ECOX Eco Innovation Group Inc (PK)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to  

Commission file number 333-248871

Registrant’s telephone number, including area code: (800) 922-4356 

Securities registered pursuant to Section 12(g) of the Act: Common Stock.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 the Securities Act. Yes ☐ No ☒ 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒  

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the last 90 days. Yes ☒ No ☐  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-K (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐  

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐ 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s common stock as of August 22, 2022 was 644,985,218 shares.

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Information contained in this quarterly report on Form 10-Q contains “forward-looking statements.” These forward-looking statements are contained principally in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project” or the negative of these words or other variations on these words or comparable terminology. The forward-looking statements herein represent our expectations, beliefs, plans, intentions or strategies concerning future events, including, but not limited to: our future financial performance; the continuation of historical trends; the sufficiency of our resources in funding our operations; our intention to acquire sustainable technology intellectual property rights; and our liquidity and capital needs. Our forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that any projections or other expectations included in any forward-looking statements will come to pass. Moreover, our forward-looking statements are subject to various known and unknown risks, uncertainties and other factors that may cause our actual results, performance, or achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. These risks, uncertainties and other factors include but are not limited to: the risks of limited management, labor and financial resources; our ability to establish and maintain adequate internal controls; our ability to develop and maintain a market in our securities; and our ability obtain financing, if and when needed, on terms that are acceptable. Except as required by applicable laws, we undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

As used in this quarterly report on Form 10-Q, “we”, “our”, “us” and the “Company” refer to Eco Innovation Group, Inc. a Nevada corporation, unless the context requires otherwise.

Item 1. Financial Statements

Index to Financial Statements

ECO INNOVATION GROUP, INC.

CONSOLIDATED BALANCE SHEETS

See the accompanying notes to these unaudited consolidated financial statements

ECO INNOVATION GROUP, INC.

CONSOLIDATED PROFIT AND LOSS STATEMENT

(Unaudited)

See the accompanying notes to these unaudited consolidated financial statements

ECO INNOVATION GROUP, INC.

STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY/DEFICIT
For the Six Months Ended June 30, 2022 and 2021

(Unaudited)

 See the accompanying notes to these unaudited consolidated financial statements.

ECO INNOVATION GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

See the accompanying notes to these unaudited consolidated financial statements

ECO INNOVATION GROUP, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2022

(Unaudited)

NOTE 1. NATURE OF OPERATIONS

Eco Innovation Group, Inc. (the “Company,” “we,” “our,” or “Eco Innovation Group”), was incorporated in the State of Nevada on March 5, 2001 under the name of Dig-It Underground, Inc. and operated as an underground cable contractor. On September 29, 2008, the Company acquired a partial interest in the high-end beauty salon business of Haydin Group Enterprises of Texas and discontinued its cable installation business. On September 1, 2011, the Company acquired a partial interest in the art licensing and sales business of Get Down Art, LLC, a Nevada limited liability company. On August 30, 2012, the Company acquired the remaining outstanding interests of Haydin Group Enterprises through a share exchange agreement. Concurrently, the Company discontinued its business with Get Down Art, LLC and resolved to unwind that acquisition. On January 5, 2016, the Company entered the natural healing and chiropractic business in Texas by acquiring Expressions Property Limited, LP, a Texas limited partnership, and Expressions Chiropractic and Rehab Center, PA, a Texas professional association, pursuant to share exchange agreements. Effective September 30, 2018, the Company terminated its beauty salon business and natural healing and chiropractic business by terminating and unwinding the shares exchange agreements entered into on August 30, 2012 with Haydin Group Enterprises and January 5, 2016 with Expressions Property Limited and Expressions Chiropractic and Rehab Center. At the same time, the Company began a business line focusing on the development of an affordable fire, hurricane and earthquake resilient steel building framing system. On August 19, 2019, the Company incorporated Steel Hemp Homes Inc. in the state of California as a wholly owned subsidiary to run the steel building frame business as a separate division. On July 1, 2018, the Company approved a reverse split of its common stock in a ratio of 1:1,000; a change of the Company’s corporate name to Eco Innovation Group, Inc.; and the change of the Company’s trading symbol to ECOX. The reverse split of the Company’s common stock was effective August 29, 2018.

On February 28, 2020, our current CEO and controlling Stockholder, Julia Otey-Raudes, took over management and control of the company, initiating a new business plan and winding down the previous business. In the related change of control transaction, Ms. Otey acquired 30,000,000 shares of super-voting Preferred Series A stock on February 28, 2020, which represent all of the authorized and outstanding Series A Preferred Stock and a voting interest of approximately 94% of the Company’s outstanding voting stock.

Under its business plan implemented in February 2020, the Company is an innovation incubator platform devoted to globally important paradigm shifts in technology, sustainable and carbon negative products development and practical deployment worldwide.  

On February 20, 2020, the Company increased its authorized common shares to 500,000,000 with a par value of $0.001, on December 21, 2021, the Company increased its authorized common shares to 1,000,000,000 with a par value of $0.001, and on April 1, 2022, the Company increased its authorized common shares to 2,000,000,000 with a par value of $0.0001. On June 8, 2022, the Company increased its authorized common stock from 2,000,000,000 shares at $0.0001 par value per share to 5,000,000,000 shares at $0.0001 par value per share, effective June 9, 2022.

The Company has authorized 50,000,000 shares of Preferred Stock, of which 30,000,000 shares have been designated as Series A Convertible Preferred Stock, with 30,000,000 shares issued and outstanding, and 1,000,000 million shares have been designated as Series C Convertible Preferred Stock, with 167,500 shares issued and outstanding. Holders of Series A Convertible Preferred Stock hold rights to vote on all matter requiring a shareholder vote at 100 common shares vote equivalent for each share of Series A Convertible Preferred Stock held. As of the date of this filing, our CEO, CFO, board chair and sole director, Julia Otey-Raudes, is the sole holder of the 30,000,000 Series A Convertible Preferred Stock outstanding.

On October 4, 2021, Eco Innovation Group, Inc. (the "Company") entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Spruce Construction, Inc., an Alberta Business Corporation (“Spruce Construction”) and Timothy Boetzkes ("Boetzkes"), a resident of the Province of Alberta, Canada and the sole shareholder of Spruce Construction, pursuant to which, the Company, Boetzkes and Spruce Construction agreed to effect an asset purchase agreement for existing construction equipment and form a new Canadian engineering and construction company in Canada, Spruce engineering & Construction Inc. The Company will own 85% of the voting interests of Spruce Engineering & Construction Inc., with Boetzkes owning 10% and Patrick Laurie 5%. See Note 6 – Acquisition for more information.

On January 4, 2022, the Company formed a subsidiary, ECOX Spruce Construction, Inc., a California corporation (“ECOX Spruce Construction”), for the purpose of starting a green construction division. On January 25, 2022, Eco Innovation Group, Inc. (the "Company"), through its California subsidiary ECOX Spruce Construction , entered into a staffing and administrative services agreement (the “Construction Services Agreement”) with Blueprint Construction, a licensed California general contractor (“Blueprint Construction”) and Edgar E. Aguilar ("Aguilar"), a resident of California and the principal of Blueprint Construction, pursuant to which, Blueprint Construction, Aguilar and ECOX Spruce Construction agreed that ECOX Spruce Construction will oversee the operation of Blueprint’s construction business in California. Under the Company’s existing LOI with Aguilar, Blueprint Construction will own 20% of the equity interests of ECOX Spruce Construction Inc., and the Company will own 80%.

Under the Construction Services Agreement, the Company agreed to manage all of Blueprint Construction’s contracting business on behalf of Blueprint Construction, for a renewable term of one year. Through ECOX Spruce Construction, the Company will provide all necessary corporate administration, shared services, compliance needs, construction staffing placement, general business infrastructure and support necessary for Blueprint’s performance under its general contracting and subcontracting projects as Blueprint’s exclusive provider of such services. Blueprint’s current active projects consist of a subcontracting agreement to renovate U.S. military base facilities, with a job value of $136,000. The Construction Services Agreement provides that ECOX Spruce Construction will receive a management fee equal to twenty percent (20%) of all collected cash revenues from Blueprint’s business.

Under its business plan implemented in February 2020, the Company is an innovation incubator platform devoted to globally important paradigm shifts in technology, sustainable and carbon negative products development and practical deployment worldwide. The Company seeks to license and develop innovative technologies in the sustainable and renewable energy field.

Accounting policies and procedures are listed below. The Company has adopted a December 31 year-end.

Basis of Presentation

The Company has prepared the financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP). The results for the interim period are not necessarily indicative of the results to be expected for the year.

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 affect 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less as cash equivalents. As of June 30, 2022, December 31, 2021, and December 31, 2020, the Company had no cash or cash equivalent balances in excess of federally insured amounts. The Company’s policy is to invest excess funds in only well capitalized financial institutions.

Earnings per share

Basic Earnings Per Share (EPS) is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS includes the potential dilution that could occur if options or other contracts to issue common stock were exercised or converted under outstanding convertible debt and outstanding common stock warrants.

Long-Lived Assets

The Company’s long-lived assets, including intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the asset by comparing the undiscounted future net cash flows expected to result from the asset to its carrying value. If the carrying value exceeds the undiscounted future net cash flows of the asset, an impairment loss is measured and recognized. An impairment loss is measured as the difference between the net book value and the fair value of the long-lived asset. During the quarter ended June 30, 2022, and the years ended December 31, 2021 and 2020, the Company evaluated long lived assets for impairment determined no impairment was necessary.

Derivative Financial Instruments

The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The Company used a Black Scholes valuation model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted price in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:

The estimated fair values for financial instruments are determined at discrete points in time based on relevant market information. These estimates involve uncertainties and cannot be determined with precision. We measure our investment in marketable securities at fair value on a recurring basis. The Company’s trading securities are valued using inputs observable in active markets and are therefore classified as Level 1 within the fair value hierarchy. Investments and derivative liabilities are valued on a recurring basis.

The following summarizes the fair value of assets and liabilities measured on a recurring basis:

Stock- Based Compensation

Stock-based compensation is computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 718. FASB ASC 718 requires all share-based payments to employees and non- employees be recognized as compensation expense in the consolidated financial statements based on their fair values. The expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). As of June 30, 2022, the Company has not adopted a Stock Option Plan and has not issued any options.

Property, Plant and Equipment

Fixed assets are carried at cost. Depreciation is computed using the straight-line method of depreciation over the assets’ estimated useful lives. Maintenance and repairs are charged to expense as incurred; major renewals and improvements are capitalized. When items of fixed assets are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in income.

Income Taxes

The provision for income taxes is the total of the current taxes payable and the net of the change in the deferred income taxes. Provision is made for the deferred income taxes where differences exist between the period in which transactions affect current taxable income and the period in which they enter into the determination of net income in the financial statements.

Revenue Recognition

Effective January 1, 2018, the Company recognizes revenue in accordance with Accounting Standards Codification 2014- 09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific revenue recognition guidance throughout the Industry Topics of the Accounting Standards Codification. The updated guidance states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also provides for additional disclosures with respect to revenues and cash f lows arising from contracts with customers. The standard will be effective f or the first interim period within annual reporting periods beginning after December 15, 2017, and the Company adopted the standard using the modified retrospective approach effective January 1, 2018.

Under the new revenue standards, the Company recognizes revenues when its customer obtains control of promised goods or services, in an amount that reflects the consideration which it expects to receive in exchange for those goods. The Company recognizes revenues following the five-step model prescribed under ASU No. 2014-09: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation. The Company recognized revenue from the sale of services at the time in which the services are delivered pursuant to the contract.

The Company had $427,761 in revenues during the six months ended June 30, 2022 and $0 in revenues during the six months ended June 30, 2021, all related to construction projects in its subsidiaries.

Other Comprehensive Income (Loss)

Other comprehensive income (loss) includes foreign currency translation gains and losses. The cumulative amount of translation gains and losses are reflected as a separate component of stockholders’ equity (deficit) in the consolidated balance sheets, as accumulated other comprehensive income.

Reclassification

Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation primarily the change to the Company’s par value being reflected retroactively and to reclassify related party convertible debt.

NOTE 2. GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying consolidated financial statements, the Company had net losses during the quarter ended June 30, 2022 and the year ended December 31, 2021 and an accumulated deficit at June 30, 2022. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. Management’s plans are to obtain additional financing in the debt and equity markets while it develops its business model. The Company’s existence is dependent upon management’s ability to develop profitable operations and to obtain additional funding sources. There can be no assurance that the Company’s financing efforts will result in profitable operations or the resolution of the Company’s liquidity problems. The accompanying statements do not include any adjustments that might result should the Company be unable to continue as a going concern.

NOTE 3. RECENTLY ISSUED ACCOUNTING STANDARDS

Management does not believe that any recently issued but not yet adopted accounting will have a material effect on the Company’s results of operation or on the reported amounted of its assets and liabilities upon adoption.

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity). ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock, which results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Additionally, ASU 2020-06 affects the diluted earnings per share calculation for instruments that may be settled in cash or shares and for convertible instruments and requires enhanced disclosures about the terms of convertible instruments and contracts in an entity's own equity. ASU 2020-06 allows entities to use a modified or full retrospective transition method and is effective for smaller reporting companies for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. The Company is evaluating the impact that this ASU may have on its consolidated financial statements.

NOTE 4. STOCKHOLDERS’ EQUITY (DEFICIT)

Preferred Stock

The Company has authorized 50,000,000 shares of Preferred Stock, of which 30,000,000 shares have been designated as Series A Convertible Preferred Stock, with 30,000,000 shares issued and outstanding, and 1,000,000 million shares have been designated as Series C Convertible Preferred Stock, with 205,000 shares issued and outstanding as of June 30, 2022.

Holders of Series A Convertible Preferred Stock hold rights to vote on all matter requiring a shareholder vote at 100 common shares vote equivalent for each share of Series A Convertible Preferred Stock held. As of the date of this filing, our CEO, CFO, board chair and sole director, Julia Otey-Raudes, is the sole holder of the 30,000,000 Series A Convertible Preferred Stock outstanding.

The Series C Convertible Preferred Stock, with 1,000,000 shares authorized and 205,000 issued and outstanding at June 30, 2022, has no voting rights, has a Stated Value of $1.00 per share, and with a par value of $0.001 per share, is redeemable after issuance by the Company at various increased prices at time intervals up to the 6-month anniversary of issuance and is mandatorily fully redeemable on the 12-month anniversary of issuance. The Series C Preferred Stock is convertible by the holder into our common shares, commencing on the 6-month anniversary of issuance at a 37% discount to the public market price.

On July 15, 2021, the Company designated 1,000,000 shares of Series C Convertible Preferred Stock. The Series C Convertible Preferred Stock ranks senior to the common stock with respect to dividends and right of liquidation and has no voting rights. The Series C Convertible Preferred Stock has a 10% cumulative annual dividend. In the event of default, the dividend rate increases to 22%. The Company may not, with consent of a majority of the holders of Series C Convertible Preferred Stock, alter or changes the rights of the Series C Convertible Preferred Stock, amend the articles of incorporation, create any other class of stock ranking senior to the Series C Convertible Preferred Stock, increase the authorized shares of Series C Convertible Preferred Stock, or liquidate or dissolve the Company. Beginning 180 days from issuance, the Series C Convertible Preferred Stock may be converted into common stock at a price based on 63% of the average of the two lowest trading prices during the 15 days prior to conversion. The Company may redeem the Series C Convertible Preferred Stock during the first 180 days from issuance, subject to early redemption penalties of up to 35%. The Series C Convertible Preferred Stock must be redeemed by the Company 12 months following issuance if not previously redeemed or converted. Based on the terms of the Series C Convertible Preferred Stock, the Company determined that the preferred stock is mandatorily redeemable and will be accounted for as a liability under ASC 480.

During the six months ended June 30, 2022, the Company entered into purchase agreements for the sale of 166,250 shares of Series C Convertible Preferred Stock with Geneva Roth Remark Holdings. As of June 30, 2022, the Company owes $3,084 in accrued dividends, reflected as interest expense, and the carrying value of the Series C Preferred stock was $156,685, net of unamortized discount of $9,565. During the six months ended June 30, 2022, $221,250 of Series C Convertible Preferred Stock and accrued dividends of $11,063 were converted into 153,892,604 shares of common stock.

Common Stock

The Company has 5,000,000,000 shares of $0.0001 par value per share common stock authorized.

On June 8, 2022, following approval by the Company’s Board of Directors and a majority of the outstanding voting stock of the Company, the Company filed Fourth Amended and Restated Articles of Incorporation with the State of Nevada reflecting an increase in the Company’s authorized common stock from 2,000,000,000 shares at $0.0001 par value per share to 5,000,000,000 shares at $0.0001 par value per share, effective June 9, 2022.

During the six months ended June 30, 2022, 115,369,190 shares of common stock were issued by the Company for the conversion of $238,632 in principal and interest of a convertible note.

During the quarter ended June 30, 2022, $221,250 of Series C Convertible Preferred Stock and accrued dividends of $11,063 were converted into 153,892,604 shares of common stock.

NOTE 5.  ACQUISITION

Asset Purchase Agreement

On October 4, 2021, Eco Innovation Group, Inc. (the "Company") entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Spruce Construction, Inc., an Alberta Business Corporation (“Spruce Construction”) and Timothy Boetzkes ("Boetzkes"), a resident of the Province of Alberta, Canada and the sole shareholder of Spruce Construction, pursuant to which, the Company, Boetzkes and Spruce Construction agreed to effect an asset purchase agreement for existing construction equipment and form a new Canadian engineering and construction company in Canada. The Company entered into the Asset Purchase Agreement for the purpose of launching a green construction division in Alberta, Canada.

Under the Asset Purchase Agreement, the Company agreed to pay Boetzkes one million shares of the Company’s restricted common stock and approximately $104,000 CAD in cash over the next 12 months for substantially all of the assets and business of Spruce Construction, consisting of vehicles, tools and equipment for the construction industry, the Spruce Construction name, and the existing book of construction business of Spruce Construction. Pursuant to the Asset Purchase Agreement, the Company, Boetzkes and Patrick Laurie, the CEO of the Company’s Canadian technology subsidiary, ECOIG Canada, have formed a new Alberta Business Corporation to own and deploy the construction assets, named Spruce Engineering & Construction Inc. The Company will own 85% of the voting interests of Spruce Engineering & Construction Inc., with Boetzkes owning 10% and Patrick Laurie 5%.

The closing of the Asset Purchase Agreement was subject to the satisfaction or waiver of customary conditions to closing, as disclosed in the term sheet for the project disclosed by the Company and filed as Exhibit 10.1 in the Company’s Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on August 11, 2021. The Company is accounting for the acquisition as a business combination under the guidance of ASC805.

On April 21, 2022, the Company entered into an amendment number one to the Asset Purchase Agreement with Boetzkes and Spruce Construction, to extend the due date for business reimbursement payments in the amount of approximately $56,000 due to Boetzkes and Spruce Construction under the Asset Purchase Agreement. Under the Asset Purchase Agreement the $56,000 payment was due at 6 months after closing, and pursuant to the April 21, 2022 amendment, that payment is now due at 12 months after the closing date, or October 3, 2022.

Lock-Up Leak-Out Agreement

On October 4, 2021, in connection with the Asset Purchase Agreement, Boetzkes entered into a Lock-Up and Leak-Out Agreement with the Company pursuant to which, among other thing, such shareholder agreed to certain restrictions regarding the resale of the common stock issued pursuant to the Asset Purchase Agreement for a period of six months from the date of the Asset Purchase Agreement, as more fully detailed therein.

Shareholders Agreement

On October 4, 2021, in connection with the Asset Purchase Agreement, the Company entered into a shareholders agreement (the “Shareholders Agreement”) with Timothy Boetzkes and Patrick Laurie. Under the Shareholders Agreement, Patrick Laurie agreed to serve as the Chief Executive Officer and Timothy Boetzkes agreed to serve as the Chief Operating Officer of Spruce Engineering & Construction Inc. The Shareholders Agreement provides for certain terms of governance, restrictive covenants including confidentiality and noncompetition, and transfer restrictions on the parties’ equity with regards to Spruce Engineering & Construction Inc.

Employment Agreements

On October 4, 2021, in connection with the Asset Purchase Agreement, Spruce Engineering & Construction Inc., of which the Company is the 85% voting equity holder, entered into employment agreements (the “Employment Agreements”) with Timothy Boetzkes and Patrick Laurie, pursuant to which Patrick Laurie shall serve as the Chief Executive Officer and Timothy Boetzkes shall serve as the Chief Operating Officer of Spruce Engineering & Construction Inc. Ancillary to the Employment Agreements, Boetzkes and Laurie also entered into restricted stock award agreements governing their minority equity stakes in Spruce Engineering & Construction Inc., which provide for a repurchase option allowing Spruce Engineering & Construction Inc. to clawback equity in the event of the employees’ for-cause termination.

The acquisition of Spruce Construction is being accounted for as a business combination under ASC 805. The Company is continuing to gather evidence to evaluate what identifiable intangible assets were acquired, such as a customer list, and the fair value of each, and expects to finalize the fair value of the acquired assets within one year of the acquisition date. 

The aggregate preliminary fair value of consideration for the Spruce Construction acquisition was as follows:

During the six months ended June 30, 2022, the Company has paid $0 against the note payable due on October 3, 2022.

The following information summarizes the preliminary allocation of the fair values assigned to the assets acquired and liabilities assumed at the acquisition date:

As a result of the acquisition, The Company recognized goodwill of $103,188, representing the difference between the value of the acquired business, the assets acquired, and the initial noncontrolling interest of $22,000, representing 15% of the total value of the business that was not acquired by the Company.

NOTE 6. RELATED PARTY TRANSACTIONS

Accrued officer compensation as of June 30, 2022 and December 31, 2021 was $427,050 and $381,800 related to services rendered by the Company’s Chief Executive officer.

NOTE 7. CONVERTIBLE NOTES

Convertible Notes Payable

On March 22, 2021, the Company entered into a convertible promissory note agreement with Claudia Villalta for the issuance of a convertible promissory note with a principal balance of $30,000. The note carries a 10% interest rate per annum and is convertible at a fixed price of $0.06 a share into a total of 500,000 common shares. Due to the variable conversion feature on the other notes, this note is tainted with no net share settlement available, the note conversion feature was bifurcated from the note and recorded as a derivative liability. This note was in default as of June 30, 2022.

On June 4, 2021, the Company entered into a securities purchase agreement (the “Labrys SPA”) with Labrys Fund, LP (“Labrys”), pursuant to which the Company issued a 12% promissory note (the “Labrys Note”) with a maturity date of June 3, 2022 (the “Labrys Maturity Date”), in the principal sum of $1,000,000. Pursuant to the terms of the Labrys Note, the Company agreed to pay to $225,000 (the “Principal Sum”) to Labrys and to pay interest on the principal balance at the rate of 12% per annum. The Labrys Note carries an original issue discount (“OID”) of $22,500. Accordingly, on the Closing Date (as defined in the Labrys SPA), Labrys paid the purchase price of $202,500 in exchange for the Labrys Note. Labrys may convert the Labrys Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the Labrys Note) at any time at a fixed conversion price equal to $0.023 per share but can be reset if the Company issues instruments at a lower price. The Company paid $14,650 of deferred financing costs which are amortized through the maturity date of the note. During the year ended December 31, 2021 the company made payments of $77,000, reducing the outstanding note balance to $148,000. Due to the dilutive issuance clauses on the conversion price, the note conversion feature was bifurcated from the note and recorded as a derivative liability. During the six months ended June 30, 2022, $139,500 of principal and $27,000 in accrued interest was converted into 54,369,190 shares of common stock. In addition the company repaid $8,500 in principal to settle the note in full.

On August 23, 2021, the Company entered into a securities purchase agreement (the “Blue Lake SPA”) with Blue Lake Partners, LLC (“Blue Lake”), pursuant to which the Company issued a 12% promissory note (the “Blue Lake Note”) with a maturity date of August 23, 2022 (the “Blue Lake Maturity Date”), in the principal sum of $150,000. Pursuant to the terms of the Blue Lake Note, the Company agreed to pay to $150,000 (the “Principal Sum”) to Blue Lake and to pay interest on the principal balance at the rate of 12% per annum. The Blue Lake Note carries an original issue discount (“OID”) of $15,000. Accordingly, on the Closing Date (as defined in the Blue Lake SPA), Blue Lake retained an additional $9,450 of legal fees and paid the purchase price of $125,500 in exchange for the Blue Lake Note. Blue Lake may convert the Blue Lake Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the Blue Lake Note) at any time at a fixed conversion price equal to $0.02 per share but can be reset if the Company issues instruments at a lower price. Due to the dilutive issuance clauses on the conversion price, the note conversion feature was bifurcated from the note and recorded as a derivative liability. During the six months ended June 30, 2022, $70,410 of principal was converted into 45,719,047 shares of common stock.

The Company may prepay the Blue Lake Note at any time prior to the date that an Event of Default (as defined in the Blue Lake Note) occurs at an amount equal to 100% of the Principal Sum then outstanding plus accrued and unpaid interest (no prepayment premium) plus $7,530 for administrative fees. The Blue Lake Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, and breach of provisions of the Blue Lake Note or Blue Lake SPA.

Upon the occurrence of any Event of Default, the Blue Lake Note shall become immediately due and payable and the Company shall pay to Blue Lake, in full satisfaction of its obligations hereunder, an amount equal to the Principal Sum then outstanding plus accrued interest multiplied by 125% (the “Default Amount”). Upon the occurrence of an Event of Default, additional interest will accrue from the date of the Event of Default at the rate equal to the lower of 16% per annum or the highest rate permitted by law.

The Blue Lake Note requires that the Company reserve from its authorized and unissued common stock a number of shares equal to the greater of: (a) 11,250,000 shares of our common stock, or (b) the sum of (i) the number of shares of common stock issuable upon conversion of or otherwise pursuant to the Blue Lake Note and such additional shares of common stock, if any, as are issuable on account of interest on the Note pursuant to the Blue Lake SPA issuable upon the full conversion of the Blue Lake Note (assuming no payment of the principal amount or interest) as of any issue date multiplied by (ii) one and a half. The Company is subject to penalties for failure to timely deliver shares to Blue Lake following a conversion request.

The Blue Lake SPA and the Blue Lake Note contain covenants and restrictions common with this type of debt transaction. Furthermore, the Company are subject to certain negative covenants under the Blue Lake SPA and the Blue Lake Note, which we believe are customary for transactions of this type. At June 30, 2022, we were in compliance with all covenants and restrictions.

In conjunction with the issuance of the Blue Lake Note, the Company issued a five year warrant exercisable for 6,000,000 shares of common stock at an exercisable price of $0.025 per share subject to anti-dilution and price protection adjustments. The warrants are accounted for as a liability based on the variable number of shares issuable under outstanding convertible debt and the warrants.

On August 23, 2021, the Company entered into a securities purchase agreement (the “Coventry SPA”) with Coventry Enterprises, LLC (“Coventry”), pursuant to which the Company issued a 10% promissory note (the “Coventry Note”) with a maturity date of May 9, 2023 (the “Coventry Maturity Date”), in the principal sum of $150,000. Pursuant to the terms of the Coventry Note, the Company agreed to pay $150,000 (the “Principal Sum”) to Coventry and to pay interest on the principal balance at the rate of 10% per annum. The Coventry Note carries an original issue discount (“OID”) of $30,000. Accordingly, on the Closing Date (as defined in the Coventry SPA), Coventry retained an additional $7,200 of legal fees and paid the purchase price of $112,800 in exchange for the Coventry Note. Coventry may convert the Coventry Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the Coventry Note) in the event of default at a variable conversion price equal to 90% of the lowest per-share during the 20 trading day period before the conversion. The note requires monthly payments of $23,571 commencing on November 8, 2022.

In conjunction with the issuance of the Coventry Note, the Company issued 10,000,000 shares of common stock. The shares are accounted for as deferred financing costs with a value of $30,000 which will be amortized through the maturity date of the note.

Convertible notes payable are comprised of the following:

As of June 30, 2022, there were 1,118,265,306 shares of common stock that may be issued under the convertible notes payable described above.

As of June 30, 2022 and December 31, 2021, unamortized debt discount was $79,977 and $198,781, respectively. During the six months ended June 30, 2022, the Company amortized debt discount of $186,004 to interest expense. Accrued interest on convertible notes was $34,159 as of June 30, 2022.

Convertible Notes Payable – Related Parties

On March 1, 2016, the Company executed two convertible notes of $4,902 each with former executives of the Company. These notes are each convertible into 50,000,000 shares of common stock. These notes are non-interest bearing. On October 14, 2019, one of these notes converted into common stock. In May 2020, Robert L. Hymers purchased half of the remaining convertible promissory note and its related conversion rights from John English in a private transaction. In May 2020, John English converted principal of $2,451 into 25,000,000 shares of common stock. The remaining principal balance owed to Robert L. Hymers of $2,451 was convertible into 25,000,000 shares of stock at December 31, 2021. On January 10, 2022, the Company issued 18,500,000 shares of common stock to Hymers upon partial conversion of the principal balance of the promissory note, so that as of the date of this filing, the note is convertible into 6,500,000 shares of common stock.

On December 9, 2019, the Company executed a convertible note with Pinnacle Consulting Services Inc.(“Pinnacle”), which is owned by Robert Hymers, for $40,000 which matured on June 9, 2020. This note bears interest at 5% per annum, which is convertible into shares of the Company’s common stock. The note is convertible at the option of the holder, into such number of fully paid and non-assessable shares of common stock as is determined by dividing that portion of the outstanding principal balance under the note by the Conversion Price, which is a 35% discount of the lowest reported sale price of the common stock for the 15 trading days immediately prior to the date of conversion. Due to the variable conversion feature, the note conversion feature was bifurcated from the note and recorded as a derivative liability. This note was in default as of June 30, 2022.

On June 30, 2020, the Company executed a convertible note with Pinnacle for $21,000 due on June 30, 2021. This note bears interest at 10% per annum and is convertible (in whole or in part), at the option of the Holder, into such number of fully paid and non-assessable shares of common stock as is determined by dividing that portion of the outstanding principal balance under this Note by the Conversion Price, which is a 35% discount of the lowest reported sale price of the common stock for the 15 trading days immediately prior to the date of conversion. Due to the variable conversion feature, the note conversion feature was bifurcated from the note and recorded as a derivative liability. This note was in default as of June 30, 2022.

On October 19, 2021, the Company executed a convertible note with Pinnacle, for $180,000, to settle outstanding consulting fees, due on April 19, 2022. This note bears interest at 10% per annum and is convertible (in whole or in part), at the option of the Holder, into such number of fully paid and non-assessable shares of common stock as is determined by dividing that portion of the outstanding principal balance under this Note by the Conversion Price of $0.0075 but can be reset if the Company issues instruments at a lower price. Due to the dilutive issuance clauses on the conversion price, the note conversion feature was bifurcated from the note and recorded as a derivative liability.

On March 23, 2022, the Company executed a convertible note with Robert Hymers for $55,000 due on September 19, 2022. This note bears interest at 10% per annum and is convertible (in whole or in part), at the option of the Holder, into such number of fully paid and non-assessable shares of common stock as is determined by dividing that portion of the outstanding principal balance under this Note by the Conversion Price, $0.000098. On April 21, 2022, the Company and Hymers entered into a debt exchange agreement, whereby the Company exchanged the $55,000 Note convertible at a Conversion Price of $0.000098 per share for a $60,000 note convertible at $0.002 per share, all other note terms remaining unchanged. The Company determined that due to the change in fair value of the conversion option being significant, the modification of the note should be accounted for as a debt extinguishment, with the resulting loss on extinguishment being recorded in additional paid-in capital because Hymers is a related party.

On March 25, 2022, the Company executed a convertible note with Alma Otey, a related party, for $23,000, due on July 13, 2022. This note bears interest at 10% per annum and is convertible (in whole or in part), at the option of the Holder, into such number of fully paid and non-assessable shares of common stock as is determined by dividing that portion of the outstanding principal balance under this Note by the Conversion Price of $0.000098 but can be reset if the Company issues instruments at a lower price. Due to the dilutive issuance clauses on the conversion price, the note conversion feature was bifurcated from the note and recorded as a derivative liability. The note requires monthly payments of $7,333.34 until the balance is paid in full. During the six months ended June 30, 2022, the Company has made payments of $5,000 on the note

Convertible notes payable – related parties are comprised of the following:

As of June 30, 2022, there were 361,481,161 shares of common stock that may be issued under the convertible notes payable described above.

As of June 30, 2022 and December 31, 2021, unamortized debt discount was $24,714 and $107,802, respectively. During the quarter ended June 30, 2022, the Company amortized debt discount of $197,081 to interest expense. Accrued interest on convertible notes was $13,494 as of June 30, 2022.

Derivative liabilities

The Company determined that the conversion options in the certain of the notes discussed above met the definition of a liability in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity’s Own Stock. The Company bifurcated the embedded conversion option in the note once the note becomes convertible and account for it as a derivative liability.

During the quarter ended June 30, 2022, the fair value of new derivative liabilities on the new issuance of debt amounted to $103,993 upon inception, with debt discount of $103,993 recognized. The Company recognized a combined loss on the change in fair value of the derivative liability and settlement of derivatives through payment of convertible notes of $664,902 during the six months ended June 30, 2022. The Black Scholes valuation model included inputs of volatility of between 209% and 625%, a dividend yield of 0%, risk free rate of 0.28%-3.01% and a term of between 0.5 years and 4.5 years.

The table below presents the change in the fair value of the derivative liability:

NOTE 8. SUBSEQUENT EVENTS

On July 5, 2022, the Company issued 23,958,333 shares of common stock to an accredited investor in partial conversion of a promissory note issued June 30, 2020 in the principal amount of $21,000. An amount of $11,500 of principal was converted at a per-share conversion price of $0.00048.

On July 15, 2022, the Company issued 38,750 shares of Series C Preferred Stock to Geneva Roth Remark Holdings pursuant to a stock purchase agreement for consideration of $35,000. The 38,750 shares of Series C Preferred Stock are convertible to shares of common stock at a discount rate of 37% from the average of the two lowest closing bid prices for the Company’s common stock during the 15 trading days prior to the conversion. As of the date of this quarterly report, the Company has 205,500 shares of Series C Preferred Stock outstanding.

On July 28, 2022, the Company issued 22,936,530 shares of common stock to an accredited investor in conversion of a promissory note issued June 30, 2020 in the principal amount of $21,000. An amount of $13,761 of the principal and interest on the note was converted at a per-share conversion price of $0.0006.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This discussion and analysis may include statements regarding our expectations with respect to our future performance, liquidity, and capital resources. Such statements, along with any other non-historical statements in the discussion, are forward-looking. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, factors listed in other documents we file with the Securities and Exchange Commission (the "SEC''). We do not assume an obligation to update any forward-looking statements. Our actual results may differ materially from those contained in or implied by any of the forward-looking statements contained herein.

The outbreak of COVID-19 evolved into a global pandemic as COVID-19 spread to many regions of the world. In response to COVID-19, governmental authorities around the world implemented measures to reduce the spread of COVID-19. These measures have and may continue to adversely affect workforces, customers, supply chains, consumer sentiment, economies, and financial markets. In addition, decreased consumer spending has and may continue to lead to an economic downturn globally.

Specifically, numerous state and local jurisdictions have and may in the future impose shelter-in-place orders, quarantines, shut-downs of non-essential businesses, and similar government orders and restrictions on their residents to control the spread of COVID-19. Such orders or restrictions have resulted in temporary facility closures, work stoppages, slowdowns and travel restrictions, among other effects, thereby adversely impacting our operations. As a result of COVID-19, we have experienced a reduction in sales of our products and slower lead times with respect to the manufacturing of our products. In addition, a downturn in the United States economy may have an adverse impact on discretionary consumer spending which may have a significant impact on our business operations and/or our ability to generate revenues and profits.

The extent to which COVID-19 impacts our business and operating results will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19, including variants such as the delta variant, and the actions to contain COVID-19 or treat its impact, among others. We do not yet know the full extent of the impacts of COVID-19 on our business; however, these effects could have a material impact on our operations and financial condition.

Overview and Financial Condition

We are an innovative entrant into the green technology licensing and construction space, and as a recently registered publicly traded company with our initial S-1 registration statement declared effective as of January 15, 2021 and our common stock registered under Section 12(g) of the Exchange Act on April 27, 2022, we are one of the few publicly-traded green technology development firms in the U.S. As of the date of this Quarterly Report, we have more than two years of implementing our business plan under new management following our change of control in late February 2020.

Our total operating and other expenses in excess of our gross profit have resulted in a net loss of $6,632,146 for the year ended December 31, 2021, and a net loss of $2,548,148 for the six months ended June 30, 2022, which, considered in light of our past financial performance, give rise to the going concern statement below. In furthering our business, as described in Item 1 above concerning our business and operations, we are seeking to license commercially viable green technologies that fulfill concrete market demands, and develop product applications that we can sell into the market. Our technology licensing and product development activities are spearheaded by Julia Otey-Roades, our Chief Executive Officer.

Green Construction Division – USA and Canada

Spruce Engineering & Construction, Inc. – Canada

Asset Purchase Agreement

On October 4, 2021, Eco Innovation Group, Inc. (the “Company”) entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Spruce Construction, Inc., an Alberta Business Corporation (“Spruce Construction”) and Timothy Boetzkes (“Boetzkes”), a resident of the Province of Alberta, Canada and the sole shareholder of Spruce Construction, pursuant to which, the Company, Boetzkes and Spruce Construction agreed to effect an asset purchase agreement for existing construction equipment and form a new Canadian engineering and construction company in Canada.

Under the Asset Purchase Agreement, the Company agreed to pay Boetzkes one million shares of the Company’s restricted common stock for substantially all of the assets and business of Spruce Construction, consisting of vehicles, tools and equipment for the construction industry, the Spruce Construction name, and the existing book of construction business of Spruce Construction. Pursuant to the Asset Purchase Agreement, the Company, Boetzkes and Patrick Laurie, the CEO of the Company’s Canadian technology subsidiary, ECOIG Canada, have formed a new Alberta Business Corporation to own and deploy the construction assets, named Spruce Engineering & Construction Inc. The Company will own 85% of the voting interests of Spruce Engineering & Construction Inc., with Boetzkes owning 10% and Patrick Laurie 5%.

On April 21, 2022, the Company entered into an amendment number one to the Asset Purchase Agreement with Boetzkes and Spruce Construction, to extend the due date for business reimbursement payments in the amount of approximately $56,000 due to Boetzkes and Spruce Construction under the Asset Purchase Agreement. Under the Asset Purchase Agreement the $56,000 payment was due at 6 months after closing, and pursuant to the April 21, 2022 amendment, that payment is now due at 12 months after the closing date, or October 3, 2022. The closing of the Asset Purchase Agreement was subject to the satisfaction or waiver of customary conditions to closing, as disclosed in the term sheet for the project disclosed by the Company and filed as Exhibit 10.1 in the Company’s Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on August 11, 2021.

Lock-Up Leak-Out Agreement

On October 4, 2021, in connection with the Asset Purchase Agreement, Boetzkes entered into a Lock-Up and Leak-Out Agreement with the Company pursuant to which, among other thing, such shareholder agreed to certain restrictions regarding the resale of the common stock issued pursuant to the Asset Purchase Agreement for a period of six months from the date of the Asset Purchase Agreement, as more fully detailed therein.

Shareholders Agreement

On October 4, 2021, in connection with the Asset Purchase Agreement, the Company entered into a shareholders agreement (the “Shareholders Agreement”) with Timothy Boetzkes and Patrick Laurie. Under the Shareholders Agreement, Patrick Laurie agreed to serve as the Chief Executive Officer and Timothy Boetzkes agreed to serve as the Chief Operating Officer of Spruce Engineering & Construction Inc. The Shareholders Agreement provides for certain terms of governance, restrictive covenants including confidentiality and noncompetition, and transfer restrictions on the parties’ equity with regards to Spruce Engineering & Construction Inc.

Employment Agreements

On October 4, 2021, in connection with the Asset Purchase Agreement, Spruce Engineering & Construction Inc., of which the Company is the 85% voting equity holder, entered into employment agreements (the “Employment Agreements”) with Timothy Boetzkes and Patrick Laurie, pursuant to which Patrick Laurie shall serve as the Chief Executive Officer and Timothy Boetzkes shall serve as the Chief Operating Officer of Spruce Engineering & Construction Inc. Ancillary to the Employment Agreements, Boetzkes and Laurie also entered into restricted stock award agreements governing their minority equity stakes in Spruce Engineering & Construction Inc., which provide for a repurchase option allowing Spruce Engineering & Construction Inc. to clawback equity in the event of the employees’ for-cause termination.

ECOX Spruce Construction, Inc. – USA

On January 4, 2022, the Company formed a subsidiary, ECOX Spruce Construction, Inc., a California corporation (“ECOX Spruce Construction”), for the purpose of starting a green construction division. Pursuant to a letter of intent (LOI) between ECOX and Edgar E. Aguilar ("Aguilar"), a resident of California and licensed California general contractor, Aguilar agreed to manage the operation of ECOX Spruce Construction’s construction business in California as its Responsible Managing Officer. Under the Company’s existing LOI with Aguilar, Blueprint Construction will own 20% of the equity interests of ECOX Spruce Construction Inc., and the Company will own 80%. ECOX Spruce Construction is in the process of securing a general contractor license in California, with the Company’s Chief Executive Officer as principal applicant. That application was approved and the Company is in the process of securing workman’s compensation insurance and bonding so that the license will become active. Once ECOX Spruce Construction is fully licensed and bonded as a California general contractor, the Company intends to seek certification as a Women’s Business Enterprise.

Going Concern

Because of recurring operating losses, net operating cash flow deficits, and an accumulated deficit, our independent auditors have indicated in their report on our June 30, 2022 financial statements that there is substantial doubt about our ability to continue as a going concern.

The continuation of our business is dependent upon our ability to generate sufficient cash flows from operations to meet its obligations, in which we have not been successful, and/or obtaining additional financing from our stockholders or other sources, as may be required. The issuance of additional equity or convertible debt securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

Corporate Information

The Company’s shares are quoted on the OTC Markets Pink Sheet tier, under the symbol ECOX. Our executive offices are located at 16525 Sherman Way, Suite C-1, Van Nuys, CA 91406, and our telephone number is (800) 922-4356.

We maintain an internet website, and our internet address is https://www.ecoig.com. The information on our website is not incorporated by reference in this Quarterly Report or in any other filings we make with the Securities and Exchange Commission (“SEC”).

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.

We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the prior June 30, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” will have the meaning associated with it in the JOBS Act.

Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements, and, if their revenues are less than $100 million, not providing an independent registered public accounting firm attestation on internal control over financial reporting. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our ordinary shares held by non-affiliates exceeds $250 million as of the end of the second fiscal quarter of that year or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our ordinary shares held by non-affiliates exceeds $700 million as of the end of the second fiscal quarter of that year. 

Reports to security holders

We are required to file annual, quarterly and current reports with the Securities and Exchange Commission and our filings are available to the public over the internet at the Securities and Exchange Commission’s website at http://www.sec.gov. The public may read and copy any materials filed by us with the Securities and Exchange Commission at the Securities and Exchange Commission’s Public Reference Room at 100 F Street N.E. Washington D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at 1-800-732-0330. The SEC also maintains an Internet site that contains reports, proxy and formation statements, and other information regarding issuers that file electronically with the SEC, at http://www.sec.gov.

Results of Operations – Three Months Ended June 30, 2022 compared to Three Months Ended June 30, 2021

Revenues were $311,156 for the three months ended June 30, 2022, and gross profit was $22,045, compared to none in the prior period. Revenues from the Company’s US and Canadian construction business began in late 2021 and in 2022.

Selling, general and administrative expenses consist primarily of payroll, professional fees, sales and marketing, research and development and other operating expenses. Selling, general and administrative expenses totaled $175,510 and $78,899 for the three months ended June 30, 2022 and 2021, respectively. For the three months ended June 30, 2022, we incurred $75,000 in executive compensation and $124,250 in consulting fees compared to $75,000 of executive compensation and $119,930 in consulting for the three months ended June 30, 2021, respectively, primarily from stock-based compensation.

The Company also recognized interest expense of $230,689, including amortization of debt discount of $98,627, a derivative gain of $2,898,359, warrant gain of $8,400, a gain on the forgiveness of debt of $14,072, and an impairment of its investment of $25,161 during the three months ended June 30, 2022. The Company also recognized a loss of $337,037 related to additional shares to be issued to MCOA under the Share Exchange Agreement. During the three months ended June 30, 2021, the Company recognized interest expense of $628,351, including amortization of debt discount of $48,646, a derivative gain of $217,497, and a loss of $292,500 related to additional shares to be issued to MCOA under the Share Exchange Agreement.

As a result of the foregoing, we recorded net income of $1,975,229 and a net loss of $977,289 for the three months ended June 30, 2022 and 2021, respectively.

Results of Operations – Six Months Ended June 30, 2022 compared to Six Months Ended June 30, 2021

Revenues were $427,761 for the six months ended June 30, 2022, and gross profit was $(3,655), compared to none in the prior period. Revenues from the Company’s US and Canadian construction business began in late 2021 and in 2022.

Selling, general and administrative expenses consist primarily of payroll, professional fees, sales and marketing, research and development and other operating expenses. Selling, general and administrative expenses totaled $310,964 and $142,404 the six months ended June 30, 2022 and 2021, respectively. For the six months ended June 30, 2022, we incurred $150,000 in executive compensation and $171,750 in consulting fees compared to $350,000 of executive compensation and $546,597 in consulting fees for the six months ended June 30, 2021, respectively, primarily from stock-based compensation.

The Company also recognized interest expense of $603,625, including amortization of debt discount of $556,670, a derivative loss of $664,902, a warrant gain of $127,725, a gain on the forgiveness of debt of $14,072, a loss on the impairment of investment of $59,059 during the six months ended June 30, 2022. The Company also recognized a loss of $736,323 related to additional shares to be issued to MCOA under the Share Exchange Agreement. During the six months ended June 30, 2021, the Company recognized interest expense of $653,265, including amortization of debt discount of $63,717, a derivative gain of $224,875. The Company also recognized a loss of $292,500 related to additional shares to be issued to MCOA under the Share Exchange Agreement during the six months ended June 30, 2021.

As a result of the foregoing, we recorded a net loss of $2,558,481 and $1,760,056 for the six months ended June 30, 2022 and 2021, respectively.

Liquidity and Capital Resources

As of June 30, 2022 and December 31, 2021, the Company had cash of $22,458 and $28,534, respectively. Furthermore, the Company had a working capital deficit of $4,647,942 and $4,509,624 as of June 30, 2022 and December 31, 2021, respectively.

During the six months ended June 30, 2022, the Company used $498,123 of cash in operating activities due to its net loss of $2,558,481, partially offset by; amortization of debt discount of $556,670; expense from shares to be issued to MCOA under the share exchange agreement of $736,323, stock-based compensation expense of $75,000, derivative gain of $664,902 and an increase in accounts payable and accrued expenses of $311,012.

The Company had no cash used in investing activities during the six months ended June 30, 2022. The Company had cash used in investing activities of $61,740 for the purchase of intangible assets under license agreements during the six months ended June 30, 2021.

During the six months ended June 30, 2022, the Company had net cash provided by financing activities of $487,613, primarily from $112,800 of proceeds on convertible debentures, $68,000 of proceeds from related party convertible debentures, proceeds from sale of common stock of $167,900, proceeds from sale of preferred C stock of $155,000, offset by repayments of convertible debentures of $8,500 and repayments of related party convertible debentures of $5,000 and repayments on notes payables of $2,587. The Company had cash net cash provided by financing activities of $296,350, primarily from $384,850 of proceeds on convertible debentures and proceeds from sale of common stock of $45,000, partially offset by repayments of convertible debentures of $133,500.

Our auditors have issued a going concern opinion on our annual consolidated financial statements, meaning that there is substantial doubt we can continue as an on-going business for the next twelve months unless we obtain additional capital. Our only sources for cash at this time are investments by others in this offering, selling our products and loans from our director. We must raise cash to implement our plan and stay in business. 

Management believes that current trends toward lower capital investment in start-up companies pose the most significant challenge to the Company’s success over the next year and in future years. Additionally, with the January 15, 2021 effectiveness of our registration statement on Form S-1, as of January 15, 2021, the Company is obligated to meet all the financial disclosure and reporting requirements associated with being a publicly reporting company. The Company’s management will have to spend additional time on policies and procedures to make sure it is compliant with various regulatory requirements, especially that of Section 404 of the Sarbanes-Oxley Act of 2002. This additional corporate governance time required of management could limit the amount of time management has to implement is business plan and impede the speed of its operations.

Limited Operating History; Need for Additional Capital

There is no historical financial information about us upon which to base an evaluation of our performance. As our business model and strategy were reinvigorated with our February 2020 change in control and new management, we are in a start-up stage of operations, and in general have generated limited revenues since our inception. We cannot guarantee that we will be successful in our business operations. Our success and performance are subject to all the normal risks inherent in the development of a new line of business, including our limited capital resources and the strength of our business partners’ business and financial positions, and the market for our green technologies.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies

The preparation of financial statements in accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect 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. A change in managements’ estimates or assumptions could have a material impact on our financial condition and results of operations during the period in which such changes occurred. Actual results could differ from those estimates. Our financial statements reflect all adjustments that management believes are necessary for the fair presentation of their financial condition and results of operations for the periods presented.

Item 3. Quantitative And Qualitative Disclosures About Market Risk.

As a smaller reporting company, we are not required to provide the information called for by this Item.

Item 4. Controls and Procedures.

 Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, the Company carried out an evaluation, under the supervision and with the participation of its management, including the Company's Chief Executive Officer and its Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as such term is defined in rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company's disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission's rules and forms, and (ii) accumulated and communicated to the Company's management, including the Chief Executive Officer and Chief Financial Officer, in a manner that allows timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes to the Company’s internal control over financial reporting as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) that occurred during the six months ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II OTHER INFORMATION

Item 1. Legal Proceedings.

The Company may be involved in certain legal proceedings that arise from time to time in the ordinary course of its business. Legal expenses associated with any contingency are expensed as incurred. The Company’s officers and directors are not aware of any threatened or pending litigation to which the Company is a party or which any of its property is the subject and which would have any material, adverse effect on the Company.

Item 1A. Risk Factors.

Reference is made to the risks and uncertainties disclosed in Item 1A (“Risk Factors”) of our Annual Report on Form 10-K for the period ended December 31, 2021, which sections are incorporated by reference into this report, as the same may be updated from time to time. Prospective investors are encouraged to consider the risks described in our 2020 Form 10-K, and our Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Report and other information publicly disclosed or contained in documents we file with the Securities and Exchange Commission before purchasing our securities.

As a smaller reporting company, the Company is not required to disclose material changes to the risk factors that were contained in the 2020 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use Of Proceeds. 

During the six months ended June 30, 2022, the Company entered into purchase agreements for the sale of 166,250 shares of Series C Convertible Preferred Stock with Geneva Roth Remark Holdings. During the six months ended June 30, 2022, $221,250 of Series C Convertible Preferred Stock and accrued dividends of $11,063 were converted into 153,892,604 shares of common stock. During the quarter ended June 30, 2022, $221,250 of Series C Convertible Preferred Stock and accrued dividends of $11,063 were converted into 153,892,604 shares of common stock.

During the six months ended June 30, 2022, 115,369,190 shares of common stock were issued by the Company for the conversion of $238,632 in principal and interest of a convertible note.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None. 

Item 6. Exhibits.

The exhibits listed on the Exhibit Index below are provided as part of this report.

 SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Eco Innovation (PK) (USOTC:ECOX)
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