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
|
|
Page |
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS: |
|
|
|
|
|
Balance Sheets, June 30, 2022 (unaudited), and December 31, 2021 |
|
4 |
|
|
|
Unaudited Statements of Operations, for the Three and Six Months Ended June 30, 2022, and June 30, 2021 |
|
5 |
|
|
|
Unaudited Statements of Changes in Stockholders’ (Deficit), for the Three and Six Months Ended June 30, 2022, and June 30, 2021 |
|
6 |
|
|
|
Unaudited Statements of Cash Flows, for the Six Months Ended June 30, 2022, and 2021 |
|
7 |
|
|
|
Notes to the Unaudited Interim Financial Statements |
|
8 |
ECO INNOVATION GROUP, INC.
CONSOLIDATED BALANCE SHEETS
| |
| | | |
| | |
| |
June 30, 2022 | | |
December 31, 2021 | |
| |
(Unaudited) | | |
| |
Assets | |
| | |
| |
Current Assets | |
| | | |
| | |
Cash and cash equivalents | |
$ | 22,458 | | |
$ | 28,534 | |
Accounts receivable | |
| 275,913 | | |
| 33,047 | |
Prepaid expenses | |
| 172,758 | | |
| 82,498 | |
Total Current Assets | |
| 471,129 | | |
| 144,079 | |
| |
| | | |
| | |
Other Assets | |
| | | |
| | |
Furniture and Equipment | |
| 35,795 | | |
| 41,974 | |
Goodwill | |
| 103,188 | | |
| 103,188 | |
Investment | |
| 16,774 | | |
| 75,833 | |
Deposits and other assets | |
| 13,612 | | |
| 8,000 | |
Total Other Assets | |
| 169,369 | | |
| 228,995 | |
Total Assets | |
$ | 640,498 | | |
$ | 373,074 | |
| |
| | | |
| | |
Liabilities and Stockholders' Deficit | |
| | | |
| | |
Current Liabilities | |
| | | |
| | |
Accounts Payable and accrued expenses | |
| 502,347 | | |
| 326,268 | |
Accounts Payable related party | |
| 440,523 | | |
| 391,377 | |
Convertible Notes Payable, net | |
| 179,613 | | |
| 129,219 | |
Notes Payable | |
| 124,708 | | |
| 127,690 | |
Deferred Revenue | |
| 82,603 | | |
| — | |
Warrant Liability | |
| 7,800 | | |
| 135,525 | |
Share Payable Liability | |
| 1,603,208 | | |
| 866,885 | |
Derivative liabilities | |
| 1,724,145 | | |
| 2,328,234 | |
Convertible Notes Payable
Related Party, net | |
| 297,439 | | |
| 138,073 | |
Series C Preferred stock liability, net | |
| 156,685 | | |
| 210,432 | |
Total Current Liabilities | |
| 5,119,071 | | |
| 4,653,703 | |
| |
| | | |
| | |
Total Liabilities | |
| 5,119,071 | | |
| 4,653,703 | |
| |
| | | |
| | |
Stockholders' Deficit | |
| | | |
| | |
Preferred stock, par value
$0.001,
authorized 50,000,000
shares, issued and outstanding 30,000,000
shares | |
| 30,000 | | |
| 30,000 | |
Common stock, par value $0.0001,
authorized 5,000,000,000 shares,
issued and outstanding 598,090,355
and 196,912,036
shares at June 30, 2022 and December 31, 2021, respectively | |
| 59,811 | | |
| 19,691 | |
Common shares to be issued, 0
and 1,000,000
as of June 30, 2022 and December 31, 2021, respectively | |
| — | | |
| 100 | |
Additional paid-in capital | |
| 10,577,432 | | |
| 8,238,979 | |
Other comprehensive income | |
| 4,811 | | |
| (18 | ) |
Accumulated deficit | |
| (15,158,465 | ) | |
| (12,594,976 | ) |
Total Stockholders' Deficit Attributable to Eco Innovation Group stockholders | |
| (4,486,411 | ) | |
| (4,306,224 | ) |
Noncontrolling interest | |
| 7,838 | | |
| 25,595.00 | |
Total stockholder's Equity (Deficit) | |
| (4,478,573 | ) | |
| (4,280,629 | ) |
| |
| | | |
| | |
TOTAL LIABILITIES and Stockholders' Deficit | |
$ | 640,498 | | |
$ | 373,074 | |
See the accompanying notes to these unaudited consolidated financial statements
ECO INNOVATION GROUP, INC.
CONSOLIDATED PROFIT AND LOSS STATEMENT
(Unaudited)
| |
| | | |
| | | |
| | | |
| | |
| |
For the Three Months Ended | | |
For the Six Months Ended | |
| |
June 30, | | |
June 30, | | |
June 30, | | |
June 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
| | |
| | |
| | |
| |
Revenue | |
$ | 311,156 | | |
$ | — | | |
$ | 427,761 | | |
$ | — | |
Cost of Revenue | |
| 289,111 | | |
| — | | |
| 431,416 | | |
| — | |
Gross Profit | |
| 22,045 | | |
| — | | |
| (3,655 | ) | |
| — | |
| |
| | | |
| | | |
| | | |
| | |
Operating Expenses | |
| | | |
| | | |
| | | |
| | |
General and Administrative | |
| 175,510 | | |
| 78,899 | | |
| 310,964 | | |
| 142,404 | |
Development and Manufacture Expenses | |
| — | | |
| 106 | | |
| — | | |
| 165 | |
Executive Compensation | |
| 75,000 | | |
| 75,000 | | |
| 150,000 | | |
| 350,000 | |
Consulting Fee | |
| 124,250 | | |
| 119,930 | | |
| 171,750 | | |
| 546,597 | |
Total Operating Expense | |
| 374,760 | | |
| 273,935 | | |
| 632,714 | | |
| 1,039,166 | |
| |
| | | |
| | | |
| | | |
| | |
Operating Loss | |
| (352,715 | ) | |
| (273,935 | ) | |
| (636,369 | ) | |
| (1,039,166 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other Income (Expenses) | |
| | | |
| | | |
| | | |
| | |
Derivative gain (loss) | |
| 2,898,359 | | |
| 217,497 | | |
| (664,902 | ) | |
| 224,875 | |
Warrant gain (loss) | |
| 8,400 | | |
| — | | |
| 127,725 | | |
| — | |
Loss on conversion of debt | |
| (8,692 | ) | |
| — | | |
| (8,692 | ) | |
| — | |
Impairment loss - Investment | |
| (25,161 | ) | |
| — | | |
| (59,059 | ) | |
| — | |
Other expense | |
| (337,037 | ) | |
| (292,500 | ) | |
| (736,323 | ) | |
| (292,500 | ) |
Interest expense | |
| (230,689 | ) | |
| (628,351 | ) | |
| (603,625 | ) | |
| (653,265 | ) |
Total Other Income (Loss) | |
| 2,305,180 | | |
| (703,354 | ) | |
| (1,944,876 | ) | |
| (720,890 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net income (loss) | |
$ | 1,952,464 | | |
$ | (977,289 | ) | |
$ | (2,581,246 | ) | |
$ | (1,760,056 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net loss attributable to noncontrolling interest | |
| 6,992 | | |
| — | | |
| 17,757 | | |
| — | |
| |
| | | |
| | | |
| | | |
| | |
Net income (loss) attributable to Eco Innovation Group | |
$ | 1,959,456 | | |
$ | (977,289 | ) | |
$ | (2,563,489 | ) | |
$ | (1,760,056 | ) |
| |
| | | |
| | | |
| | | |
| | |
Currency translation loss | |
| (7 | ) | |
| — | | |
| 4,829 | | |
| — | |
| |
| | | |
| | | |
| | | |
| | |
Comprehensive Income (Loss) | |
$ | 1,959,449 | | |
$ | (977,289 | ) | |
$ | (2,558,660 | ) | |
$ | (1,760,056 | ) |
| |
| | | |
| | | |
| | | |
| | |
Basic Loss per Common Share | |
$ | 0.00 | | |
$ | (0.01 | ) | |
$ | (0.01 | ) | |
$ | (0.01 | ) |
Diluted Loss per Common Share | |
$ | (0.00 | ) | |
$ | (0.01 | ) | |
$ | (0.01 | ) | |
$ | (0.01 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted Average Common Shares Outstanding Basic | |
| 456,781,691 | | |
| 176,014,934 | | |
| 378,483,176 | | |
| 168,147,666 | |
Weighted Average Common Shares Outstanding Diluted | |
| 4,174,626,803 | | |
| 176,014,934 | | |
| 378,483,176 | | |
| 168,147,666 | |
| |
| | | |
| | | |
| | | |
| | |
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)
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
|
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| |
Preferred Stock A | | |
Common Stock | | |
Common Stock to be issued | | |
Additional Paid-in Capital | | |
Accumulated Deficit | | |
Other Comprehensive Income | | |
Total Equity of Eco Innovation Group | | |
Noncontrolling interest | | |
Total Equity | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
| | |
| | |
| | |
| | |
| | |
| |
Balance, December 31, 2021 | |
| 30,000,000 | | |
$ | 30,000 | | |
| 196,912,036 | | |
$ | 19,691 | | |
| 1,000,000 | | |
$ | 100 | | |
| 8,238,979 | | |
$ | (12,594,976 | ) | |
$ | (8 | ) | |
$ | (4,306,224 | ) | |
$ | 25,595 | | |
$ | (4,280,629 | ) |
Common stock issued for cash proceeds | |
| — | | |
| — | | |
| 34,000,000 | | |
| 3,400 | | |
| — | | |
| — | | |
| 164,500 | | |
| — | | |
| — | | |
| 167,900 | | |
| — | | |
| 167,900 | |
Common stock issued for conversion of notes payable | |
| — | | |
| — | | |
| 89,769,190 | | |
| 8,978 | | |
| — | | |
| — | | |
| 201,494 | | |
| — | | |
| — | | |
| 201,472 | | |
| — | | |
| 210,472 | |
Common stock issued for conversion of Series C preferred | |
| — | | |
| — | | |
| 67,414,457 | | |
| 6,743 | | |
| — | | |
| — | | |
| 121,882 | | |
| — | | |
| — | | |
| 128,625 | | |
| — | | |
| 128,625 | |
Settlement of derivative liability upon conversion of notes payable | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 310,621 | | |
| — | | |
| — | | |
| 310,621 | | |
| — | | |
| 310,621 | |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (4,522,945 | ) | |
| — | | |
| (4,522,945 | ) | |
| (10,765 | ) | |
| (4,533,710 | ) |
Comprehensive Loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 4,836 | | |
| 4,836 | | |
| — | | |
| 4,836 | |
Balance, March 31, 2022 | |
| 30,000,000 | | |
$ | 30,000 | | |
| 388,095,683 | | |
$ | 38,812 | | |
| 1,000,000 | | |
$ | 100 | | |
| 9,037,476 | | |
$ | (17,117,921 | ) | |
$ | 4,818 | | |
$ | (8,006,715 | ) | |
$ | 14,830 | | |
$ | (7,991,885 | ) |
Common stock issued for conversion of notes payable | |
| — | | |
| — | | |
| 25,600,000 | | |
| 2,560 | | |
| — | | |
| — | | |
| 25,600 | | |
| — | | |
| — | | |
| 28,160 | | |
| — | | |
| 28,160 | |
Common stock issued for conversion of Series C preferred | |
| — | | |
| — | | |
| 86,478,147 | | |
| 8,647 | | |
| — | | |
| — | | |
| 95,041 | | |
| — | | |
| — | | |
| 103,688 | | |
| — | | |
| 103,688 | |
Common stock issued for financing costs | |
| — | | |
| — | | |
| 13,219,047 | | |
| 1,322 | | |
| — | | |
| — | | |
| 37,369 | | |
| — | | |
| — | | |
| 38,691 | | |
| — | | |
| 38,691 | |
Common stock issued for services | |
| — | | |
| — | | |
| 27,785,714 | | |
| 2,779 | | |
| (1,000,000 | ) | |
| (100 | ) | |
| 72,321 | | |
| — | | |
| — | | |
| 75,000 | | |
| — | | |
| 75,000 | |
Common stock issued for settlement of liabilities | |
| — | | |
| — | | |
| 56,911,764 | | |
| 5,691 | | |
| — | | |
| — | | |
| 91,059 | | |
| — | | |
| — | | |
| 96,750 | | |
| — | | |
| 96,750 | |
Settlement of derivative liability upon conversion of notes payable | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1,218,566 | | |
| — | | |
| — | | |
| 1,218,566 | | |
| — | | |
| 1,218,566 | |
Net income | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1,959,456 | | |
| — | | |
| 1,959,456 | | |
| (6,992 | ) | |
| 1,952,464 | |
Comprehensive Loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (7 | ) | |
| (7 | ) | |
| — | | |
| (7 | ) |
Balance, June 30, 2022 | |
| 30,000,000 | | |
$ | 30,000 | | |
| 598,090,355 | | |
$ | 59,811 | | |
| — | | |
$ | — | | |
| 10,577,432 | | |
$ | (15,158,465 | ) | |
$ | 4,811 | | |
$ | (4,486,411 | ) | |
$ | 7,838 | | |
$ | (4,478,573 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, December 31, 2020 | |
| 30,000,000 | | |
$ | 30,000 | | |
| 139,930,680 | | |
$ | 13,993 | | |
| 20,000,000 | | |
$ | 20,000 | | |
| 6,386,060 | | |
$ | (5,959,540 | ) | |
$ | — | | |
$ | 490,513 | | |
$ | — | | |
$ | 490,513 | |
Common stock to be issued for services | |
| — | | |
| — | | |
| 10,000,000 | | |
| 1,000 | | |
| (5,000,000 | ) | |
| (5,000 | ) | |
| 339,000 | | |
| — | | |
| — | | |
| 335,000 | | |
| — | | |
| 335,000 | |
Common stock for prepaid expenses | |
| — | | |
| — | | |
| 1,176,471 | | |
| 118 | | |
| — | | |
| — | | |
| 99,882 | | |
| — | | |
| — | | |
| 100,000 | | |
| — | | |
| 100,000 | |
Common stock to issued for license agreement | |
| — | | |
| — | | |
| 15,000,000 | | |
| 1,500 | | |
| (15,000,000 | ) | |
| (15,000 | ) | |
| 13,500 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Common stock issued for cash proceeds | |
| — | | |
| — | | |
| 749,999 | | |
| 75 | | |
| — | | |
| — | | |
| 44,925 | | |
| — | | |
| — | | |
| 45,000 | | |
| — | | |
| 45,000 | |
Common stock issued for investment | |
| — | | |
| — | | |
| 10,833,333 | | |
| 1,083 | | |
| — | | |
| — | | |
| 648,167 | | |
| — | | |
| — | | |
| 650,000 | | |
| — | | |
| 650,000 | |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (782,767 | ) | |
| — | | |
| (782,767 | ) | |
| — | | |
| (782,767 | ) |
Balance, March 31, 2021 | |
| 30,000,000 | | |
| 30,000 | | |
| 177,690,483 | | |
| 17,769 | | |
| — | | |
| — | | |
| 7,532,284 | | |
| (6,742,307 | ) | |
| — | | |
| 837,746 | | |
| — | | |
| 837,746 | |
Common stock cancelled | |
| — | | |
| — | | |
| (2,675,000 | ) | |
| (268 | ) | |
| — | | |
| — | | |
| 268 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Common stock issued for investment | |
| — | | |
| — | | |
| — | | |
| — | | |
| 13,240,741 | | |
| 13,241 | | |
| — | | |
| — | | |
| — | | |
| 13,241 | | |
| — | | |
| 13,241 | |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (977,289 | ) | |
| — | | |
| (977,289 | ) | |
| — | | |
| (977,289 | ) |
Balance, June 30, 2021 | |
| 30,000,000 | | |
$ | 30,000 | | |
| 175,015,483 | | |
$ | 17,501 | | |
| 13,240,741 | | |
$ | 13,241 | | |
| 7,532,552 | | |
$ | (7,719,596 | ) | |
$ | | | |
$ | (126,302 | ) | |
$ | | | |
$ | (126,302 | ) |
|
See the accompanying notes to these unaudited consolidated financial
statements.
ECO INNOVATION GROUP, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
| |
| | | |
| | |
|
| |
| |
| |
Six Months Ended June 30 | |
| |
2022 | | |
2021 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | | |
| | |
Net loss | |
$ | (2,581,246 | ) | |
$ | (1,760,056 | ) |
Adjustments to reconcile net loss to net cash | |
| | | |
| | |
used by operating activities: | |
| | | |
| | |
Derivative (gain) loss | |
| 664,902 | | |
| (224,875 | ) |
Warrant (gain) loss | |
| (127,725 | ) | |
| — | |
Depreciation expense | |
| 6,179 | | |
| — | |
Loss on conversion of debt | |
| 8,692 | | |
| — | |
Investment impairment loss | |
| 59,059 | | |
| — | |
Amortization of debt discount | |
| 556,670 | | |
| 63,717 | |
Interest expense on derivative issuance | |
| — | | |
| 530,203 | |
Share payable expense | |
| 736,323 | | |
| 292,500 | |
Stock based compensation | |
| 75,000 | | |
| 335,000 | |
Changes in operating assets and liabilities | |
| | | |
| | |
Accounts receivable | |
| (242,866 | ) | |
| — | |
Prepaid expenses | |
| (95,872 | ) | |
| 41,667 | |
Deferred Revenue | |
| 82,603 | | |
| — | |
Accounts payable and accrued expenses | |
| 311,011 | | |
| 487,883 | |
Accounts payable related party | |
| 49,146 | | |
| — | |
Net cash used by operating activities | |
| (498,123 | ) | |
| (233,961 | ) |
| |
| | | |
| | |
CASH FLOWS FROM INVESTING ACTIVITIES: | |
| | | |
| | |
Purchase of intangible assets | |
| — | | |
| (61,740 | ) |
Net cash provided by investing activities | |
| — | | |
| (61,740 | ) |
| |
| | | |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES: | |
| | | |
| | |
Proceeds from convertible debenture | |
| 112,800 | | |
| 384,850 | |
Repayment of convertible debentures | |
| (8,500 | ) | |
| (133,500 | ) |
Proceeds from sale of common stock | |
| 167,900 | | |
| 45,000 | |
Proceeds from sale of preferred C stock | |
| 155,000 | | |
| — | |
Repayment of notes payable | |
| (2,587 | ) | |
| — | |
Proceeds from convertible notes payable, related party | |
| 68,000 | | |
| — | |
Repayment of convertible notes payable, related party | |
| (5,000 | ) | |
| | |
Net cash provided by financing activities | |
| 487,613 | | |
| 296,350 | |
| |
| | | |
| | |
Effect of foreign exchange on cash | |
| 4,434 | | |
| — | |
| |
| | | |
| | |
Change in cash | |
| (6,076 | ) | |
| 649 | |
Cash, beginning of year | |
| 28,534 | | |
| 84 | |
Cash, end of year | |
$ | 22,458 | | |
$ | 733 | |
| |
| | | |
| | |
Supplemental Cash Flow information | |
| | | |
| | |
Cash paid for interest | |
$ | — | | |
$ | — | |
Cash paid for income taxes | |
$ | — | | |
$ | 44,155 | |
| |
| | | |
| | |
Non-Cash transactions | |
| | | |
| | |
Common stock issued for investment | |
$ | — | | |
$ | 650,000 | |
Common stock issued for Conversion of notes payable | |
$ | 236,910 | | |
$ | — | |
Common stock issued for prepaid expenses | |
$ | — | | |
$ | 100,000 | |
Common stock issued for Conversion of Series C Preferred stock liability | |
$ | 232,313 | | |
$ | — | |
Discount issued on convertible debt | |
$ | 68,000 | | |
$ | — | |
Intangible asset Capitalized | |
$ | — | | |
$ | 249,560 | |
Settlement of derivative liability upon conversion of notes payable | |
$ | 460,003 | | |
$ | — | |
Extinguishment of liabilities upon debt modification | |
$ | 1,069,184 | | |
$ | — | |
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:
· |
|
Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; |
· |
|
Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
· |
|
Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
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:
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis |
|
|
|
|
|
|
|
|
June 30, 2022 |
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
Assets |
|
|
|
|
|
|
|
|
Investments |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
Liabilities |
|
|
|
|
|
|
|
|
Derivative liability |
|
|
— |
|
|
|
— |
|
|
|
1,724,145 |
|
|
|
1,724,145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
Assets |
|
|
|
|
|
|
|
|
Investments |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
Liabilities |
|
|
|
|
|
|
|
|
Derivative liability |
|
|
— |
|
|
|
— |
|
|
|
2,328,234 |
|
|
|
2,328,234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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:
Schedule of preliminary Fair value Acquisition |
|
|
|
|
|
|
Amount |
Notes payable issued to seller |
|
|
103,689 |
|
1,000,000 shares of common stock |
|
|
23,000 |
|
Noncontrolling interest |
|
|
22,000 |
|
Total preliminary consideration transferred |
|
$ |
148,698 |
|
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:
Schedule Of Recognized Identified Assets Acquired And Liabilities |
|
|
Accounts Receivable |
|
$ |
30,577 |
|
Trucks |
|
|
41,974 |
|
Goodwill |
|
|
103,188 |
|
Vehicle Note Payable |
|
|
(27,041 |
) |
Net assets acquired |
|
$ |
148,698 |
|
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:
Schedule of convertible notes payable | |
| | | |
| | |
| |
June 30, | | |
December 31, | |
| |
2022 | | |
2021 | |
Convertible note payable – Claudia Magdalena Villalta | |
$ | 30,000 | | |
$ | 30,000 | |
Convertible note payable – Labrys | |
$ | — | | |
$ | 148,000 | |
Convertible notes payable- Blue Lake Holdings | |
$ | 79,590 | | |
$ | 150,000 | |
Convertible note payable – Coventry | |
$ | 150,000 | | |
$ | — | |
Total | |
$ | 259,590 | | |
$ | 328,000 | |
Less debt discounts | |
$ | (79,977 | ) | |
$ | (198,781 | ) |
Net | |
$ | 179,613 | | |
$ | 129,219 | |
Less current portion | |
$ | (179,613 | ) | |
$ | (129,219 | ) |
Long term portion | |
$ | — | | |
$ | — | |
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:
Schedule of convertible notes payable | |
| | | |
| | |
| |
June 30, | | |
December 31, | |
| |
2022 | | |
2021 | |
Convertible notes payable – Pinnacle Consulting Services | |
$ | 241,000 | | |
$ | 241,000 | |
Convertible notes payable – Robert Hymers | |
$ | 63,153 | | |
$ | 4,875 | |
Convertible notes payable- Alma Otey | |
$ | 18,000 | | |
$ | — | |
Total | |
$ | 322,153 | | |
$ | 245,875 | |
Less debt discounts | |
$ | (24,714 | ) | |
$ | (107,802 | ) |
Net | |
$ | 297,439 | | |
$ | 138,073 | |
Less current portion | |
$ | (297,439 | ) | |
$ | (138,073 | ) |
Long term portion | |
$ | — | | |
$ | — | |
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:
Schedule Of Derivative Liabilities At Fair Value | |
| | |
Fair Value as of January 1, 2022 | |
$ | 2,328,234 | |
Initial recognition of derivative added as debt discount | |
| 317,631 | |
Settlement of derivative liability as a result of payment on convertible notes | |
| (6,108 | ) |
Settlement of derivative liability as a result of conversion of convertible notes | |
| (460,003 | ) |
Settlement of derivative liability as a result of extinguishment of convertible notes | |
| (1,126,619 | ) |
Loss on change in fair value | |
| 671,010 | |
Fair Value as of June 30, 2022 | |
| 1,724,145 | |
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.