ECO SCIENCE SOLUTIONS, INC. - Quarter Report: 2016 April (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2016
[ ]TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from [ ] to [ ]
Commission file number 000-54803
(Exact name of registrant as specified in its charter)
Nevada
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46-4199032
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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|
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1135 Makawao Avenue, Suite 103-188, Makawao, Hawaii
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96768
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(Address of principal executive offices)
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(Zip Code)
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Registrant's telephone number:
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(800) 379-0226
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N/A
(Former name, former address and former fiscal year, if changed since last report)
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 [ ]
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Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [X] No [ ]
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
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[ ]
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Accelerated filer
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[ ]
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Non-accelerated filer
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[ ]
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Smaller reporting company
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[X]
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(Do not check if a smaller reporting company)
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Indicate the number of shares outstanding of each of the registrant’s
classes of common stock as of the latest practicable date.
Page
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PART I – FINANCIAL INFORMATION
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Item 1.
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Financial Statements
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3
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Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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4
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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8
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Item 4.
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Controls and Procedures
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8
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PART II – OTHER INFORMATION
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||
Item 1.
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Legal Proceedings
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9
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Item 1A.
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Risk Factors
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9
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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9
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Item 3.
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Defaults Upon Senior Securities
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9
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Item 4.
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Mine Safety Disclosures
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9
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Item 5.
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Other Information
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9
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Item 6.
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Exhibits
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10
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SIGNATURES
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11
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2
ECO SCIENCE SOLUTIONS, INC.
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
PART I -- FINANCIAL INFORMATION
Page
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Unaudited Balance Sheets as of April 30, 2016 and January 31, 2016
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F-1
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Unaudited Statements of Operations for the three months ended April 30, 2016 and 2015
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F-2
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Unaudited Statement of Cash Flows for the three months ended April 30, 2016 and 2015
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F-3
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Notes to the Unaudited Financial Statements
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F-4 to F-12
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3
ECO SCIENCE SOLUTIONS, INC.
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||||||||
BALANCE SHEETS
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||||||||
April 30, 2016
(Unaudited)
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January 31, 2016
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|||||||
ASSETS
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||||||||
Current assets
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||||||||
Cash
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$
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252
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$
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6,706
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||||
Prepaid expenses
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5,484
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-
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||||||
Total current assets
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5,736
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6,706
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||||||
Property and equipment, net
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2,200
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-
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||||||
TOTAL ASSETS
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$
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7,936
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$
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6,706
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||||
LIABILITIES AND STOCKHOLDERS' DEFICIT
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||||||||
Current liabilities
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||||||||
Accounts payable and accrued expenses
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$
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79,082
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$
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67,173
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||||
Related party payable
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73,333
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18,333
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||||||
Notes payable, short-term, related party
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35,000
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-
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||||||
Notes payable, convertible
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232,450
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232,450
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||||||
Notes payable, short-term, related party, convertible
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251,045
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251,045
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||||||
Liabilities for allocated and unissued shares
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676,038
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147,510
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||||||
Total current liabilities
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1,346,948
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716,511
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||||||
Long term liabilities
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||||||||
Notes payable-convertible-related party, net of unamortized discount
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48,555
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46,710
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||||||
Total long term liabilities
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48,555
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46,710
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||||||
Total liabilities
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1,395,503
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763,221
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||||||
Stockholders' deficit
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||||||||
Preferred stock, $.001 par, 50,000,000 shares authorized, none issued and outstanding at January 31, 2016 and January 31, 2015, respectively
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-
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-
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||||||
Common stock, $0.0001 par, 650,000,000 shares authorized, 28,526,349 shares issued and 27,526,349 shares outstanding at April 30, 2016 and 28,226,349 issued and outstanding at January 31, 2016
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2,752
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2,822
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||||||
Treasury stock (1,000,000 shares issued at a cost of $0.0075 per share)
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7,500
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-
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||||||
Additional paid in capital, common, and deferred compensation
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9,155,325
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9,133,256
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||||||
Accumulated deficit
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(10,553,144
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)
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(9,892,593
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)
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||||
Total stockholders' deficit
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(1,387,567
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)
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(756,515
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)
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
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$
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7,936
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$
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6,706
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The accompanying notes are an integral part of these financial statements
F-1
ECO SCIENCE SOLUTIONS, INC.
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INCOME STATEMENTS
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||||||||
(Unaudited)
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||||||||
For the three months ended
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||||||||
April 30, 2016
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April 30, 2015
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|||||||
Depreciation
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$
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63
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$
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-
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||||
General and administrative expenses
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489,020
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14,029
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||||||
Amortization of stock options
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-
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151,250
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||||||
Net operating loss
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(489,083
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)
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(165,279
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)
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||||
Other income (expenses)
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||||||||
Interest expense
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(9,310
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)
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(5,726
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)
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Loss on shares issued for services and fees
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(162,158
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)
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-
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|||||
Total other income (expenses)
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(171,468
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)
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(5,726
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)
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Net loss
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$
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(660,551
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)
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(171,005
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)
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Net loss per common share - basic and diluted
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$
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(0.02
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)
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(0.01
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)
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|||
Weighted average common shares outstanding - basic and diluted
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27,856,349
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30,772,214
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The accompanying notes are an integral part of these financial statements
F-2
ECO SCIENCE SOLUTIONS, INC.
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||||||||
STATEMENTS OF CASH FLOWS
(Unaudited)
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||||||||
For the three months ended
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||||||||
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April 30, 2016
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April 30, 2015
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||||||
Cash flows from operating activities:
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||||||||
Net loss
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$
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(660,551
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)
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$
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(171,005
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)
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Adjustments to reconcile net loss to net cash used in operating activities:
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||||||||
Depreciation
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63
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-
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||||||
Loss on shares issued for services and fees
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162,158
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-
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||||||
Stock based compensation
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25,000
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151,250
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||||||
Amortization of debt discount
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1,845
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-
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||||||
Liabilities from unissued shares
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378,370
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-
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||||||
Changes in operating assets and liabilities:
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||||||||
Prepaid expenses
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(5,484
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)
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-
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|||||
Increase (decrease) in accounts payable and accrued expenses
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11,909
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6,365
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||||||
Increase (decrease) in related party payables
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55,000
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-
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||||||
Net cash used in operating activities
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(31,690
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)
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(13,390
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)
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||||
Cash Flows from Investing Activities:
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||||||||
Purchase equipment
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(2,263
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)
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-
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|||||
Net cash used in investing activities
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(2,263
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)
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-
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|||||
Cash flows from financing activities:
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||||||||
Proceeds from related party loans
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35,000
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10,000
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||||||
Repurchase of common shares
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(7,500
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)
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-
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|||||
Net cash provided by financing activities
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27,500
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10,000
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||||||
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||||||||
Net decrease in cash
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(6,453
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)
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(3,390
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)
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||||
Cash-beginning of period
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6,706
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13,322
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||||||
Cash-end of period
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$
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252
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$
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9,932
|
||||
NON-CASH ACTIVITIES
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||||||||
Shares issued for services and fees
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$
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12,000
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$
|
-
|
||||
SUPPLEMENTAL DISCLOSURES
|
||||||||
Interest paid
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$
|
-
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$
|
-
|
||||
Income taxes paid
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$
|
-
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$
|
-
|
The accompanying notes are an integral part of these financial statements
F-3
ECO SCIENCE SOLUTIONS, INC.
NOTES TO THE FINANCIAL STATEMENTS
April 30, 2016
NOTE 1: NATURE OF BUSINESS AND CONTINUANCE OF OPERATIONS
The Company was incorporated in the state of Nevada on December 8, 2009 under the name Pristine Solutions, Inc. Headquartered in Miami, Florida, Eco Science Solutions, Inc., a Nevada corporation, is charged with the research and exploration of eco-friendly technology and properties. On February 14, 2014, the Company changed its name to Eco Science Solutions, Inc. (OTC Pink Sheets: ESSI).
On November 4, 2013, through the Agreements for the License of Intellectual Property "(the "License Agreements"), the Company acquired an exclusive license to the EcoFlora Spark Plug (the “EcoFlora Plug”), a unique product with technology for which the US Patent and Trademark Office (“USPTO”) issued Patent #8,853,925 on October 7, 2014. Effective August 28, 2015, the License Agreements were terminated.
On August 31, 2015, the Company executed an Asset Purchase Agreement dated August 28, 2015 (the "Purchase Agreement") with Kensington Marketing, Inc., a Nevada corporation, to acquire a certain technology application known as “Stay Hydrated.” In exchange for the technology application, the Company issued 1,500,000 restricted shares of the Company's common stock, valued at $150,000. On January 11, 2016, the Company cancelled the agreement with Kensington Marketing, cancelled 1,500,000 shares of Common Stock issued to Kensington Marketing, and returned the “Stay Hydrated” application the Company acquired in exchange for the 1,500,000 shares.
On January 1, 2016, the Company entered into a technology licensing and marketing support agreement with Separation Degrees – One, Inc. (“SDOI”) that will result in the development, licensing and management of on-going technology solutions and marketing campaigns for ESSI’s initiatives. Additionally, the Company entered into an Asset Purchase Agreement with SDOI wherein the Company acquired a proprietary messaging and customer relationship management software platform from SDOI.
On January 11, 2016, the Company’s Board of Directors (the “Board”) authorized the creation of 1,000 shares of Series A Voting Preferred Stock. The holder of the shares of the Series A Voting Preferred Stock has the right to vote those shares of the Series A Voting Preferred Stock regarding any matter or action that is required to be submitted to the shareholders of the Company for approval. The vote of each share of the Series A Voting Preferred Stock is equal to and counted as 10 times the votes of all of the shares of the Company’s (i) common stock, and (ii) other voting preferred stock issued and outstanding on the date of each and every vote or consent of the shareholders of the Company regarding each and every matter submitted to the shareholders of the Company for approval. The Series A Voting Preferred Stock will not be convertible into Common Stock.
The Company agreed to issue 500,000 shares of common stock as consideration for the Asset Purchase Agreement with SDOI, and further to settle all invoices received for services rendered as well as advertising fees incurred by way of issuance of common stock at a 30% discount to market as S-8 shares (ref: Note 3)
The Company will continue to operate, research and explore eco-friendly technology, social media initiatives and applications that generate revenue through advertisements connected to the social media channels as well as downloads of the application and sales of actual goods from the Company’s operating sites.
NOTE: The following notes and any further reference made to “the Company”, "we", "us", "our" and "ESSI" shall mean Eco Science Solutions, Inc., unless otherwise indicated.
F-4
ECO SCIENCE SOLUTIONS, INC.
NOTES TO THE FINANCIAL STATEMENTS
April 30, 2016
NOTE 1: NATURE OF BUSINESS AND CONTINUANCE OF OPERATIONS (cont’d)
Going Concern
These financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated significant revenues to date and has never paid any dividends and is unlikely to pay dividends or generate significant earnings in the immediate or foreseeable future. As at April 30, 2016, the Company had a working capital deficit of $1,341,212 and an accumulated deficit of $10,553,144. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability to raise equity or debt financing, and the attainment of profitable operations from the Company's future business. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.
The financial statements reflect all adjustments consisting of normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of the results for the periods shown. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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Financial Statements Presented
The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 210 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature. Operating results for the three months ended April 30, 2016, are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2017. For further information, refer to the financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K/A for the fiscal year ended January 31, 2016 as filed with the Securities and Exchange Commission on June 20 2016.
Certain reclassifications have been made to the prior period’s financial statements to conform to the current period’s presentation.
Use of Estimates
The preparation of consolidated financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to long-lived assets and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
F-5
ECO SCIENCE SOLUTIONS, INC.
NOTES TO THE FINANCIAL STATEMENTS
April 30, 2016
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
Cash and cash equivalents
The Company considers all highly liquid instruments with maturity of three months or less at the time of purchase to be cash equivalents. As of January 31, 2016 and January 31, 2015, respectively, the Company had cash, but no cash equivalents.
Technology and licensing rights (Intangible assets)
Technology and licensing rights are recorded at cost and capitalized, and are reviewed for impairment at a minimum of once per year or whenever events or changes in circumstances suggest a need for evaluation.
Advertising and Marketing Costs
Advertising and marketing costs are expensed as incurred and were $73,510 during the year ended January 31, 2016 and $Nil in the year ended January 31, 2015.
Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value. During the year ended January 31, 2016 the Company impaired $3,500 in long-lived assets relative to the acquisition of a communications platform. In fiscal 2015 there was no impairment of long-lived assets.
Fair Value Measurements
Pursuant to ASC 820, Fair Value Measurements and Disclosures and ASC 825, Financial Instruments, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 and 825 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 and 825 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1:
|
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
|
Level 2:
|
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
|
Level 3:
|
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
|
The Company’s financial instruments consist principally of cash, accounts payable, and accrued liabilities. Pursuant to ASC 820 and 825, the fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
F-6
ECO SCIENCE SOLUTIONS, INC.
NOTES TO THE FINANCIAL STATEMENTS
April 30, 2016
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
Revenue Recognition
The Company recognizes revenue in accordance with ASC 605, Revenue Recognition. Revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service has been provided, and collectability is reasonably assured. As of January 31, 2016, no revenue has been recognized, as the Company has not commenced operations.
Cost of Revenue
Costs of revenue consist of the direct expenses incurred in order to generate revenue. Such costs are recorded as incurred. Our cost of revenue will consist consists primarily of fees associated with the operation of our social media venues and fulfillment of specific customer advertising campaigns related to our downloadable apps.
Stock-Based Compensation
The Company records stock-based compensation in accordance with ASC 718, Share-Based Payments, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.
Basic and Diluted Net Income (Loss) Per Share
The Company computes 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.
Recently issued accounting pronouncements
In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which amends ASC Topic 718, Compensation – Stock Compensation, and includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements. The new standard is effective for the Company for the annual period ending after December 15, 2016, and for annual and interim periods thereafter, with early adoption permitted. The Company is currently evaluating the impact of this accounting standard update on the Company’s financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the current leasing guidance and upon adoption, will require lessees to recognize right-of-use assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. The new standard is effective for the Company for the annual period beginning after December 15, 2018, and can be early adopted by applying a modified retrospective approach for leases existing at, and entered into after, the beginning of the earliest comparable period presented in the financial statements. The Company is currently evaluating the impact of this accounting standard update on the Company’s financial statements.
F-7
ECO SCIENCE SOLUTIONS, INC.
NOTES TO THE FINANCIAL STATEMENTS
April 30, 2016
NOTE 3: INTANGIBLE ASSETS
Communications Platform – Separation Degrees – One, Inc.
On January 1, 2016, the Company entered into a technology licensing and marketing support agreement with Separation Degrees – One, Inc. (“SDOI”) that will result in the development, licensing and management of on-going technology solutions and marketing campaigns for ESSI’s initiatives. Additionally, the Company entered into an Asset Purchase Agreement with SDOI wherein the Company acquired a proprietary messaging and customer relationship management software platform from SDOI.
Under the terms of the agreements, the Company will issue to SDOI 1,000 shares of the Company’s Series A Voting Preferred Stock. The Series A Voting Preferred Stock has the right to vote those shares of the Series A Voting Preferred Stock regarding any matter or action that is required to be submitted to the shareholders of the Company for approval. The vote of each share of the Series A Voting Preferred Stock is equal to and counted as 10 times the votes of all of the shares of the Company’s (i) common stock, and (ii) other voting preferred stock issued and outstanding on the date of each and every vote or consent of the shareholders of the Company regarding each and every matter submitted to the shareholders of the Company for approval.
The Company obtained a third party valuation in respect of the issuance of the Series A Voting Preferred stock and recorded a technology licensing and marketing expense of $35,500 in respect of the valuation report. The third party valuation report was based on the following inputs as at January 1, 2016: (1) price per share of common stock of $0.007; (2) 28,426,349 common shares outstanding; 1,000 Series A Preferred shares issued 1/1/16; (3) A 17.5% premium over the combined common share value for the voting preferences; (4)284,291,916,349 total voting shares and 284,263,490,000 voting rights represented 99.99% of the total.
As of January 31, 2016 and April 30, 2016, 1,000 Series A Voting Preferred Stock had not yet been issued and $35,500 remained on the balance sheets as liabilities for issuance of shares.
Further under the terms of the aforementioned technology licensing and marketing support agreement, the Company agreed to the issuance and DWAC of $35,000 worth of S-8 shares in ESSI Common Stock (issued at a 30% discount to the market close on the date of payment due (the 1st of every month), or a share price of $0.01 whichever is greater), to SDOI for ongoing monthly project and planned technical development/maintenance, production and staging server administration, ongoing marketing services and monthly advertising management. The shares are to be issued on or before the 1st business day of each calendar month.
As of April 30, 2016, $173,000 (January 31, 2016 - $35,000) worth of S-8 shares had not yet been issued and the Company recorded $173,000 as liabilities for issuance of common shares on the balance sheet of which $140,000 is the value of the services rendered and a further $33,000 represents the loss on settlement date related to the fair market value of the shares, discounted at 30%, with respect to the shares allocated to settle the fees incurred.
On January 4, 2016 the Company entered into a further agreement with SDOI for the purchase of a discrete communications software platform, including custom developed libraries, the consideration for which was the issuance of 500,000 shares of common stock. The Company recorded the fair market value of $3,500 in respect of the software platform on the date of the agreement as intangible assets on the Company’s balance sheet.
As at fiscal year end the Company evaluated the asset for impairment and determined recovery of the value of the asset was indeterminate during the present stage of the Company’s execution of its business plan. As a result, we recorded an impairment loss of $3,500 which was recognized in the profit and loss account.
As of April 30, 2016 and January 31, 2016, 500,000 shares of common stock had not yet been issued $3,500 remained on the balance sheet as s liabilities for issuance of shares.
Subsequent to the period ended April 30, 2016 the Company and SDOI entered into a further amendment to the terms of the aforementioned agreements, which provided for the following:
(1)
|
SDOI will not be issued Series A Preferred Stock initially equal to the current total authorized common shares outstanding of 650,000,000;
|
(2)
|
Invoices for advertising services billed separately from the $35,000 standard monthly fee will have the same terms as the monthly fee; i.e., the amount invoiced will be paid via the issuance of S-8 shares of ESSI Common Stock (issued at a 30% discount to the market VWAP on the date of payment due or a share price of $0.01, whichever is greater).
|
During the three months ended April 30, 2016 the Company received invoices for advertising services from SDOI totaling $273,370. The Company determined the value of the shares issuable to settle the invoiced at a 30% discount to fair market value on the settlement date and recorded a loss of $117,158 in relation to the shares issuable. A total of $390,528 was recorded on the Company’s balance sheets as liability for issuance of common shares (2016 - $73,510). The allocated shares had not yet been issued as at April 30, 2016.
F-8
ECO SCIENCE SOLUTIONS, INC.
NOTES TO THE FINANCIAL STATEMENTS
April 30, 2016
NOTE 4: PREPAID EXPENSES
Prepaid expenses consist of the following:
April 30,
2016
|
January 31,
2016
|
|||||||
Office lease – Security deposits
|
$
|
817
|
$
|
-
|
||||
Server network fee
|
4,667
|
-
|
||||||
Total prepaid expense
|
$
|
5,484
|
$
|
-
|
NOTE 5: NOTES PAYABLE
As of April 30, 2016 notes payable consists of an unsecured convertible promissory note in the remaining sum of $232,450 (January 31, 2016 - $232,450). The note bears interest at a rate of 6% per annum, is due January 31, 2017, and is convertible into the Company’s common stock at a rate of $0.003 per share.
As of April 30, 2016 and January 31, 2016, the Company has accrued $48,107 and $44,680, respectively, as interest on the convertible note payable.
NOTE 6: RELATED PARTY TRANSACTIONS
|
As of April 30, 2016 and January 31, 2016, related parties are due a total of $316,088 and $316,088, respectively.
April 30, 2016
|
January 31, 2016
|
|||||||
Related party payable compensation (2)
|
$
|
73,333
|
$
|
18,333
|
||||
Notes payable (4)
|
35,000
|
-
|
||||||
Convertible notes payable for cash proceeds received(1)
|
251,045
|
251,045
|
||||||
Convertible notes payable for unpaid compensation (3)
|
59,000
|
59,000
|
||||||
Less: unamortized discount (3)
|
(10,445
|
)
|
(12,290
|
|||||
Total convertible notes payable, net of unamortized discount
|
299,600
|
297,755
|
||||||
Total related party loans
|
334,600
|
297,755
|
||||||
Total related party transactions
|
$
|
407,933
|
$
|
316,088
|
F-9
ECO SCIENCE SOLUTIONS, INC.
NOTES TO THE FINANCIAL STATEMENTS
April 30, 2016
NOTE 6: RELATED PARTY TRANSACTIONS (cont’d)
|
Related party convertible notes payable consists of the following unsecured convertible promissory notes:
Description
|
Principal
|
Interest Rate
|
Conversion Rate
|
Maturity Date
|
||||||
Note Payable (1)
|
$
|
251,045
|
5%
|
FMV
|
On demand with 90 days written notice
|
|||||
Note Payable (3)
|
$
|
59,000
|
6%
|
80% of FMV
|
10/01/2017
|
|||||
Less: unamortized discount (3)
|
(10,445
|
)
|
||||||||
Note Payable, net of unamortized discount
|
$
|
48,555
|
(1)
|
As of April 30, 2016 and January 31, 2016, a company controlled by the Company’s former Chairman of the Board a convertible note payable with a principal balance totaling $251,045.
|
(2)
|
Effective December 17, 2015, Mr. Jeffery Taylor was appointed to serve as Chief Executive Officer of the Company and Mr. Don Lee Taylor was appointed to serve as Chief Financial Officer of the Company. On December 21, 2015 the Company entered into employment agreements with Mr. Jeffery Taylor and Mr. Don Lee Taylor for a period of 24 months, where after the contract may be renewed in one year terms at the election of both parties. Jeffery Taylor shall receive an annual gross salary of $115,000 and Don Lee Taylor shall receive an annual gross salary of $105,000 payable in equal installments on the last day of each calendar month and which may be accrued until such time as the Company has sufficient cash flow to settle amounts payable. Further under the terms of the respective agreements all inventions, innovations, improvements, know-how, plans, development, methods, designs, analyses, specifications, software, drawings, reports and all similar or related information (whether or not patentable or reduced to practice) which relate to any of the Company’s actual or proposed business activities and which are created, designed or conceived, developed or made by the Executive during the Executive’s past or future employment by the Company or any Affiliates, or any predecessor thereof (“Work Product”), belong to the Company, or its Affiliates, as applicable.
During the three month period ended April 30, 2016 the Company accrued management fees in the amount of $28,750 to Mr. Jeffery Taylor and $26,250 to Mr. Don Lee Taylor. As of April 30, 2016, the Company had not made any cash payments in respect of these fees, leaving a total of $73,333 on the balance sheets as related party accounts payable ($18,333 – January 31, 2016).
|
(3)
|
On October 1, 2015 the Company issued its former President a convertible promissory note in the principal amount of $59,000 for unpaid compensation. The note bears interest at a rate of 6% per annum, matures on October 1, 2017, and contains a repayment provision which permits the holder to convert the debt into the Company's common stock at a rate of 80% of the fair market value of the common stock on the date of conversion. The conversion discount of 20% of FMV results in a beneficial conversion feature. As a result, the difference between the conversion rate and the market rate of $14,750 on the date of the transaction has been classified as a discount on the note. As of April 30, 2016, the Company expensed $1,845 as amortization of the debt discount which is included as interest expense. As of April 30, 2016, $10,445 of unamortized discount remains, and will be amortized over the next 17 months.
|
(4)
|
On February 17, 2016 the Company issued promissory notes to Mr. Jeffery Taylor, CEO, in the amount of $17,500 and to Mr. Don Lee Taylor, CFO, in the amount of $17,500, respectively. The notes bear interest at a rate of 1% per annum, maturing on August 17, 2016.
|
As of April 30, 2016 and January 31, 2016, the Company has accrued $4,037 and $2,268, respectively, as interest with respect to the aforementioned related party loans.
F-10
ECO SCIENCE SOLUTIONS, INC.
NOTES TO THE FINANCIAL STATEMENTS
April 30, 2016
NOTE 7: COMMON STOCK
Common Stock
The total number of authorized shares of common stock that may be issued by the Company is 650,000,000 shares with a par value of $0.0001.
On February 26, 2016 the Company purchased back and cancelled 1,000,000 shares of common stock for $7,500 as part of its ongoing Share Buyback program. The shares are reflected as Treasury shares on the Company’s balance sheet.
On March 18, 2016 the Company issue 100,000 shares of restricted stock to consultant Mike Hogue in respect to agreement for certain marketing and administrative services. The shares were valued at market on the date of the contract, February 1, 2016, for a total of $250,000
On April 6, 2016 the Company issued a total of 1,200,000 shares of common stock valued at $0.01 per share in relation to a consulting agreement with SDOI.
As of April 30, 2016 and January 31, 2016, respectively, 28,526,349 and 28,226,349 shares of the Company’s common stock were issued and outstanding.
A further 11,644,126 shares have been allocated for issuance under the terms of agreements with SDOI (ref: Note 3) but remain unissued as at April 30, 2016.
Series A Voting Preferred Shares
On January 11, 2016, the Company’s Board of Directors (the “Board”) authorized the creation of 1,000 shares of Series A Voting Preferred Stock. The holder of the shares of the Series A Voting Preferred Stock has the right to vote those shares of the Series A Voting Preferred Stock regarding any matter or action that is required to be submitted to the shareholders of the Company for approval. The vote of each share of the Series A Voting Preferred Stock is equal to and counted as 10 times the votes of all of the shares of the Company’s (i) common stock, and (ii) other voting preferred stock issued and outstanding on the date of each and every vote or consent of the shareholders of the Company regarding each and every matter submitted to the shareholders of the Company for approval. The Series A Voting Preferred Stock will not be convertible into Common Stock.
As of April 30, 2016 and January 31, 2016, no Series A Voting Preferred Shares were issued.
NOTE 8: STOCK OPTIONS
The following table represents the number of options currently outstanding under the 2012 Employee Stock Option Plan:
Options Activity
|
Weighted
|
|||||||
Number
|
Average
|
|||||||
of Shares
|
Exercise Price
|
|||||||
Outstanding at January 31, 2016
|
6,500,000
|
$
|
0.20
|
|||||
Issued
|
-
|
-
|
||||||
Exercised
|
-
|
-
|
||||||
Expired / Cancelled
|
(6,500,000)
|
0.20
|
||||||
Outstanding at April 30, 2016
|
-
|
$
|
-
|
F-11
ECO SCIENCE SOLUTIONS, INC.
NOTES TO THE FINANCIAL STATEMENTS
April 30, 2016
NOTE 8: STOCK OPTIONS (cont’d)
As of January 31, 2016 and January 31, 2015, the Company has granted a total of 6,500,000 options to purchase common stock shares. In connection with the options granted, a total of $2,665,000 has been recorded as deferred compensation, and has been expensed during the fiscal year ended January 31, 2016 and 2015.
During the period ended April 30, 2016, in accordance with the terms of the underlying option agreements, upon the termination of services to the Company by the consultant and the officer holding the options, all outstanding stock options expired unexercised 90 days thereafter.
NOTE 9: COMMITMENTS
On March 22, 2016 we entered into a two-year lease commencing April 1, 2016 for a total of 253 square feet of office and 98 square feet of reception space. Monthly base rent for the period April 1, 2016 to March 31, 2017 is $526.50 per month and increases to $552.83 per month for the subsequent year ending March 31, 2018. Operating costs for the first year of the lease are estimated at $258.06 per month. The Company has remitted a security deposit in the amount of $817.24 in respect of the lease. Further our officers and directors have executed a personal guarantee in respect of the aforementioned lease agreement.
NOTE 10: INCOME TAXES
Deferred income taxes are determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company’s assets and liabilities. Deferred income taxes are measured based on the tax rates expected to be in effect when the temporary differences are included in the Company’s tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases.
Operating loss carry-forwards generated during the period from December 8, 2009 (date of inception) through April 30, 2016 of approximately $10,385,616, will begin to expire in 2029. The Company applies a statutory income tax rate of 34%.
Accordingly, deferred tax assets related to net operating loss carry-forwards total approximately $3,469,300 at April 30, 2016. For the three months’ period ended April 30, 2016 and 2015 the valuation allowance increased by approximately $169,500 and $58,200, respectively.
NOTE 11: SUBSEQUENT EVENTS
On May 9, 2016 the Company issued 596,884 shares of common stock to an unrelated third party in respect to the assignment of the remaining balance of a convertible note in the principal amount of $96,100. Upon assignment the conversion terms of the note were amended from $0.003 per share to a 40% discount to market based on the date immediately prior to the notice of conversion. As a result, the shares were issued in full settlement of the principal value of the note at $0.161 per share.
On May 9, 2016 the Company issued a total of 1,375,000 shares of common stock valued at $0.01 per share in relation to a consulting agreement with SDOI.
On June 1, 2016, the Company entered into a further amendment to the Technology Licensing and Marketing Agreement between SDOI and the Company. Under the Amendment:(1) SDOI will not be issued Series A Preferred Stock initially equal to the current total authorized common shares outstanding of 650,000,000; (2) Invoices for advertising services will be billed separately from the $35,000 standard monthly fee and will have the same terms as the monthly fee; i.e., the amount invoiced will be paid via the issuance of S-8 shares of ESSI Common Stock (issued at a 30% discount to the market VWAP on the date of payment due or a share price of $0.01, whichever is greater).
F-12
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
Forward Looking Statements
This quarterly report contains forward-looking statements. These statements relate to future events or the Company’s future financial performance. In some cases, forward-looking statements can be identified by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors” that may cause the Company’s or its industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.
The Company’s unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with the Company’s financial statements and the related notes that appear elsewhere in this quarterly report.
The following discussion contains forward-looking statements that reflect the Company’s plans, estimates and beliefs. The Company’s actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this quarterly report. All adjustments necessary for a fair statement of the results for the interim periods have been made, and all adjustments are of a normal recurring nature.
In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States Dollars and all references to “common shares” refer to the common shares in the Company’s capital stock.
As used in this quarterly report, the terms "we", "us", "our" and "ESSI" mean Eco Science Solutions, Inc. unless otherwise indicated.
Description of Business
The Company was incorporated in the state of Nevada on December 8, 2009 under the name Pristine Solutions, Inc. Headquartered in Miami, Florida, Eco Science Solutions, Inc., a Nevada corporation, is charged with the research and exploration of eco-friendly technology and properties. On February 14, 2014, the Company changed its name to Eco Science Solutions, Inc. (OTC Pink Sheets: ESSI).
On November 4, 2013, through the Agreements for the License of Intellectual Property "(the "License Agreements"), the Company acquired an exclusive license to the EcoFlora Spark Plug (the “EcoFlora Plug”), a unique product with technology for which the US Patent and Trademark Office (“USPTO”) issued Patent #8,853,925 on October 7, 2014. Effective August 28, 2015, the License Agreements were terminated.
On August 31, 2015, the Company executed an Asset Purchase Agreement dated August 28, 2015 (the "Purchase Agreement") with Kensington Marketing, Inc., a Nevada corporation, to acquire a certain technology application known as “Stay Hydrated.” In exchange for the technology application, the Company issued 1,500,000 restricted shares of the Company's common stock, valued at $150,000. On January 11, 2016, the Company cancelled the agreement with Kensington Marketing, cancelled 1,500,000 shares of Common Stock issued to Kensington Marketing, and returned the “Stay Hydrated” application the Company acquired in exchange for the 1,500,000 shares.
On January 1, 2016, the Company entered into a technology licensing and marketing support agreement with Separation Degrees – One, Inc. (“SDOI”) that will result in the development, licensing and management of on-going technology solutions and marketing campaigns for ESSI’s initiatives. Additionally, the Company entered into an Asset Purchase Agreement with SDOI wherein the Company acquired a proprietary messaging and customer relationship management software platform from SDOI.
On January 11, 2016, the Company’s Board of Directors (the “Board”) authorized the creation of 1,000 shares of Series A Voting Preferred Stock. The holder of the shares of the Series A Voting Preferred Stock has the right to vote those shares of the Series A Voting Preferred Stock regarding any matter or action that is required to be submitted to the shareholders of the Company for approval. The vote of each share of the Series A Voting Preferred Stock is equal to and counted as 10 times the votes of all of the shares of the Company’s (i) common stock, and (ii) other voting preferred stock issued and outstanding on the date of each and every vote or consent of the shareholders of the Company regarding each and every matter submitted to the shareholders of the Company for approval. The Series A Voting Preferred Stock will not be convertible into Common Stock.
The Company agreed to issue 500,000 shares of common stock as consideration for the Asset Purchase Agreement with SDOI, and further to settle all invoices received for services rendered as well as advertising fees incurred by way of issuance of common stock at a 30% discount to market as S-8 shares.
The Company will continue to operate, research and explore eco-friendly technology, social media initiatives and applications that generate revenue through advertisements connected to the social media channels as well as downloads of the application and sales of actual goods from the Company’s operating sites.
4
Current business overview
Eco Science Solutions, Inc. is a technology-focused Company targeting the multi-billion-dollar health and wellness industry.
From enterprise software solutions, entertaining and useful content generation for mass distribution to consumer apps for daily use, the Company develops technical solutions that empower enthusiasts in their pursuit and enjoyment of building eco-friendly businesses and living healthy lifestyles.
Eco Science’s core services span business location, localized communications between consumers and business operators, social networking, educational content, e-commerce, and delivery.
The Company’s licensed e-commerce platform enables health-and-wellness enthusiasts to easily locate, access, and connect with health-and-wellness businesses and like-minded enthusiasts, and to facilitate the research of and purchasing of eco-friendly products … anytime, anywhere.
Results of Operations
The following summary of the Company’s results of operations should be read in conjunction with the Company’s unaudited financial statements for the three months ended April 30, 2016:
For the three months ended
|
||||||||
April 30, 2016
|
April 30, 2015
|
|||||||
Depreciation
|
$
|
63
|
$
|
-
|
||||
General and administrative expenses
|
489,020
|
14,029
|
||||||
Amortization of stock options
|
-
|
151,250
|
||||||
Net operating loss
|
(489,083
|
)
|
(165,279
|
)
|
||||
Other income (expenses)
|
||||||||
Interest expense
|
(9,310
|
)
|
(5,726
|
)
|
||||
Loss on shares issued for services and fees
|
(162,158
|
)
|
-
|
|||||
Total other income (expenses)
|
(171,468
|
)
|
(5,726
|
)
|
||||
Net loss
|
$
|
(660,551
|
)
|
(171,005
|
)
|
Revenue
The Company has only recently launched its current business activity and has not yet generated revenues from its primary business operation.
5
Cost of sales
To date the Company has not yet recorded revenues in respect to its primary business activities. Costs of sales are expected to include advertising fees, commission fees associated with the download of our apps and sales of online products, server fees and other associated expenditures related to production of content for our blogs.
General and Administrative Expenses
For the three months ended
|
||||||||||||
April 30
|
||||||||||||
|
2016
|
2015
|
Variances
|
|||||||||
Legal, accounting and audit fees
|
$
|
10,791
|
$
|
6,002
|
$
|
4,789
|
||||||
Management and consulting fees
|
79,255
|
4,500
|
74,755
|
|||||||||
Research, development, and promotion
|
105,000
|
-
|
105,000
|
|||||||||
Transfer agent and filing fees
|
1,395
|
1,636
|
(241
|
)
|
||||||||
Office supplies and other general expenses
|
14,056
|
1,891
|
12,165
|
|||||||||
Advertising costs
|
278,523
|
-
|
278,523
|
|||||||||
Total general and administrative expenses
|
$
|
489,020
|
$
|
14,029
|
$
|
474,991
|
Comparison of the three months ended April 30, 2016 and 2015
During the three months ended April 30, 2016, the Company incurred total operating expenses of $489,083 of which $278,523 related to advertising costs incurred as a result of its change in business focus. A further $105,000 was expended on research, development and promotion in respect of a contract entered into during January 2016 under which the Company is required to pay a flat fee of $35,000 per month for services rendered in relation to a technology licensing and marketing agreement. The Company agreed to issue S-8 shares to settle all advertising and development costs incurred. There were no similar expenditures in the three months ended April 30, 2015. In addition, during the period Management and consulting fees increased from $4,500 (2015) to $79,255 in the three months ended April 30, 2016, legal, audit and accounting fees increased from $6,002 (2015) to $10,791 and Office supplies and other general expenses increased from $1,891 (2015) to $14,056. All of the increased expenditures period over period as the direct result of the Company’s revised business focus to operate in the eco-friendly technology sector using social media sites and offering apps to generate advertising revenues and download fees.
Other expenses incurred in the period include interest expenses of $9,310 up from only $5,726 in the prior comparative three month period ended April 30, 2015, and a loss on shares issued for services and fees totaling $162,158 in the current three months ended April 30, 2016, with no similar expenditure in the prior comparative period.
The net loss as at April 30, 2016 totaled $660,551 as compared to $171,005 in the three months ended April 30, 2015.
Plan of Operation
We have recently changed the focus of our business to operate in the eco-friendly technology sector using social media sites and offering apps to generate advertising revenues and download fees. The Company's need for ongoing capital by way of loans, sale of equity and/or convertible notes is expected to continue during the current fiscal year until we can establish revenues from operations. We are presently financing ongoing licensing support and maintenance fees associated with our newly commenced business focus by the issuance of shares of common stock for services at a discount to our market price. There are no assurances additional capital will be available to the Company on acceptable terms.
Future funding could result in potentially dilutive issuances of equity securities, the incurrence of debt, contingent liabilities and/or amortization expenses related to goodwill and other intangible assets, which could materially adversely affect the Company's business, results of operations and financial condition. Any future funding might require the Company to obtain additional equity or debt financing, which might not be available on terms favorable to the Company, or at all, and such financing, if available, might be dilutive.
6
Going Concern
These financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated significant revenues to date and has never paid any dividends and is unlikely to pay dividends or generate significant earnings in the immediate or foreseeable future. As at April 30, 2016, the Company had a working capital deficit of $1,341,212 and an accumulated deficit of $10,553,144. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability to raise equity or debt financing, and the attainment of profitable operations from the Company's future business. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.
The financial statements reflect all adjustments consisting of normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of the results for the periods shown. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
Liquidity and Capital Resources
As of April 30, 2016, the Company had total current assets of $6,706, and total current liabilities of $1,346,948 as compared to $6,706 in current assets and $716,511 in total current liabilities at the fiscal year ended January 31, 2016. The Company has limited financial resources available outside loans from its officers and directors and funds it has obtained through use of convertible debt instruments and loans with third parties. While the Company is working towards generating revenue to offset some of its existing operating expenditures, it is possible that without realization of additional capital, it would be unlikely for the Company to continue as a going concern. In order for the Company to remain a Going Concern it may need to find additional capital. Presently the Company is financing many of its key expenditures by way of issuance of shares to its key creditors for services provided and fees incurred. Additional working capital may be sought through additional debt or equity private placements, additional notes payable to banks or related parties (officers, directors or stockholders), or from other available funding sources at market rates of interest, or a combination of these. The ability to raise necessary financing will depend on many factors, including the nature and prospects of any business to be acquired and the economic and market conditions prevailing at the time financing is sought. During the most recently completed fiscal year management has obtained additional funding with success, however there is no guarantee we will be able to continue to obtain financing if and when required. The current economic downturn may make it difficult to find new capital sources for the Company should they be required.
Cash flows from operating activities
During the three months ended April 30, 2016 and 2015 the Company used $31,690 and $13,390 of cash flow for operating activities respectively. The increase in cash used in operating activities is primarily attributable to an increase in costs during the period associated with the Company’s new operational focus. During the period ended April 30, 2016 the Company recorded liabilities from unissued shares of $378,370 and a loss on shares issued for fees and services with no comparative expense in the three months ended April 30, 2015. In addition, during the period the Company incurred related party payables of $55,000 as compared to Nil in the three months ended April 30, 2015 and reported an increase to accounts payable of $11,909 (2016) as compared to an increase of only $6,365 in 2015. Finally, the Company recorded a substantive reduction to share based compensation in the three months ended April 30, 2016 of only $25,000 compared to $151,250 in the three months ended April 30, 2015.
Cash flows from investing activities
During the three months ended April 30, 2016 the Company expended $2,263 to purchase equipment as compared to $Nil in the three months ended April 30, 2015.
Cash flows from financing activities
During the three months ended April 30, 2016 the Company received proceeds from related party loans totaling $35,000 as compared to $10,000 in the prior comparative period. In addition, the Company expended $7,500 with respect to its share buyback program and returned 1,000,000 shares to treasury with no similar transaction in the thre months ended April 30, 2015.
Future Financings
We anticipate continuing to rely related party and third party loans and/or equity sales of our common shares and/or shares for services rendered in order to continue to fund our business operations in the event of ongoing operational shortfalls. Issuances of additional shares will result in dilution to our existing shareholders. There is no assurance that we will achieve any of additional sales of our equity securities or arrange for debt or other financing to fund our research and development activities.
Contractual Obligations
The Company is a smaller reporting Company as defined by Rule 12b-2 of the Securities Act of 1934 and we are not required to provide the information under this item.
7
Going Concern
These financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities as a going concern in the normal course of business. The Company has not generated significant revenues to date and has never paid any dividends and is unlikely to pay dividends or generate significant earnings in the immediate or foreseeable future. As at October 31, 2015, the Company had a working capital deficit from continuing operations of $285,813, and an accumulated deficit of $9,658,455. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability to raise equity or debt financing, and the attainment of profitable operations from the Company's future business. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.
Off-Balance Sheet Arrangements
The Company has no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Critical Accounting Policies
The preparation of our consolidated financial statements and notes thereto requires management to make estimates and assumptions that affect the amounts and disclosures reported within those financial statements. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, contingencies, litigation and income taxes. Management bases its estimates and judgments on historical experiences and on various other factors believed to be reasonable under the circumstances. Actual results under circumstances and conditions different than those assumed could result in differences from the estimated amounts in the financial statements. There have been no material changes to these policies during the three months ended April 30, 2016.
Recently issued accounting pronouncements
In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which amends ASC Topic 718, Compensation – Stock Compensation, and includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements. The new standard is effective for the Company for the annual period ending after December 15, 2016, and for annual and interim periods thereafter, with early adoption permitted. The Company is currently evaluating the impact of this accounting standard update on the Company’s financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the current leasing guidance and upon adoption, will require lessees to recognize right-of-use assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. The new standard is effective for the Company for the annual period beginning after December 15, 2018, and can be early adopted by applying a modified retrospective approach for leases existing at, and entered into after, the beginning of the earliest comparable period presented in the financial statements. The Company is currently evaluating the impact of this accounting standard update on the Company’s financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is a smaller reporting Company as defined by Rule 12b-2 of the Securities Act of 1934 and we are not required to provide the information under this item.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
An evaluation was conducted under the supervision and with the participation of our management of the effectiveness of the design and operation of our disclosure controls and procedures as of April 30, 2016. Based on that evaluation, our management concluded that our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Such officer also confirmed that there was no change in our internal control over financial reporting during the three-month period ended April 30, 2016, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal controls over financial reporting that occurred during the three months ended April 30, 2016, that have materially, or are reasonably likely to materially, affect the Company’s internal controls over financial reporting.
8
PART II
The Company knows of no material, existing or pending legal proceedings against it, nor is the Company involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which its director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to its interest.
The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item.
Recent Sales of Unregistered Securities
On May 9, 2016 the Company issued 596,884 shares of common stock to an unrelated third party in respect to the assignment of the remaining balance of a convertible note in the principal amount of $96,100. Upon assignment the conversion terms of the note were amended from $0.003 per share to a 40% discount to market based on the date immediately prior to the notice of conversion. As a result, the shares were issued in full settlement of the principal value of the note at $0.161 per share.
On May 9, 2016 the Company issued a total of 1,375,000 shares of common stock valued at $0.01 per share in relation to a consulting agreement with SDOI.
On June 1, 2016, the Company entered into a further amendment to the Technology Licensing and Marketing Agreement between SDOI and the Company. Under the Amendment:(1) SDOI will not be issued Series A Preferred Stock initially equal to the current total authorized common shares outstanding of 650,000,000; (2) Invoices for advertising services will be billed separately from the $35,000 standard monthly fee and will have the same terms as the monthly fee; i.e., the amount invoiced will be paid via the issuance of S-8 shares of ESSI Common Stock (issued at a 30% discount to the market VWAP on the date of payment due or a share price of $0.01, whichever is greater).
A further 11,644,126 shares have been allocated for issuance under the terms of agreements with SDOI (ref: Note 3 of the financial statements contained herein) but remain unissued as at April 30, 2016.
Exemption From Registration. The shares of common stock referenced herein were issued in reliance upon an exemption from registration afforded either under Section 4(2) of the Securities Act for transactions by an issuer not involving a public offering, or Regulation D promulgated thereunder, or Regulation S for offers and sales of securities outside the U.S.
None.
ITEM 4.
|
MINE SAFETY STANDARDS
|
Not applicable.
ITEM 5.
|
OTHER INFORMATION
|
None.
9
Exhibit Number
|
Exhibit Description
|
Filed Previously
|
Filed herewith
|
3.1
|
Articles of Incorporation of Pristine Solutions Inc. (incorporated by reference to the Registrant’s registration statement on Form S-1 filed on May 4, 2010)
|
*
|
|
3.2
|
Certificate of Amendment filed with the Nevada Secretary of State on January 29, 2010. (incorporated by reference to the Registrant’s registration statement on Form S-1 filed on May 4, 2010)
|
*
|
|
3.3
|
Bylaws of Pristine Solutions Inc. (incorporated by reference to the Registrant’s registration statement on Form S-1 filed on May 4, 2010)
|
*
|
|
3.4
|
Amended Articles of Incorporation/Certificate of Amendment filed with the Nevada Secretary of State on March 7, 2012 (incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended January 31, 2012 filed July 31, 2012)
|
*
|
|
3.5
|
Articles of Exchange filed with the Nevada Secretary of State on October 31, 2012 (incorporated by reference to the Registrant’s Current Report on Form 8-K filed November 13, 2012)
|
*
|
|
3.6
|
Certificate to accompany Restated Articles or Amended and Restated Articles (incorporated by reference to the Registrant’s Current Report on Form 8-K filed January 3, 2013)
|
*
|
|
3.7
|
Certificate of Amendment to Articles of Incorporation for Nevada Profit Corporations (incorporated by reference to the Registrant’s Current Report on Form 8-K filed February 18, 2014)
|
*
|
|
3.8
|
Designation of Series A Voting Preferred shares filed with the Nevada Secretary of State on January 12, 2016
|
*
|
|
10.1
|
Employment Agreement between the Company and Mike Borkowski dated November 1, 2015
|
*
|
|
10.2
|
December 21, 2015 employment agreement between the Company and Jeffery Taylor
|
*
|
|
10.3
|
December 21, 2015 employment agreement between the Company and Don Lee Taylor
|
*
|
|
10.4
|
Technology licensing and marketing support agreement between Separation Degrees – One, Inc. (“SDOI”) and the Company dated January 1, 2016
|
*
|
|
10.5
|
Asset purchase agreement between the Company and Separation Degrees – One, Inc. (“SDOI”) dated January 4, 2016
|
*
|
|
10.6
|
Amendment No. 1 to the Technology licensing and marketing support agreement between Separation Degrees – One, Inc. (“SDOI”)
|
*
|
|
10.7
|
Amendment No. 2 to the Technology licensing and marketing support agreement between Separation Degrees – One, Inc. (“SDOI”)
|
|
* |
(31)
|
Rule 13a-14(a)/15d-14(a) Certifications
|
||
31.1*
|
Certification of our Chief Executive Officer pursuant to Rule 13(a)-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended
|
*
|
|
31.2*
|
Certification of our Chief Financial Officer pursuant to Rule 13(a)-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended
|
*
|
|
(32)
|
Section 1350 Certifications
|
||
32.1*
|
Certification of our Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002
|
*
|
|
32.2*
|
Certification of our Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002
|
*
|
|
(101)
|
Interactive Data Files
|
||
101.INS*
|
XBRL Instance Document**
|
||
101.SCH*
|
XBRL Taxonomy Extension Schema Document**
|
||
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase Document**
|
||
101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase Document**
|
||
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase Document**
|
||
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase Document**
|
** To be filed by Amendment.
10
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
ECO SCIENCE SOLUTIONS, INC.
|
|
|
|
|
Dated: June 20, 2016
|
/s/ Jeffery Taylor
|
|
Jeffery Taylor
|
|
President, Chief Executive Officer, Secretary and Director
|
11