accordance with ASC # 815, Accounting for Derivative Instruments and Hedging Activities, the Company 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 March 31, 2021, and June 30, 2020, the advances from Ivo Heiden, our previous CEO, were $0 and $28,155, respectively.
As
of March 31, 2021, and June 30, 2020, accrued interest due to our previous CEO was $0 and $18,456, respectively.
On September 1, 2017, the Company entered
into a Loan Agreement (the “Loan Agreement”) with Ivo Heiden, its then sole officer and director, under
which the Company received 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 September
1, 2018, the Loan Agreement was extended to September 1, 2019. On June 28, 2019, the Loan Agreement was extended to September
1, 2020. On May 1, 2020, the Loan Agreement was extended to September 1, 2021. On January 6, 2021, the balance of this loan
and accrued interests were waived by Ivo Heiden and the Loan Agreement was terminated on the same day. As of March 31, 2021,
and June 30, 2020, the outstanding balance on this loan was $0 and $28,155 with accrued interest of $0 and $7,012. During
the three-month periods ended March 31, 2021 and 2020, the Company borrowed $0 and $544, respectively, under this Loan Agreement.
During the three-months period ended March 31, 2021 and 2020, the Company expensed interest of $0 and $544, respectively,
related to this Loan Agreement. During the nine-month periods ended March 31, 2021 and 2020, the Company borrowed $5,959 and $7,449,
respectively, under this Loan Agreement. During the nine-months period ended March 31, 2021 and 2020, we expensed interest of
$1,299 and $1,528, respectively, related to this Loan Agreement.
On March 31, 2021, the Company entered
into a Loan Agreement with New York Listing Management Inc, a related party, under which the Company receives 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. As of March 31, 2021, the outstanding balance on this
loan was $5,916 with accrued interest of $0. During the three-month periods ended March 31, 2021, the Company borrowed $5,916,
under this Loan Agreement. During the three-months period ended March 31, 2021 we expensed interest of $0, related to this Loan
Agreement.
During
the nine months ended March 31, 2021 and 2020, the Company issued 0 and 6,975,000 shares of common stock.
On
January 6, 2021, Ivo Heiden has waived the accrued interests and liabilities of the Loan Agreement and two convertible
notes (one dated May 1, 2020, the other October 12, 2018) for the total amount of $225,487, the Company has recorded such
amount as additional paid in capital accordingly.
Note
5. Subsequent Events
On March 18, 2021, by unanimous written
consent of the Board of Directors of the Company, the Board of Directors adopted resolutions approving 1) a reverse split
of the Company’s common stock at a ratio of 1-for-10, whereby every 10 shares of the issued and outstanding common
stock shall be combined into one share of issued and outstanding common stock (the “Reverse Stock Split”);
2) an increase in the number of the authorized capital stock from 75,000,000 to 500,000,000, with the par value remaining at $0.0001
per share, consisting of 450,000,000 shares of common stock, par value $0.0001 per share and 50,000,000 shares of preferred
stock, par value $0.0001 per share (the “Increase of Authorized Stock”); 3) a change of the Company’s name and
ticker from “Ecomat, Inc.” and “ECMT,” to “Ecomax, Inc.” and “ECMX,” subject to
availability of such name and ticker (the “Change of Name,” together with the Reverse Stock Split and the Increase
of Authorized Stock, collectively referred to as the “Corporate Actions”); 4) amendments to its articles of incorporation
to reflect the Corporate Actions (the “Amendments of Articles of Incorporation”); and 5) a proposal that such resolutions
be submitted for a vote of the stockholders of the Company.
On March 18, 2021, the stockholder holding
in the aggregate 20,205,000 shares of common stock or approximately 85% of the common stock outstanding on such date, approved
the Corporate Actions.
On April 1, 2021, the Company filed a preliminary
information statement on Schedule 14C with the U.S. Securities and Exchange Commission (the “SEC”).
On April 13, 2021, the Company filed a
definitive information statement on Schedule 14C with SEC.
On April 20, 2021, the Company filed a
certificate of change and a certificate of amendment with the Secretary of State of the State of Nevada.
The Corporate Actions, as of the date of
this report, have not come into effect yet.
Beyond
the events above, the Company’s management has performed subsequent events procedures through the date the financial statements
were available to be issued. There were no other subsequent events requiring adjustment to or disclosure in the consolidated financial
statements.