ECO SCIENCE SOLUTIONS, INC. - Quarter Report: 2017 October (Form 10-Q)

---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

[  ]TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES 

 EXCHANGE ACT OF 1934

Commission file number 000-54803

 

(Exact name of registrant as specified in its charter)

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.

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).

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

      If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

---

ECO SCIENCE SOLUTIONS, INC.

TABLE OF CONTENTS

 

 

---

PART I -- FINANCIAL INFORMATION

 

 

ITEM 1.                FINANCIAL STATEMENTS

 

 

ECO SCIENCE SOLUTIONS, INC.

NOTES TO THE FINANCIAL STATEMENTS

(Unaudited)

 

 

---

ECO SCIENCE SOLUTIONS, INC.

BALANCE SHEETS

The accompanying notes are an integral part of these unaudited financial statements

---

ECO SCIENCE SOLUTIONS, INC.

STATEMENTS OF OPRATIONS

(Unaudited)

The accompanying notes are an integral part of these unaudited financial statements

---

ECO SCIENCE SOLUTIONS, INC.

STATEMENTS OF CASH FLOW

(Unaudited)

The accompanying notes are an integral part of these unaudited financial statements

---

ECO SCIENCE SOLUTIONS, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

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. On January 8, 2014, the Company changed its name from Pristine Solutions, Inc. to Eco Science Solutions, Inc.  

During fiscal 2016 the Company changed its business focus and on January 1, 2016, the Company entered into a technology licensing and marketing support agreement with Separation Degrees – One, Inc. ("SDOI") that was focused on 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 Agreement with SDOI was revised so that SDOI received 500,000 shares of Common Stock rather than Preferred Shares; no Preferred Shares were issued to SDOI.  In addition to the issuance of the 500,000 shares of common stock as consideration for the Asset Purchase Agreement with SDOI, the Company agreed further to settle all invoices received for services rendered by SDOI, as well as advertising fees incurred, by way of issuance of common stock at a 30% discount to market as S-8 shares.

On January 10, 2017, the Company entered into a Cancellation and Release Agreement with SDOI wherein the Company agreed to issue 4,000,000 common shares to SDOI (or its designee) in exchange for the cancellation of the $1,920,424 worth of remaining outstanding invoices and fees owed to SDOI.

Further, on July 26, 2017, all of the Shares of an Uruguayan entity, Holway Sociedad Anonima ("Holway", "Holway SA") were purchased by certain former shareholders of Ga Du who thereafter became the sole shareholders of Holway.  Holway's objective is to perform business in the Free-trade zone in Uruguay in accordance with the laws of the Free-trade zone; in every kind of industrial, commercial or other activity relating to its business of providing financial services.  On September 19, 2017, the Holway shareholders transferred all of their shares of Holway to Ga Du, and will hereafter conduct business pursuant to the Holway Uruguayan registration as Ga Du; Doing Business As (DBA).

---

ECO SCIENCE SOLUTIONS, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

NOTE 1: NATURE OF BUSINESS AND CONTINUANCE OF OPERATIONS (cont'd)

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 October 31, 2017, the Company had a working capital deficit of $4,207,494 and an accumulated deficit of $65,557,595. 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.

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 nine months ended October 31, 2017, are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2018.  For further information, refer to the financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2017 as filed with the Securities and Exchange Commission on May 1, 2017.

Certain reclassifications have been made to the prior period's financial statements to conform to the current period's presentation.

---

ECO SCIENCE SOLUTIONS, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

The consolidated financial statements include the accounts of Eco Science Solutions, Inc. and its wholly-owned subsidiary, Ga Du Corporation. All significant intercompany balances and transactions have been eliminated.

 

The preparation of 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 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.

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 October 31, 2017, and January 31, 2017, respectively, the Company had cash, but no cash equivalents. 

The acquisition of subsidiary is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Company in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree's identifiable assets and liabilities are recognized at their fair values at the acquisition date.

Goodwill arising on acquisition is recognized as an asset and initially measured at cost, being the excess of the cost of the business combination over the Company's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognized.

 

Goodwill arising on the acquisition of an entity represents the excess of the cost of acquisition over the Company's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the entity recognized at the date of acquisition.

 

Goodwill is initially recognized as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. 

Goodwill is tested for impairment at least annually or whenever there is an indication that the asset may be impaired.

---

ECO SCIENCE SOLUTIONS, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

 

Property and equipment are recorded at cost. Depreciation and amortization on property and equipment are determined using the straight-line method over the three to five year estimated useful lives of the 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 are expensed as incurred and were $1,441,396 during the nine-month period ended October 31, 2017 and $1,296,327 in the same period ended October 31, 2016. Advertising and marketing costs include ad placement and click through programs placed on a wide network of mediums acquired from advertising consolidators including Taboola, Outbrain, MGID, Rev Content, Yahoo, MSN, AOL, Google and others for the full scope of the Company's brands including the Herbo and Ftirix apps for all platforms, GooglePlay, iOS, Android, as well as the corporate e-commence site and all the other underlying supporting social media platforms such as YouTube, Twitter, Instagram, and Facebook.

 

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. There was no impairment of long-lived assets during the six-month period ended October 31, 2017 and October 31, 2016.

FASB ASC 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. FASB ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. FASB ASC 820 describes three levels of inputs that may be used to measure fair value:

 

Level 1 – Quoted prices in active markets for identical assets or liabilities.

 

Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3 – Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level of input that is significant to the fair value measurement of the instrument.

---

ECO SCIENCE SOLUTIONS, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

The following table provides a summary of the fair value of our derivative liabilities as of October 31, 2017 and January 31, 2017:

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 October 31, 2017, no revenue has been recognized, as the Company changed its core business in January 2016 and is currently developing its new business operation.

 

Costs of revenue consist of the direct expenses incurred 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.

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.

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.

---

ECO SCIENCE SOLUTIONS, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The ASU requires an entity to disaggregate the service cost component from the other components of net benefit cost. The service cost component is presented in the same line items as other compensation costs arising from services rendered by the pertinent employees during the period and the other components of net benefit costs are presented separately as other income/expense below income from operations. ASU 2017-07 will be effective for the Company in our fiscal year and interim periods beginning November 1, 2018.

The Company has reviewed all other recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements will have a material impact on its financial condition or the results of its operations.

NOTE 3: BUSINESS COMBINATION

Allocation of the net assets acquired is presented below:

---

ECO SCIENCE SOLUTIONS, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

NOTE 3: BUSINESS COMBINATION (cont'd_

As of closing of the business combination, the management carried out testing for impairment and results of the tests indicated that the goodwill was fully impaired and as such it has been expensed in the current period.

Intangible assets acquired include a Financial Services Platform, Testing Labs, as well as Inventory Control and Advisory Software Platforms.  The acquired assets are not yet generating revenue.

NOTE 4: PROPERTY AND EQUIPMENT

 

Property and equipment, net consists of the following:

Depreciation expense was $2,333 and $440 for the nine months ended October 31, 2017 and 2016, respectively.

Depreciation expense was $1,294 and $189 for the three months ended October 31, 2017 and 2016, respectively.

NOTE 5: INTANGIBLE ASSETS

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.

On June 1, 2016, the Company and SDOI entered into a further amendment to the terms of the aforementioned agreements, which provided for the following:

---

ECO SCIENCE SOLUTIONS, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

NOTE 5: INTANGIBLE ASSETS (cont'd)

As of January 31, 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. As of January 31, 2017, the determination to issue 1,000 shares of Series A Voting Preferred Stock was reversed and $nil 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. On October 1, 2016, the monthly standard fee increased to $42,000 from $35,000.

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 yearend January 31, 2016, 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 January 31, 2016, 500,000 shares of common stock had not yet been issued $3,500 remained on the balance sheet as liabilities for issuance of shares.  In January 2017, 500,000 shares of common stock were issued in full satisfaction of the terms of the agreement.

The following table summarizes the invoices received for advertising services from SDOI as well as service fees invoiced for project and planned technical development/maintenance, production and staging server administration, and ongoing marketing services:

 

During fiscal 2017 the scope of services provided by SDOI included in the above fee schedule include cash advertising expenditures for reimbursement as a result of ad placement and click through programs placed on a wide network of mediums acquired from advertising consolidators including Taboola, Outbrain, MGID, Rev Content, Yahoo, MSN, AOL, Google and others for the full scope of the Company's brands including the Herbo and Ftirix apps for all platforms, GooglePlay, iOS, Android, as well as the corporate e-commence site and all the other underlying supporting social media platforms such as YouTube, Twitter, Instagram, and Facebook, with a goal of driving views and increasing visibility on a global scale.  In addition, fees incurred for technology licensing and marketing include the ongoing development and maintenance, as well as technology development fees for the Company's websites, applications, content platforms and social media channels.

---

ECO SCIENCE SOLUTIONS, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

NOTE 5: INTANGIBLE ASSETS (cont'd)

During the fourth quarter of fiscal 2017 the Company and SDOI agreed to negotiate a cancelation of the licensing and marketing support agreement.  The Company and SDOI agreed that the accrued burden of the liability of the shares issuable under the terms of the agreement and the associated market value of the shares no longer met the intent of the original agreement between the parties. On January 10, 2017, the Company executed a Cancellation and Release Agreement with SDOI.

 

Pursuant to the Technology Licensing and Marketing Agreement, in the event the Company was not able to pay the invoices generated by SDOI, any outstanding balances were to be converted into common shares of the Company ("S-8 Shares"). Under the Cancellation and Release Agreement, SDOI has agreed to cancel the outstanding balance of unpaid invoices owed to SDOI in exchange for 4,000,000 Common shares.

 

The following table is the summary of the market value of the allocated S-8 shares recorded on the balance sheet as liabilities for issuance of shares which are associated with the invoices received for advertising services from SDOI including services for project and planned technical development/maintenance, production and staging server administration, and ongoing marketing services provided:

4,000,000 Common shares issued to SDOI were valued at market on the agreement date of January 10, 2017, for a total of $11,040,000.

The following table is the summary of loss on the S-8 shares:

 Intangible Assets of Ga Du Corporation

---

ECO SCIENCE SOLUTIONS, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

NOTE 6: SPONSORSHIP AGREEMENTS

On February 9, 2017, the Company entered into a Sponsorship Agreement with Fruit of Life Productions LLC, wherein, the Company agreed to pay Fruit of Life Productions LLC the sum of Fifty Thousand Dollars ($50,000).

The total amount of $185,000 expended has been recorded as research, development, and promotional expenses.

NOTE 7: LICENSE AND MASTER MARKETING AGREEMENT

Alliance provides certain financial and marketing services to businesses and individuals, including the Cannabis Industry, on a programmatic or membership basis (the "Financial Program"), of which Alliance derives fees and income from enrolling companies in the Financial Program and providing a range of services, with respect to which AFN and Ga Du may derive fees and income, for such clients (the "Members") according to the AFN pricing schedule (the "Fees").

Alliance Financial Network is registered with FinCEN (MSB Registration Number: 31000094744769) as a financial services institution, compliant with the AML/BSA guidelines of FinCEN, and is regulated by the Internal Revenue Service.  Operating a mobile application known as eXPO™ electronic eXchange Portal, Alliance provides financial and marketing services to businesses and individuals, which are challenged in the traditional banking systems, and generally are those that require more intensive compliance then banks are willing, or able to perform.  One such industry is the cannabis industry; Alliance is configured to establish Membership relationships businesses in this industry following a full compliance audit on the business.

Ga Du has agreed to issue, or cause to be issued, two hundred thousand (200,000) shares of the Company's common stock to Alliance.  Ga Du shall have the exclusive right to undertake marketing responsibilities of Alliance's Financial Services to businesses in the Cannabis industry, initially in Michigan, Oregon and Washington, with plans to extend throughout the United States, provided that it shall not extend to any states where Cannabis sales have not been legalized by that state's laws.

Ga Du shall be credited with all Cannabis related members and revenues that use Alliance's financial and marketing services, regardless of the source of revenue, or the party that enrolled the customer that generated the revenues, that are generated within any territory in which Ga Du has commenced business. 

Alliance will provide all software platform(s) necessary to deliver the Financial Services, assure compliance with appropriate Federal Requirements and international money laundering restrictions, administer all compliance, enrollment, and collection of fees from the Members contracting with Alliance, provide any and all necessary marketing or other materials describing Alliance's services and program, will forward any required Sales Commissions to the appropriate recipients, and assure adequate customer service at all times.

---

ECO SCIENCE SOLUTIONS, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

Alliance will be responsible for the functional operation of any software utilized in providing its services and for the administration and handling of monies and/or any credits relating thereto and, in the event of any claim, cause of action or lawsuit (together the "Claims") for failure to properly administer such responsibilities, Alliance shall have the sole obligation to defend such Claim(s) and shall fully indemnify, defend and hold harmless Ga Du from and against such Claims.

Alliance will maintain accounting and data concerning the income from the Cannabis Industry and will generate a monthly income statement as to each of the following revenue streams: (i) membership fees; (ii) cash depository fees; (iii) merchant processing and credit card fees; (iv) transfer fees; and (v) advertising fees.

Alliance and Ga Du will split compensation derived from income generated from enrollees of Ga Du as follows: (a) for income from point of sale payments to merchants, after deducting any Sales Commissions and cost basis (interchange and bank fees), Alliance will receive forty percent (40%), and Ga Du shall receive sixty percent (60%); (b) for income from cash depository business deriving from the Cannabis industry, Alliance will receive sixty five percent (65%), and Ga Du will receive thirty five percent (35%); (c) for income derived from membership fees from the Cannabis industry, Alliance and Ga Du will split the revenue 40/60 as in (a) above; (d) for income generated from transfer fees, Alliance and Ga Du will split the revenue on a 50/50 basis; and (e) for any other income derived from providing services to the Cannabis industry, Alliance and Ga Du will split the income on an equal fifty/fifty basis, except that income derived from advertising fees paid by advertisers utilizing Alliance's kiosks will be split eighty-five percent (85%) to Alliance and fifteen percent (15%) to Ga Du.

200,000 shares of common stock valued at $50,000, or $0.25 per share as research and development expenses.

A total amount of $102,533 in respect to the assigned convertible note, include principal of $100,000 and accrued interest receivable of $2,533 which amounts were recorded as additional paid in capital.

NOTE 8: PREPAID EXPENSES

Prepaid expenses consist of the following:

 

---

ECO SCIENCE SOLUTIONS, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

NOTE 9: NOTES PAYABLE AND CONVERTIBLE NOTE

On May 9, 2016, the Company issued 596,884 shares of common stock to an unrelated third party in respect to the assignment of a portion of a convertible note of in the 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.

As of December 16, 2016, the unsecured convertible promissory note bearing interest at 6% per annum, in the remaining sum of $136,350 (January 31, 2016 - $232,450) convertible into the Company's common stock at a rate of $0.003 per share and due and payable January 31, 2017 was canceled. Under the terms of the Cancellation and Release Agreement a total of $186,704 was extinguished including principal of $136,350 and all accrued and unpaid interest of $50,354.  

During the fiscal year ended January 31, 2017, the Company received an accumulated amount of $14,930 from a third party. The notes bear interest at a rate of 1% per annum, and each due three months from issue date.

During the months of August and September 2016 the accumulated principal balance became due and payable on the three-month anniversary of each advance. As of October 31, 2017, these amounts were unpaid.

As of October 31, 2017, the Company has accrued interest of $218 in respect of the accumulated amount payable.  

During the fiscal year ended January 31, 2017, the Company received an amount of $50,000 from a third party. The note bears interest at a rate of 1% per annum, and is due three months from issue date. As at October 31, 2017 the note became due and payable, but remained unpaid as at October 31, 2017.

As of October 31, 2017, the Company has accrued interest of $500. 

During the fiscal year ended January 31, 2017, the Company received an amount of $225,000 from a third party. The note bears interest at a rate of 6% per annum, and is due one year from issue date.

On February 14, 2017, the Company received an amount of $150,000 from a third party. The note bears interest at a rate of 6% per annum, and is due one year from issue date.

ECO SCIENCE SOLUTIONS, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

NOTE 9: NOTES PAYABLE AND CONVERTIBLE NOTE (cont'd)

On March 3, 2017, the Company received an amount of $40,000 from a third party. The note bears interest at a rate of 6% per annum, and is due one year from issue date.

On March 15, 2017, the Company received an amount of $175,000 from a third party. The note bears interest at a rate of 6% per annum, and is due one year from issue date.

On March 24, 2017, the Company received an amount of $15,000 from a third party. The note bears interest at a rate of 6% per annum, and is due one year from issue date.

On March 30, 2017, the Company received an amount of $25,000 from a third party. The note bears interest at a rate of 6% per annum, and is due one year from issue date.

On April 12, 2017, the Company received an amount of $200,000 from a third party. The note bears interest at a rate of 6% per annum, and is due one year from issue date.

On April 26, 2017, the Company received an amount of $5,000 from a third party. The note bears interest at a rate of 6% per annum, and is due one year from issue date.

On May 5, 2017, the Company received an amount of $100,000 from a third party. The note bears interest at a rate of 6% per annum, and is due one year from issue date.

On July 17, 2017, the Company received an amount of $70,000 from a third party. The note bears interest at a rate of 6% per annum, and is due one year from issue date.

On August 14, 2017, the Company received an amount of $150,000 from a third party. The note bears interest at a rate of 6% per annum, and is due one year from issue date.

On August 24, 2017, the Company received an amount of $150,000 from a third party. The note bears interest at a rate of 6% per annum, and is due one year from issue date.

On August 31, 2017, the Company received an amount of $30,000 from a third party. The note bears interest at a rate of 6% per annum, and is due one year from issue date.

On September 6, 2017, the Company received an amount of $35,000 from a third party. The note bears interest at a rate of 6% per annum, and is due one year from issue date.

On September 18, 2017, the Company received an amount of $150,000 from a third party. The note bears interest at a rate of 6% per annum, and is due one year from issue date.

On October 2, 2017, the Company received an amount of $27,500 from a third party. The note bears interest at a rate of 6% per annum, and is due one year from issue date.

On October 11, 2017, the Company received an amount of $180,000 from a third party. The note bears interest at a rate of 6% per annum, and is due one year from issue date.

On October 16, 2017, the Company received an amount of $40,000 from a third party. The note bears interest at a rate of 6% per annum, and is due one year from issue date.

As of October 31, 2017, the Company has accrued interest of $43,214 in respect of the aforementioned notes.

---

ECO SCIENCE SOLUTIONS, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

As of October 31, 2017, and January 31, 2017, related parties are due a total of $362,060 and $616,994, respectively

---

ECO SCIENCE SOLUTIONS, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

---

ECO SCIENCE SOLUTIONS, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

NOTE 11: CONVERTIBLE NOTE AND DERIVATIVE LIABILITY

The Company analyzed the above convertible debenture under ASC 815-10-15-83 and concluded that this convertible debenture meets the definition of a derivative. We estimated the fair value of the derivative on the inception dates, and subsequently, using the Black-Scholes valuation technique, adjusted for the effect of dilution, because that technique embodies all of the assumptions (including, volatility, expected terms, and risk-free rates) that are necessary to fair value complex derivate instruments.

The carrying value of these convertible notes is as follows:

 

 

The unamortized discount of $1,311,998 associated with above note will be expensed in future periods.

As a result of the application of ASC No. 815 in period ended October 31, 2017 the fair value of the conversion feature is summarized as follows:

The fair value at the commitment and re-measurement dates for the Company's derivative liabilities were based upon the following management assumptions as of October 31, 2017 and commitment date:
 

---

ECO SCIENCE SOLUTIONS, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

NOTE 12: 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.

As of October 31, 2017, there were 46,557,572 shares issued and 45,557,572 outstanding and 46,331,186 issued and 45,331,186 outstanding as at January 31, 2017

Common stock issued during the nine-month period ended October 31, 2017

On February 16, 2017, the Company issued 26,386 shares of common stock pursuant to a conversion notice presented to the Company relative to a convertible note for previously incurred and unpaid compensation totalling $59,000 plus accrued interest which amount was due to a former officer and director.

On July 11, 2017, the Company issued 16,000,000 shares of restricted stock valued at $18,400,000 or $1.15 per share, the fair market value on the date of issue pursuant to the Stock Purchase Agreement entered into with the founders of Ga Du Corporation, Andy Tucker, L. John Lewis, Dante Jones, and Wendy Maguire (ref: Note 3).

On September 22, 2017, the Company issued 200,000 shares of restricted stock valued at $50,000 or $0.25 per share, the fair market value on the date of issue pursuant to the Assignment Agreement entered between Ga Du Corporation and G&L Enterprises. (ref: Note 7).

Common stock issued during the fiscal year ended January 31, 2017

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 issued 100,000 shares of restricted stock to consultant Mike Hogue in respect to an 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. (ref: Note 4)

On May 9, 2016, the Company issued 596,884 shares of common stock to an unrelated third party in respect to the assignment of proceeds from a convertible note totaling $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 assigned balance 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. (ref; Note 4)

On August 5, 2016, the Company issued a total of 1,250,000 shares of common stock valued at $0.01 per share in relation to a consulting agreement with SDOI. (ref; Note 4)

---

ECO SCIENCE SOLUTIONS, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

 

NOTE 12: COMMON STOCK (cont'd)

On October 24, 2016, the Company issued a total of 982,953 shares of common stock valued at between $0.1709 and $0.47430 per share in relation to a consulting agreement with SDOI. (ref; Note 4)

On January 4, 2017, the Company issued a total of 500,000 shares of common stock valued at $0.007 per share in relation to Asset Purchase Agreement with SDOI (ref: Note 4)

On January 13, 2017, the Company issued a total of 3,000,000 shares of restricted stock to Mr. Jeffery Taylor valued at $8,190,000, or $2.73 per share as stock-based compensation recorded as management fees.

On January 13, 2017, the Company issued a total of 3,000,000 shares of restricted stock to Mr. Don Lee Taylor valued at $8,190,000, or $2.73 per share as stock-based compensation recorded as management fees.

On January 13, 2017, the Company issued a total of 1,000,000 shares of restricted stock to Sharon Mitchell valued at $2,730,000, or $2.73 per share as stock-based compensation recorded as legal, accounting and audit fees.

On January 13, 2017, the Company issued a total of 1,000,000 shares of restricted stock to Michael Rountree valued at $2,730,000, or $2.73 per share as stock-based compensation recorded as legal, accounting and audit fees.

On January 13, 2017, the Company issued 100,000 shares of restricted stock to consultant Mike Hogue valued at $273,000, or $2.73 per shares as stock-based compensation recorded as advertising and marketing expenses.

On January 17, 2017, the Company issued 4,000,000 shares of restricted stock to SDOI valued at $11,040,000, or $2.76 per shares (ref: Note 4).  Concurrently the liability for unissued shares recorded up to the date of settlement under the terms of the cancelation agreement with SDOI were extinguished.

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 October 31, 2017, and January 31, 2017, no Series A Voting Preferred Shares were issued.

NOTE 13: COMMITMENTS

---

ECO SCIENCE SOLUTIONS, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

NOTE 13: COMMITMENTS cont'd)

         

   The Company filed an S-1 Registration Statement in respect of the foregoing on January 27, 2017 which received Effect by the Securities and Exchange Commission, on May 15, 2017. To date there has been no funding provided under the aforementioned agreement.

---

ECO SCIENCE SOLUTIONS, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

NOTE 14: CONTINGENCIES

 

On July 7, 2017, a purported shareholder of Eco Science Solutions, Inc. (the "Company"), Mr. Jimmie Glorioso, filed a verified shareholder derivative complaint against Jeffrey L. Taylor, Don L. Taylor (collectively, Jeffrey and Don Taylor are the "Taylors"), L. John Lewis and S. Randall Oveson, the directors and officers in the Company, in the First Judicial District Court of the State of Nevada, Carson City County (the "Nevada Complaint").  The Company is identified as a nominal defendant, against which no claims are plead.  The Nevada Complaint arises out of alleged materially false and misleading statements or omissions from SEC filings and/or public statements by or on behalf of Company.  The Nevada Complaint asserts claims on behalf of the Company for breach of fiduciary duties against the Taylors, unjust enrichment against all individual defendants, abuse of control against the Taylors, gross mismanagement against the Taylors, waste of corporate assets against the Taylors and aiding and abetting breach of fiduciary duty against all individual defendants.  The Nevada Complaint (1) seeks judicial declarations that (i) Mr. Glorioso may maintain this action on behalf of the Company and (ii) all individual defendants have breached and/or aided and abetted the breach of their fiduciary duties to the Company; (2) seeks damages to the Company allegedly sustained as a result of the acts/omissions of all individual defendants; (3) seeks an order directing the Company and all individual defendants to take all necessary actions to reform and improve the Company's corporate governance in order to avoid any alleged future harm to the Company. The individual defendants, the Company and the plaintiff have stipulated to a temporary stay of the proceedings.

On October 20, 2017, a purported shareholder of the Company, Mr. Ian Bell, filed a verified stockholder derivative complaint against the Taylors, L. John Lewis and S. Randall Oveson, the directors and officers in the Company, and Gannon Giguiere in the United States District Court for the District of Hawaii (the "Hawaii Complaint").  The Company is identified as a nominal defendant, against which no claims are plead.  The Hawaii Complaint arises out of alleged materially false and misleading statements or omissions from SEC filings and/or public statements by or on behalf of the Company.  The Hawaii Complaint asserts claims on behalf of the Company for breach of fiduciary duty against the Taylors and Mr. Oveson, aiding and abetting breach of fiduciary duty against all individual defendants, waste of corporate assets against all individual defendants and unjust enrichment against all individual defendants.  The Hawaii Complaint (1) seeks damages for the alleged breaches of fiduciary duties, aiding and abetting, waste and unjust enrichment and an order directing the Company and all individual defendants to take all necessary actions to reform and improve the Company's corporate governance in order to avoid any alleged future harm to the Company.

NOTE 15: INCOME TAXES

Operating loss carry-forwards generated during the period from December 8, 2009 (date of inception) through October 31, 2017 of approximately $16,271,000, 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 $3,929,000 at October 31, 2017. For the nine months period ended October 31, 2017 and 2016 the valuation allowance increased by approximately $1,889,900 and $667,900, respectively. 

NOTE 16: SUBSEQUENT EVENTS

---

ITEM 2.                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

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.  On February 14, 2014, the Company changed its name to Eco Science Solutions, Inc. ("ESSI")

Eco Science Solutions, Inc. and its recently acquired subsidiary Ga Du Corporation continue to focus on becoming a premier health, wellness and alternative medicines business by effectively servicing and connecting health conscious consumers with local businesses to satisfy their alternative medical needs.  The Company's consumer initiatives are centered on education and connecting consumers with various holistic health, wellness and alternative medicine products and businesses. The Company's professional initiatives provide business operators with real-time inventory control, advisory and financial services, data analytics, and delivery coordination technology.

Ongoing project development of the Company's e-commerce platform, financial services platforms, testing labs, and inventory control platform are envisioned to allow for ESSI to evolve into a leadership role with the alternative health and wellness industry.

Current business overview

Currently our business is in a pre-revenue stage, wherein we are investing in Research & Development in order to build both consumer and enterprise technologies, along with brand advertising to create consumer and professional awareness of our service offering. Once we have gained a large enough audience and successfully implement our newly acquired financial services platform, the Company expects to begin monetizing all of its available assets.

 

The Company continues to offer the Herbo apps, Fitrix app, UseHerbo.com and "The Pursuit of Fine Herb" original content either through Apple and Google app stores or online through a web-browser or through social channels, such as Facebook, Instagram and YouTube.

  

Along with the ongoing development of app and ecommerce platforms the Company has expanded its investment in enterprise software to support the most recent acquisition s of Ga Du. technology. The Company's enterprise technology investments are centered on our platform that matches and connects consumers with desired products and/or providers, as well as providing for a convenient payment solution.  

---

 

The following summary of the Company's results of operations should be read in conjunction with the Company's unaudited financial statements for the nine months ended October 31, 2017:

 

 

 

While the Company has not yet recorded revenues in respect to its primary business activities, either from operations of ESSI or its recently acquired Ga Du subsidiary, investments have been made in technology and brand development. When applicable, the Company will account for advertising fees, commissions associated with the sales of online products, and directly related headcount costs to the Company's Cost of Sales.

Three months ended October 31, 2017:

General and administrative expenses, exclusive of amounts expended on advertising and marketing or impairment of goodwill charges in the three-month period ended October 31, 2017 totalled $662,754 ($216,019 - 2016).  Costs include a total of $376,575 for management and consulting fees as compared to $58,985 in the comparative three months ended October 31, 2016. During the current fiscal year the Company has expanded its management and consulting staff. Further, legal, accounting and audit fees incurred in the three-month period ended October 31, 2017 totalled $92,759, as compared to only $16,779 in the prior comparative period.  The substantive increase in management and professional fees is due to the increase in the Company's operations period over period and the retention of new staff and consultants.  In particular consulting fees in the period include technical project management, technical software development and cloud based data center management.  The services span the Company's technical platforms from e-commerce, mobile applications, enterprise software and data center management. The dramatic increase in legal fees period over period is due to certain due diligence fees paid in respect of certain third-party contracts as well as increased legal costs due to the increase in operations.  The Company expended a total of $81,200 on research, development and promotion in the current three months as compared to $112,000 in the prior comparative three-month period.  Current period expenditures include sponsorship and licencing fees as the Company moves to expand its brand awareness.  Office supplies and other general expenses also experienced a substantial increase period over period from $26,485 (2016) to $111,680 in the current three months period as the Company expanded its operations.

Nine months ended October 31, 2017:

General and administrative expenses, exclusive of amounts expended on advertising and marketing or impairment of goodwill charges in the nine-month period ended October 31, 2017 totalled $2,145,863 ($642,112 - 2016).  Costs for the nine months comparative periods include a total of $1,002,108 for management and consulting fees as compared to $206,752 in the comparative nine months ended October 31, 2016.  Further, legal, accounting and audit fees incurred in the nine-month period ended October 31, 2017 totalled $252,085, as compared to only $74,993 in the prior comparative period.   The substantive increase in management and professional fees is due to the increase in the Company's operations period over period and the retention of new staff and consultants.  Further legal fees period over period increased dramatically due to certain due diligence fees paid in respect of certain third-party contracts as well as increased legal costs due to the increase in operations.  The Company expended a total of $645,085 on research, development and promotion in the current nine months as compared to $286,500 in the prior comparative nine-month period.  Current period expenditures include sponsorship and licencing fees as the Company moves to expand its brand awareness.  Office supplies and other general expenses also experienced a substantial increase period over period from $69,687 (2016) to $244,410 in the current nine months period as the Company expanded its operations.

The Company changed the focus of its business at the close of fiscal 2016 to operate in the eco friendly technology sector using social media sites and offering apps to generate advertising revenues and download fees. During fiscal 2017 the Company laid the groundwork for income generation from these services by investing in ongoing development of its applications, websites and visibility in both the local and global market.  The Company has invested heavily in advertising to allow its applications and ecommerce website visibility on a global stage.  The Company further expanded its portfolio in 2017 to a 360-degree ecosystem for business location, localized communications between consumers and business operators, on-topic social networking, inventory management / selection, payment facilitation and delivery arrangement. The Company's holistic commerce and content platform is expected to enable health, wellness and alternative medicine enthusiasts to easily locate, access, and connect with others to facilitate the research of and purchasing of eco-science friendly products.  As well, recently the Company has also become focused on performing business in the Free-trade zone in Uruguay in accordance with the laws of the Free-trade zone; in every kind of industrial, commercial or other activity relating to its business of providing financial services.  We have applied for a financial advisory services charter to perform financial services through Ga Du, and under the regulatory laws of the Uruguayan Central Bank.

The Company's need for ongoing capital by way of loans, sale of equity and/or convertible notes is expected to continue to increase during the current fiscal year until we can establish revenues from operations. We expect to continue to need financing ongoing advertising and marketing fees, upgrades and expansion of our apps, licensing support and maintenance fees associated with our business focus by the issuance of shares of common stock at a discount to our market price. We entered into an equity purchase agreement and filed a Form S-1 Registration Statement relative to the equity purchase agreement, which received Effect from the SEC on May 15, 2017.  We expect to begin execution of the equity purchase agreement during fiscal 2018. There are no assurances additional capital will be available to the Company on acceptable terms or that this equity line will be available to us when needed.

 

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.

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 October 31, 2017, the Company had a working capital deficit of $4,207,494 and an accumulated deficit of $65,557,595. 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. While the Company entered into an Equity Purchase Agreement to sell up to 10,000,000 shares of our common stock (Ref: Note 9) there can be no guarantee the Company will receive proceeds sufficient to meet its ongoing operational overheads from these sales, or that these sales will occur.

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.

As October 31, 2017, the Company had total current assets of $142,632, and total current liabilities of $4,350,126 as compared to $244,941 in current assets and $1,021,002 in total current liabilities at the fiscal year ended January 31, 2017. 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, equity lines and loans with third parties.  Repayment of certain of these financing instruments are suspended while the Company is processing its application to relist on a public exchange in the United States. 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. Previously, the Company has financed many of its key expenditures by way of issuance of shares to its key creditors for services provided and fees incurred. The Company is currently looking for additional sources of capital to meet its ongoing operational overheads and its liabilities have increased substantially in the current period. 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.

During the nine months ended October 31, 2017 and 2016 the Company used $2,405,554 and $200,862 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 prior nine-month period ended October 31, 2016, the Company recorded liabilities from unissued shares of $849,826, a loss on shares issued for fees and services of $684,748, stock based compensation of $25,000 and amortization of debt discount of $5,535with no comparative charges in the current nine-month period ended October 31, 2017.  In addition, during the period ended October 31, 2017 the Company increased related party payables by $519,652 as compared to an increase of $126,302 in the prior period, and reported an increase to accounts payable of $697,568 as compared to an increase of only $49,640 in 2016. The Company recorded an increase to prepaid expenses of $36.983 in the current period compared to $817 in the prior comparative nine-month period. Finally, the Company recorded an impairment loss on goodwill of $18,400,000 in the current period with no comparative charges in the prior fiscal period.  The impairment loss relates to the value of shares issued for the acquisition of the Company's wholly owned subsidiary, Ga Du Corporation.

During the nine months ended October 31, 2017, the Company expended $13,266 to purchase equipment as compared to $2,263 in the nine months ended October 31, 2016.

During the nine months ended October 31, 2017 the Company received proceeds from notes payable totalling $2,175,695 as compared to $266,610 in the prior comparative period.  During the nine months ended October 31, 2017 the Company received proceeds totalling $633,195 (2016- $35,000) from related party loans, with no repayments in the current six months ended October 31, 2017 as compared to $5,000 in repayments 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 during the nine months ended October 31, 2016 with no similar transactions in the current nine-month period ended October 31, 2017.

We anticipate continuing to rely on 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. We entered into an equity purchase agreement for this purpose which we expect to execute during fiscal 2018. There are no assurances additional capital will be available to the Company on acceptable terms or that this equity line will be available to us when needed.

 

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.

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 nine months ended October 31, 2017.  Refer to Note 2 to our unaudited financial statements contained herein.

 

Recently issued accounting pronouncements

In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The ASU requires an entity to disaggregate the service cost component from the other components of net benefit cost. The service cost component is presented in the same line items as other compensation costs arising from services rendered by the pertinent employees during the period and the other components of net benefit costs are presented separately as other income/expense below income from operations. ASU 2017-07 will be effective for the Company in our fiscal year and interim periods beginning November 1, 2018.

The Company has reviewed all other recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements will have a material impact on its financial condition or the results of its operations.

---

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 October 31, 2017. 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 nine-month period ended October 31, 2017 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 nine months ended October 31, 2017 that have materially, or are reasonably likely to materially, affect the Company's internal controls over financial reporting.

---

PART II

ITEM 1.                LEGAL PROCEEDINGS

 

On July 7, 2017, a purported shareholder of Eco Science Solutions, Inc. (the "Company"), Mr. Jimmie Glorioso, filed a verified shareholder derivative complaint against Jeffrey L. Taylor, Don L. Taylor (collectively, Jeffrey and Don Taylor are the "Taylors"), L. John Lewis and S. Randall Oveson, the directors and officers in the Company, in the First Judicial District Court of the State of Nevada, Carson City County (the "Nevada Complaint").  The Company is identified as a nominal defendant, against which no claims are plead.  The Nevada Complaint arises out of alleged materially false and misleading statements or omissions from SEC filings and/or public statements by or on behalf of Company.  The Nevada Complaint asserts claims on behalf of the Company for breach of fiduciary duties against the Taylors, unjust enrichment against all individual defendants, abuse of control against the Taylors, gross mismanagement against the Taylors, waste of corporate assets against the Taylors and aiding and abetting breach of fiduciary duty against all individual defendants.  The Nevada Complaint (1) seeks judicial declarations that (i) Mr. Glorioso may maintain this action on behalf of the Company and (ii) all individual defendants have breached and/or aided and abetted the breach of their fiduciary duties to the Company; (2) seeks damages to the Company allegedly sustained as a result of the acts/omissions of all individual defendants; (3) seeks an order directing the Company and all individual defendants to take all necessary actions to reform and improve the Company's corporate governance in order to avoid any alleged future harm to the Company. The individual defendants, the Company and the plaintiff have stipulated to a temporary stay of the proceedings.

On October 20, 2017, a purported shareholder of the Company, Mr. Ian Bell, filed a verified stockholder derivative complaint against the Taylors, L. John Lewis and S. Randall Oveson, the directors and officers in the Company, and Gannon Giguiere in the United States District Court for the District of Hawaii (the "Hawaii Complaint").  The Company is identified as a nominal defendant, against which no claims are plead.  The Hawaii Complaint arises out of alleged materially false and misleading statements or omissions from SEC filings and/or public statements by or on behalf of the Company.  The Hawaii Complaint asserts claims on behalf of the Company for breach of fiduciary duty against the Taylors and Mr. Oveson, aiding and abetting breach of fiduciary duty against all individual defendants, waste of corporate assets against all individual defendants and unjust enrichment against all individual defendants.  The Hawaii Complaint (1) seeks damages for the alleged breaches of fiduciary duties, aiding and abetting, waste and unjust enrichment and an order directing the Company and all individual defendants to take all necessary actions to reform and improve the Company's corporate governance in order to avoid any alleged future harm to the Company.

Other than as set out above, 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.

 

ITEM 1A.             RISK FACTORS

 

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.

 

ITEM 2.                UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On September 22, 2017, the Company issued 200,000 shares of restricted stock valued at $50,000 or $0.25 per share, the fair market value on the date of issue pursuant to the Assignment Agreement entered between Ga Du Corporation and G&L Enterprises. (ref: Note 7 to the financial statements included herein).

---

 

ITEM 3.                DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4.                MINE SAFETY STANDARDS

Not applicable.

 

ITEM 5.                OTHER INFORMATION

None.

---

ITEM 6.                EXHIBITS, FINANCIAL STATEMENT SCHEDULES

⁽¹⁾To be filed by Amendment

---

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.