UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For
the fiscal year ended June 30, 2020
Commission
file number: 000-2613
Ecomat Inc.
(Exact
Name Of Registrant As Specified In Its Charter)
|
Nevada |
|
13-3865026 |
|
(State
of Incorporation) |
|
(I.R.S.
Employer Identification No.) |
|
|
|
|
|
40
Wall Street, 28th Floor, New York, NY |
|
10005 |
|
(Address
of Principal Executive Offices) |
|
(ZIP
Code) |
Registrant’s
Telephone Number, Including Area Code: (323) 552-9867
Indicate
if the Registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes [ ] No
[X]
Indicate
if the Registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes [ ] No
[X]
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 past 90 days. Yes [X] No [ ]
Indicate
if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant’s knowledge, in the definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K.
[ ]
On
December 31, 2019, the aggregate market value of the 3,606,750
common stock held by non-affiliates of the registrant was
approximately $252,472 based on the last price of the Registrants
common stock of $0.07 on December 31, 2019. On September 17, 2020,
the Registrant had 23,811,750 shares of common stock
outstanding.
Indicate
whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer (as defined in Rule 12b-2 of the
Exchange Act) or a smaller reporting Company.
|
Large
accelerated filer [ ] |
Accelerated
filer [ ] |
Non-Accelerated
filer [ ] |
Smaller
reporting company [X] |
Indicate
whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act). Yes [X] No [ ]
TABLE OF CONTENTS
PART
I
ITEM
1. DESCRIPTION OF BUSINESS Back
to Table of Contents
Some
of the statements contained in this annual report on Form 10-K of
Ecomat Inc. (hereinafter the “Company”, “We” or the “Registrant”)
discuss future expectations, contain projections of our plan of
operation or financial condition or state other forward-looking
information. In this annual report, forward-looking statements are
generally identified by the words such as “anticipate”, “plan”,
“believe”, “expect”, “estimate”, and the like. Forward-looking
statements involve future risks and uncertainties, there are
factors that could cause actual results or plans to differ
materially from those expressed or implied. These statements are
subject to known and unknown risks, uncertainties, and other
factors that could cause the actual results to differ materially
from those contemplated by the statements. The forward-looking
information is based on various factors and is derived using
numerous assumptions. A reader, whether investing in the Company’s
securities or not, should not place undue reliance on these
forward-looking statements, which apply only as of the date of this
Registration Statement. Important factors that may cause actual
results to differ from projections include, for example:
|
● |
the
success or failure of Management’s efforts to implement the
Registrant’s plan of operation; |
| ● |
the
ability of the Registrant to fund its operating
expenses; |
| ● |
the
ability of the Registrant to compete with other companies that have
a similar plan of operation; |
| ● |
the
effect of changing economic conditions impacting our plan of
operation; |
| ● |
the
ability of the Registrant to meet the other risks as may be
described in future filings with the SEC. |
General
Background of the Registrant
Ecomat
Inc. (the “Company” or “Ecomat”) is a Nevada corporation that was
formed to develop the Ecomat concept - an environmentally sound
solution to the current standard dry cleaning method that utilizes
percloroethylene, which has been shown to have various toxic
effects. The Company was incorporated on December 14, 1995 pursuant
to the laws of the State of Delaware.
On
February 9, 2007, the Company completed its change in domicile to
Nevada.
On
March 26, 1999, the Company filed a petition under Chapter 7 for
liquidation of the Company’s business. As a result of which all of
our properties were transferred to a United States Trustee and the
Company terminated all of its business operations. The Bankruptcy
Trustee has disposed of all of the assets.
On
June 14, 2006, the Bankruptcy Court granted an order approving the
contract and finding that Park Avenue Group is a good faith
purchaser within the meaning of 11 USC Section 363(m) of the
Bankruptcy Code.
On
June 15, 2006 and as a result of the Bankruptcy Court Order, Park
Avenue Group appointed Ivo Heiden to the board of directors of the
Registrant and to serve as its sole executive officer (the
“Management”). Mr. Heiden has no ongoing relationship with such
entity.
Business
Objectives of the Company
The
Company has no business operations. Management has determined to
direct its efforts and limited resources to pursue potential new
business opportunities. The Registrant does not intend to limit
itself to a particular industry and has not established any
particular criteria upon which it shall consider a business
opportunity.
The
Registrant’s common stock is subject to quotation on the OTC Pink
Sheets under the symbol ECMT. There is currently only a limited
trading market in the Registrant’s shares nor do we believe that
any active trading market has existed for the last 3 years. In the
event that an active trading market commences, there can be no
assurance as to the market price of our shares of common stock,
whether any trading market will provide liquidity to investors, or
whether any trading market will be sustained.
Management
would have substantial flexibility in identifying and selecting a
prospective new business opportunity. The Registrant is dependent
on the judgment of its Management in connection with this process.
In evaluating a prospective business opportunity, we would
consider, among other factors, the following:
|
● |
costs
associated with pursuing a new business opportunity; |
| ● |
growth
potential of the new business opportunity; |
| ● |
experiences,
skills and availability of additional personnel necessary to pursue
a potential new business opportunity; |
| ● |
necessary
capital requirements; |
| ● |
the
competitive position of the new business opportunity; |
| ● |
stage
of business development; |
| ● |
the
market acceptance of the potential products and
services; |
| ● |
proprietary
features and degree of intellectual property; and |
| ● |
the
regulatory environment that may be applicable to any prospective
business opportunity. |
The
foregoing criteria are not intended to be exhaustive and there may
be other criteria that Management may deem relevant. In connection
with an evaluation of a prospective or potential business
opportunity, Management may be expected to conduct a due diligence
review.
The
time and costs required to pursue new business opportunities, which
includes negotiating and documenting relevant agreements and
preparing requisite documents for filing pursuant to applicable
securities laws, cannot be ascertained with any degree of
certainty.
Management
intends to devote such time as it deems necessary to carry out the
Registrant’s affairs. The exact length of time required for the
pursuit of any new potential business opportunities is uncertain.
No assurance can be made that we will be successful in our efforts.
We cannot project the amount of time that our Management will
actually devote to the Registrant’s plan of operation.
The
Registrant intends to conduct its activities so as to avoid being
classified as an “Investment Company” under the Investment Company
Act of 1940, and therefore avoid application of the costly and
restrictive registration and other provisions of the Investment
Company Act of 1940 and the regulations promulgated
thereunder.
Registrant
is a Blank Check Company
At
present, the Registrant is a development stage company with no
revenues, no assets and no specific business plan or purpose. The
Registrant’s business plan is to seek new business opportunities or
to engage in a merger or acquisition with an unidentified company.
As a result, the Registrant is a “blank check company” and, as a
result, any offerings of the Registrant’s securities under the
Securities Act of 1933, as amended (the “Securities Act”) must
comply with Rule 419 promulgated by the Securities and Exchange
Commission (the “SEC”) under the Act. The Registrant’s Common Stock
is a “penny stock,” as defined in Rule 3a51-1 promulgated by the
SEC under the Securities Exchange Act of 1934 (the “Exchange Act”).
The Penny Stock rules require a broker-dealer, prior to a
transaction in penny stock not otherwise exempt from the rules, to
deliver a standardized risk disclosure document that provides
information about Penny Stocks and the nature and level of risks in
the penny stock market. The broker-dealer also must provide the
customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its sales person in the
transaction, and monthly account statements showing the market
value of each Penny Stock held in the customer’s account. In
addition, the Penny Stock rules require that the broker-dealer, not
otherwise exempt from such rules, must make a special written
determination that the Penny Stock is suitable for the purchaser
and receive the purchaser’s written agreement to the transaction.
These disclosure rules have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes
subject to the Penny Stock rules. So long as the common stock of
the Registrant is subject to the Penny Stock rules, it may be more
difficult to sell the Registrant’s common stock.
We
are a Shell Company as defined in Rule 405 promulgated by the SEC
under the Securities Act. A Shell Company is one that has no or
nominal operations and either: (i) no or nominal assets; or (ii)
assets consisting primarily of cash or cash equivalents. As a Shell
Company, we are restricted in our use of Registrations on Form S-8
under the Securities Act; the lack of availability of the use of
Rule 144 by security holders; and the lack of liquidity in our
stock.
Form
S-8
Shell
companies are prohibited from using Form S-8 to register securities
under the Securities Act. If a company ceases to be a Shell
Company, it may use Form S-8 sixty calendar days, provided it has
filed all reports and other materials required to be filed under
the Exchange Act during the preceding 12 months (or for such
shorter period that it has been required to file such reports and
materials after the company files “Form 10 information,” which is
information that a company would be required to file in a
registration statement on Form 10 if it were registering a class of
securities under Section 12 of the Exchange Act. This information
would normally be reported on a current report on Form 8-K
reporting the completion of a transaction that caused the company
to cease being a Shell Company.
Unavailability
of Rule 144 for Resale
Rule
144(i) “Unavailability to Securities of Issuers with No or Nominal
Operations and No or Nominal Non-Cash Assets” provides that Rule
144 is not available for the resale of securities initially issued
by an issuer that is a Shell Company. We have identified our
company as a Shell Company and, therefore, the holders of our
securities may not rely on Rule 144 to have the restriction removed
from their securities without registration or until the company is
no longer identified as a Shell Company.
As a
result of our classification as a Shell Company, our investors are
not allowed to rely on the “safe harbor” provisions of Rule 144,
promulgated pursuant to the Securities Act, so as not to be
considered underwriters in connection with the sale of our
securities until one year from the date that we cease to be a Shell
Company. This will likely make it more difficult for us to attract
additional capital through subsequent unregistered offerings
because purchasers of securities in such unregistered offerings
will not be able to resell their securities in reliance on Rule
144, a safe harbor on which holders of restricted securities
usually rely to resell securities.
Very
Limited Liquidity of our Common Stock
Our
common stock trades from time to time on the OTC Pink Sheet Market
but there is no active market maker in our common stock. As a
result, there is only limited liquidity in our common stock. We
plan to seek quotation of our common stock on the OTCQB Market. In
order for our common stock to become subject to quotation on the
OTCQB Market, we must obtain a market maker to file an application
with the Financial Industry Regulatory Authority (FINRA) on our
behalf pursuant to Rule 15c2-11 under the Exchange Act. If we fail
to continue to comply with the listing requirements of the OTCQB
Market, the price of our common stock and the ability of our
stockholders to to access the capital markets could be negatively
impacted. We cannot provide any assurance that we will be able to
continue to satisfy the requirements of the OTCQB Markets’ for
continued quotation.
We
will be deemed a blank check company under Rule 419 of the
Securities Act
The
provisions of Rule 419 apply to registration statements filed under
the Securities Act by a blank check company, such as the Company.
Rule 419 requires that a blank check company filing a registration
statement deposit the securities being offered and proceeds of the
offering into an escrow or trust account pending the execution of
an agreement for an acquisition or merger.
In
addition, an issuer is required to file a post-effective amendment
to the registration statement upon the execution of an agreement
for such acquisition or merger. The rule provides procedures for
the release of the offering funds in conjunction with the post
effective acquisition or merger. The obligations to file
post-effective amendments are in addition to the obligations to
file Forms 8-K to report for both the entry into a material
definitive (non-ordinary course of business) agreement and the
completion of the transaction. Rule 419 applies to both primary and
re-sale or secondary offerings.
Within
five (5) days of filing a post-effective amendment setting forth
the proposed terms of an acquisition, the Company must notify each
investor whose shares are in escrow. Each investor then has no
fewer than 20 and no greater than 45 business days to notify the
Company in writing if they elect to remain an investor. A failure
to reply indicates that the person has elected to not remain an
investor. As all investors are allotted this second opportunity to
determine to remain an investor, acquisition agreements should be
conditioned upon enough funds remaining in escrow to close the
transaction.
Effecting
a business combination
Prospective
investors in the Company’s common stock will not have an
opportunity to evaluate the specific merits or risks of any of the
one or more business combinations that we may undertake A business
combination may involve the acquisition of, or merger with, a
company which needs to raise substantial additional capital by
means of being a publicly trading company, while avoiding what it
may deem to be adverse consequences of undertaking a public
offering itself. These include time delays, significant expense,
loss of voting control and compliance with various Federal and
state securities laws. A business combination may involve a company
which may be financially unstable or in its early stages of
development or growth.
The
Registrant has not identified a target business or target
industry
The
Company’s effort in identifying a prospective target business will
not be limited to a particular industry and the Company may
ultimately acquire a business in any industry Management deems
appropriate. To date, the Company has not selected any target
business on which to concentrate our search for a business
combination. While the Company intends to focus on target
businesses in the United States, it is not limited to U.S. entities
and may consummate a business combination with a target business
outside of the United States. Accordingly, there is no basis for
investors in the Company’s common stock to evaluate the possible
merits or risks of the target business or the particular industry
in which we may ultimately operate. To the extent we effect a
business combination with a financially unstable company or an
entity in its early stage of development or growth, including
entities without established records of sales or earnings, we may
be affected by numerous risks inherent in the business and
operations of financially unstable and early stage or potential
emerging growth companies. In addition, to the extent that we
effect a business combination with an entity in an industry
characterized by a high level of risk, we may be affected by the
currently unascertainable risks of that industry. An extremely high
level of risk frequently characterizes many industries which
experience rapid growth. In addition, although the Company’s
Management will endeavor to evaluate the risks inherent in a
particular industry or target business, we cannot assure you that
we will properly ascertain or assess all significant risk
factors.
Sources
of target businesses
Our
Management anticipates that target business candidates will be
brought to our attention from various unaffiliated sources,
including securities broker-dealers, investment bankers, venture
capitalists, bankers and other members of the financial community,
who may present solicited or unsolicited proposals. Our Management
may also bring to our attention target business candidates. While
we do not presently anticipate engaging the services of
professional firms that specialize in business acquisitions on any
formal basis, we may engage these firms in the future, in which
event we may pay a finder’s fee or other compensation in connection
with a business combination. In no event, however, will we pay
Management any finder’s fee or other compensation for services
rendered to us prior to or in connection with the consummation of a
business combination.
Selection
of a target business and structuring of a business
combination
Management
owns 55.56% of the issued and outstanding shares of common stock
and will have broad flexibility in identifying and selecting a
prospective target business. In evaluating a prospective target
business, our Management will consider, among other factors, the
following:
|
● |
financial
condition and results of operation of the target
company; |
| ● |
growth
potential; |
|
● |
experience
and skill of Management and availability of additional
personnel; |
| ● |
capital
requirements; |
| ● |
competitive
position; |
| ● |
stage
of development of the products, processes or services; |
| ● |
degree
of current or potential market acceptance of the products,
processes or services; |
| ● |
proprietary
features and degree of intellectual property or other protection of
the products, processes or services; |
| ● |
regulatory
environment of the industry; and |
| ● |
costs
associated with effecting the business combination. |
These
criteria are not intended to be exhaustive. Any evaluation relating
to the merits of a particular business combination will be based,
to the extent relevant, on the above factors as well as other
considerations deemed relevant by our Management in effecting a
business combination consistent with our business objective. In
evaluating a prospective target business, we will conduct a due
diligence review which will encompass, among other things, meetings
with incumbent Management and inspection of facilities, as well as
review of financial and other information which will be made
available to us.
We
will endeavor to structure a business combination so as to achieve
the most favorable tax treatment to us, the target business and
both companies’ stockholders. However, there can be no assurance
that the Internal Revenue Service or applicable state tax
authorities will necessarily agree with the tax treatment of any
business combination we consummate.
The
time and costs required to select and evaluate a target business
and to structure and complete the business combination cannot
presently be ascertained with any degree of certainty. Any costs
incurred with respect to the identification and evaluation of a
prospective target business with which a business combination is
not ultimately completed will result in a loss to us.
Probable
lack of business diversification
While
we may seek to effect business combinations with more than one
target business, it is more probable that we will only have the
ability to effect a single business combination, if at all.
Accordingly, the prospects for our success may be entirely
dependent upon the future performance of a single business. Unlike
other entities which may have the resources to complete several
business combinations with entities operating in multiple
industries or multiple areas of a single industry, it is probable
that we will lack the resources to diversify our operations or
benefit from the possible spreading of risks or offsetting of
losses. By consummating a business combination with only a single
entity, our lack of diversification may:
|
● |
subject
us to numerous economic, competitive and regulatory developments,
any or all of which may have a substantial adverse impact upon the
particular industry in which we may operate subsequent to a
business combination, and |
| ● |
result
in our dependency upon the development or market acceptance of a
single or limited number of products, processes or
services. |
Limited
ability to evaluate the target business’ Management
Although
we intend to closely scrutinize the Management of a prospective
target business when evaluating the desirability of effecting a
business combination, we cannot assure you that our assessment of
the target business’ Management will prove to be correct. In
addition, we cannot assure you that the future Management will have
the necessary skills, qualifications or abilities to manage a
public company intending to embark on a program of business
development. Furthermore, the future role of our director, if any,
in the target business cannot presently be stated with any
certainty.
While
it is possible that our director will remain associated in some
capacity with us following a business combination, it is unlikely
that he will devote his full efforts to our affairs subsequent to a
business combination. Moreover, we cannot assure you that our
director will have significant experience or knowledge relating to
the operations of the particular target business.
Following
a business combination, we may seek to recruit additional managers
to supplement the incumbent Management of the target business. We
cannot assure you that we will have the ability to recruit
additional managers, or that additional managers will have the
requisite skills, knowledge or experience necessary to enhance the
incumbent Management.
Our
auditors have expressed substantial doubt about our ability to
continue as a going concern
Our
audited financial statements for the years ended June 30, 2020 and
2019, were prepared using the assumption that we will continue our
operations as a going concern. Our independent accountants in their
audit report have expressed substantial doubt about our ability to
continue as a going concern. Our operations are dependent on our
ability to raise sufficient capital or complete business
combination as a result of which we become profitable. Our
financial statements do not include any adjustments that may result
from the outcome of this uncertainty. There is not enough cash on
hand to fund our administrative expenses and operating expenses for
the next twelve months. Therefore, we may be unable to continue
operations in the future as a going concern. If we cannot continue
as a viable entity, our stockholders may lose some or all of their
investment in the Company’s shares of common stock.
Competition
In
identifying, evaluating and selecting a target business, we expect
to encounter intense competition from other entities having a
business objective similar to ours. Many of these entities are well
established and have extensive experience identifying and effecting
business combinations, either directly or through affiliates. Many
if not virtually most of these competitors possess far greater
financial, human and other resources compared to our resources.
While we believe that there are numerous potential target
businesses that we may identify, our ability to compete in
acquiring certain of the more desirable target businesses will be
limited by our limited financial and human resources. Our inherent
competitive limitations are expected by Management to give others
an advantage in pursuing the acquisition of a target business that
we may identify and seek to pursue. Further, any of these
limitations may place us at a competitive disadvantage in
successfully negotiating a business combination. Our Management
believes, however, that our status as a reporting public entity
with potential access to the United States public equity markets
may give us a competitive advantage over certain privately-held
entities having a similar business objective in acquiring a
desirable target business with growth potential on favorable
terms.
If we
succeed in effecting a business combination, there will be, in all
likelihood, intense competition from existing competitors of the
business we acquire. In particular, certain industries which
experience rapid growth frequently attract an increasingly larger
number of competitors, including those with far greater financial,
marketing, technical and other resources than the initial
competitors in the industry in which we seek to operate. The degree
of competition characterizing the industry of any prospective
target business cannot presently be ascertained. We cannot assure
you that, subsequent to a business combination, we will have the
resources to compete effectively, especially to the extent that the
target business is in a high-growth industry.
Employees
Mr.
Heiden, our CEO and CFO, is our sole executive officer. Mr. Heiden
is not obligated to devote any specific number of hours per week
and, in fact, intends to devote only as much time as he deems
reasonably necessary to administer the Company’s affairs until such
time as a business combination is consummated. The amount of time
he will devote in any time period will vary based on the
availability of suitable target businesses to investigate. We do
not intend to have any full-time employees prior to the
consummation of a business combination.
Conflicts
of Interest
The
Company’s Management is not required to commit its full time to the
Company’s affairs. As a result, pursuing new business opportunities
may require a longer period of time than if Management would devote
full time to the Company’s affairs. Management is not precluded
from serving as an officer or director of any other entity that is
engaged in business activities similar to those of the Registrant.
Management has not identified and is not currently negotiating a
new business opportunity for us. In the future, Management may
become associated or affiliated with entities engaged in business
activities similar to those we intend to conduct. In such event,
Management may have conflicts of interest in determining to which
entity a particular business opportunity should be presented. In
the event that the Company’s Management has multiple business
affiliations, our Management may have legal obligations to present
certain business opportunities to multiple entities. In the event
that a conflict of interest shall arise, Management will consider
factors such as reporting status, availability of audited financial
statements, current capitalization and the laws of jurisdictions.
If several business opportunities or operating entities approach
Management with respect to a business combination, Management will
consider the foregoing factors as well as the preferences of the
Management of the operating company. However, Management will act
in what it believes will be in the best interests of the
shareholders of the Registrant. The Registrant shall not enter into
a transaction with a target business that is affiliated with
Management.
ITEM
1A. RISK FACTORS RELATED TO OUR BUSINESS Back to Table of Contents
Forward-Looking Statements
This
annual report on Form 10-K contains forward-looking statements that
are based on current expectations, estimates, forecasts and
projections about us, our future performance, the market in which
we operate, our beliefs and our Management’s assumptions. In
addition, other written or oral statements that constitute
forward-looking statements may be made by us or on our behalf.
Words such as “expects”, “anticipates”, “targets”, “goals”,
“projects”, “intends”, “plans”, “believes”, “seeks”, “estimates”,
variations of such words and similar expressions are intended to
identify such forward-looking statements. These statements are not
guarantees of future performance and involve certain risks,
uncertainties and assumptions that are difficult to predict or
assess. Therefore, actual outcomes and results may differ
materially from what is expressed or forecast in such
forward-looking statements.
Any
investment in our shares of common stock involves a high degree of
risk. You should carefully consider the following information about
these risks, together with the other information contained in this
annual report before you decide to invest in our common stock. Each
of the following risks may materially and adversely affect our
business objective, plan of operation and financial condition.
These risks may cause the market price of our common stock to
decline, which may cause you to lose all or a part of the money you
invested in our common stock. We provide the following cautionary
discussion of risks, uncertainties and possible inaccurate
assumptions relevant to our business plan. In addition to other
information included in this annual report, the following factors
should be considered in evaluating the Company’s business and
future prospects.
The Company has a limited operating history and very limited
resources.
Since
emerging from bankruptcy, the Company’s operations have been
limited to seeking a potential business combination and has had no
revenues from operations. Investors will have no basis upon which
to evaluate the Company’s ability to achieve the Company’s business
objective, which is to effect a merger, capital stock exchange
and/or acquire an operating business. The Company will not generate
any revenues until, at the earliest, after the consummation of a
business combination or acquiring an operating business.
Our auditors have expressed substantial doubt about our ability to
continue as a going concern.
As of
June 30, 2020, we had no cash and cash equivalents and an
accumulated deficit of $276,236. Our audited financial statements
for the years ended June 30, 2020 and 2020, were prepared using the
assumption that we will continue our operations as a going concern.
Our independent accountants in their audit report have expressed
substantial doubt about our ability to continue as a going concern.
Our operations are dependent on our ability to raise sufficient
capital or complete business combination as a result of which we
become profitable. Our financial statements do not include any
adjustments that may result from the outcome of this
uncertainty.
There
is not enough cash on hand to fund our administrative expenses and
operating expenses for the next twelve months. Therefore, we may be
unable to continue operations in the future as a going concern. If
we cannot continue as a viable entity, our stockholders may lose
some or all of their investment in the Company’s shares of common
stock.
Since the Company has not yet selected a particular target industry
or target business with which to complete a business combination,
the Company is unable to ascertain the merits or risks associated
with any particular business or industry.
Since
the Company has not yet identified a particular industry or
prospective target business, there is no basis for investors to
evaluate the possible merits or risks of the target business which
the Company may ultimately acquire. If the Company completes a
business combination with a financially unstable company or an
entity in its development stage, the Company may be affected by
numerous risks inherent in the operations of those entities.
Although the Company’s Management intends to evaluate the risks
inherent in a particular industry or target business, the Company
cannot assure you that it will properly ascertain or assess all of
the significant risk factors. There can be no assurance that any
prospective business combination will benefit shareholders or prove
to be more favorable to shareholders than any other investment that
may be made by shareholders and investors.
Unspecified and unascertainable risks
There
is no basis for shareholders to evaluate the possible merits or
risks of potential business combination. To the extent that the
Company effects a business combination with a financially unstable
operating company or an entity that is in its early stage of
development or growth, the Company will become subject to numerous
risks. If the Company effects a business combination with an entity
in a high-risk industry, the Company will become subject to the
currently unascertainable risks of that industry. Although
Management will endeavor to evaluate the risks inherent in a
particular business or industry, there can be no assurance that
Management will properly ascertain or assess all such risks that
the Company perceived at the time of the consummation of a business
combination.
It is likely that the Company’s current sole officer and director
will resign upon consummation of a business combination and the
Company will have only limited ability to evaluate the Management
of the target business.
The
Company’s ability to successfully effect a business combination
will be dependent upon the efforts of the Company’s Management. The
future role of Management in the target business cannot presently
be ascertained. Although it is possible that Management may remain
associated with the target business following a business
combination, it is likely that the Management of the target
business will remain in place. Although the Company intends to
closely scrutinize the management of a target business in
connection with evaluating the desirability of effecting a business
combination, the Company cannot assure you that the Company’s
assessment of Management will prove to be correct.
Dependence on key personnel
The
Company is dependent upon the continued services of Management. To
the extent that his services become unavailable, the Company will
be required to obtain other qualified personnel and there can be no
assurance that it will be able to recruit qualified persons upon
acceptable terms.
The Company’s sole officer and director may allocate his time to
other businesses activities, thereby causing conflicts of interest
as to how much time to devote to the Company’s affairs. This could
have a negative impact on the Company’s ability to consummate a
business combination in a timely manner, if at
all.
The
Company’s officer and director is not required to commit his full
time to the Company’s affairs, which may result in a conflict of
interest in allocating his time between the Company’s business and
other businesses. The Company does not intend to have any full-time
employees prior to the consummation of a business combination.
Management of the Company is engaged in other business endeavors
and is not obligated to contribute any specific number of his hours
per week to the Company’s affairs. Mr. Heiden owes fiduciary duty
to Baltic Capital Corp. of which he is the sole officer and
director.
If
Management’s other business affairs require him to devote more time
to such affairs, it could limit his ability to devote time to the
Company’s affairs and could have a negative impact on the Company’s
ability to consummate a business combination. Furthermore, we do
not have an employment agreement with Mr. Heiden. Mr. Heiden has no
formal obligation or commitment to provide any particular amount of
time to the Company’s affairs.
The Company may be unable to obtain additional financing, if and
when required, to complete a business combination or to fund the
operations and growth of the business combination target, which
could compel the Company to restructure a potential business
combination transaction or to entirely abandon a particular
business combination.
The
Company has not yet identified any prospective target business. If
we require funds for a particular business combination, because of
the size of the business combination or otherwise, we will be
required to seek additional financing, which may or may not be
available a terms and conditions satisfactory to the Company, if at
all. To the extent that additional financing proves to be
unavailable when and if needed to consummate a particular business
combination, we would be compelled to restructure the transaction
or abandon that particular business combination and seek an
alternative target business candidate. In addition, if we
consummate a business combination, we may require additional
financing to fund the operations or growth of the target business.
The failure to secure additional financing could have a material
adverse effect on the continued development or growth of the target
business. The Company’s officer, director or stockholders are not
required to provide any financing to us in connection with or after
a business combination.
It is probable that the Company will only be able to enter into one
business combination, which will cause us to be solely dependent on
such single business and a limited number of products or
services.
It is
probable that the Company will enter into a business combination
with a single operating business. Accordingly, the prospects for
the Company’s success may be:
|
● |
solely
dependent upon the performance of a single operating business,
or |
| ● |
dependent
upon the development or market acceptance of a single or limited
number of products or services. |
In
this case, the Company will not be able to diversify the Company’s
operations or benefit from the possible spreading of risks or
offsetting of losses, unlike other entities which may have the
resources to complete several business combinations in different
industries or different areas of a single industry.
The Company has limited resources and there is significant
competition for business combination opportunities. Therefore, the
Company may not be able to enter into or consummate an attractive
business combination.
The
Company expects to encounter intense competition from other
entities having a business objective similar to the Company’s,
including venture capital funds, leveraged buyout funds and
operating businesses competing for acquisitions. Many of these
entities are well established and have extensive experience in
identifying and effecting business combinations directly or through
affiliates. Many of these competitors possess greater technical,
human and other resources than the Company does and the Company’s
financial resources are limited when contrasted with those of many
of these competitors. While the Company believes that there are
numerous potential target businesses that it could acquire, the
Company’s ability to compete in acquiring certain sizable target
businesses will be limited by the Company’s limited financial
resources and the fact that the Company will use its common stock
to acquire an operating business. This inherent competitive
limitation gives others an advantage in pursuing the acquisition of
certain target businesses.
The Company may be unable to obtain additional financing, if
required, to complete a business combination or to fund the
operations and growth of the target business, which could compel
the Company to restructure a potential business transaction or
abandon a particular business combination.
We
may be required to seek additional financing. We cannot assure you
that such financing would be available on acceptable terms, if at
all. If additional financing proves to be unavailable, we would be
compelled to restructure the transaction or abandon that particular
business combination and seek an alternative target business. In
addition, if we consummate a business combination, we may require
additional financing to fund the operations or growth of the target
business. The failure to secure additional financing could have a
material adverse effect on the continued development or growth of
the target business.
Financing requirements to fund operations associated with reporting
obligations under the Exchange Act.
The
Company has no revenues and is dependent upon the willingness of
the Company’s Management to fund the costs associated with the
reporting obligations under the Exchange Act, other administrative
costs associated with the Company’s corporate existence and
expenses related to the Company’s business objective. The Company
is not likely to generate any revenues until the consummation of a
business combination, at the earliest. The Company believes that it
will have available sufficient financial resources available from
its Management to continue to pay accounting and other professional
fees and other miscellaneous expenses that may be required until
the Company commences business operations following a business
combination.
We
are dependent upon interim funding provided by Management or an
affiliated party to pay professional fees and expenses. Our
Management has provided funding, without formal agreement, as has
been required to pay for accounting fees and other administrative
expenses of the Company.
The
Company does not currently engage in any business activities that
provide cash flow. The costs of investigating and analyzing
potential business combination candidates and preparing and filing
Exchange Act reports for what may be an unlimited period of time
will be paid by our sole officer and director, or an affiliated
party notwithstanding the fact that there is no written agreement
to pay such costs. The Company intends to repay these advances when
it has the cash resources to do so.
Based
on our CEO’s resource commitment to fund our operations, we believe
that we will be able to continue as a going concern until such time
as we conclude a business combination. During the next 12 months we
anticipate incurring costs related to:
|
● |
filing
of Exchange Act reports. |
| ● |
franchise
fees, registered agent fees and accounting fees, and |
| ● |
investigating,
analyzing and consummating an acquisition or business
combination. |
We
estimate that these costs will range from five to ten thousand
dollars per year, and that we will be able to meet these costs as
necessary through loans/advances from Management or affiliated
parties until we enter into a business combination.
The Company’s sole officer and director has a 55.56% equity
interest in the Company and thus is in a position to influence
certain actions requiring stockholder vote.
Management
has no present intention to call for an annual meeting of
stockholders to elect new directors prior to the consummation of a
business combination. As a result, our current director will
continue in office at least until the consummation of the business
combination. If there is an annual meeting of stockholders for any
reason, the Company’s Management has broad discretion regarding
proposals submitted to a vote by shareholders as a consequence of
Management’s significant equity interest. Accordingly, the
Company’s Management will continue to exert substantial control at
least until the consummation of a business combination.
Broad discretion of Management
Any
person who invests in the Company’s common stock will do so without
an opportunity to evaluate the specific merits or risks of any
prospective business combination. As a result, investors will be
entirely dependent on the broad discretion and judgment of
Management in connection with the selection of a prospective
business combination. There can be no assurance that determinations
made by the Company’s Management will permit us to achieve the
Company’s business objectives.
Reporting requirements may delay or preclude a business
combination
Pursuant
to the requirements of Section 13 of the Exchange Act, the Company
is required to provide certain information about significant
acquisitions and other material events. The Company will continue
to be required to file quarterly reports on Form 10-Q and annual
reports on Form 10-K, which annual report must contain the
Company’s audited financial statements. As a reporting company
under the Exchange Act, following any business combination, we will
be required to file a report on Form 8-K, which report contains
audited financial statements of the acquired entity. These audited
financial statements must be filed with the SEC within 5 days
following the closing of a business combination. While obtaining
audited financial statements is typically the responsibility of the
acquired company, it is possible that a potential target company
may be a non-reporting company with unaudited financial statements.
The time and costs that may be incurred by some potential target
companies to prepare such audited financial statements may
significantly delay or may even preclude consummation of an
otherwise desirable business combination. Acquisition prospects
that do not have or are unable to obtain the required audited
statements may not be appropriate for acquisition because we are
subject to the reporting requirements of the Exchange
Act.
If the Company is deemed to be an investment company, the Company
may be required to institute burdensome compliance requirements and
the Company’s activities may be restricted, which may make it
difficult for the Company to enter into a business
combination.
|
● |
restrictions
on the nature of the Company’s investments; and |
| ● |
restrictions
on the issuance of securities, which may make it difficult for us
to complete a business combination. |
| |
|
|
In
addition, we may have imposed upon us burdensome requirements,
including: |
|
|
| ● |
registration
as an investment company; |
| ● |
adoption
of a specific form of corporate structure; and |
| ● |
reporting,
record keeping, voting, proxy and disclosure requirements and other
rules and regulations. |
The
Company does not believe that its anticipated principal activities
will subject it to the Investment Company Act of 1940.
The Company may be deemed to have no “Independent Director”,
actions taken and expenses incurred by our officer and director on
behalf of the Company will generally not be subject to “Independent
Review”.
Our
director owns shares of our common stock and, although no
compensation will be paid to him for services rendered prior to or
in connection with a business combination, he may receive
reimbursement for out-of-pocket expenses incurred by him in
connection with activities on the Company’s behalf such as
identifying potential target businesses and performing due
diligence on suitable business combinations. There is no limit on
the amount of these out-of-pocket expenses and there will be no
review of the reasonableness of the expenses by anyone other than
our board of director, which consist of one director who may seek
reimbursement. If our director will not be deemed “independent,” he
will generally not have the benefit of independent director
examining the propriety of expenses incurred on our behalf and
subject to reimbursement. Although the Company believes that all
actions taken by our director on the Company’s behalf will be in
the Company’s best interests, the Company cannot assure the
investor that this will actually be the case. If actions are taken,
or expenses are incurred that are actually not in the Company’s
best interests, it could have a material adverse effect on our
business and plan of operation and the price of our stock held by
the public stockholders.
General Economic Risks.
The
Company’s current and future business objectives and plan of
operation are likely dependent, in large part, on the state of the
general economy. Adverse changes in economic conditions may
adversely affect the Company’s business objective and plan of
operation. These conditions and other factors beyond the Company’s
control include also, but are not limited to regulatory
changes.
Risks
Related to Our Common Stock
The Company’s shares of common stock are traded from time to time
on the OTC Pink Sheet Market.
Our
common stock trades from time to time on the OTC Pink Sheet Market.
As a result, there is only limited liquidity in our common stock.
We plan to seek quotation of our common stock on the OTCQB Market.
Quotation of the Company’s securities on the OTCQB market limits
the liquidity and price of the Company’s common stock more than if
the Company’s shares of common stock were listed on the Nasdaq
Stock Market or a national exchange. In order for our common stock
to become subject to quotation on the OTCQB Market, we must obtain
a market maker to file an application with the Financial Industry
Regulatory Authority (FINRA) on our behalf pursuant to Rule 15c2-11
under the Exchange Act. If we fail to continue to comply with the
listing requirements of the OTCQB Market, the price of our common
stock and the ability of our stockholders to to access the capital
markets could be negatively impacted. We cannot provide any
assurance that we will be able to continue to satisfy the
requirements of the OTCQB Markets’ for continued quotation. There
can be no assurance that there will be a liquid trading market for
the Company’s common stock following a business combination. In the
event that a liquid trading market commences, there can be no
assurance as to the market price of the Company’s shares of common
stock, whether any trading market will provide liquidity to
investors, or whether any trading market will be
sustained.
Our common stock is subject to the Penny Stock Rules of the SEC and
the trading market in our common stock is limited, which makes
transactions in our stock cumbersome and may reduce the value of an
investment in our common stock.
The
Securities and Exchange Commission has adopted Rule 3a51-1 which
establishes the definition of a “penny stock,” for the purposes
relevant to us, as any equity security that has a market price of
less than $5.00 per share or with an exercise price of less than
$5.00 per share, subject to certain exceptions. For any transaction
involving a penny stock, unless exempt, Rule 15g-9
require:
|
● |
that
a broker or dealer approve a person’s account for transactions in
penny stocks; and |
| ● |
the
broker or dealer receive from the investor a written agreement to
the transaction, setting forth the identity and quantity of the
penny stock to be purchased. |
In
order to approve a person’s account for transactions in penny
stocks, the broker or dealer must:
|
● |
obtain
financial information and investment experience objectives of the
person; and |
| ● |
make
a reasonable determination that the transactions in penny stocks
are suitable for that person and the person has sufficient
knowledge and experience in financial matters to be capable of
evaluating the risks of transactions in penny stocks. |
The
broker or dealer must also deliver, prior to any transaction in a
penny stock, a disclosure schedule prescribed by the SEC relating
to the penny stock market, which, in highlight form:
|
● |
sets
forth the basis on which the broker or dealer made the suitability
determination; and |
| ● |
that
the broker or dealer received a signed, written agreement from the
investor prior to the transaction. |
Generally,
brokers may be less willing to execute transactions in securities
subject to the “penny stock” rules. This may make it more difficult
for investors to dispose of our common stock and cause a decline in
the market value of our stock.
Disclosure
also has to be made about the risks of investing in penny stocks in
both public offerings and in secondary trading and about the
commissions payable to both the broker-dealer and the registered
representative, current quotations for the securities and the
rights and remedies available to an investor in cases of fraud in
penny stock transactions. Finally, monthly statements have to be
sent disclosing recent price information for the penny stock held
in the account and information on the limited market in penny
stocks.
State blue sky registration; potential limitations on resale of the
Company’s common stock
The
holders of the Company’s shares of common stock registered under
the Exchange Act and those persons who desire to purchase them in
any trading market that may develop in the future, should be aware
that there may be state blue-sky law restrictions upon the ability
of investors to resell the Company’s securities. Accordingly,
investors should consider the secondary market for the Registrant’s
securities to be a limited one.
It is
the intention of the Registrant’s Management following the
consummation of a business combination to seek coverage and
publication of information regarding the Registrant in an accepted
publication manual which permits a manual exemption. The manual
exemption permits a security to be distributed in a particular
state without being registered if the Registrant issuing the
security has a listing for that security in a securities manual
recognized by the state. However, it is not enough for the security
to be listed in a recognized manual. The listing entry must contain
(1) the names of issuers, officers, and directors, (2) an issuer’s
balance sheet, and (3) a profit and loss statement for either the
fiscal year preceding the balance sheet or for the most recent
fiscal year of operations. Furthermore, the manual exemption is a
non-issuer exemption restricted to secondary trading transactions,
making it unavailable for issuers selling newly issued
securities.
Most
of the accepted manuals are those published by Standard and Poor’s,
Moody’s Investor Service, Fitch’s Investment Service, and Best’s
Insurance Reports, and many states expressly recognize these
manuals. A smaller number of states declare that they “recognize
securities manuals” but do not specify the recognized manuals. The
following states do not have any provisions and therefore do not
expressly recognize the manual exemption: Alabama, Georgia,
Illinois, Kentucky, Louisiana, Montana, South Dakota, Tennessee,
Vermont and Wisconsin.
Rule 144 Related Risks
The
SEC adopted amendments to Rule 144 which became effective on
February 15, 2008. These Rule 144 amendments apply to securities
acquired both before and after that date. Generally, under the Rule
144 amendments, a person who has beneficially owned restricted
shares for at least six months would be entitled to sell their
securities provided that: (i) such person is not deemed to have
been an affiliate at the time of, or at any time during the three
months preceding, a sale; (ii) we are subject to and are current in
the Exchange Act periodic reporting requirements for at least 90
days before the sale; and (iii) if the sale occurs prior to
satisfaction of a one-year holding period, provided current
information is available at the time of sale.
Persons
who have beneficially owned restricted shares for at least six
months but who are affiliates at the time of, or at any time during
the three months preceding a sale, would be subject to additional
restrictions, by which such person would be entitled to sell within
any three-month period only a number of securities that does not
exceed the greater of either of the following: (i) 1% of the total
number of securities of the same class then outstanding; or (ii)
the average weekly trading volume of such securities during the
four calendar weeks preceding the filing of a notice on Form 144
with respect to the sale; provided, in each case, that we are
subject to the Exchange Act periodic reporting requirements for at
least three months before the sale. Such sales by affiliates must
also comply with the manner of sale, current public information and
notice provisions of Rule 144.
These
Rule 144 related risks are subject to further restrictions in the
event that the Exchange Act reporting company is deemed to be a
Shell Company, such as the Registrant.
Restrictions on the Reliance of Rule 144 by Shell Companies or
Former Shell Companies
Historically,
the SEC staff has taken the position that Rule 144 is not available
for the resale of securities initially issued by companies that
are, or previously were, blank check companies, like us. The SEC
has codified and expanded this position in the amendments discussed
above by prohibiting the use of Rule 144 for resale of securities
issued by any shell companies (other than business combination
related shell companies) or any issuer that has been at any time
previously a shell company. The SEC has provided an important
exception to this prohibition, however, if the following conditions
are met:
|
● |
The
issuer of the securities that was formerly a shell company has
ceased to be a shell company; |
| ● |
The
issuer of the securities is subject to the reporting requirements
of Section 13 or 15(d) of the Exchange Act; |
| ● |
The
issuer of the securities has filed all Exchange Act reports and
material required to be filed, as applicable, during the preceding
12 months (or such shorter period that the issuer was required to
file such reports and materials), other than Current Reports on
Form 8-K; and |
| ● |
At
least one year has elapsed from the time that the issuer filed
current comprehensive disclosure with the SEC reflecting its status
as an entity that is not a shell company. |
As a
result, it is likely that pursuant to Rule 144, stockholders who
receive our restricted securities in a business combination will
not be able to sell our shares without registration until one year
after we have completed our initial business
combination.
Rule 145 Related Risk
Under
the new amendments, affiliates of a target company who receive
registered shares in a Rule 145 business combination transaction,
and who do not become affiliates of the acquirer, will be able to
immediately resell the securities received by them into the public
markets without registration (except for affiliates of a shell
company as discussed in the following section). However, those
persons who are affiliates of the acquirer, and those who become
affiliates of the acquirer after the acquisition, will still be
subject to the Rule 144 resale conditions generally applicable to
affiliates, including the adequate current public information
requirement, volume limitations, manner-of-sale requirements for
equity securities, and, if applicable, a Form 144
filing.
Application of Rule 145 to Shell Companies
Public
resale of securities acquired by affiliates of acquirers and target
companies in business combination transactions involving shell
companies will continue to be subject to restrictions imposed by
Rule 145. If the business combination transaction is not registered
under the Securities Act, then the affiliates must look to Rule 144
to resell their securities (with the additional Rule 144 conditions
applicable to shell company securities). If the business
combination transaction is registered under the Securities Act,
then affiliates of the acquirer and target company may resell the
securities acquired in the transaction, subject to the following
conditions:
|
● |
The
issuer must meet all of the conditions applicable to shell
companies under Rule 144; |
| ● |
After
90 days from the date of the acquisition, the affiliates may resell
their securities subject to Rule 144’s volume limitations, adequate
current public information requirement, and manner-of-sale
requirements; |
| ● |
After
six months from the date of the acquisition, selling
security-holders who are not affiliates of the acquirer may resell
their securities subject only to the adequate current public
information requirement of Rule 144; and |
| ● |
After
one year from the date of the acquisition, selling security-holders
who are not affiliates or the acquirer may resell their securities
without restriction. |
Application of Rule 419 to Shell Companies
The
provisions of Rule 419 apply to registration statements filed under
the Securities Act of 1933, as amended, by a blank check company.
Rule 419 requires that a blank check company filing such
registration statement deposit the securities being offered and
proceeds of the offering into an escrow or trust account pending
the execution of an agreement for an acquisition or
merger.
In
addition, the registrant is required to file a post-effective
amendment to the registration statement upon the execution of an
agreement for such acquisition or merger. The rule provides
procedures for the release of the offering funds in conjunction
with the post effective acquisition or merger. The obligations to
file post-effective amendments are in addition to the obligations
to file Forms 8-K to report for both the entry into a material
non-ordinary course agreement and the completion of the
transaction. Rule 419 applies to both primary and re-sale or
secondary offerings.
Within
five (5) days of filing a post-effective amendment setting forth
the proposed terms of an acquisition, the Company must notify each
investor whose shares are in escrow. Each investor then has no
fewer than 20 and no greater than 45 business days to notify the
Company in writing if they elect to remain an investor. A failure
to reply indicates that the person has elected to not remain an
investor. As all investors are allotted this second opportunity to
determine to remain an investor, acquisition agreements should be
conditioned upon enough funds remaining in escrow to close the
transaction.
You May Not Be Entitled to Protections Normally Afforded to
Investors of Bank Check Companies.
If
the net proceeds of an offering under the Securities Act of 1933 is
used to complete an initial business combination with a target
business that has not been identified, and we will have net
tangible assets in excess of $5,000,001 upon the successful
consummation of this offering and will file a Current Report on
Form 8-K, including an audited balance sheet demonstrating this
fact, we are exempt from rules promulgated by the SEC to protect
investors of blank check companies such as Rule 419. Accordingly,
investors will not be afforded the benefits or protections of those
rules which would, for example, completely restrict the
transferability of our securities, require us to complete our
initial business combination within 18 months of the effective date
of the initial registration statement and restrict the use of
interest earned on the funds held in the trust account.
Investors
will then not be entitled to protections normally offered to
investors in Rule 419 blank check offerings.
Possible Issuance of Additional Securities.
Our
Articles of Incorporation authorize the issuance of 74,000,000
shares of common stock, par value $0.0001. As of June 30, 2020, we
had 23,811,750 shares issued and outstanding. We may be expected to
issue additional shares in connection with our pursuit of new
business opportunities and new business operations. To the extent
that additional shares of common stock are issued, our shareholders
would experience dilution of their respective ownership interests.
If we issue shares of common stock in connection with our intent to
pursue new business opportunities, a change in control of the
Registrant may be expected to occur. The issuance of additional
shares of common stock may adversely affect the market price of our
common stock, in the event that an active trading market
commences.
Dividends unlikely
The
Company does not expect to pay dividends for the foreseeable future
because it has no revenues or cash resources. The payment of
dividends will be contingent upon the Company’s future revenues and
earnings, if any, capital requirements and overall financial
conditions. The payment of any future dividends will be within the
discretion of the Company’s board of directors as then constituted.
It is the Company’s expectation that future Management following a
business combination will determine to retain any earnings for use
in its business operations and accordingly, the Company does not
anticipate declaring any dividends in the foreseeable
future.
ITEM
1B. UNRESOLVED STAFF COMMENTS Back to Table of Contents
Not
applicable.
ITEM
2. DESCRIPTION OF PROPERTIES Back
to Table of Contents
The
Registrant’s corporate office is located at 40 Wall Street,
28th Floor, New York, NY 10005, which space is provided
to us on a rent-free basis. The Registrant believes that the office
facilities are sufficient for the foreseeable future and this
arrangement will remain until we find a new business
opportunity.
ITEM
3. LEGAL PROCEEDING Back to Table
of Contents
None.
ITEM
4. MINE SAFETY DISCLOSURES Back
to Table of Contents
None.
PART
II
ITEM
5. MARKET FOR REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER
MATTER Back to Table of
Contents
Market
Price Information
Our
common stock is currently quoted on the OTC market “Pink Sheets”
under the symbol ECMT. For the periods indicated, the following
table sets forth the high and low bid prices per share of common
stock. The below prices represent inter-dealer quotations without
retail markup, markdown, or commission and may not necessarily
represent actual transactions.
| |
|
Price
Range |
|
|
Period |
|
High |
|
|
Low |
|
| Year Ended June
2019: |
|
|
|
|
|
|
|
First
Quarter |
|
$ |
0.11 |
|
|
$ |
0.03 |
|
| Second
Quarter |
|
$ |
0.09 |
|
|
$ |
0.03 |
|
| Third
Quarter |
|
$ |
0.07 |
|
|
$ |
0.05 |
|
| Fourth
Quarter |
|
$ |
0.10 |
|
|
$ |
0.06 |
|
| Year Ended June 30,
2020: |
|
|
|
|
|
|
|
|
| First
Quarter |
|
$ |
0.07 |
|
|
$ |
0.05 |
|
| Second
Quarter |
|
$ |
0.14 |
|
|
$ |
0.06 |
|
| Third
Quarter |
|
$ |
0.07 |
|
|
$ |
0.04 |
|
| Fourth
Quarter |
|
$ |
0.06 |
|
|
$ |
0.04 |
|
As of
June 30, 2020, our shares of common stock were held by
approximately 47 stockholders of record. The transfer agent of our
common stock is Standard Registrar and Transfer Company, Inc. Phone
(801) 571-8844.
Dividends
Holders
of common stock are entitled to dividends when, as, and if declared
by the Board of Directors, out of funds legally available
therefore. We have never declared cash dividends on its common
stock and our Board of Directors does not anticipate paying cash
dividends in the foreseeable future as it intends to retain future
earnings to finance the growth of our businesses. There are no
restrictions in our articles of incorporation or bylaws that
restrict us from declaring dividends.
Securities
Authorized for Issuance Under Equity Compensation
Plans
No
equity compensation plan or agreements under which our common stock
is authorized for issuance has been adopted during the fiscal year
ended June 30, 2020 and 2019.
ITEM
6. SELECTED FINANCIAL DATA Back
to Table of Contents
N.A.
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
PLAN OF OPERATION Back to Table
of Contents
Management’s Plan of Operation
The
following discussion contains forward-looking statements.
Forward-looking statements give our current expectations or
forecasts of future events. You can identify these statements by
the fact that they do not relate strictly to historical or current
facts. They use of words such as “anticipate”, “estimate”,
“expect”, “project”, “intend”, “plan”, “believe”, and other words
and terms of similar meaning in connection with any discussion of
future operating or financial performance. From time to time, we
also may provide forward-looking statements in other materials we
release to the public.
Overview
The
Company’s current business objective is to seek a business
combination with an operating company. We intend to use the
Company’s limited personnel and financial resources in connection
with such activities. The Company will utilize its capital stock,
debt or a combination of capital stock and debt, in effecting a
business combination. It may be expected that entering into a
business combination will involve the issuance of restricted shares
of capital stock. The issuance of additional shares of our capital
stock:
|
● |
may
significantly reduce the equity interest of our
stockholders; |
| ● |
will
likely cause a change in control if a substantial number of our
shares of capital stock are issued, and most likely will also
result in the resignation or removal of our present officer and
director; and |
| ● |
may
adversely affect the prevailing market price for our common
stock. |
| |
|
|
Similarly,
if we issued debt securities, it could result in: |
|
|
| ● |
default
and foreclosure on our assets if our operating revenues after a
business combination were insufficient to pay our debt
obligations; |
| ● |
acceleration
of our obligations to repay the indebtedness even if we have made
all principal and interest payments when due if the debt security
contained covenants that required the maintenance of certain
financial ratios or reserves and any such covenants were breached
without a waiver or renegotiations of such covenants; |
| ● |
our
immediate payment of all principal and accrued interest, if any, if
the debt security was payable on demand; and |
| ● |
our
inability to obtain additional financing, if necessary, if the debt
security contained covenants restricting our ability to obtain
additional financing while such security was
outstanding. |
Results
of Operations during the year ended June 30, 2020 as compared to
the year ended June 30, 2019
We
have not generated any revenues during the years 2020 and 2019. We
had total operating expenses of $56,673 related to general and
administrative expenses during the year ended June 30, 2020
compared to total operating expenses of $67,330 during the year
ended June 30, 2019. We incurred interest expense of $10,788 during
the year ended June 30, 2020 compared to interest expense of $9,542
during the year ended June 30, 2019. During the year ended June 30,
2020 and 2019, we had a net loss of $67,461 and $76,872,
respectively, mainly due to our general and administrative
expenses.
Liquidity
and Capital Resources
At
present, the Company has no business operations and no cash
resources other than that provided by Management. We are dependent
upon interim funding provided by Management or an affiliated party
to pay professional fees and expenses. Our Management and an
affiliated party have agreed to provide funding as may be required
to pay for accounting fees and other administrative expenses of the
Company until the Company enters into a business combination. The
Company would be unable to continue as a going concern without
interim financing provided by Management.
If we
require additional financing, we cannot predict whether equity or
debt financing will become available at terms acceptable to us, if
at all. The Company depends upon services and funding provided by
Management to fulfill its filing obligations under the Exchange
Act. At present, the Company has no financial resources to pay for
such services.
The
Company does not currently engage in any business activities that
provide cash flow.
During
the next 12 months we anticipate incurring costs related
to:
|
● |
filing
of Exchange Act reports. |
| ● |
franchise
fees, registered agent fees and accounting fees, and |
| ● |
investigating,
analyzing and consummating an acquisition or business
combination. |
We
estimate that these costs will be in the range of five to six
thousand dollars per year, and that we will be able to meet these
costs as necessary, to be loaned to us by our CEO.
On
June 30, 2020 and 2019, we have had no current assets. As of June
30, 2020, we had $214,961 in liabilities consisting of accounts
payable of $3,350, advance from a related party of $28,155, accrued
interest due to related parties of $18,456 and a $165,000 in
convertible notes. As of June 30, 2019, we had $203,300 in current
liabilities consisting of advance from a related party of $19,831,
accrued compensation of $45,000, accrued interest due to related
parties of $13,469 and $125,000 in two convertible
notes.
We
had a negative cash flow from operations of $8,324 during the year
ended June 30, 2020, mainly due to a net loss of $67,461 offset by
an increase in accounts payable and accrued liabilities of $59,137.
We financed our negative cash flow from operations during the year
ended June 30, 2020 through advances made by our CEO of
$8,324.
We
had a negative cash flow from operations of $7,329 during the year
ended June 30, 2019 mainly due to a net loss of $76,872 offset by
an increase in accounts payable and accrued liabilities of $69,543.
We financed our negative cash flow from operations during the year
ended June 30, 2019 through advances made by our CEO of
$7,329.
The
Company currently plans to satisfy its cash requirements for the
next 12 months through borrowings from its CEO and believes it can
satisfy its cash requirements so long as it is able to obtain
financing from him. The Company expects that money borrowed will be
used during the next 12 months to satisfy the Company’s operating
costs, professional fees and for general corporate purposes. On
September 1, 2017, we formalized a verbal funding agreement and
entered into a Loan Agreement with Ivo Heiden, our sole officer and
director, under which we receive funding of up to $100,000 for
general operating expenses from time-to-time as needed by the
Company. The loan bears an interest rate of 8% per annum and shall
be due and payable on a date three hundred sixty-six (366) days
from the date of the Loan Agreement. On May 1, 2020, the Loan
Agreement was extended to September 1, 2021. As of June 30, 2020,
the Company has received a total of $28,155 under this Loan
Agreement.
The
Company intends to repay these advances at a time when it has the
cash resources to do so.
The
Company has only limited capital. Additional financing is necessary
for the Company to continue as a going concern. Our independent
auditors have unqualified audit opinion for the years ended June
30, 2020 and 2019 with an explanatory paragraph on going
concern.
Off-Balance
Sheet Arrangements
As of
June 30, 2020 and 2019, we did not have any off-balance sheet
arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K
promulgated under the Securities Act of 1934.
Contractual
Obligations and Commitments
As of
June 30, 2020 and 2019, we did not have any contractual
obligations.
Critical
Accounting Policies
Our
significant accounting policies are described in the notes to our
financial statements for the years ended June 30, 2020 and 2019,
and are included elsewhere in this registration
statement.
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Back to Table of
Contents
We
have not entered into, and do not expect to enter into, financial
instruments for trading or hedging purposes.
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Back to Table of Contents
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Back to Table of Contents
To
the Board of Directors and
Stockholders
of Ecomat Inc.
Opinion
on the Financial Statements
We
have audited the accompanying balance sheets of Ecomat Inc. (the
Company) as of June 30, 2020 and 2019 and the related statements of
operations, stockholders’ deficit, and cash flows for the two-year
period ended June 30, 2020 and the related notes (collectively
referred to as the financial statements). In our opinion, the
financial statements present fairly, in all material respects, the
financial position of the Company as of June 30, 2020 and 2019 and
the results of its operations and its cash flows for the periods
ended June 30, 2020 and 2019, in conformity with accounting
principles generally accepted in the United States of
America.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting.
As part of our audits, we are required to obtain an understanding
of internal control over financial reporting, but not for the
purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly,
we express no such opinion.
Our
audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis
for our opinion.
The
accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 2 to
the financial statements, the Company suffered losses from
operations which raise substantial doubt about its ability to
continue as a going concern. Managements plans regarding those
matters are also described in Note 2. The financial statements do
not include any adjustments that might result from the outcome of
this uncertainty.
|
/s/
M&K CPAS, PLLC |
|
| |
|
| We
have served as the Company’s auditor since 2016. |
|
| |
|
| Houston,
TX |
|
| September
17, 2020 |
|
Ecomat
Inc.
Balance
Sheets
Balance
Sheets as of June 30 2020 and 2019
Back
to Table of Contents
| |
|
June 30,
2020 |
|
|
June 30,
2019 |
|
| ASSETS |
|
|
|
|
|
|
| Current assets: |
|
|
|
|
|
|
|
|
| Cash |
|
$ |
- |
|
|
$ |
- |
|
| Total
current assets |
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
| Total
assets |
|
$ |
- |
|
|
$ |
- |
|
| |
|
|
|
|
|
|
|
|
| LIABILITIES AND STOCKHOLDERS’
DEFICIT |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
|
|
| Accounts payable
-trade |
|
$ |
3,350 |
|
|
$ |
- |
|
| Advances from - related party |
|
|
28,155 |
|
|
|
19,831 |
|
| Accrued compensation - related
party |
|
|
- |
|
|
|
45,000 |
|
| Accrued interest related party |
|
|
18,456 |
|
|
|
13,469 |
|
| Convertible notes - related party |
|
|
165,000 |
|
|
|
125,000 |
|
| Total
current liabilities |
|
|
214,961 |
|
|
|
203,300 |
|
| |
|
|
|
|
|
|
|
|
| Stockholders’ deficit: |
|
|
|
|
|
|
|
|
| Preferred stock,
$0.0001 par value; 1,000,000 authorized; none issued and
outstanding at June 30, 2020 and June 30, 2019. |
|
|
- |
|
|
|
- |
|
| Common stock,
$0.0001 par value; 74,000,000 shares authorized; 23,811,750 and
16,836,750 issued and outstanding at June 30, 2020 and 2019,
respectively |
|
|
2,381 |
|
|
|
1,684 |
|
| Additional paid in
capital |
|
|
58,894 |
|
|
|
3,791 |
|
|
Accumulated deficit |
|
|
(276,236 |
) |
|
|
(208,775 |
) |
| Total
stockholders’ deficit |
|
|
(214,961 |
) |
|
|
(203,300 |
) |
| Total
liabilities and stockholders’ deficit |
|
$ |
- |
|
|
$ |
- |
|
See
Summary of Significant Accounting Policies and Notes to Financial
Statements.
Ecomat
Inc.
Statements
of Operations
Back
to Table of Contents
| |
|
Fiscal Year |
|
|
Fiscal Year |
|
| |
|
Ended |
|
|
Ended |
|
| |
|
June 30,
2020 |
|
|
June 30,
2019 |
|
| Revenue |
|
$ |
- |
|
|
$ |
- |
|
| Costs and
expenses: |
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
56,673 |
|
|
|
67,330 |
|
| Total operating
expenses |
|
|
56,673 |
|
|
|
67,330 |
|
| |
|
|
|
|
|
|
|
|
| Other income and expenses |
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
10,788 |
|
|
|
9,542 |
|
| Net
loss |
|
$ |
(67,461 |
) |
|
$ |
(76,872 |
) |
| |
|
|
|
|
|
|
|
|
| Per shares amounts: |
|
|
|
|
|
|
|
|
| Basic
and diluted net loss |
|
$ |
(0.00 |
) |
|
$ |
(0.00 |
) |
| |
|
|
|
|
|
|
|
|
| Weighted average shares
outstanding (basic and diluted) |
|
|
21,105,602 |
|
|
|
16,836,750 |
|
See
Summary of Significant Accounting Policies and Notes to Financial
Statements.
Ecomat
Inc.
Statement
of Stockholders’ Deficit for the years ended June 30, 2020 and
2019
Back
to Table of Contents
| |
|
Common
Stock |
|
|
Additional |
|
|
|
|
|
Total |
|
| |
|
Number of |
|
|
Stated Or |
|
|
Paid-In |
|
|
Accumulated |
|
|
Shareholders’ |
|
| |
|
Shares |
|
|
Par
Value |
|
|
Capital |
|
|
Deficit |
|
|
Deficit |
|
| Balance at June 30, 2018 |
|
|
16,836,750 |
|
|
$ |
1,684 |
|
|
$ |
3,791 |
|
|
$ |
(131,903 |
) |
|
$ |
(126,428 |
) |
| Net
loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(76,872 |
) |
|
|
(76,872 |
) |
| Balance at June 30, 2019 |
|
|
16,836,750 |
|
|
$ |
1,684 |
|
|
$ |
3,791 |
|
|
$ |
(208,775 |
) |
|
$ |
(203,300 |
) |
| Shares issued upon debt
conversion |
|
|
6,975,000 |
|
|
|
697 |
|
|
|
55,103 |
|
|
|
- |
|
|
|
55,800 |
|
| Net
loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(67,461 |
) |
|
|
(67,461 |
) |
| Balance at June 30, 2020 |
|
|
23,811,750 |
|
|
|
2,381 |
|
|
|
58,894 |
|
|
|
(276,236 |
) |
|
|
(214,961 |
) |
See
Summary of Significant Accounting Policies and Notes to Financial
Statements.
Ecomat
Inc.
Statements
of Cash Flows
Back
to Table of Contents
| |
|
Fiscal Year |
|
|
Fiscal Year |
|
| |
|
Ended |
|
|
Ended |
|
| |
|
June 30,
2020 |
|
|
June 30,
2019 |
|
| Cash flows from operating
activities: |
|
|
|
|
|
|
|
|
| Net loss |
|
$ |
(67,461 |
) |
|
$ |
(76,872 |
) |
| Adjustments required to reconcile net
loss to cash used in operating activities: |
|
|
|
|
|
|
|
|
| Imputed
interest |
|
|
- |
|
|
|
- |
|
| Changes in operating assets and
liabilities: |
|
|
|
|
|
|
|
|
|
Increase (decrease) in accounts payable and accrued
liabilities |
|
|
59,137 |
|
|
|
69,543 |
|
| Cash
flows used by operating activities |
|
|
(8,324 |
) |
|
|
(7,329 |
) |
| |
|
|
|
|
|
|
|
|
| Cash flows from financing
activities: |
|
|
|
|
|
|
|
|
| Advances from
related party |
|
|
8,324 |
|
|
|
7,329 |
|
|
Convertible note borrowings |
|
|
- |
|
|
|
- |
|
| Cash
generated by financing activities |
|
|
8,324 |
|
|
|
7,329 |
|
| |
|
|
|
|
|
|
|
|
| Change in cash |
|
|
- |
|
|
|
- |
|
| Cash - beginning of period |
|
|
- |
|
|
|
- |
|
| Cash - end of period |
|
$ |
- |
|
|
$ |
- |
|
| |
|
|
|
|
|
|
|
|
| Non-cash investing and financing
activities: |
|
|
|
|
|
|
|
|
| Accrued compensation settled with
convertible notes payable |
|
$ |
90,000 |
|
|
$ |
75,000 |
|
| Common stock issued upon conversion of
debt |
|
$ |
55,800 |
|
|
$ |
- |
|
See
Summary of Significant Accounting Policies and Notes to Financial
Statements.
Ecomat
Inc.
Background
and Significant Accounting Policies
June
30, 2020
Back
to Table of Contents
Note
1. The Company and Significant Accounting Policies
Ecomat
Inc. (the “Company”) was incorporated on December 14, 1995 pursuant
to the laws of the State of Delaware. On February 9, 2007, the
Company completed its change in domicile to Nevada.
The
Company used to operate a wet-cleaning process which was one of the
first environmentally sound solution to current dry-cleaning
methods.
Basis
of Presentation:
We
adopted “fresh-start” accounting as of June 15, 2006 in accordance
with procedures specified by AICPA Statement of Position (“SOP”)
No. 90-7, “Financial Reporting by Entities in Reorganization under
the Bankruptcy Code.
Significant Accounting Policies:
Use
of Estimates:
The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make
estimates and assumptions that affect reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statement and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from the estimates.
Cash
and Cash Equivalents:
For
financial statement presentation purposes, the Company considers
those short-term, highly liquid investments with original
maturities of three months or less to be cash or cash equivalents.
There were no cash equivalents at June 30, 2020 or 2019.
Property
and Equipment:
New
property and equipment are recorded at cost. Property and equipment
included in the bankruptcy proceedings and transferred to the
Trustee had been valued at liquidation value. Depreciation is
computed using the straight-line method over the estimated useful
lives of the assets, generally 5 years. Expenditures for renewals
and betterments are capitalized. Expenditures for minor items,
repairs and maintenance are charged to operations as incurred. Gain
or loss upon sale or retirement due to obsolescence is reflected in
the operating results in the period the event takes
place.
Valuation
of Long-Lived Assets:
We
review the recoverability of our long-lived assets including
equipment, goodwill and other intangible assets, when events or
changes in circumstances occur that indicate that the carrying
value of the asset may not be recoverable. The assessment of
possible impairment is based on our ability to recover the carrying
value of the asset from the expected future pre-tax cash flows
(undiscounted and without interest charges) of the related
operations. If these cash flows are less than the carrying value of
such asset, an impairment loss is recognized for the difference
between estimated fair value and carrying value. Our primary
measure of fair value is based on discounted cash flows. The
measurement of impairment requires management to make estimates of
these cash flows related to long-lived assets, as well as other
fair value determinations.
Stock
Based Compensation:
Stock-based
awards are accounted for using the fair value method in accordance
with ASC 718, Share-Based Payments. Our primary type of share-based
compensation consists of stock options. We use the Black-Scholes
option pricing model in valuing options. The inputs for the
valuation analysis of the options include the market value of the
Company’s common stock, the estimated volatility of the Company’s
common stock, the exercise price of the warrants and the risk-free
interest rate.
Fair
Value of Financial Instruments:
FASB
ASC 825, “Financial Instruments,” requires entities to disclose the
fair value of financial instruments, both assets and liabilities
recognized and not recognized on the balance sheet, for which it is
practicable to estimate fair value. FASB ASC 825 defines fair value
of a financial instrument as the amount at which the instrument
could be exchanged in a current transaction between willing
parties. At June 30, 2020 and 2019, the carrying value of certain
financial instruments (cash and cash equivalents, accounts payable
and accrued expenses.) approximates fair value due to the
short-term nature of the instruments or interest rates, which are
comparable with current rates.
Earnings
per Common Share:
We
compute net income (loss) per share in accordance with ASC 260,
Earning per Share. ASC 260 requires presentation of both basic and
diluted earnings per share (EPS) on the face of the income
statement. Basic EPS is computed by dividing net income (loss)
available to common shareholders (numerator) by the weighted
average number of shares outstanding (denominator) during the
period. Diluted EPS gives effect to all dilutive potential common
shares outstanding during the period using the treasury stock
method and convertible preferred stock using the if-converted
method. In computing Diluted EPS, the average stock price for the
period is used in determining the number of shares assumed to be
purchased from the exercise of stock options or warrants. Diluted
EPS excludes all dilutive potential shares if their effect is
anti-dilutive.
Income
Taxes:
We
have adopted ASC 740, Accounting for Income Taxes. Pursuant to ASC
740, we are required to compute tax asset benefits for net
operating losses carried forward. The potential benefits of net
operating losses have not been recognized in these financial
statements because the Company cannot be assured it is more likely
than not it will utilize the net operating losses carried forward
in future years.
We
must make certain estimates and judgments in determining income tax
expense for financial statement purposes. These estimates and
judgments occur in the calculation of certain tax assets and
liabilities, which arise from differences in the timing of
recognition of revenue and expense for tax and financial statement
purposes.
Deferred
tax assets and liabilities are determined based on the differences
between financial reporting and the tax basis of assets and
liabilities using the tax rates and laws in effect when the
differences are expected to reverse. ASC 740 provides for the
recognition of deferred tax assets if realization of such assets is
more likely than not to occur. Realization of our net deferred tax
assets is dependent upon our generating sufficient taxable income
in future years in appropriate tax jurisdictions to realize benefit
from the reversal of temporary differences and from net operating
loss, or NOL, carryforwards. We have determined it more likely than
not that these timing differences will not materialize and have
provided a valuation allowance against substantially all of our net
deferred tax asset.
Management
will continue to evaluate the realizability of the deferred tax
asset and its related valuation allowance. If our assessment of the
deferred tax assets or the corresponding valuation allowance were
to change, we would record the related adjustment to income during
the period in which we make the determination. Our tax rate may
also vary based on our results and the mix of income or loss in
domestic and foreign tax jurisdictions in which we
operate.
In
addition, the calculation of our tax liabilities involves dealing
with uncertainties in the application of complex tax regulations.
We recognize liabilities for anticipated tax audit issues in the
U.S. and other tax jurisdictions based on our estimate of whether,
and to the extent to which, additional taxes will be due. If we
ultimately determine that payment of these amounts is unnecessary,
we will reverse the liability and recognize a tax benefit during
the period in which we determine that the liability is no longer
necessary. We will record an additional charge in our provision for
taxes in the period in which we determine that the recorded tax
liability is less than we expect the ultimate assessment to
be.
ASC
740 which requires recognition of estimated income taxes payable or
refundable on income tax returns for the current year and for the
estimated future tax effect attributable to temporary differences
and carry-forwards. Measurement of deferred income tax is based on
enacted tax laws including tax rates, with the measurement of
deferred income tax assets being reduced by available tax benefits
not expected to be realized.
Uncertain
Tax Positions:
The
Financial Accounting Standards Board issued Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes - an interpretation of
FASB Statement No. 109, Accounting for Income Taxes” (“FIN No. 48”)
which was effective for the Company on January 1, 2007. FIN No. 48
addresses the determination of whether tax benefits claimed or
expected to be claimed on a tax return should be recorded in the
financial statements. Under FIN No. 48, the Company may recognize
the tax benefit from an uncertain tax position only if it is more
likely than not that the tax position will be sustained on
examination by the taxing authorities based on the technical merits
of the position. The tax benefits recognized in the financial
statements from such position should be measured based on the
largest benefit that has a greater than fifty percent likelihood of
being realized upon ultimate settlement. FIN No. 48 also provides
guidance on derecognition, classification, interest and penalties,
accounting in interim periods and disclosure
requirements.
Our
federal and state income tax returns are open for fiscal years
ending on or after June 30, 2007. We are not under examination by
any jurisdiction for any tax year. At June 30, 2020, we had no
material unrecognized tax benefits and no adjustments to
liabilities or operations were required under FIN 48.
Recent
Accounting Pronouncements
In
July 2018, the FASB issued ASU No. 2018-10, Codification
Improvements to Topic 842, Leases. The amendments in ASU 2018-10
provide additional clarification and implementation guidance on
certain aspects of the previously issued ASU No. 2016-02, Leases
(Topic 842) (“ASU 2016-02”) and have the same effective and
transition requirements as ASU 2016-02. Upon the effective date,
ASU 2018-10 will supersede the current lease guidance in ASC Topic
840, Leases. Under the new guidance, lessees will be required to
recognize for all leases, with the exception of short-term leases,
a lease liability, which is a lessee’s obligation to make lease
payments arising from a lease, measured on a discounted basis.
Concurrently, lessees will be required to recognize a right-of-use
asset, which is an asset that represents the lessee’s right to use,
or control the use of, a specified asset for the lease term. ASU
2018-10 is effective for private companies and emerging growth
public companies for interim and annual reporting periods beginning
after December 15, 2019, with early adoption permitted. The
guidance is required to be applied using a modified retrospective
transition approach for leases existing at, or entered into after,
the beginning of the earliest comparative periods presented in the
financial statements. During the year ended June 30, 2020, the
Company assessed the impact this guidance had on its financial
statements and concluded that at present ASU No. 2018-10 has no
impact on its financial statements.
In
August, 2016, the FASB issued ASU No. 2016-15, Statement of Cash
Flows (Topic 230): Classification of Certain Cash Receipts and Cash
Payments (a consensus of the Emerging Issues Task Force). Effective
for public business entities for fiscal years beginning after
December 15, 2017, and interim periods within those fiscal years.
For all other entities, the amendments are effective for fiscal
years beginning after December 15, 2018, and interim periods within
fiscal years beginning after December 15, 2019. Early adoption is
permitted, including adoption in an interim period. If an entity
early adopts the amendments in an interim period, any adjustments
should be reflected as of the beginning of the fiscal year that
includes that interim period. An entity that elects early adoption
must adopt all of the amendments in the same period.
In
May, 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts
with Customers (Topic 606): Narrow-Scope Improvements and Practical
Expedients. The amendments in this Update affect the guidance in
Accounting Standards Update 2014-09, Revenue from Contracts with
Customers (Topic 606), which became effective. The effective date
and transition requirements for the amendments in this Update are
the same as the effective date and transition requirements for
Topic 606 (and any other Topic amended by Update 2014-09).
Accounting Standards Update 2015-14, Revenue from Contracts with
Customers (Topic 606): Deferral of the Effective Date, defers the
effective date of Update 2014-09 by one year.
In
April, 2016, the FASB issued ASU No. 2016-10, Revenue from
Contracts with Customers (Topic 606): Identifying Performance
Obligations and Licensing. The amendments in this Update affect the
guidance in Accounting Standards Update 2014-09, Revenue from
Contracts with Customers (Topic 606), which became effective. The
effective date and transition requirements for the amendments in
this Update are the same as the effective date and transition
requirements in Topic 606 (and any other Topic amended by Update
2014-09). Accounting Standards Update 2015-14, Revenue from
Contracts with Customers (Topic 606): Deferral of the Effective
Date, defers the effective date of Update 2014-09 by one
year.
The
Company has considered all new accounting pronouncements and has
concluded that there are no new pronouncements that may have a
material impact on results of operations, financial condition, or
cash flows, based on current information.
Note
2. Going Concern
The
accompanying financial statements have been prepared assuming the
Company will continue as a going concern The Company has incurred
losses, has negative operational cash flows and has no revenues.
The future of the Company is dependent upon Management success in
its efforts and limited resources to pursue and effect a business
combination. These conditions raise substantial doubt about the
Company’s ability to continue as a going concern. These financial
statements do not include any adjustments that might arise from
this uncertainty.
If a
business combination transaction is not consummated, we do not
believe that we could succeed in raising additional capital, from
unrelated parties, needed to sustain our operations without some
strategic transaction, such as a business combination or merger. If
we are unable to consummate such a transaction, we expect that we
would need to cease all operations and wind down. Although we are
currently evaluating our strategic alternatives with respect to all
aspects of our business, we cannot assure you that any actions that
we take would raise or generate sufficient capital to fully address
the uncertainties of our financial position.
Note
3. Income Taxes
We
have adopted ASC 740 which provides for the recognition of a
deferred tax asset based upon the value the loss carry-forwards
will have to reduce future income taxes and management’s estimate
of the probability of the realization of these tax
benefits.
We
have a current operating loss carry-forward of $276,236. We have
determined it more likely than not that these timing differences
will not materialize and have provided a valuation allowance
against substantially all our net deferred tax asset.
Future
utilization of currently generated federal and state NOL and tax
credit carry forwards may be subject to a substantial annual
limitation due to the ownership change limitations provided by the
Internal Revenue Code of 1986, as amended and similar state
provisions. The annual limitation may result in the expiration of
NOL and tax credit carry forwards before full
utilization.
| |
|
June 30,
2020 |
|
|
June 30,
2019 |
|
| Individual components giving rise
to the deferred tax assets are as follows: |
|
|
|
|
|
|
|
|
| Future tax benefit
arising from net operating loss carryovers |
|
$ |
58,010 |
|
|
$ |
48,843 |
|
| Less
valuation allowance |
|
|
(58,010 |
) |
|
|
(48,843 |
) |
| Total
deferred tax asset |
|
$ |
- |
|
|
$ |
- |
|
The
Company is not under examination by any jurisdiction for any tax
year. Our federal and state income tax returns are open for fiscal
years ending on or after June 30, 2007.
Note
4. Stockholders’ Equity
Common
Stock
The
certificate of incorporation authorizes the issuance of 74,000,000
shares of common stock, par value $0.0001. All issued shares of
common stock are entitled to one vote per share of common stock. As
of June 30, 2020, the Company has 23,811,750 shares of common stock
issued and outstanding.
During
the year ended June 30, 2020, the Company and a note holder, agreed
to convert the principal amount of $55,000 and the accrued interest
of $5,800 into 6,975,000 shares of restricted common stock. During
the year ended June 30, 2019, the Company did not issue any shares
of common stock.
Preferred
Stock
The
certificate of incorporation authorizes the issuance of 1,000,000
shares of preferred stock with a par value of $0.0001 per share.
None are issued.
Stock
Based Compensation
There
were no grants of employee or non-employee stock or options in
either fiscal period ended June 30, 2020 and 2019.
Note
5. Convertible Note
On
July 8, 2017, we issued a convertible promissory note for services
provided in the principal amount of $50,000 bearing interest at 1%
per annum until paid or converted. The conversion price of the note
is $0.008 per share. The closing price of the Company’s common
stock on July 7, 2017 was $0.008 per share. Interest will be
payable upon the maturity date at July 7, 2018. On October 1, 2018,
the Company agreed to adjust the interest rate, effective July 1,
2018, on this convertible note from 1% to 8%. On November 19, 2019,
WWYD, Inc., the note holder, and the Company agreed to convert the
principal amount and the accrued interest of $55,800 into 6,975,000
shares of restricted common stock. The Company did not record
neither gain not loss in connection with this conversion of debt
into equity. During the years ended June 30, 2020 and 2019, the
Company recorded $1,535 and $3,956, respectively, in interest. As
of June 30, 2020 and June 30, 2019, the accrued interest for this
convertible note was $0 and $4,266, respectively.
On
September 1, 2017, we entered into a Loan Agreement with Ivo
Heiden, our sole officer and director, under which we receive
funding for general operating expenses from time-to-time as needed
by the Company. The Loan Agreement bears interest of 8% per annum
and shall be due and payable on a date 366 days from the date of
the loan. On May 1, 2020, the Loan Agreement was extended to
September 1, 2021. As of June 30, 2020 and 2019, the outstanding
balance on this loan was $28,155 and $19,831 with accrued interest
of $7,012 and $4,946. During the year ended June 30, 2020 and 2019,
the Company borrowed $8,324 and $7,329, respectively, under this
Loan Agreement. During the years ended June 30, 2020 and 2019, we
expensed interest of $2,066 and $1,329, respectively, related to
this Loan Agreement.
On
October 12, 2018, we issued a $75,000 convertible promissory note
to Ivo Heiden. The convertible note bears interest at 8% per annum
until paid or converted. The conversion price of the note is $0.034
per share, the closing price of the Company’s common stock on the
date of issuance. Interest will be payable upon the maturity date
at October 12, 2020. During the years ended June 30, 2020 and 2019,
the Company expensed interest of $5,984 and $4,257, respectively,
related to this note. As of June 30, 2020 and 2019, the Company has
recorded $10,241 and $4,257, respectively, in accrued interest with
respect to this convertible note.
On
May 1, 2020, we issued a $90,000 convertible promissory note to Ivo
Heiden. The convertible note bears interest at 8% per annum until
paid or converted. The conversion price of the note is $0.04 per
share, the closing price of the Company’s common stock on the date
of issuance. Interest will be payable upon the maturity date at May
1, 2022. During the year ended June 30, 2020, the Company expensed
interest of $1,203 related to this note. As of June 30, 2020, the
Company has recorded $1,203 in accrued interest with respect to
this convertible note.
In
accordance with ASC # 815, Accounting for Derivative Instruments
and Hedging Activities, we evaluated the note holder’s
non-detachable conversion right provision and liquidated damages
clause, contained in the terms governing the Convertible Note to
determine whether the features qualify as an embedded derivative
instrument at issuance. Such non-detachable conversion right
provision and liquidated damages clause did not need to be
accounted as derivative financial instruments.
Note
6. Related Party Transactions
Due
to Related Parties:
Amounts
due to related parties consist of advances made by our CEO and
accrued interest due to our CEO.
As of
June 30, 2020 and June 30, 2019, our CEO has made advances of
$28,155 and $19,831, respectively.
As of
June 30, 2020 and June 30, 2019, accrued interest due to our CEO
was $18,456 and $9,203, respectively.
As of
June 30, 2019, the Company owed $4,264 in accrued interest to WWYD,
Inc., a former related party.
As of
June 30, 2020 and June 30, 2019, accrued compensation due to our
CEO was $0 and $45,000, respectively.
On
October 12, 2018, the Company issued a convertible note of $75,000
to our CEO evidencing previously accrued compensation.
On
May 1, 2020, the Company issued a convertible note of $90,000 to
our CEO evidencing previously accrued compensation.
On
November 19, 2019, the Company and WWYD, Inc., a note holder,
agreed to convert the principal amount of $55,000 and the accrued
interest of $5,800 into 6,975,000 shares of restricted common
stock.
Note
7. Subsequent Events
The
Company had no subsequent events after June 30, 2020 to the date
the financial statements were issued.
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE Back to
Table of Contents
N.A.
ITEM
9A. CONTROLS AND PROCEDURES Back
to Table of Contents
Evaluation
of Disclosure Controls and Procedures
As of
June 30, 2020, the Company’s chief executive officer and chief
financial officer conducted an evaluation regarding the
effectiveness of the Company’s disclosure controls and procedures
(as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act.
Based upon the evaluation of these controls and procedures, our
chief executive officer and chief financial officer concluded that
our disclosure controls and procedures were ineffective as of the
end of the fiscal year 2020 under the Committee of Sponsoring
Organizations of the Treadway Commission in Internal
Control-Integrated Framework (2013).
Management’s
Annual Report on Internal Control Over Financial
Reporting
The
Company’s management is responsible for establishing and
maintaining adequate internal control over financial reporting, as
defined in Exchange Act Rule 13a-15. Internal control over
financial reporting is defined in Rule 13a-15(f) and 15(d)-15(f)
under the Exchange Act as a process designed to provide reasonable
assurance to the Company’s management and Board of Directors
regarding the preparation and fair presentation of published
financial statements. Management conducted an assessment of the
Company’s internal control over financial reporting as of June 30,
2020 based on the framework and criteria established by the
Committee of Sponsoring Organizations of the Treadway Commission in
Internal Control-Integrated Framework (2013).
Based
on our assessment and those criteria, we have concluded that our
internal control over financial reporting were ineffective because
of the identification of material weaknesses including lack of
sufficient internal accounting personnel in order to ensure
complete documentation of complex transactions and adequate
financial reporting during the year ended June 30, 2020. The
Company has no formal control process related to the identification
and approval of related party transactions. Management has
identified corrective actions for the weaknesses and intends to
implement accounting procedures to address before mentioned
material weaknesses during the fiscal year 2021.
Because
of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
This
annual report does not include an attestation report of the
company’s registered public accounting firm regarding internal
control over financial reporting. Management’s report was not
subject to attestation by the Company’s registered public
accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the Company to provide only
Management’s report in this annual report.
Changes
in Internal Control Over Financial Reporting
There
were no changes in our internal control over financial reporting or
in other factors identified in connection with the evaluation
required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15
that occurred during the fourth quarter ended June 30, 2020 that
have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
ITEM
9B. OTHER INFORMATION Back to
Table of Contents
None.
PART
III
ITEM
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT, AND
CORPORATE GOVERNANCE Back to
Table of Contents
The
following table sets forth the names and ages of the member of our
Board of Director and our executive officers and the positions held
by each.
|
Name |
|
Age |
|
Title |
| Ivo
Heiden |
|
53 |
|
CEO,
CFO and Chairman |
Ivo
Heiden, 53, has been CEO, CFO and Chairman of the Registrant since
June 2006. Mr. Heiden was the CEO, CFO and Chairman of Nexien
Biopharma Inc., a public reporting company, from February 2007 to
October 2017. Since 2008, Mr. Heiden is the president and chairman
of Baltic Capital Corp. a private corporation, focused on
distressed public equity research and invstments.
Our
director holds office until the next annual meeting of stockholders
and until his successors have been duly elected and qualified.
There are no agreements with respect to the election of directors.
We do not compensate our directors. Officers are appointed annually
by the Board of Directors and each executive officer serves at the
discretion of the Board of Directors. We do not have any standing
committees at this time.
Our
director, officer or affiliates have not, within the past five
years, filed any bankruptcy petition, been convicted in or been the
subject of any pending criminal proceedings, or is any such person
the subject or any order, judgment or decree involving the
violation of any state or federal securities laws.
Section
16(a) Compliance
Section
16(a) of the Securities and Exchange Act of 1934 requires the
Registrant’s directors and executive officers, and persons who own
beneficially more than ten percent (10%) of the Registrant’s Common
Stock, to file reports of ownership and changes of ownership with
the Securities and Exchange Commission. Copies of all filed reports
are required to be furnished to the Registrant pursuant to Section
16(a). Our CEO and Chairman director has informed us that he has
filed Form 3 and Form 5 reports as required to be filed under
Section 16(a).
ITEM 11. EXECUTIVE COMPENSATION
Back to Table of
Contents
For
the three fiscal years ended June 30, 2020, 2019 and 2018, we did
not pay any compensation to our executive officer and bonus
exceeding $100,000.
Executive
Employment Agreements
To
date, we have not entered into any employment agreements with our
executive officer.
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENTBack to Table of
Contents
The
following table sets forth information regarding the beneficial
ownership of our common stock as of June 30, 2020. The information
in this table provides the ownership information for: each person
known by us to be the beneficial owner of more than 5% of our
common stock; each of our directors; each of our executive
officers; and our executive officers and directors as a
group.
Beneficial
ownership has been determined in accordance with the rules and
regulations of the SEC and includes voting or investment power with
respect to the shares. Unless otherwise indicated, the persons
named in the table below have sole voting and investment power with
respect to the number of shares indicated as beneficially owned by
them.
| Name of Beneficial
Owner |
|
Common Stock
Beneficially Owned (1) |
|
|
Percentage
of Common Stock Owned (1) |
|
| Ivo Heiden (2) |
|
|
17,685,882 |
|
|
|
62.57 |
% |
| 2275 Huntington Drive, Suite 851 |
|
|
|
|
|
|
|
|
| San Marino, CA 91108 |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| WWYD, Inc. |
|
|
6,975,000 |
|
|
|
29.29 |
% |
| 34
35th Street, 6th Floor |
|
|
|
|
|
|
|
|
| Brooklyn, NY 11232 |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Palatin AG |
|
|
|
|
|
|
|
|
| Beethovenstrasse 43 |
|
|
|
|
|
|
|
|
| 8022 Zuerich, Switzerland |
|
|
1,560,000 |
|
|
|
6.55 |
% |
| |
|
|
|
|
|
|
|
|
| Director and Officer (1 person) |
|
|
17,685,882 |
|
|
|
62,57 |
% |
(1)
Applicable percentage ownership is based on 23,811,750 shares of
common stock outstanding as of June 30, 2020. Beneficial ownership
is determined in accordance with the rules of the Securities and
Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock subject to
options, warrants, preferred stock or other securities convertible
into common stock that are currently exercisable or convertible, or
exercisable or convertible within 60 days of June 30, 2020, are
deemed outstanding for computing the percentage of the person
holding the option, warrant, preferred stock, or convertible
security but are not deemed outstanding for computing the
percentage of any other person.
(2)
Includes 4,455,882 shares underlying convertible notes, excluding
accrued interest, outstanding as of June 30, 2020.
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE Back to Table of
Contents
During
the years ended June 30, 2020 and 2019, Mr. Heiden made cash
advances of $8,324 and $7,329, respectively, to the Company for
franchise taxes, audit fees and registered agent fees. As of June
30, 2020 and 2019, the Company owed $18,456 and $9,203,
respectively, in accrued interest to Mr. Heiden. The interest for
these advances is 8%.
As of
June 30, 2020 and 2019, accrued compensation due to our CEO was $0
and $45,000, respectively. As of June 30, 2019, the Company owed
two convertible notes for a total of $165,000 and accrued interest
of $11,444 to our Ivo Heiden, our sole officer and
director.
ITEM
14. PRINCIPAL ACCOUNTING FEES AND SERVICES Back to Table of Contents
The
Registrant’s Board of Directors has appointed M&K CPAS, PLLC as
independent public accountant for the fiscal year ended June 30,
2020 and 2019.
Principal
Accounting Fees
The
following table presents the fees for professional audit services
rendered by M&K CPAS, PLLC for the audit of the Registrant’s
annual financial statements for the years ended June 30, 2020 and
2019, and fees billed for other services rendered by M&K CPAS,
PLLC during those periods.
| |
|
Year
Ended |
|
| |
|
June 30,
2020 |
|
|
June 30,
2019 |
|
| Audit fees |
|
$ |
6,375 |
|
|
$ |
5,650 |
|
ITEM
15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE Back to Table of Contents
(a)
The following documents are filed as exhibits to this report on
Form 10-K or incorporated by reference herein. Any document
incorporated by reference is identified by a parenthetical
reference to the SEC filing that included such document.
SIGNATURES
Pursuant
to the requirements of of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed below by the
following person on behalf of the registrant and in the capacities
and on the date indicated.
|
ECOMAT
INC. |
|
|
|
|
|
By: |
/s/
Ivo Heiden |
|
| |
Ivo
Heiden |
|
| |
Chief
Executive Officer and Chairman |
|
| |
(Principal
Executive Officer) |
|
| |
Date:
September 17, 2020 |
|
|
By: |
/s/
Ivo Heiden |
|
| |
Ivo
Heiden |
|
| |
Chief
Financial Officer |
|
| |
(Principal
Financial and Principal Accounting Officer) |
|
| |
Date:
September 17, 2020 |
|
