As filed with the U.S. Securities and Exchange Commission on September 18, 2020 .
Registration No. 0001144169
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Amendment No. 1
to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_______________________________________
ECO INNOVATION GROUP, INC.
(Exact Name of Registrant as Specified in its Charter)
Nevada (State or Other Jurisdiction of Incorporation) | 3691 (Primary Standard Industrial Classification Code Number) | 85-0842591 (I.R.S. Employer Identification No.) |
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Julia Otey-Raudes
16525 Sherman Way, Suite C-1
Van Nuys, CA 91406
(747) 224-2453
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Independent Law PLLC
Alan T. Hawkins
2106 NW 4th Pl
Gainesville, FL 32603
(352) 353-4048
Approximate dates of commencement of proposed sale to the public: From time to time after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: x
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act Registration Statement number of the earlier effective Registration Statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act Registration Statement number of the earlier Registration Statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act Registration Statement number of the earlier Registration Statement for the same offering. ¨
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.
Large accelerated filer: | ¨ | Accelerated filer: | ¨ |
Non-accelerated filer: | ¨ | Smaller reporting company: | x |
Emerging growth company | x |
CALCULATION OF REGISTRATION FEE CHART
Title of | Amount | Proposed | Proposed | Amount of |
Class of | to be | Maximum | Maximum | Registration Fee(3) |
Securities | Registered | Aggregate | Aggregate Offering | |
to be | Price Per | Price(2) | ||
Registered | Share | |||
Common Stock, $0.001 par value per share, Issued and Outstanding to be registered as part of a Secondary Offering by certain Selling Stockholders (as hereinafter defined) (1) | 25,000,000 | $0.08 | $2,000,000.00 | $259.60 |
Newly Issued Common Stock, $0.001 par value per share , to be registered as part of a Direct Public Offering (as hereinafter defined) | 25,000,000 | $0.08 | $2,000,000.00 | $259.60 |
Total | 50,000,000 | $4,000,000.00 | $519.20 |
(1) | The Shares of our common stock being registered hereunder are being registered for sale by the Selling Stockholders named in the Prospectus. |
(2) | The proposed maximum offering price per share and the proposed maximum aggregate offering price have been estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(c) under the Securities Act of 1933, as amended using the average of the high and low prices as reported on OTC Markets as of the filing date. |
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.
THIS REGISTRATION STATEMENT AND THE PROSPECTUS THEREIN COVER THE REGISTRATION OF 50,000,000 SHARES OF COMMON STOCK.
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The information in this Prospectus is not complete and may be changed. We may not sell these securities until the Registration Statement, as amended, filed with the Securities and Exchange Commission is effective. This Prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted .
PRELIMINARY PROSPECTUS (SUBJECT TO COMPLETION) DATED SEPTEMBER 18, 2020
PRELIMINARY PROSPECTUS
ECO INNOVATION GROUP, INC.
16525 Sherman Way, Suite C-1
Van Nuys, CA 91406
(747)-224-2453
50,000,000 SHARES OF COMMON STOCK
25,000,000 Shares of common stock being sold at $0.08 per share pursuant to the Primary Direct Offering
25,000,000 Shares of common stock being offered at $0.08 per share by the Selling Stockholders
Sale Total Depending on Percentage of Direct Public Offering Securities Sold | ||||||||||||||||||||
Per Share | 100% | 75% | 50% | 25% | ||||||||||||||||
Public Offering Price | $ | 0.08 | $ | 2,000,000 | $ | 1,500,000 | $ | 1,000,000 | $ | 500,000 | ||||||||||
Underwriting Discounts and Commissions | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
Proceeds to Eco Innovation Group, Inc. | $ | 0.08 | $ | 2,000,000 | $ | 1,500,000 | $ | 1,000,000 | $ | 500,000 |
This preliminary Prospectus (the “Prospectus”) relates to the registration of fifty million (50,000,000) shares of common stock in Eco Innovation Group, Inc., a Nevada corporation (referred to herein as the “Company,” “ECOX,” “we,” “our,” “us,” or other similar pronouns). The Company is registering twenty-five million (25,000,000) shares of common stock at $0.08 per share in a direct public offering (“Primary Direct Offering”). In addition, the Company is registering twenty-five million (25,000,000) shares of common stock currently held by our “Selling Stockholders,” or individually, “Selling Stockholder.” The Selling Stockholders will sell the shares of common stock at the fixed price of $0.08 per share until such time, if ever, that the common stock is quoted on the OTC Bulletin Board, the OTCQX, OCTQB or listed on a securities exchange. See “Plan of Distribution” beginning on page 22 of this Prospectus for more information.
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The Company will be registering all common stock under the Exchange Act in connection with this Offering. Discounts, concessions, commissions and similar selling expenses attributable to the sale of common stock covered by this Prospectus will be borne by the selling stockholders. We will pay all expenses (other than discounts, concessions, commissions and similar selling expenses) relating to the registration of the common stock with the Securities and Exchange Commission.
Our shares of common stock subject to the Primary Direct Offering and Selling Stockholders are referred to herein collectively as our “Shares.” We estimate our total offering registration costs to register the Shares to be approximately $519.20 and our legal, auditor and related fees will be approximately $5,500.00 equaling a total expense to the Company of $6,019.20 relating to the registration.
There is no minimum number of Shares that must be sold by us for the offering to proceed. The Company will retain any proceeds from the Direct Offering, while the Selling Stockholders will retain the proceeds from their common share sales.
Our common stock is currently quoted on the OTC Markets Pink under the symbol “ECOX”. On September 16, 2020, the closing price for our common stock as reported was $0.08 per share. This price will fluctuate based on the demand for our common stock.
INVESTING IN OUR SECURITIES INVOLVES RISKS. YOU SHOULD REVIEW CAREFULLY THE RISKS AND UNCERTAINTIES DESCRIBED UNDER THE HEADING “RISK FACTORS” CONTAINED ON PAGE 12. YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY BEFORE YOU MAKE YOUR INVESTMENT DECISION.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this amended Prospectus is September 18, 2020
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TABLE OF CONTENTS
PROSPECTUS SUMMARY | 6 |
SUMMARY FINANCIAL INFORMATION | 10 |
SUMMARY OF THIS OFFERING | 11 |
RISK FACTORS | 12 |
USE OF PROCEEDS | 22 |
THE OFFERING | 23 |
DILUTION | 20 |
SELLING STOCKHOLDERS | 24 |
PLAN OF DISTRIBUTION | 25 |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS | 28 |
DESCRIPTION OF SECURITIES | 28 |
INTERESTS OF EXPERTS | 29 |
DESCRIPTION OF BUSINESS | 30 |
DESCRIPTION OF PROPERTY | 30 |
LEGAL PROCEEDINGS | 34 |
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS | 34 |
MANAGEMENT'S DISCUSSION AND ANALYSIS | 31 |
DIRECTORS AND EXECUTIVE OFFICERS | 37 |
EXECUTIVE AND DIRECTOR COMPENSATION | 40 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 43 |
INTERIM FINANCIAL STATEMENTS | 56 |
SUBSEQUENT EVENTS | 68 |
WHERE YOU CAN FIND MORE INFORMATION | 69 |
You should rely only on the information contained or incorporated by reference to this Prospectus in deciding whether to purchase our Shares. We have not authorized anyone to provide you with information different from that contained in this Prospectus. Under no circumstances should the delivery to you of this Prospectus or any sale made pursuant to this Prospectus create any implication that the information contained in this Prospectus is correct as of any time after the date of this Prospectus. Our business, financial condition, operating results and prospects may have changed since that date. To the extent that any facts or events arising after the date of this Prospectus, individually or in the aggregate, represent a fundamental change in the information presented in this Prospectus, this Prospectus will be updated to the extent required by law.
Eco Innovation Group, Inc., ECOX, the ECOX logo, and other trademarks or service marks of Eco Innovation Group, Inc. appearing in this Prospectus are the property of Eco Innovation Group, Inc. This Prospectus also includes trademarks, tradenames and service marks that are the property of other organizations. Solely for convenience, trademarks and tradenames referred to in this Prospectus may appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights to these trademarks and tradenames.
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References to “Management” in this Prospectus mean the senior officers of the Company. See “Directors and Executive Officers.” Any statements in this Prospectus made by or on behalf of Management are made in such persons’ capacities as officers of the Company and not in their personal capacities.
Prospective purchasers should rely only on the information contained in this Prospectus. We have not authorized any other person to provide prospective purchasers with additional or different information. If anyone provides prospective purchasers with additional or different or inconsistent information, including information or statements in media articles about us, prospective purchasers should not rely on it. Prospective purchasers should assume that the information appearing in this Prospectus is accurate only as at its date, regardless of its time of delivery or of any distribution of the Direct Public Offering Shares. Our business, financial conditions, results of operations and prospects may have changed since that date.
We present our Financial Statements (as defined below) in United States dollars. Unless otherwise indicated, all references to dollar amounts in this Prospectus are to United States dollars. Reference to “United States” or “U.S.” are references to the United States of America.
CAUTIONARY NOTE TO INVESTORS
Investment in our Company and in our common shares involves risks. We refer you to our Risk Factors and other sections of this Prospectus relative to outlining such risks.
PROSPECTUS SUMMARY
This summary highlights selected information that is presented in greater detail elsewhere in this Prospectus. This summary does not contain all the information you should consider before investing in our common stock. You should read this entire Prospectus carefully, including the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our financial statements and the related notes included elsewhere in this Prospectus, before making an investment decision. Unless the context otherwise requires, the terms “Eco Innovation Group,” “the Company,” “we,” “us,” and “our” in this Prospectus refer to Eco Innovation Group, Inc.
OUR COMPANY
Business Strategy
Eco Innovation Group, Inc. is a socially responsible and sustainability-focused technology incubator devoted to the commercialization of select intellectual property that, given the right business platform, has the potential to achieve high-value commercial success. Our value creation strategy is a strategic approach to environmental sustainability: we seek innovative socially responsible products and technologies with the potential to create globally important paradigm shifts in energy efficiency and environmental sustainability. Consistent with our strategy, we seek to source and evaluate environmentally sustainable and socially responsible technologies that have compelling market potential.
Market Opportunity
We believe our strategic approach to environmental sustainability and socially responsible technology development offers an attractive value proposition. Environmental sustainability and social responsibility are at the core of a rapidly growing target market recognized for its growth prospects, driven by consumer preference, competitive imperative, regulatory impacts, investor mandates and capital markets. Consumers, both individual and institutional, are core to the change.
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According to a report published by Deloitte in February 2020, environmental, social, and governance (ESG) investing is rapidly growing in major global economies and capital markets. As reported by Deloitte, ESG-mandated assets in the United States could grow almost three times as fast as non-ESG-mandated assets to comprise half of all professionally managed investments by 2025, and an estimated 200 new funds in the United States with an ESG investment mandate are expected to launch over the next three years, more than doubling the activity from the previous three years. Also, the Governance and Accountability Institute suggested that 86% of S&P 500 companies published sustainability reports in 2018 – up from 20% in 2011. Studies conducted by NYU Stern and Bank of America reported that consumers are also increasingly looking to align themselves with sustainable companies that serve a greater social purpose.
In our approach to the Company’s market opportunity, we not only look for great people with great technology, as part of our 9-step “Evaluation to Market” discipline, we also look to choose scalable technology opportunities and to maximize profit margins.
Business Model
Eco Innovation Group is focusing our socially responsible and sustainability-focused technology incubator on an energy efficiency-focused business model. We seek to partner with innovators, inventors and technology holders developing products with socially responsible benefits in the areas of energy efficiency, carbon emissions reduction, environmentally sustainable housing, green foods, and clean water. Our core business model is to provide a technology incubator platform by applying capital and management expertise to accelerate the introduction of exceptional technologies to the marketplace. We focus specifically on developing sustainable and socially responsible technologies for the U.S. and international markets. In pursuit of this mission, we seek to create sustainability tech startups with strong commercialization support, international and local connections, and access to investment.
While focusing on socially responsible and sustainability-focused technology, our business model will benefit from the diversification provided by working with multiple inventors and technology companies. Sustainable technology breakthroughs offer the opportunity for substantial growth, while our outsourcing contract manufacturing relationships offer predictable and scalable revenue opportunities. On August 25, 2020, the Company signed a Master Outsourcing Contract Manufacturing Agreement with Eco-Gen Energy, Inc. (“Eco-Gen”), pursuant to which the Company will manufacture and source products for Eco-Gen. The Master Outsourcing Contract Manufacturing Agreement with Eco-Gen is a related party transaction insofar as our CEO and controlling Stockholder, Julia Otey-Raudes, is a director of Eco-Gen.
Specifically, the Company has contracted to provide material purchase and management services, supply base management services, final product and component production services, delivery services, inventory management services, and related financial services pursuant to the Master Outsourcing Contract Manufacturing Agreement with Eco-Gen. Under this agreement, the Company will bill cost of goods and services through to Eco-Gen with a 15% margin. Our agreement with Eco-Gen is for approximately $6 million and is anticipated to produce $25.5 million in revenue over the next 12 months.
Our Technology Agreements
Power Booster™: On June 16, 2020, the Company signed an Exclusive Global Licensing Agreement with the Bellagio IP Trust for the ECOX Power Booster™ technology, giving the Company the exclusive right to manufacture and sell Power Booster™ products. The Power Booster™ technology utilizes proprietary technologies incorporating electrical magnetism and high-speed switching technology to boost energy output from residential and commercial power systems. The Power Booster™ is based on advanced electronics that allow an electrical system within a home or business to be supplied with 880 watts of electricity and output useful electrical power of 2,200 watts while increasing the Power Factor (PF) and Total Harmonic Distortion (THD). In many installations, when installed properly, substantial energy savings can be achieved via use of the Power Booster™ system. The Company and the patent holder have tested the system, achieving up to a 60% saving in energy consumption, depending on multiple factors, including intended usage, quality of existing power source and overall system configuration. Actual energy savings will vary depending on overall application and other factors. The Company plans to manufacture products using the Power Booster™ technology in the United States, however, the current 2020 Covid 19-impacted business climate has impeded significant progress by the Company on this initiative since the signing date of the Exclusive Global Licensing Agreement.
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Additionally, Management is in the process of negotiating other similar green technology licensing arrangements with other technology innovators, both entities and individuals. As of the time of this filing, these other potential elements of the Company’s business model remain under negotiation and in developmental stages. Please see Description of Business of this Prospectus, Page 30, for additional details of the Company’s planned business and of the status of these arrangements as of the date of filing of this Prospectus.
Corporate Information
The Company’s shares are quoted on the OTC Markets Pink Sheet tier, under the symbol ECOX. Our executive offices are located at 16525 Sherman Way, Suite C-1, Van Nuys, CA 91406, and our telephone number is (747) 224-2453.
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.
We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the prior June 30, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” will have the meaning associated with it in the JOBS Act.
Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements, and, if their revenues are less than $100 million, not providing an independent registered public accounting firm attestation on internal control over financial reporting. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our ordinary shares held by non-affiliates exceeds $250 million as of the end of the second fiscal quarter of that year or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our ordinary shares held by non-affiliates exceeds $700 million as of the end of the second fiscal quarter of that year.
Corporate History
The Company was originally incorporated on March 5, 2001, as Dig-It Underground, Inc., a Nevada corporation, and was engaged in the business of underground cable contracting. On September 29, 2008, the Company entered into a share exchange agreement with Haydin Group Enterprises (“Haydin”), a sole proprietorship, and concurrently resolved to wind down its cable installation business. Via a share exchange agreement, the Company acquired an interest in Haydin’s salon equipment, office equipment, lease assignments for salon locations, reception office equipment, salon stations, and remodeled salon facilities.
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On September 1, 2011, the Company entered into a share exchange agreement with Get Down Art, LLC, a Nevada limited liability company. On August 30, 2012, the Company acquired Haydin as a wholly-owned subsidiary of the Company through a share exchange agreement. On January 5, 2016, the Company acquired Expressions Property Limited, LP, a Texas limited partnership and Expressions Chiropractic and Rehab Center, PA in a share exchange agreement. These acquisitions allowed the Company to enter into the natural healing and chiropractic business in Cedar Hill and North Richland Hills, Texas. Effective June 30, 2018, the Company resolved and agreed to spin out Haydin Group Enterprises, Expressions Property Limited, LP and Expressions Chiropractic and Rehab Center, PA as private entities and thereby unwinding the share exchange agreements entered into on August 30, 2012 and January 5, 2016, respectively. From 2018 until early 2020, the Company was operated as an innovation incubator platform with an initial focus on affordable fire, hurricane, and earthquake resilient steel framing systems.
On February 28, 2020, our CEO, Julia Otey-Raudes, took over management and control of the Company and began implementing the Company’s new business model, changing the Company’s operations to its current business plan as of the date of her control acquisition. Upon the change of control, Ms. Otey-Raudes transferred all assets and intellectual property related to the Company’s previous business and discontinued operations out of the Company to the former CEO, John English. Since that time, with the new business model established by Ms. Otey-Raudes, the Company has organized its environmentally sustainable technology and energy efficiency-oriented incubator business model by pursuing licensing agreements with the owners of promising socially responsible technologies.
The Company will be registering all Shares under the Exchange Act in connection with this Offering.
For more information about current business operations and our corporate history, please see the section of this Prospectus entitled “Description of Business” beginning on page 30.
Eco Innovation Group brings together Inventors, Innovators and Creators with the business and finance expertise needed to make the world a better place for our future generations.
In the past, solar power technology was considered high tech and innovative. It is now a standard technology making our air cleaner and reducing emissions causing climate change.
We seek the brightest minds and most innovative environmentally sustainable technologies to create products with high potential for commercial success, to become the future generation of clean, green socially responsible tech.
Founded by Inventors and Business Professionals, Eco Innovation Group works to bring the most promising and innovative products and services to the marketplace, to make people's lives richer and the world a better, cleaner place for future generations.
At Eco Innovation Group, we are focused on the development of commercially successful technology, and always directed by our mission to help people and the earth we all call Home. We take our Social Responsibility Contract seriously in all our endeavors.
It is not what we do, it is who we are.
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SUMMARY FINANCIAL INFORMATION
The following tables summarize our financial data for the periods presented and should be read together with the sections of this Prospectus entitled “Risk Factors,” “Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as our financial statements and related notes appearing elsewhere in this Prospectus. We derived the summary financial information for the periods ended December 31, 2019 and December 31, 2018 from our audited financial statements and related notes appearing elsewhere in this Prospectus. The audited historical results are not necessarily indicative of the results we expect in the future.
The Company’s financial statements for the period ended June 30, 2020 appearing elsewhere in this Prospectus are not audited. The unaudited historical results are not necessarily indicative of the results we expect in the future.
The Company sustained continued operating losses during the years ended December 31, 2019 and 2018. The Company’s continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations, in which it has not been successful, and/or obtaining additional financing from its Stockholders or other sources, as may be required.
The Company’s financial statements have been prepared assuming that the Company will continue as a going concern; however, the above condition raises substantial doubt about the Company’s ability to do so. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.
Audited Balance Sheet
Summary Data
For Years Ending December 31, 2019 and December 31, 2018
2019 | 2018 | |||||||
Cash | $ | 246 | 22,153 | |||||
Total Current Assets | 246 | 22,153 | ||||||
TOTAL ASSETS | 8,246 | 428,086 | ||||||
Total Liabilities | 104,232 | 25,128 | ||||||
Stockholders’ Equity (Deficit) | (95,986 | ) | 402,958 | |||||
Total Liabilities and Total Deficit | 8,246 | 428,086 |
Audited Statement of Operations
Summary Data
For Years Ending December 31, 2019 and December 31, 2018
2019 | 2018 | |||||||
Revenues | $ | — | — | |||||
Total Operating Expenses | 201,968 | 655,907 | ||||||
Operating Loss | (525,384 | ) | (764,224 | ) | ||||
Net Gain on Discontinued Operations | 35,494 | |||||||
Net Loss | (525,384 | ) | (728,728 | ) | ||||
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SUMMARY OF THIS OFFERING
Securities being registered by the Selling Stockholders pursuant to the Secondary Offering: | 25,000,000 shares of common stock | |
Secondary Offering price: | $0.08 per share | |
Secondary Offering period: | From the date of this Prospectus until February 28, 2021 | |
Newly issued common stock being registered pursuant to the Direct Public Offering: | 25,000,000 shares of common stock | |
Primary Offering (Direct Public Offering) price: | $0.08 per share | |
Primary Offering (Direct Public Offering) period: | From the date of this Prospectus until February 28, 2021 | |
Number of Shares Outstanding After the Offering: | 160,930,680 shares of common stock | |
Market for the common stock: | Our shares of common stock are currently quoted on the OTC Markets Pink under the symbol “ECOX”. | |
Use of proceeds: | We will receive approximately $2,000,000 in gross proceeds if we sell all of the Shares in the Direct Public Offering. We will receive estimated net proceeds of approximately $1,889,506.76 after incurring an estimated $6,019.20 in expenses related to the Direct Public Offering, if we sell all of those Shares. We will receive none of the proceeds from the sale of Shares by the Selling Stockholders. Proceeds from the Direct Public Offering will be used for general working capital, purchases of capital equipment, enhancement of our marketing programs, and for other general corporate purposes, as set forth below. See “Use of Proceeds” beginning on page 22 for a more detailed explanation of how the proceeds from the Direct Public Offering will be used. | |
Risk Factors: | See “Risk Factors” beginning on Page 12 and the other information in this Prospectus for a discussion of the factors you should consider before deciding to invest in shares of our common stock. | |
Subscriptions: | Subscriptions are to be made payable to: | |
Eco Innovation Group, Inc. 16525 Sherman Way, Suite C-1 Van Nuys, CA 91406 (747)-224-2453 Attention: Julia Otey-Raudes |
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RISK FACTORS
Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this Prospectus, including our financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our shares of common stock. The occurrence of any of the events or developments described below could harm our business, financial condition, operating results, and growth prospects. In such an event, the market price of our shares of common stock could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.
There could be unidentified risks involved with an investment in our securities.
The foregoing risk factors are not a complete list or explanation of the risks involved with an investment in the securities. Additional risks will likely be experienced that are not presently foreseen by the Company. Prospective investors must not construe the information provided herein as constituting investment, legal, tax or other professional advice. Before making any decision to invest in our securities, you should read this entire Prospectus and consult with your own investment, legal, tax and other professional advisors. An investment in our securities is suitable only for investors who can assume the financial risks of an investment in the Company for an indefinite period of time and who can afford to lose their entire investment. The Company makes no representations or warranties of any kind with respect to the likelihood of the success or the business of the Company, the value of our securities, any financial returns that may be generated or any tax benefits or consequences that may result from an investment in the Company.
General risk relating to COVID-19 pandemic
The novel coronavirus (COVID-19) pandemic may have an unexpected effect on our business, financial condition and results of operations.
In March 2020, the World Health Organization declared COVID-19 a global pandemic, and governmental authorities around the world have implemented measures to reduce the spread of COVID-19. These measures have adversely affected workforces, customers, supply chains, consumer sentiment, economies, and financial markets, and, along with decreased consumer spending, have led to an economic downturn across many global economies.
The COVID-19 pandemic has rapidly escalated in the United States, creating significant uncertainty and economic disruption, and leading to record levels of unemployment nationally. Numerous state and local jurisdictions have imposed, and others in the future may impose, shelter-in-place orders, quarantines, shut-downs of non-essential businesses, and similar government orders and restrictions on their residents to control the spread of COVID-19. Such orders or restrictions have resulted in temporary facility closures, work stoppages, slowdowns and travel restrictions, among other effects, thereby adversely impacting our operations. In addition, we expect to be impacted by a downturn in the United States economy, which could have an adverse impact on discretionary consumer spending and may have a significant impact on our business operations and/or our ability to generate revenues and profits.
In response to the COVID-19 disruptions, we have implemented a number of measures designed to protect the health and safety of our staff and contractors. These measures include restrictions on non-essential business travel, the institution of work-from-home policies wherever feasible and the implementation of strategies for workplace safety at our facilities that remain open. We are following the guidance from public health officials and government agencies, including implementation of enhanced cleaning measures, social distancing guidelines and wearing of masks.
The extent to which COVID-19 ultimately impacts our business, financial condition and results of operations will depend on future developments, which are highly uncertain and unpredictable, including new information which may emerge concerning the severity and duration of the COVID-19 outbreak and the effectiveness of actions taken to contain the COVID-19 outbreak or treat its impact, among others. Additionally, while the extent to which COVID-19 ultimately impacts our operations will depend on a number of factors, many of which will be outside of our control. The COVID-19 outbreak is evolving and new information emerges daily; accordingly, the ultimate consequences of the COVID-19 outbreak cannot be predicted with certainty.
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In addition to the COVID-19 disruptions possibility adversely impacting our business and financial results, they may also have the effect of heightening many of the other risks described in these Risk Factors, including risks relating to changes due to our limited operating history; our ability to generate sufficient revenue, to generate positive cash flow; our relationships with third parties, and many other factors. We will endeavor to minimize these impacts, but there can be no assurance relative to the potential impacts that may be incurred.
Generally, while we believe the coronavirus may have a negative impact on our future financial results, the impact is difficult to assess at this time. Our newly implemented business plan has not yet generated revenue as of the date of this filing, and future results are speculative. As an early-stage company with a limited operating history, the effects of the coronavirus on our business plan are impossible to predict. Although we believe that responsive actions related to COVID-19 may adversely affect our future business, financial condition, liquidity, and cash flow, we are unable to predict the extent of any such impact as circumstances rapidly evolve.
Risks Related to Our Business and Industry
Our limited operating history makes evaluating our business and future prospects difficult and may increase the risk of your investment.
You must consider the risks and difficulties we face as an early-stage company with a limited operating history. If we do not successfully address these risks, our business, prospects, operating results and financial condition will be materially and adversely harmed. We are in the beginning stages of introducing new technologies to the marketplace and we have a very limited operating history on which investors can base an evaluation of our business, operating results, and prospects. It is difficult to predict our future revenues and appropriately budget for our expenses, and we have limited insight into trends that may emerge and affect our business.
We anticipate we will experience losses for the foreseeable future
We have reported losses and we expect these losses to continue as we seek to introduce our new technologies to the marketplace.
We may experience significant delays in the design, manufacture, launch, and financing of our products, which may increase the risk of your investment.
Any delay in the design, manufacture, marketing or sales of our products could materially damage our brand, business, prospects, financial condition and operating results, and thus the value of your investment.
We face significant barriers in our attempt to introduce our products to the marketplace, and if we cannot successfully overcome those barriers our business will be negatively impacted.
The market for our products has traditionally been controlled by a limited number of large corporations. These large corporations could hold significant power relative to the installation of new technologies on the electric power grid or relative to the installation of new technologies connected to the power grid. These corporations could seek to block our access to power grid connections, resulting in difficulties for our company to gain installations and revenues and profits. Our heat exchanger technologies are also new and as a result there could be market entry delays due to numerous competitive factors.
We face significant market competition.
Our market sector is extremely competitive. Our competitors include numerous larger, diversified companies that have more financial, marketing and other resources, distribution networks and greater name recognition than us. Our ability to be successful will depend on many factors, some of which may be outside of our direct control.
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We are often dependent on our suppliers, a significant number of which are single or limited source suppliers, and the inability of these suppliers to continue to deliver, or their refusal to deliver, necessary components of our system and/or the system of our customers at prices and volumes acceptable to us would have a material adverse effect on our business, prospects and operating results.
Our supply chain exposes us to multiple potential sources of delivery failure or component shortages. For example, earthquakes, floods or other natural disasters could negatively impact our supply chain. We are currently evaluating, qualifying and selecting our suppliers for future production and we intend to establish in the future dual suppliers for several key components of our products, although we expect that a number of components will be single-sourced. We have in the past experienced source disruptions in our supply chains, which have caused delays in our production process and we may experience additional delays in the future with respect to our current products and other products we produce in the future.
Changes in business conditions, wars, governmental changes and other factors beyond our control or which we do not presently anticipate, could also affect our suppliers’ ability to deliver components to us on a timely basis. Furthermore, if we experience significant increased demand, or need to replace our existing suppliers, there can be no assurance that additional supplies of component parts will be available when required on terms that are favorable to us, at all, or that any supplier would allocate sufficient supplies to us in order to meet our requirements or fill our orders in a timely manner. The loss of any single or limited source supplier or the disruption in the supply of components from these suppliers could lead to delays in vehicle deliveries to our customers, which could hurt our relationships with our customers and also materially adversely affect our business, prospects and operating results.
Increases in costs, disruption of supply or shortage of major components of our systems supplied by our vendors or to raw materials, could harm our business.
We may experience increases in the cost or a sustained interruption in the supply or shortage of components, raw materials and/or finished goods from our suppliers. Any such an increase or supply interruption could materially negatively impact our business, prospects, financial condition and operating results.
Product sales lead times may be significant and could negatively affect our business.
Decision timeframes and sales cycles within our industry are often long with significant analysis being required before purchasing decisions are completed. These long decisions and sales cycles may negatively affect our ability to generate revenues.
We are subject to substantial regulation and industry-standard guidelines related to the manufacturing of our products and relative safety requirements for our products
The industry in which we operate is highly regulated and there are considerable regulations regarding the manufacturing, labeling, marketing, and safety of our products. While we take great care to comply with regulatory compliance, our inability could affect our ability to manufacture and market our products, thus affecting our ability to generate profits for the Company.
We are dependent on licensing agreements for several of our products.
While we believe our contracts, agreements and relationships with the entities from which we license various technologies are sound. There can be no assurance these license agreements will continue as envisioned. While we take great care to maintain good relationships with technology licensors, disagreements or attempts to cancel our contractual rights could negatively affect our business and our ability to generate revenues and/or profits.
Our future growth may be dependent upon consumers’ willingness to adopt new technologies relative to energy conservation, alternative electric generation, electrical storage technologies and alternatives to traditional heating and cooling technologies.
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Our growth is highly dependent upon the adoption by consumers, governments, electric utility companies and private enterprises of alternative technologies. If the market for our alternative technologies does not develop as we expect or develops more slowly than we expect, our business, prospects, financial condition and operating results will be harmed. The market for our products is relatively new, rapidly evolving, characterized by rapidly changing technologies, price competition, additional competitors, evolving government regulation and industry standards, alternative energy generation and storage announcements and changing consumer demands and behaviors. There can be no assurance our new technologies will be accepted.
Other factors that may influence the adoption of our technologies include:
· | public perception of alternative forms of electricity generation, storage, and alternative heating and cooling technologies, especially relating to the adoption of these new technologies. While it is thought that the public’s perception of our technologies is positive, these can be no assurance these perceptions could change in the future. |
· | advancement of alternative technologies. The marketplace in which we operate is experiencing considerable innovation. There can be no assurance that our competitors will not create alternative technologies that could place our products at a disadvantage in the market. Such technological advancements could negatively affect our business operations and our ability to produce profits. |
· | reductions in the environmental impact of traditional fossil fuel electric generation; |
· | the environmental consciousness of consumers; |
· | volatility in the cost of oil, natural gas and other fuels. A significant long term decrease in the cost of alternatives could negatively affect our business operations and our ability to produce profits. |
· | consumers’ perceptions of the dependency of the United States on oil from unstable or hostile countries; |
· | government regulations and economic incentives promoting fuel efficiency and alternate forms of energy; |
· | the availability of tax and other governmental incentives relative to electricity generation, storage or consumption; |
· | perceptions about the technologies and the actual cost of both fossil fuels and alternative energy sources. |
Our future growth may be dependent upon consumers’ willingness to adopt new technologies relative to pathogen detection, sterilization of interiors of buildings.
Our growth may be highly dependent upon the adoption by consumers, governments, and business of pathogen and illness mitigation technologies. If the market for new technologies that the Company may market in these areas does not develop as we expect or develops more slowly than we expect, our business, prospects, financial condition and operating results will be harmed. The market for our potential new pathogen mitigation related products is relatively new, rapidly evolving, characterized by rapidly changing technologies, price competition, additional competitors, evolving government regulation and industry standards, and changing consumer demands and behaviors. There can be no assurance our new technologies will be accepted by the market.
If our suppliers or technology license partners fail to use ethical business practices and comply with applicable laws and regulations, our brand image could be harmed due to negative publicity.
Our core values, which include developing the highest quality products while operating with integrity, are an important component of our brand image, which makes our reputation particularly sensitive to allegations of unethical business practices. We do not control our independent suppliers or their business practices. Accordingly, we cannot guarantee their compliance with ethical business practices, such as environmental responsibility, fair wage practices, and compliance with child labor laws, among others. A lack of demonstrated compliance could lead us to seek alternative suppliers, which could increase our costs and result in delayed delivery of our products, product shortages or other disruptions of our operations.
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Violation of labor or other laws by our suppliers or the divergence of an independent supplier’s labor or other practices from those generally accepted as ethical in the United States or other markets in which we do business could also attract negative publicity for us and our brand. This could diminish the value of our brand image and reduce demand for our performance electric vehicles if, as a result of such violation, we were to attract negative publicity. If we, or other manufacturers in our industry, encounter similar problems in the future, it could harm our brand image, business, prospects, financial condition and operating results.
We manufacture critical components used within electrical and cooling/heating systems and, as a result, could be subject to litigation.
Product liability claims are common in the electrical product and heating and cooling systems industry. Even though we have not been subject to such claims in the past, we could be the defendant in a lawsuit including those related to product liability claims alleging defects in the design, manufacture or operation of our green technology products. Any litigation, regardless of its merit or eventual outcome, could result in significant legal costs and high damage awards or settlements. Although we currently maintain product liability insurance, the coverage is subject to deductibles and limitations, and may not be adequate to cover future claims. Additionally, we may be unable to maintain our existing product liability insurance in the future at satisfactory rates or at adequate amounts.
If product liability lawsuits are brought against us, our business may be harmed, and we may be required to pay damages.
Our business exposes us to potential product liability claims that are inherent in the market for electrical systems and components and relative to the green technology and energy efficiency markets in which we do business. We could become the subject of product liability lawsuits alleging that component failures, malfunctions, manufacturing flaws, design defects or inadequate disclosure of product-related risks or product-related information resulted in an unsafe condition or injury to patients.
Regardless of the merit or eventual outcome, product liability claims may result in:
· | decreased demand for our products |
· | injury to our reputation; |
· | significant litigation costs; |
· | substantial monetary awards to or costly settlements with customers; |
· | product recalls; |
· | material defense costs; |
· | loss of revenues; |
· | the inability to commercialize new products or product candidates; and diversion of management attention from pursuing our business strategy. |
Our business may suffer if we are unable to attract or retain talented personnel.
Our success will depend in large measure on the abilities, expertise, judgment, discretion, integrity and good faith of Management, as well as other personnel. We have a small management team, and the loss of a key individual or our inability to attract suitably qualified replacements or additional staff could adversely affect our business. Our success also depends on the ability of Management to form and maintain key commercial relationships within the marketplace. No assurance can be given that key personnel will continue their association or employment with us or that replacement personnel with comparable skills will be found. If we are unable to attract and retain key personnel and additional employees, our business may be adversely affected. We do not maintain key-man life insurance on any of our executive employees.
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The lack of available and cost-effective directors and officer’s insurance coverage in our industry may cause us to be unable to attract and retain qualified executives, and this may result in our inability to further develop our business.
Our business depends on attracting independent directors, executives and senior management to advance our business plans. We currently do not have directors and officer’s insurance to protect our sole director or any new directors that may be appointed in the future and the Company against the possible third-party claims. This is due to the significant lack of availability of such policies at reasonably competitive prices. As a result, the Company and our executive directors and officers are susceptible to liability claims arising by third parties, and as a result, we may be unable to attract and retain qualified independent directors and executive management causing the development of our business plans to be impeded as a result.
If we fail to maintain satisfactory relationships with future customers, our business may be harmed.
Due to competition or other factors, we could lose business from our future customers, either partially or completely. The future loss of one or more of our significant customers or a substantial future reduction of orders by any of our significant customers could harm our business and results of operations. Moreover, our customers may vary their order levels significantly from period to period and customers may not continue to place orders with us in the future at the same levels as in prior periods. In the event that in the future we lose any of our larger customers, we may not be able to replace that revenue source. This could harm our financial results.
Management of growth will be necessary for us to be competitive.
Successful expansion of our business will depend on our ability to effectively attract and manage staff, strategic business relationships, and Stockholders. Specifically, we will need to hire skilled management and technical personnel as well as manage partnerships to navigate shifts in the general economic environment. Expansion has the potential to place significant strains on financial, management, and operational resources, yet failure to expand will inhibit our profitability goals.
We depend on key personnel and have a difficult time recruiting needed personnel.
Our future success depends on the efforts of a small number of key personnel. In addition, due to our financial resources and specialized expertise required, we may not be able to recruit the individuals needed for our business needs. There can be no assurance that we will be successful in attracting and retaining the personnel we require to operate and be innovative.
Our strategies to grow our business may not be successful.
We are pursuing a variety of strategies to grow our business, including, as outlined below. There can be no assurances we will be able to successfully grow our business operations.
· | collaborations, licensing arrangements, joint ventures, strategic alliances or partnerships; |
· | pursuing sales in international markets; and |
· | acquisitions of complementary products or technologies. |
As a growing company, we have to develop reliable accounting resources and internal controls. Failure to achieve and maintain effective controls could prevent us from producing reliable financial reports.
Effective internal controls and accounting resources are necessary for us to provide reliable financial reports. We are in the process of implementing a system of internal controls. Failure to achieve and maintain an effective internal accounting and control environment could cause us to face regulatory action and also cause investors to lose confidence in our reported financial information, either of which could have an adverse effect on our business and financial results.
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RISKS OF GOVERNMENT ACTION AND REGULATORY UNCERTAINTY
Our products and operations are subject to extensive government regulation and industry association group compliance requirements. Our failure to comply with applicable requirements could harm our business.
Our products are subject to extensive regulation in the United States and elsewhere. Within the United States, there are numerous government agencies that regulate electrical components and the connection and operation of these components and systems. These may include but are not limited to Consumer Product Safety Commission (CPSC), Department of Energy (DOE), Environmental Protection Agency (EPA), Federal Communication Commission (FCC), Federal Trade Commission (FTC), Occupational Safety and Health Administration (OSHA). Many states within the United States have similar bodies and the state Public Utilities Commission. Additionally, there are numerous industry associated standards created, such as those enacted by the National Electrical Manufacturers Association and other industry bodies, to which we could be required to adhere.
The government imposed and industry regulations to which we are subject are complex and have tended to become more stringent over time. Regulatory changes could result in restrictions on our ability to carry on or expand our operations, higher than anticipated costs or lower than anticipated sales. Lack of adherence to these many requirements could result in prohibitions on sales of our products; and in the most serious cases, criminal penalties.
Our future sales could be affected by availability of government subsidies for wind, solar or other alternative energy production sources.
There are numerous U.S. federal, U.S. state, and non-U.S. government programs to subsidize wind, solar and other alternative forms of energy production, storage, transmission, usage, etc. The availability of such programs or curtailment of such programs could have negative impacts on our business and our ability to generate revenues and profits. There can be no assurances any current program or future program will be ongoing. Any change to subsidy framework could negatively affect our operations.
RISKS RELATED TO OUR COMMON STOCK AND THIS OFFERING
We may need additional capital that will dilute the ownership interest of investors.
We may require additional capital to fund our future business operations. If we raise additional funds through the issuance of equity, equity-related or convertible debt securities, these securities may have rights, preferences or privileges senior to those of the rights of holders of our shares of common stock, who may experience dilution of their ownership interest of our shares of common stock. We cannot predict whether additional financing will be available to us on favorable terms when required, or at all. During recent financial periods, we have experienced negative cash flow from operations and expect to experience significant negative cash flow from operations in the future. The issuance of additional shares of common stock by our board of directors may have the effect of further diluting the proportionate equity interest and voting power of holders of our shares of common stock.
We will be controlled by existing Stockholders after this offering.
Upon the completion of this Offering, our officers currently will continue to oversee the Company’s operations. As a result, these individuals will likely have a significant influence on the affairs and management of the Company, as well as on all matters requiring stockholder approval, including electing and removing members of its board of directors, causing the Company to engage in transactions with affiliated entities, causing or restricting the sale or merger of the Company and changing the Company’s dividend policy. Such concentration of ownership and control could have the effect of delaying, deferring or preventing a change in control of the Company, even when such a change of control would be in the best interests of the Company’s other stockholders
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This offering does not require a minimum number of Shares to be sold. As such, we may not receive sufficient funds from this offering. Thus, investors could be at risk.
This offering does not require a minimum number of Shares to be sold. We may raise less than the amount required to execute our stated minimum business plan, which calls for funding of $2 million. If we are unable to raise sufficient funding to achieve the $2 million in gross proceeds need to implement this minimum business plan, we may not be able to execute our business plan as currently designed. Investors could be at risk if we are unable to raise this minimum business plan amount because funds will need to be reserved for fees and expenses related to this offering and for administrative expense. As is outlined elsewhere in this filing, we estimate our total offering registration costs to be approximately $519.20 and our legal, auditor and related fees will be $5,500.00 equaling a total expense to the Company of $6,019.20 relating to the registration. A significant portion of these fees will be incurred by the Company regardless of the amount of gross proceeds raised via this Offering.
Our shares of common stock qualify as a penny stock. As such, we are subject to the risks associated with "penny stocks". Regulations relating to "penny stocks" limit the ability of our Stockholders to sell their shares and, as a result, our Stockholders may have to hold their shares indefinitely.
Our shares of common stock are deemed to be "penny stock" as that term is defined in Regulation Section 240.3a51-1 of the Securities and Exchange Commission. Penny stocks are stocks: (a) with a price of less than $5.00 per share; (b) that are not traded on a "recognized" national exchange; (c) whose prices are not quoted on the NASDAQ automated quotation system (NASDAQ - where listed stocks must still meet the requirement (a) above); or (d) in issuers with net tangible assets of less than $2,000,000 (if the issuer has been in continuous operation for at least three years) or $5,000,000 (if in continuous operation for less than three years), or with average revenues of less than $6,000,000 for the last three years.
Section 15(g) of the Securities Exchange Act of 1934 and Regulation 240.15g(c)2 of the Securities and Exchange Commission require broker dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor's account. Potential investors in our shares of common stock are urged to obtain and read such disclosure carefully before purchasing any shares of common stock that are deemed to be "penny stock".
Moreover, Regulation 240.15g-9 of the SEC requires broker dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker dealer to: (a) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (b) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (c) provide the investor with a written statement setting forth the basis on which the broker dealer made the determination in (ii) above; and (d) receive a signed and dated copy of such statement from the investor confirming that it accurately reflects the investor's financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult for investors in our shares of common stock to resell their shares to third parties or to otherwise dispose of them. Holders should be aware that, according to SEC Release No. 34-29093, dated April 17, 1991, the market for penny stocks suffers from patterns of fraud and abuse.
Our Management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, Management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities.
FINRA sales practice requirements may also limit a stockholder’s ability to buy and sell our stock and to deposit certificates in paper form or to clear shares for trading under Safe Harbor exemptions and regulations for unregistered shares.
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In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority (known as “FINRA”) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our shares of common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares. FINRA requirements make it more difficult for our investors to deposit paper stock certificates or to clear our shares of common stock that are transferred electronically to brokerage accounts. There can be no assurances that our investors will be able to clear our shares for eventual resale.
Costs and expenses of being a reporting company under the 1934 Securities Exchange Act may be burdensome and prevent us from achieving profitability.
As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, and parts of the Sarbanes-Oxley Act. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting and financial compliance costs, make some activities more difficult, time-consuming and costly, and place a significant strain on our personnel, systems, and resources.
RISKS RELATED TO THE OFFERING
Since our shares of common stock are thinly traded their value is more susceptible to extreme rises or declines in price, and you may not be able to sell your shares at or above the price paid.
Since our shares of common stock are thinly traded its trading price is likely to be highly volatile and could be subject to extreme fluctuations in response to various factors, many of which are beyond our control, including (but not necessarily limited to): the trading volume of our shares, the number of analysts, market-makers and brokers following our shares of common stock, new products or services introduced or announced by us or our competitors, actual or anticipated variations in quarterly operating results, conditions or trends in our business industries, additions or departures of key personnel, sales of our shares of common stock and general stock market price and volume fluctuations of publicly traded, and particularly microcap, companies.
Investors may have difficulty reselling shares of our common stock, either at or above the price they paid for our stock, or even at fair market value. The stock markets often experience significant price and volume changes that are not related to the operating performance of individual companies, and because our shares of common stock are thinly traded it is particularly susceptible to such changes. These broad market changes may cause the market price of our shares of common stock to decline regardless of how well we perform as a company. In addition, there is a history of securities class action litigation following periods of volatility in the market price of a company’s securities. Although there is no such litigation currently pending or threatened against us, such a suit against us could result in the incursion of substantial legal fees, potential liabilities and the diversion of management’s attention and resources from our business. Moreover, and as noted below, our shares are currently quoted on the OTC Markets Pink and, further, are subject to the penny stock regulations. Price fluctuations in such shares are particularly volatile and subject to potential manipulation by market-makers, short-sellers and option traders.
Our chief executive officer and our sole director will continue to have substantial control over us after this offering, which could limit your ability to influence the outcome of key transactions, including a change of control.
After this offering, our executive officer and principal stockholders will beneficially own or control, directly or indirectly, a significant majority of our shares. For example, our CEO and sole director holds 30,000,000 shares of preferred stock that allows for up to 96.8% control of any Stockholder vote. As a result, this stockholder could have significant influence over the outcome of matters submitted to our stockholders for approval, including the election or removal of directors, any amendments to our certificate of incorporation or bylaws and any merger, consolidation or sale of all or substantially all of our assets, and over the management and affairs of our company. This concentration of ownership may also have the effect of delaying or preventing a change in control of our company or discouraging others from making tender offers for our shares and might affect the market price of our common stock.
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Our chief executive officer, Julia Otey-Raudes, is considered the underwriter of this offering and is a Selling Stockholder.
The Shares will be sold in a “Direct Public Offering” through director and Chief Executive Officer Julia Otey-Raudes, who may be considered an underwriter as that term is defined in Section 2(a) (11).
Because we do not expect to pay any dividends on our common stock for the foreseeable future, investors in this offering may never receive a return on their investment.
We do not anticipate that we will pay any cash dividends to holders of our common stock in the foreseeable future. Instead, we plan to retain any earnings to maintain and expand our existing operations. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any return on their investment.
There could be unidentified risks involved with an investment in our securities.
The foregoing risk factors are not a complete list or explanation of the risks involved with an investment in the securities. Additional risks will likely be experienced that are not presently foreseen by the Company. Prospective investors must not construe this and the information provided herein as constituting investment, legal, tax or other professional advice. Before making any decision to invest in our securities, you should read this entire Prospectus and consult with your own investment, legal, tax and other professional advisors. An investment in our securities is suitable only for investors who can assume the financial risks of an investment in the Company for an indefinite period of time and who can afford to lose their entire investment. The Company makes no representations or warranties of any kind with respect to the likelihood of the success or the business of the Company, the value of our securities, any financial returns that may be generated or any tax benefits or consequences that may result from an investment in the Company.
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
This Prospectus may contain certain “forward-looking” statements as such term is defined by the SEC in its rules, regulations and releases, which represent the registrant’s expectations or beliefs, including but not limited to, statements concerning the registrant’s operations, economic performance, financial condition, growth and acquisition strategies, investments, and future operational plans. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intent,” “could,” “estimate,” “might,” “plan,” “predict” or “continue” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, certain of which are beyond the registrant’s control, and actual results may differ materially depending on a variety of important factors, including uncertainty related to acquisitions, governmental regulation, managing and maintaining growth, the operations of the Company and its subsidiary, volatility of stock price, federal enforcement and state enforcement, and any other factors discussed in this and other registrant filings with the Securities and Exchange Commission.
The risks and uncertainties and other factors include but are not limited to those set forth under the “Risk Factors”, beginning on page 12 of this Prospectus. Given these risks and uncertainties, readers are cautioned not to place undue reliance on our forward-looking statements. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Except as otherwise required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements or the risk factors described in this Prospectus or in the documents we incorporate by reference, whether as a result of new information, future events, changed circumstances or any other reason after the date of this Prospectus.
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Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” and matters described in Prospectus generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this Prospectus will in fact occur. We caution you not to place undue reliance on these forward-looking statements. In addition to the information expressly required to be included in this Prospectus, we will provide such further material information, if any, as may be necessary to make the required statements, in light of the circumstances under which they are made, not misleading.
Except as required by federal securities laws, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
USE OF PROCEEDS
The Selling Stockholders are selling all of the Shares of our common stock covered by this Prospectus for their own accounts. Accordingly, we will not receive any proceeds from the resale of our common stock by the Selling Stockholders.
However, we will receive proceeds from any sale of the Shares of common stock under the Direct Public Offering. We estimate that the gross proceeds to us from the sale of our Common Stock in the Direct Public Offering will be approximately $2,000,000, based on an assumed initial public offering price of $0.08 per share. Each $0.01 increase (decrease) in the assumed offering price of $0.08 per share would increase (decrease) the proceeds to us from this offering by approximately $250,000 assuming the number of Shares offered by us, as set forth on the cover page of this Prospectus, remains the same and estimated offering expenses payable by us.
We estimate our total offering registration costs to be approximately $519.20, which will be paid from corporate funds. We estimate our legal and auditor related fees will be $5,500.00, which, together with registration fees, will reduce the funds received by the Company via the Direct Public Offering by $6,019.20. Similarly, each increase (decrease) of one million shares in the number of Shares of common stock offered by us would increase (decrease) the net proceeds that we receive from this offering by approximately $100,000 assuming the offering price remains the same.
Proceeds from the Direct Public Offering will be used for general working capital, purchases of capital equipment, enhancement of our marketing programs, and for other general corporate purposes, as set forth below.
Percentage of Offering Shares Sold | 100 | % | 75 | % | 50 | % | 25 | % | ||||||||
Accounting, Audit, Transfer Agent, Edgar Agent, and Other Fees associated with being a publicly traded company | $ | 250,000 | $ | 187,500 | $ | 125,000 | $ | 62,500 | ||||||||
Equipment | $ | 437,600 | $ | 328,200 | $ | 218,800 | $ | 109,400 | ||||||||
Hiring Personnel | $ | 312,400 | $ | 234,300 | $ | 156,200 | $ | 78,100 | ||||||||
Product Supplies | $ | 125,000 | $ | 93,750 | $ | 62,500 | $ | 31,250 | ||||||||
Inventories | $ | 250,000 | $ | 187,500 | $ | 125,000 | $ | 62,500 | ||||||||
Working Capital | $ | 625,000 | $ | 468,750 | $ | 312,500 | $ | 156,250 | ||||||||
Total Use of Proceeds | $ | 2,000,000 | $ | 1,500,000 | $ | 1,000,000 | $ | 500,000 |
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The Company anticipates the estimated $2,000,000 gross proceeds from a fully subscribed Direct Public Offering will enable it to execute its maximum business plan, expand marketing efforts, fund inventory build-up and to fund the working capital account.
In the event that Direct Public Offering is not fully subscribed, the Company may be required to seek additional financing as the Company needs a minimum of approximately $625,000 in gross proceeds to implement its minimum business plan and support its operations over the next twelve months. There can be no assurance additional financing will be available when needed, and, if available, that it will be on terms acceptable to the Company.
DETERMINATION OF OFFERING PRICE
Our shares of common stock are currently quoted on the OTC Markets Pink under the symbol “ECOX”. The proposed offering price of the Shares is $0.08 and has been estimated solely for the purpose of computing the amount of the registration fee in accordance with Rule 457(c) of the Securities Act of 1933, on the basis of the average of the transaction prices of the shares of common stock of the Company as reported on the OTC Markets Group, Inc., for the last two years.
THE OFFERING
This Prospectus relates to the following. The Company will be registering all Shares of Common Stock under the Exchange Act in connection with this Offering.
1) | The offer and sale from time to time of up to 25,000,000 of the Company’s common shares by the Selling Stockholders. The 25,000,000 common shares being offered by the Selling Stockholders will represent approximately 18.4% of the 135,930,680 shares of common stock issued and outstanding as of the date of this Prospectus. |
2) | The offer and sale from time to time of up to 25,000,000 of the Company’s common shares by the Company. We intend to offer and sell these shares through our officers and directors who will receive no compensation or fees with the offers and/or sales. The 25,000,000 shares being offered by the Company will represent approximately 18.4% of our 135,930,680 shares of common stock issued and outstanding as of the date of this Prospectus. |
3) | The total of 50,000,000 shares included in this Offering, including the 25,000,000 shares being offered by the Selling Stockholders and the 25,000,000 common shares offered by the Company in the Direct Public Offering will represent approximately 36.8% of our shares of common stock issued and outstanding as of the date of this Prospectus. |
4) | Common shares Outstanding Prior to the Offering: 135,930,680 |
5) | Common shares to be Outstanding After to the Offering: 160,930,680 |
DIVIDEND POLICY
We have not declared or paid dividends on our common stock since our formation, and we do not anticipate paying dividends in the foreseeable future. Declaration or payment of dividends, if any, in the future, will be at the discretion of our Board of Directors and will depend on our then current financial condition, results of operations, capital requirements and other factors deemed relevant by the Board of Directors. There are no contractual restrictions on our ability to declare or pay dividends. Consequently, you will only realize an economic gain on your investment in our common stock if the price appreciates. You should not purchase our common stock expecting to receive cash dividends. Since we do not anticipate paying dividends, and if we are not successful in establishing an orderly public trading market for our shares, then you may not have any manner to liquidate or receive any payment on your investment. Therefore, our failure to pay dividends may cause you to not see any return on your investment even if we are successful in our business operations. In addition, because we may not pay dividends in the foreseeable future, we may have trouble raising additional funds which could affect our ability to expand our business operations.
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MARKET FOR OUR COMMON STOCK
Market Information
Our common stock is quoted on the OTC Markets Pink under the symbol ECOX.
We have issued 135,930,680 common shares as of September 16, 2020. Of these common shares, 125,308,800 are restricted as of date of this filing.
We have a total of 30,000,000 preferred shares outstanding.
There are zero warrants outstanding.
There are zero options outstanding.
Holders
We had 59 Stockholders of record of our common stock as of September 16, 2020.
Securities Authorized for Issuance under Equity Compensation Plans
We have no authorized shares under any equity compensation plans.
Dividends
Please see “Dividend Policy” beginning on page 23 above.
DILUTION/ACCRETION TO STOCKHOLDERS
Just prior to the Offering there are 135,930,680 common shares outstanding. The 25,000,000 of the Company’s common shares being offered by the Company in the Direct Public Offering represent a dilution event to common Stockholders that will result in a new total for outstanding and issued common shares of 160,930,680.
The following table illustrates dilution to investors on an approximate dollar per share basis, depending upon whether we sell 100%, 75%, 50%, or 25% of the Shares being offered in the Direct Public Offering:
Percentage of Offering Shares Sold | 100 | % | 75 | % | 50 | % | 25 | % | ||||||||
Offering price per share | $ | 0.08 | $ | 0.08 | $ | 0.08 | $ | 0.08 | ||||||||
Net tangible book value per share before offering | (0.001 | ) | (0.001 | ) | (0.001 | ) | (0.001 | ) | ||||||||
Increase per share attributable to investors | 0.01 | 0.007 | 0.004 | 0.001 | ||||||||||||
Pro forma net tangible book value per share after offering | 0.01 | 0.009 | 0.005 | 0.001 |
SELLING STOCKHOLDERS
The following table sets forth the shares beneficially owned, as of September 16, 2020, by the Selling Stockholders prior to the Offering contemplated by this Prospectus, the number of Shares each Selling Stockholder is offering by this Prospectus and the number of shares which each would own beneficially if all such offered Shares are sold.
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Beneficial ownership is determined in accordance with Securities and Exchange Commission rules. Under these rules, a person is deemed to be a beneficial owner of a security if that person or his/her spouse has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power to vote or direct the voting of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under the Securities and Exchange Commission rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary beneficial interest. Except as noted below, each person has sole voting and investment power.
In total, 25,000,000 Shares are being registered by the Selling Stockholders. The Company will not receive any proceeds from the sale of the Selling Stockholder Shares.
The percentages below are calculated based on 135,930,680 shares of our common stock issued and outstanding as of September 16, 2020 and exclusive of the additional 25,000,000 shares of common stock being issued as part of the Direct Public Offering.
Number of Outstanding Shares Beneficially Owned | Number of | Number of | Percentage of | |
Name of Beneficial Owner | Shares offered | Shares Held | Total Issued | |
by | After the Offering | and | ||
Selling Stockholder | Outstanding after the | |||
Offering | ||||
Pinnacle Consulting Services, Inc. (1) | 12,000,000 | 11,500,000 | 500,000 | 0.27% |
Julia Otey-Raudes (2) | 35,000,000 | 4,000,000 | 31,000,000 | 22.81% |
Bellagio Trust | 25,000,000 | 4,000,000 | 21,000,000 | 15.45% |
Robert Salna | 5,000,000 | 5,000,000 | 0 | 0% |
Tabular Investments, LLC (3) | 600,000 | 500,000 | 100,000 | 0.07% |
Notes on Selling Stockholders:
(1) | Consists of 12,000,000 shares of outstanding common stock held by Pinnacle Consulting Services, Inc. Robert L. Hymers, III is the controlling stockholder of Pinnacle Consulting Services, Inc. and the beneficial owner of the 12,000,000 shares held in its name. |
(2) | Ms. Otey-Raudes is our chief executive officer and chief financial officer. She also serves as the chairperson of the Board of Directors. |
(3) | Consists of 600,000 shares of common stock held by Tabular Investments, LLC. Tad Mailander is the beneficial owner of the 600,000 shares held in the name of Tabular Investments, LLC. |
PLAN OF DISTRIBUTION
The Direct Public Offering Shares will be sold in a “Direct Public Offering” through our sole director and Chief Executive Officer, Julia Otey-Raudes, who may be considered an underwriter as that term is defined in Section 2(a) (11). Ms. Otey will not receive any commission in connection with the sale of Shares, although we may reimburse her for direct expenses incurred by her in connection with the offer and sale of the Shares.
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The Company is registering 25,000,000 Shares of common stock at $0.08 per share in a Direct Public Offering. In addition, the Company is registering 25,000,000 Shares of common stock currently held by our “Selling Stockholders,” or individually, “Selling Stockholder.” The Selling Stockholders will sell the Shares of Common Stock at the fixed price of $0.08 per share until such time, if ever, that the common stock is quoted on the OTC Markets OTCQX market, OCTQB market or listed on a securities exchange.
Our Shares of common stock subject to the Primary Direct Offering and Selling Stockholders are referred to herein collectively as our “Shares.” We estimate our total offering registration costs to be approximately $519.20 and our legal, auditor and related fees will be $5,500 equaling at total expense to the Company of $6,019.20 relating to the registration.
There is no minimum number of Shares that must be sold by us for the offering to proceed. The Company will retain any proceeds from the Direct Public Offering, while the Selling Stockholders will retain the proceeds from their resale of Shares.
Ms. Otey will be relying on, and complying with, Rule 3a4-1(a)(4)(ii) of the Exchange Act as a “safe harbor” from registration as a broker-dealer in connection with the offer and sale of the Shares. In order to rely on such “safe harbor” provisions provided by Rule 3a4-1(a) (4) (ii), she must be in compliance with all of the following:
· | she must not be subject to a statutory disqualification; | ||
· | she must not be compensated in connection with such selling participation by payment of commissions or other payments based either directly or indirectly on such transactions; | ||
· | she must not be an associated person of a broker-dealer; | ||
· | she must primarily perform, or is intended primarily to perform at the end of the Offering, substantial duties for or on behalf of the Company otherwise than in connection with transactions in securities; and | ||
· | she must perform substantial duties for the Company after the close of the Offering not connected with transactions in securities, and not have been an associated person of a broker or dealer for the preceding 12 months, and not participate in selling an offering of securities for any issuer more than once every 12 months. |
Ms. Otey-Raudes will comply with the guidelines enumerated in Rule 3a4-1(a) (4) (ii). Neither Ms. Otey nor any of her affiliates, will be purchasing Shares in the Offering.
You may purchase Shares by completing and manually executing a simple subscription agreement and delivering it with your payment in full for all Shares you wish to purchase to our offices. A copy of the form of that subscription agreement is attached as an exhibit to our registration statement of which this Prospectus is a part. Your subscription shall not become effective until accepted by us and approved by our counsel. Our subscription process is as follows:
· | This Prospectus, with subscription agreement, is delivered by the Company to each offeree; | |
· | the subscription is completed by the offeree, and submitted with check back to the Company where the subscription and a copy of the check is faxed to counsel for review; | |
· | each subscription is reviewed by counsel for the Company to confirm the subscribing party completed the form, and to confirm the state of acceptance; | |
· | once approved by counsel, the subscription is accepted by Ms. Otey-Raudes, and the funds shall be deposited within four (4) days of acceptance; | |
· | subscriptions not accepted are returned with all funds sent with the subscription within three business days of the Company’s receipt of the subscription, without interest or deduction of any kind. |
The Selling Stockholders and any of their pledgees, donees, transferees, assignees and successors-in-interest may, from time to time, sell any or all of their Shares of our Common Stock on any stock exchange, market or trading facility on which the Shares are traded or quoted or in private transactions. The Selling Stockholders may use any one or more of the following methods when selling Shares:
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· | ordinary brokerage transactions and transactions in which the broker-dealer solicits Investors; | |
· | block trades in which the broker-dealer will attempt to sell the Shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; | |
· | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; | |
· | an exchange distribution in accordance with the rules of the applicable exchange; | |
· | privately negotiated transactions; | |
· | to cover short sales made after the date that this Prospectus is declared effective by the Commission; | |
· | broker-dealers may agree with the Selling Stockholders to sell a specified number of such Shares at a stipulated price per share; | |
· | a combination of any such methods of sale; and | |
· | any other method permitted pursuant to applicable law. |
Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Stockholders, or, if any broker-dealer acts as an agent for the purchaser of Shares, from the purchaser, in amounts to be negotiated. The Selling Stockholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved.
The Selling Stockholders may from time to time pledge or grant a security interest in some or all of the Shares owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell Shares of our Common Stock from time to time under this Prospectus, or under an amendment to this Prospectus under Rule 462(c) or other applicable provision of the Securities Act of 1933 amending the list of Selling Stockholders to include the pledgee, transferee or other successors in interest as Selling Stockholders under this Prospectus.
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in “penny stocks.” Penny stocks generally are equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver to the prospective purchaser a standardized risk disclosure document prepared by the Securities and Exchange Commission that provides information about penny stocks and the nature and level of risks in the penny stock market. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from such rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the prospective purchaser and receive the purchaser’s written agreement to the transaction. Furthermore, subsequent to a transaction in a penny stock, the broker-dealer will be required to deliver monthly or quarterly statements containing specific information about the penny stock. It is anticipated that our common stock will be traded on the OTC Markets Pink at a price of less than $5.00. In this event, broker-dealers would be required to comply with the disclosure requirements mandated by the penny stock rules. These disclosure requirements will likely make it more difficult for investors in this Offering to sell their Common Stock in the secondary market.
Upon our being notified in writing by a Selling Stockholder that any material arrangement has been entered into with a broker-dealer for the sale of our Common Stock through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, a post-effective amendment to this Prospectus will be filed, if required, pursuant to Rule 462(c) under the Securities Act, disclosing (i) the name of each such Selling Stockholder and of the participating broker-dealer(s), (ii) the number of Shares involved, (iii) the price at which such Shares of our common stock were sold, (iv)the commissions paid or discounts or concessions allowed to such broker-dealer(s). In addition, upon our being notified in writing by a Selling Stockholder that a donee or pledgee intends to sell more than 500 shares of our Common Stock, a post-effective amendment to this Prospectus will be filed if then required in accordance with applicable securities law.
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Prior to any involvement of any broker-dealer in the Offering, such broker-dealer must seek and obtain clearance of the underwriting compensation and arrangements from FINRA.
The Selling Stockholders also may transfer the Shares of our Common Stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this Prospectus.
The Selling Stockholders and any broker-dealers or agents that are involved in selling the Shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the Shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Discounts, concessions, commissions and similar selling expenses, if any, that can be attributed to the sale of Shares will be paid by the Selling Stockholder and/or the purchasers. Each Selling Stockholder has represented and warranted to us that it acquired the securities subject to this Prospectus in the ordinary course of such Selling Stockholders’ business and, at the time of its purchase of such securities, such Selling Stockholder had no agreements or understandings, directly or indirectly, with any person to distribute any such securities.
We have advised each Selling Stockholder that it may not use Shares registered in this Prospectus to cover short sales of our Common Stock made prior to the date on which this Prospectus shall have been declared effective by the Commission. If a Selling Stockholder uses this Prospectus for any sale of our common stock, it will be subject to the prospectus delivery requirements of the Securities Act. The Selling Stockholders will be responsible to comply with the applicable provisions of the Securities Act and Exchange Act, and the rules and regulations there under promulgated, including, without limitation, Regulation M, as applicable to such Selling Stockholders in connection with resales of their respective Shares under this Prospectus.
We are required to pay all fees and expenses incident to the registration of the Shares. We have agreed to indemnify the Selling Stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.
All sales by the Company to the public through direct the Direct Public Offering will be issued directly from the Company to the subscriber as a proceeds-generating offering for the Company.
Certain Relationships and Related Transactions
There are no material contracts, agreements or other transactions between any Company Entity or any of their respective affiliates, on the one part, and the Contributor or any person holding a direct interest in the Contributor or any of their respective affiliates, on the other part.
DESCRIPTION OF SECURITIES
General
Preferred Shares in the Company
Our Board of Directors has created two classes of shares of preferred stock, designated “Series A Convertible Preferred Stock” and “Series B Convertible Preferred Stock”. The Company has designated 49,000,000 shares of Series A Convertible Preferred Stock, of which 30,000,000 shares have been issued and are outstanding. Holders of Series A Convertible Preferred Stock hold rights to vote on all matter requiring a Stockholder vote at 100 common shares vote equivalent for each share of Series A Convertible Preferred Stock held. As of the date of this filing, our CEO, CFO, board chair and sole director, Julia Otey-Raudes, is the sole holder of the 30,000,000 Series A Convertible Preferred Stock outstanding. As of September 18, 2020 , the filing date of this Prospectus, there are no shares of Series B Convertible Preferred Stock issued or outstanding.
Holders of Preferred Series A have no liquidation rights that are superior to common Stockholders.
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Common shares in the Company
Our Board of Directors has created a class of shares of common stock designated as the shares of common stock. Each share of common stock entitles its holder to one vote on all matters on which common Stockholders are entitled to vote, including the election of directors. The Company’s shares of common stock do not have cumulative voting rights. The Company is authorized to issue 500,000,000 shares of $0.001 par value shares of common stock. As of September 18, 2020 , the date of this filing, the Company had 135,930,680 shares of common stock outstanding.
On July 1, 2018, by resolution of the Company’s Board of Directors and by written consent of a majority of the Company’s Stockholders eligible to vote, there was approved and implemented by the Company: (i) a reverse split of its common stock in a ratio of 1:1,000; (ii) a change of the Company’s name to Eco Innovation Group, Inc.; and (iii), the change of the Company’s trading symbol to ECOX. The reverse split of the Company’s common stock was effective August 29, 2018. On Dec 31, 2019, we filed an increase in authorized shares with the Secretary of State of Nevada. The total authorized common shares are increased to 500,000,000 with a par value $0.001.
Subject to the preferences that may be applicable to any outstanding classes of stock, the holders of the shares of common stock will share equally on a per share basis any dividends, when and if declared by the Board of Directors out of funds legally available for that purpose. If the Company is liquidated, dissolved, or wound up, the holders of the shares of common stock will be entitled to a ratable share of any distribution to Stockholders, after satisfaction of all the Company’s liabilities and of the prior rights of any outstanding classes of the Company’s stock. Shares of common stock carry no preemptive or other subscription rights to purchase shares of the Company’s stock and are not convertible, redeemable, or assessable.
Options to Purchase common shares in the Company
There are no outstanding options.
Outstanding Warrants
There are no outstanding warrants.
Transfer Agent
Our transfer agent is Nevada Agency & Transfer Company, with offices at:
50 W. Liberty Street
Suite 800
Reno, NV 89501
INTERESTS OF EXPERTS
The financial statements of the Company as of and for the years ended December 31, 2019 and 2018 appearing in this Prospectus and the Registration Statement of which it is a part, have been audited by an independent registered public accounting firm, Boyle CPA, LLC, as set forth in their report dated September 16, 2020 (which contains an explanatory paragraph regarding the Company’s ability to continue as a going concern), appearing elsewhere herein. The base Prospectus, dated September 16, 2020, is hereby amended to include the current report of Boyle CPA, LLC, which was not included in the original Prospectus.
INFORMATION WITH RESPECT TO THE REGISTRANT
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ TOGETHER WITH THE FINANCIAL STATEMENTS OF ECO INNOVATION GROUP, INC. AND THE NOTES TO FINANCIAL STATEMENTS INCLUDED IN THIS REGISTRATION STATEMENT. THIS DISCUSSION SUMMARIZES THE SIGNIFICANT FACTORS AFFECTING OUR OPERATING RESULTS, FINANCIAL CONDITIONS AND LIQUIDITY AND CASH-FLOW SINCE INCEPTION.
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DESCRIPTION OF BUSINESS
Business Strategy
Eco Innovation Group, Inc. is a socially responsible and sustainability-focused technology incubator devoted to the commercialization of select intellectual property that, given the right business platform, has the potential to achieve high-value commercial success. Our value creation strategy is a strategic approach to environmental sustainability: we seek innovative socially responsible products and technologies with the potential to create globally important paradigm shifts in energy efficiency and environmental sustainability. Consistent with our strategy, we seek to source and evaluate environmentally sustainable and socially responsible technologies that have compelling market potential.
Market Opportunity
We believe our strategic approach to environmental sustainability and socially responsible technology development offers an attractive value proposition. Environmental sustainability and social responsibility are at the core of a rapidly growing target market recognized for its growth prospects, driven by consumer preference, competitive imperative, regulatory impacts, investor mandates and capital markets. Consumers, both individual and institutional, are core to the change.
According to a report published by Deloitte in February 2020, environmental, social, and governance (ESG) investing is rapidly growing in major global economies and capital markets. As reported by Deloitte, ESG-mandated assets in the United States could grow almost three times as fast as non-ESG-mandated assets to comprise half of all professionally managed investments by 2025, and an estimated 200 new funds in the United States with an ESG investment mandate are expected to launch over the next three years, more than doubling the activity from the previous three years. Also, the Governance and Accountability Institute suggested that 86% of S&P 500 companies published sustainability reports in 2018 – up from 20% in 2011. Studies conducted by NYU Stern and Bank of America reported that consumers are also increasingly looking to align themselves with sustainable companies that serve a greater social purpose.
In our approach to the Company’s market opportunity, we not only look for great people with great technology, as part of our 9-step “Evaluation to Market” discipline, we also look to choose scalable technology opportunities and to maximize profit margins.
Business Model
Eco Innovation Group is focusing our socially responsible and sustainability-focused technology incubator on an energy efficiency-focused business model. We seek to partner with innovators, inventors and technology holders developing products with socially responsible benefits in the areas of energy efficiency, carbon emissions reduction, environmentally sustainable housing, green foods, and clean water. Our core business model is to provide a technology incubator platform by applying capital and management expertise to accelerate the introduction of exceptional technologies to the marketplace. We focus specifically on developing sustainable and socially responsible technologies for the U.S. and international markets. In pursuit of this mission, we seek to create sustainability tech startups with strong commercialization support, international and local connections, and access to investment.
While focusing on socially responsible and sustainability-focused technology, our business model will benefit from the diversification provided by working with multiple inventors and technology companies. Sustainable technology breakthroughs offer the opportunity for substantial growth, while our outsourcing contract manufacturing relationships offer predictable and scalable revenue opportunities. On August 25, 2020, the Company signed a Master Outsourcing Contract Manufacturing Agreement with Eco-Gen Energy, Inc. (“Eco-Gen”), pursuant to which the Company will manufacture and source products for Eco-Gen. The Master Outsourcing Contract Manufacturing Agreement with Eco-Gen is a related party transaction insofar as our CEO and controlling Stockholder, Julia Otey-Raudes, is a director of Eco-Gen.
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Specifically, the Company has contracted to provide material purchase and management services, supply base management services, final product and component production services, delivery services, inventory management services, and related financial services pursuant to the Master Outsourcing Contract Manufacturing Agreement with Eco-Gen. Under this agreement, the Company will bill cost of goods and services through to Eco-Gen with a 15% margin. Our agreement with Eco-Gen is for approximately $6 million and is anticipated to produce $25.5 million in revenue over the next 12 months.
Our Technology Agreements
Power BoosterTM Licensing Agreement
Power Booster™: On June 16, 2020, the Company signed an Exclusive Global Licensing Agreement with the Bellagio IP Trust for the ECOX Power Booster™ technology, giving the Company the exclusive right to manufacture and sell Power Booster™ products. The Power Booster™ technology utilizes proprietary technologies incorporating electrical magnetism and high-speed switching technology to boost energy output from residential and commercial power systems. The Power Booster™ is based on advanced electronics that allow an electrical system within a home or business to be supplied with 880 watts of electricity and output useful electrical power of 2,200 watts while increasing the Power Factor (PF) and Total Harmonic Distortion (THD). In many installations, when installed properly, substantial energy savings can be achieved via use of the Power Booster™ system. The Company and the patent holder have tested the system, achieving up to a 60% saving in energy consumption, depending on multiple factors, including intended usage, quality of existing power source and overall system configuration. Actual energy savings will vary depending on overall application and other factors. The Company plans to manufacture products using the Power Booster™ technology in the United States, however, the current 2020 Covid 19-impacted business climate has impeded significant progress by the Company on this initiative since the signing date of the Exclusive Global Licensing Agreement.
The Exclusive Global Licensing Agreement with the Bellagio IP Trust (“Bellagio”), attached hereto (the “Bellagio Agreement”), grants rights to the Company to market the Power Booster™ and other products developed by Bellagio. In exchange for the agreement, the Company has issued Bellagio twenty-five million (25,000,000) restricted common shares in the Company and will pay to Bellagio a royalty of 11% of the net manufacturing price of all Power Booster™ products sold.
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The Power Booster™ Control Panel
The core technology behind the Power Booster™ system is based on an innovative use of high-speed switching that has only recently been introduced to the marketplace. The system allows for energy creation in direct proportion to the induction of the magnetic field implemented into the system, thus creating useful electric energy from the magnetic field. The Company plans to administer the marketing of the Power Booster™, system via multiple sales channels, including but not limited to solar power electrical manufacturers, solar power systems integrators and installers, new homebuilders, and power system distribution companies. Additionally, the increased PF and THD mean that in some installations, when the device is properly installed and configured, the user will need less electricity.
With the Bellagio Agreement put into place, the Company is in the initial stages of marketing and distributing the Power Booster™ system and has thus far generated no revenue from the product. Since the signing date of the Exclusive Global Licensing Agreement with Bellagio, the impacts of Covid-19 on the 2020 business climate has impeded significant progress by the Company on this initiative.
Additionally, Management is in the process of negotiating other similar green technology licensing arrangements with other technology innovators, both entities and individuals. As of the time of this filing, these other potential elements of the Company’s business model remain under negotiation and in developmental stages. Please see Description of Business of this Prospectus, Page 30, for additional details of the Company’s planned business and of the status of these arrangements as of the date of filing of this Prospectus.
Corporate Information
The Company’s shares are quoted on the OTC Markets Pink Sheet tier, under the symbol ECOX. Our executive offices are located at 16525 Sherman Way, Suite C-1, Van Nuys, CA 91406, and our telephone number is (747) 224-2453.
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.
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In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.
We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the prior June 30, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” will have the meaning associated with it in the JOBS Act.
Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements, and, if their revenues are less than $100 million, not providing an independent registered public accounting firm attestation on internal control over financial reporting. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our ordinary shares held by non-affiliates exceeds $250 million as of the end of the second fiscal quarter of that year or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our ordinary shares held by non-affiliates exceeds $700 million as of the end of the second fiscal quarter of that year.
Other Product Areas
The Company is active in negotiating additional licensing and joint ventures in the areas of electrical technologies, green energy, energy efficiency, innovative heat exchange technologies designed to reduce heating and cool costs for residential and commercial buildings, pathogen detection and mitigation, and green housing. At this time, these remain unsigned and are in various stages of negotiations.
Corporate History
Eco Innovation Group, Inc., was originally incorporated on March 5, 2001 as Dig-It Underground, Inc., a Nevada corporation that initially operated as an underground cable contractor. On September 29, 2008, the Company entered into a share exchange agreement with Haydin Group Enterprises (“Haydin”), a sole proprietorship, and concurrently resolved to wind down its cable installation business. By virtue of the share exchange agreement, the Company acquired an interest in Haydin’s salon equipment, office equipment, lease assignments for salon locations, reception office equipment, salon stations, and remodeled salon facilities that included upgraded and permitted electrical, plumbing and signage. The Company’s business focused on the operation of a string of high-end beauty salons in the Cedar Hill, Texas area.
On September 1, 2011, the Company entered into a share exchange agreement with Get Down Art, LLC, a Nevada limited liability company. The consummation of the share exchange provided the Company with original art and agreements with artists with licensing agreements with businesses. The Company acquired art inventory, accounts receivable, office leasing and build out. The Company resolved to unwind its previous acquisition of Haydin dated September 29, 2008.
On August 30, 2012, the Company acquired Haydin as a wholly owned subsidiary of the Company through a share exchange agreement wherein the Company issued fifty million shares of its common stock in exchange for all of the legal right title and interest in the assets of Haydin, which owned a chain of high-end beauty salons that focused on skin and hair care and nail care. Haydin also promoted sales of beauty supplies and products and sold to other salons in Texas. The Haydin beauty salons retained highly trained experienced cosmetologists who had a long history with the business. Concurrently, the Company discontinued its business with Get Down Art, LLC and resolved to unwind that acquisition.
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On January 5, 2016, the Company acquired Expressions Property Limited, LP, a Texas limited partnership and Expressions Chiropractic and Rehab Center, PA in a share exchange agreement. This acquisition allowed the Company to enter into the natural healing and chiropractic business in Cedar Hill and North Richland Hills, Texas.
Effective June 30, 2018, the Company resolved and agreed to spin out Haydin Group Enterprises, Expressions Property Limited, LP and Expressions Chiropractic and Rehab Center, PA as private entities and thereby unwinding the share exchange agreements entered into on August 30, 2012 and January 5, 2016, respectively.
The Company was subsequently an innovation incubator platform from 2018 until early 2020 that was devoted to globally important paradigm shifts in technology, sustainable products development, and research, will initially re introduce a more affordable, fire, hurricane and earthquake resilient steel framing system.
On February 28, 2020, our current CEO and controlling Stockholder, Julia Otey-Raudes, took over management and control of the company and transferred all of the IP relating to the Company’s old business model back to John English. In the related change of control transaction, Ms. Otey acquired 30,000,000 shares of super-voting Preferred Series A stock on February 28, 2020, and launched the company into a new direction. The Company is now an innovation incubator platform devoted to globally important paradigm shifts in technology, sustainable and carbon negative products development and practical deployment worldwide. ECOX will initially introduce a revolutionary power booster for homes and offices that, when installed as directed, holds the potential to reduce energy consumption, depending on configuration by up to 60% and other energy saving related technologies.
The Company’s common shares are quoted on the OTC Markets Pink market tier under the symbol ECOX.
DESCRIPTION OF PROPERTY
The Company does not lease or own an office, any real estate or assets as of the year ended December 31, 2019, and as of the date of this filing.
LEGAL PROCEEDINGS
From time to time and in the course of business, we may become involved in various legal proceedings seeking monetary damages and other relief. The amount of the ultimate liability, if any, from such claims cannot be determined.
As of the date of this filing, there were no legal claims currently pending or threatened against us that in the opinion of Management would be likely to have a material adverse effect on our financial position, results of operations or cash flows.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
Shares of the Company’s common stock are quoted under the symbol "ECOX" on the OTC Markets Quotation System Pink market tier.
The OTC Markets Quotation System is quotation service that display real-time quotes, last-sale prices and volume information in over-the-counter equity securities. The market is limited for our stock and any prices quoted may not be a reliable indication of the value of our shares of common stock. The following Table sets forth the high and low bid prices per share of our shares of common stock by OTC Markets for the periods indicated.
For the Period Ending December 31, 2019 | High | Low | ||||||
First Quarter | $ | 0.25 | $ | 0.08 | ||||
Second Quarter | $ | 0.19 | $ | 0.0013 | ||||
Third Quarter | $ | 0.08 | $ | 0.0086 | ||||
Fourth Quarter | $ | 0.125 | $ | 0.03 | ||||
For the Period Ending December 31, 2018 | High | Low | ||||||
First Quarter | $ | 0.5 | $ | 0.3 | ||||
Second Quarter | $ | 0.6 | $ | 0.2 | ||||
Third Quarter | $ | 0.6 | $ | 0.2 | ||||
Fourth Quarter | $ | 0.6 | $ | 0.2 |
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As of September 18, 2020 , the shares traded at $0.08 bid and $0.095 ask price with a total of 72,000 shares traded in the previous 10 days of trading.
Holders of Record
As of September 18, 2020 , the date of filing of this Prospectus and Registration Statement, we have 135,930,680 shares of our common stock issued and outstanding, held by approximately 59 Stockholders of record.
Dividends
We have not paid, nor declared any cash dividends since our inception and do not intend to declare or pay any such dividends in the foreseeable future. Our ability to pay cash dividends is subject to limitations imposed by state law.
MANAGEMENT'S DISCUSSION AND ANALYSIS
This discussion and analysis may include statements regarding our expectations with respect to our future performance, liquidity, and capital resources. Such statements, along with any other non-historical statements in the discussion, are forward-looking. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, factors listed in other documents we file with the Securities and Exchange Commission (the "SEC''). We do not assume an obligation to update any forward-looking statements. Our actual results may differ materially from those contained in or implied by any of the forward-looking statements contained herein.
Overview and Financial Condition
Going Concern
The Company sustained continued operating losses during the years ended December 31, 2019 and 2018. The Company's continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations, in which it has not been successful, and/or obtaining additional financing from its Stockholders or other sources, as may be required.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern; however, the above conditions raise substantial doubt about the Company's ability to do so. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets, or the amounts and classifications of liabilities that may result, should the Company be unable to continue as a going concern.
While priority is on generating cash from operations through the sale of the Company's products and services, Management is also seeking to raise additional working capital through various financing sources, including the sale of the Company's equity and/or debt securities, which may not be available on commercially reasonable terms, if at all. If such financing is not available on satisfactory terms, we may be unable to continue our business as desired and our operating results will be adversely affected. In addition, any financing arrangement may have potentially adverse effects on us and/or our Stockholders. Debt financing (if available and undertaken) will increase expenses, must be repaid regardless of operating results and may involve restrictions limiting our operating flexibility. If we issue equity securities to raise additional funds, the percentage ownership of our existing Stockholders will be reduced and the new equity securities may have rights, preferences or privileges senior to those of the current holders of our shares of common stock.
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Results of Operations
The following table sets forth the results of our operations for the periods ended December 31, 2019 and 2018.
For the years ended December 31 | ||||||||
2019 | 2018 | |||||||
Net Sales | $ | $ | ||||||
Total Expenses | 201,968 | 655,907 | ||||||
Net Loss from Operations | (201,968 | ) | (655,907 | ) | ||||
Other Expenses | 323,416 | 108,317 | ||||||
Net Loss | $ | (525,384 | ) | $ | (764,224 | ) |
Operating Results
Year Ending December 31, 2019 Compared December 31, 2018
Our sales totaled $0 for the twelve months ended December 31, 2019 and $0 for the twelve months ended December 31, 2018. The Company is continuing in its efforts to increase its sales but there is no guarantee that it will be able to do so.
We had $0 costs of goods sold for the twelve months ended December 31, 2019 and $0 for the twelve months ended December 31, 2018.
Selling, general and administrative expenses consist primarily of payroll, professional fees, sales and marketing, research and development and other operating expenses. Selling, general and administrative expenses totaled $201,968 for the twelve months ended December 31, 2019 and $655,907 for the twelve months ended December 31, 2018. The change is primarily due to a reduced level of overall activity at the Company while the business operations were being restructured.
As a result of the foregoing, we recorded a net loss of $525,384 for the twelve months ended December 31, 2019, compared to a net loss of $764,224 for the twelve months ended December 31, 2018. The decrease in the loss is primarily attributed to the reduction in general and administrative expenses.
The following table sets forth the results of our operations for the periods ended June 30, 2020 and June 30, 2019.
For the six month periods ended June 30 | ||||||||
2020 | 2019 | |||||||
Net Sales | $ | $ | ||||||
Total Expenses | 3,087,916 | 17,772 | ||||||
Net Loss from Operations | (3,087,916) | (17,772) | ||||||
Other Expenses | 45,963 | - | ||||||
Net Loss | $ | (3,133,879) | $ | (17,772) |
Six Months Ending June 30, 2020 Compared June 30, 2019
Our sales totaled $0 for the six months ended June 30, 2020 and $0 for the six months ended June 30, 2019. The Company is continuing in its efforts to increase its sales but there is no guarantee that it will be able to do so.
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We had $0 costs of goods sold for the six months ended June 30, 2020 and $0 for the six months ended June 30, 2019.
Selling, general and administrative expenses consist primarily of payroll, professional fees, sales and marketing, research and development and other operating expenses. Selling, general and administrative expenses totaled $47,166 for the six months ended June 30, 2020 and $17,222 for the six months ended June 30, 2019. The change is primarily due to an increased levels of overall activity as the Company began restructuring efforts.
For the six months ended June 30, 2020, we incurred $650,000 in development and manufacturing expenses compared to $0 for the six-month period ended June 30, 2019. The increase in the category was due to implementation of programs to development new products. For the six months ended June 30, 2020, we incurred $260,000 in executive compensation and $2,130,750 in consulting fees compared to $0 for the six-month period ended June 30, 2019. The increase in the category was due to the hiring of senior management and professional consultants focused on restructuring business operations.
As a result of the foregoing, we recorded a net loss of $3,133,879 for the six months ended June 30, 2020, compared to a net loss of $17,772 for the six months ended June 30, 2019. The increase in the loss is primarily attributed to the increased in operating expense categories as the Company began to develop new products and retain professional staff.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names and ages of our current directors and executive officers, the principal offices and positions held by each person, and the date such person became a director or executive officer. Our executive officers are appointed by the Board of Directors. The directors serve one-year terms until their successors are elected. The executive officers serve terms of one year or until their death, resignation or removal by the Board of Directors. Unless described below, there are no family relationships among any of the directors and officers.
The following table presents information with respect to our officers, directors and significant employees as of September 18, 2020.
Name | Age | Position | ||
Julia Otey-Raudes | 41 | Chief Executive Officer, Chief Financial Officer |
Biographical Information Regarding Officers and Directors
Ms. Otey-Raudes is an experienced executive with business experience in a variety of industries. From October of 2010 to the present, she has been and continues to be one of the founders of Eco-Gen Energy, Inc., and served as the corporate secretary and treasurer of Eco-Gen during that period. At Eco-Gen Energy, she was part of the product development team for an innovative energy saving technology, the JouleBox™. She continues to serve as a director on the board of Eco-Gen.
From June 2008 to January 2009, prior to founding and working with Eco-Gen Energy, Ms. Otey-Raudes held positions with the Chilean Government’s Ministry of Labor and Social Welfare, where she was involved in educational outreach programs that taught entrepreneurial skills to women. From February 2009 to August of 2010, she worked as a project manager in the construction industry in Chile, managing large commercial building projects. Previously, from December of 1999 to September 2007, she worked as an executive for Wolfgang Puck’s flagship restaurant, Spago, in Beverly Hills, California, where she gained valuable executive organization and management skills. Ms. Otey-Raudes serves as the Company’s Chief Executive Officer, Chief Financial Officer, Chairperson of the Board of Directors, and is the corporation’s sole director.
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Term of Office
All of our directors are appointed for a one-year term to hold office until the next annual meeting of stockholders and until their successors are elected and qualified, or until their earlier death, retirement, resignation or removal. Executive officers serve at the discretion of the Board of Directors, and are elected or appointed to serve until the next Board of Directors meeting following the annual meeting of stockholders. Our executive officers are appointed by our Board of Directors and hold office until removed by the Board.
Involvement in Certain Legal Proceedings
To the best of our knowledge, during the past five years, none of the following occurred with respect to a present director (or person nominated to become director), executive officer, founder, promoter or control person: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; or (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
Code of Ethics
We have adopted a corporate code of ethics. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code. To the knowledge of the Company, there have been no reported violations of the Code of Ethics.
Whistleblower Procedures Policy
In accordance with the requirements of Section 301 of the Sarbanes-Oxley Act of 2002, the Board of Directors of the Company has adopted a Whistleblower Procedures Policy, stating that all employees of the Company are strongly encouraged to report any evidence of financial irregularities which they may become aware of, including those with respect to internal controls, accounting or auditing matters. Under the Whistleblower Procedures Policy, the management of the Company shall promptly and periodically communicate to all employees with access to accounting, payroll and financial information the means by which they may report any such irregularities. In the event an employee is uncomfortable for any reason reporting irregularities to his or her supervisor or other management of the Company, employees may report directly to any member of the Board of Directors of the Company. The identity of any employee reporting under these procedures will be maintained as confidential at the request of the employee, or may be made on an anonymous basis. Notice must be provided to all of the Company’s employees with access to accounting, payroll and financial information in respect of these procedures.
The Company’s Board of Directors does not have any designated or appointed Committees of the Board.
CORPORATE GOVERNANCE
Director Independence
We are not listed on a major U.S. securities exchange and, therefore, are not subject to the corporate governance requirements of any such exchange, including those related to the independence of directors. Upon our listing on any national securities exchange or any inter-dealer quotation system, we will elect such independent directors as is necessary under the rules of any such securities exchange.
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Board Leadership Structure
We currently have one executive officer who is also a director. Our Board has reviewed the Company’s current Board leadership structure. In light of the Company’s size, nature of the Company’s business, regulatory framework under which the Company operates, stockholder base, the Company’s peer group and other relevant factors, the Company has determined that this structure is currently the most appropriate Board leadership structure for our company. Nevertheless, the Board intends to carefully evaluate from time to time whether our current structure should be modified based on what the Board believes is best for the Company and our stockholders.
Board Role in Risk Oversight
Risk is inherent in every business, and how well a business manages risk can ultimately determine its success. We face a number of risks, including strategic risks, enterprise risks, financial risks, and regulatory risks. While our management is responsible for day to day management of various risks we face, the Board, as a whole, is responsible for evaluating our exposure to risk and to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed. The Board reviews and discusses policies with respect to risk assessment and risk management. The Board also has oversight responsibility with respect to the integrity of the Company’s financial reporting process and systems of internal control regarding finance and accounting, as well as its financial statements.
Audit Committee
The Board does not currently have a standing Audit Committee. The full Board performs the principal functions of the Audit Committee. The full Board monitors our financial reporting process and internal control system and reviews and appraises the audit efforts of our independent accountants.
Compensation Committee
The Board does not currently have a standing Compensation Committee. The full Board establishes our overall compensation policies and reviews recommendations submitted by our management.
Nominating Committee
The Board does not currently have a standing Nominating Committee. We do not maintain a policy for considering nominees. Our Bylaws provides that the number of Directors shall be fixed from time to time by the Board, but in no event shall be less than the minimum required by law. The Board of Directors shall be large enough to maintain our required expertise but not too large to function efficiently. Director nominees are recommended, reviewed and approved by the entire Board. The Board believes that this process is appropriate due to the relatively small number of directors on the Board and the opportunity to benefit from a variety of opinions and perspectives in determining director nominees by involving the full Board.
Compensation Consultants
We have not historically relied upon the advice of compensation consultants in determining Named Executive Officer compensation. Instead, the full Board reviews compensation levels and makes adjustments based on their personal knowledge of competition in the market place, publicly available information and informal surveys of human resource professionals.
Stockholder Communications
Stockholders who wish to communicate with the Board may do so by addressing their correspondence to the Board at Eco Innovation Group, Inc., Attention: Julia Otey-Raudes, 16525 Sherman Way, Suite C-1 Van Nuys, CA 91406. The Board shall review and respond to all correspondence received, as appropriate.
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Director Independence
There are no independent directors at this time.
EXECUTIVE AND DIRECTOR COMPENSATION
Our sole director, Julia Otey-Raudes, is also our chief executive officer and chief financial officer. Effective May 1, 2020, Ms. Otey-Raudes and the Company entered into an executive employment agreement for a term of one year. Under the terms of the agreement, she will serve as the Company’s CEO receiving a base salary of $300,000 per year and will be awarded a starting bonus of ten million (10,000,000) restricted common shares. The shares will vest on a monthly basis over the term of the one-year agreement at a rate of 1/12 per month. The agreement is attached hereto.
Ms. Julia Otey-Raudes receives no compensation for serving as the Chairperson and sole director of the Company. During the Director’s term, the Company reimburses the Director for all reasonable out-of-pocket expenses incurred by the Director in attending any in-person meetings, provided that the Director complies with the generally applicable policies, practices and procedures of the Company for submission of expense reports, receipts or similar documentation of such expenses. Any reimbursements for allocated expenses as compared to out-of-pocket expenses of the Director in excess of $500.00 must be approved in advance by the Company.
Executive Compensation Table
Name and principal position | Year | Salary ($) | Bonus ($) | Stock awards ($) | Option awards ($) | Nonequity incentive plan compensation ($) | Nonqualified deferred compensation earnings ($) | All other compensation ($) | Total ($) | |||||||||||||||||||||||||||
John English | 2018 | $ | 0 | $ | 0 | $ | 2,000(1) | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 2,000 | (1) | ||||||||||||||||||
John English | 2017 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 |
(1) Mr. English received 2,000,000 common shares as stock compensation during 2018. The shares were valued at $2,000.
Directors | Title | Monthly Compensation | |||||
Julia Otey-Raudes(1)(2) | Chief Executive Officer, Chief Financial Officer and Chairman | $ | 0 | (1)(2) | |||
(1) | Ms. Otey-Raudes received no monthly compensation as an executive of the Company during the year ended December 31, 2019. She and the Company have agreed to an Executive Employment Agreement as of May 1, 2020, attached hereto. |
(2) | Ms. Otey-Raudes was granted 10,000,000 shares of common stock as of May 1, 2020 as a starting bonus compensation for her executive roles at the Company. |
Director Compensation Table
Directors | Title | Monthly Compensation | |||||
Julia Otey-Raudes(1)(2) | Chief Executive Officer, Chief Financial Officer and Chairman | $ | 0 | ||||
(1) | Ms. Otey-Raudes receives no monthly compensation as a director of the Company. |
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(2) | Ms. Otey-Raudes was granted 10,000,000 shares of common stock as of May 1, 2020 as compensation for her executive roles at the Company. Ms. Otey-Raudes received no monthly compensation as an executive of the Company during the year ended December 31, 2019. She and the Company have agreed to an Executive Employment Agreement as of May 1, 2020, attached hereto. |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the beneficial ownership of our common stock as of September 18, 2020 , for: (i) each of our executive officers; (ii) each of our directors; (iii) all of our directors and executive officers as a group; and (iv) each person known by us to be the beneficial owner of more than five percent of any class of our voting securities.
The securities "beneficially owned" by an individual are determined in accordance with the definition of "beneficial ownership" set forth in the regulations promulgated under the Exchange Act and, accordingly, may include securities owned by or for, among others, the spouse and/or minor children of an individual and any other relative who resides in the same home as such individual, as well as other securities as to which the individual has or shares voting or investment power or which each person has the right to acquire within 60 days through the exercise of options or otherwise. Beneficial ownership may be disclaimed as to certain of the securities.
The following table is based on the number of shares outstanding, totaling 135,930,680 as of September 18, 2020 . The following table sets forth certain information as of September 18, 2020 by (i) all persons who are known by us to beneficially own more than 5% of our outstanding shares of common stock; and (ii) each director, director nominee, and Named Executive Officer. The footnotes below pertain to total shares, voting rights and conversion shares, and provide other explanations.
Name of Beneficial Owner | Common Shares Owned | Percent of common shares | Preferred Shares Owned | Series A Votes(1)(5) | Voting Shares(5) | Voting Power(5) | ||||||||||||||||||
Julia Otey-Raudes(1)(5) | 35,000,000 | 25.7 | % | 30,000,000 | 3,000,000,000 | 3,035,000,000 | (5) | 96.8 | %(5) | |||||||||||||||
Bellagio IP Trust(2) | 25,000,000 | 18.4 | % | 25,000,000 | 0.8 | % | ||||||||||||||||||
John English | 25,000,000 | 18.4 | % | 25,000,000 | 0.8 | % | ||||||||||||||||||
Donald Steinberg(3) | 25,000,000 | 18.4 | % | 25,000,000 | 0.8 | % | ||||||||||||||||||
Pinnacle Consulting Services Inc.(4) | 12,000,000 | 8.83 | % | 12,000,000 | 0.38 | % |
1) | Ms. Otey-Raudes is our CEO, CFO, board chairperson and sole director. She owns 35,000,000 common shares and 30,000,000 preferred shares, by which she holds voting power on a per-preferred shares basis of 100 common share vote equivalency for each preferred share she holds. |
2) | Bellagio IP Trust is the licensor for the Power Booster™ technology pursuant to a technology licensing agreement executed by and between the Company and Bellagio IP Trust. |
3) | Mr. Steinberg is beneficial owner of a total of 25,000,00 common shares, including 20,000,000 common shares held by Blue Ridge Enterprises and 5,000,000 common shares held by Heritage Funding, LLC. Mr. Steinberg is the controlling party of both Blue Ridge Enterprises and Heritage Funding, LLC. |
4) | Mr. Robert L. Hymers III is the beneficial owner of a total of 12,000,000 common shares, which consist of 12,000,000 shares of outstanding common stock held by Pinnacle Consulting Services, Inc. Robert L. Hymers, III is the controlling stockholder of Pinnacle Consulting Services, Inc. |
5) | Ms. Otey-Raudes, via her ownership of 30,000,000 preferred shares, is entitled to voting power of 100 common share equivalents for each preferred share held. Including all preferred and common shares, she is entitled to 3,035,000,000 votes. There is a possible voting pool of 3,135,930,680 common share equivalent votes, thus Ms. Otey-Raudes controls 96.8% of any vote put forth to Stockholders. |
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Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Each of the beneficial owners listed above has direct ownership, voting power and investment power with respect to the shares of Company preferred stock and common stock.
Item 5. | Interest of Management and Others in Certain Transactions
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No relationship, direct or indirect, that would be required to be described in a registration statement of the Company pursuant to Item 404 of Regulation S-K, exists between or among the Company, on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company, on the other hand, that would require disclosure.
Changes in Control
As of the date of this Prospectus, we are not aware of any arrangement that may result in a change in control of our Company.
LEGAL MATTERS
The validity of the Shares sold by us under this Prospectus, including the Shares to be sold by the Selling Stockholders, will be passed upon for us by Independent Law PLLC, Alan T. Hawkins, Esq., 2106 NW 4th Pl, Gainesville, FL 32603.
EXPERTS
Boyle CPA, LLC, our independent registered public accountant, has audited our financial statements included in this Prospectus and Registration Statement to the extent and for the periods set forth in their audit report. Boyle CPA, LLC has presented its report with respect to our audited financial statements. The base Prospectus, dated September 16, 2020, is hereby amended to include the current report of Boyle CPA, LLC, which was not included in the original Prospectus.
COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our Articles of Incorporation provide that we shall indemnify our directors and officers to the fullest extent permitted by Nevada law and that none of our directors will be personally liable to the Company or its Stockholders for monetary damages for breach of fiduciary duty as a director, except for liability:
· | for any breach of the director’s duty of loyalty to the Company or its Stockholders; |
· | for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of the law; |
· | under Nevada General Corporation Law for the unlawful payment of dividends; or |
· | for any transaction from which the director derives an improper personal benefit. |
These provisions require us to indemnify our directors and officers unless restricted by Nevada law and eliminate our rights and those of our Stockholders to recover monetary damages from a director for breach of his or her fiduciary duty of care as a director except in the situations described above. The limitations summarized above, however, do not affect our ability or that of our Stockholders to seek non-monetary remedies, such as an injunction or rescission, against a director for breach of his or her fiduciary duty.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
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ECO INNOVATION GROUP, INC.
INDEX TO FINANCIAL STATEMENTS
For the Years Ended
December 31, 2019 and December 31, 2018
Page | ||||
Report of Independent Registered Public Accountants | 44 | |||
Balance Sheets as of December 31, 2019 and 2018 | 45 | |||
Statements of Operations for the years ended December 31, 2019 and 2017 | 46 | |||
Statement of Stockholder’s Deficit for years ended December 31, 2019 and 2018 | 47 | |||
Statements of Cash Flows for the years ended December 31, 2019 and 2018 | 48 | |||
Notes to Financial Statements | 49 |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and
Board of Directors of Eco Innovation Group, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Eco Innovation Group, Inc. (the “Company”) as of December 31, 2019 and 2018, the related consolidated statements of operations, changes in stockholders’ equity (deficit), and cash flows for each of the two years in the period ended December 31, 2019, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis of Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to fraud or error. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Substantial Doubt About the Company’s Ability to Continue as a Going Concern
As discussed in Note 2 to the consolidated financial statements, the Company’s net losses and accumulated deficit raise substantial doubt about its ability to continue as a going concern for one year from the issuance of these consolidated financial statements. Management’s plans are also described in Note 2. The consolidated financial statements do not include adjustments that might result from the outcome of this uncertainty.
/s/ Boyle CPA, LLC
We have served as the Company’s auditor since 2020
Bayville, NJ
September 18, 2020
361 Hopedale Drive SE | P (732) 822-4427 |
Bayville, NJ 08721 | F (732) 510-0665 |
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ECO INNOVATION GROUP, INC.
BALANCE SHEETS
DECEMBER 31, 2019 AND 2018
December 31, | ||||||||
2019 | 2018 | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 246 | $ | 22,153 | ||||
Accounts receivable- net | — | — | ||||||
Total Current Assets | 246 | 22,153 | ||||||
Other Assets | ||||||||
Investment in Marijuana Company of America, at fair value | — | 397,933 | ||||||
Deposits and other assets | 8,000 | 8,000 | ||||||
Total Other Assets | 8,000 | 405,933 | ||||||
Total Assets | $ | 8,246 | $ | 428,086 | ||||
Liabilities and Stockholders' Equity (Deficit) | ||||||||
Current Liabilities | ||||||||
Accounts payable and accrued expenses | $ | 1,797 | $ | 324 | ||||
Convertible note payable, net of discount | 21,875 | — | ||||||
Derivative liability | 60,658 | — | ||||||
Convertible notes payable, related party | 4,902 | 9,804 | ||||||
Related party loans | 15,000 | 15,000 | ||||||
Total Current Liabilities | 104,232 | 25,128 | ||||||
Total Liabilities | 104,232 | 25,128 | ||||||
Stockholders' Equity | ||||||||
Preferred stock, par value $0.001, authorized 50,000,000 shares, | ||||||||
issued and outstanding 30,000,000 shares | 30,000 | 30,000 | ||||||
Common stock, par value $0.001, authorized 500,000,000 shares, | ||||||||
issued and outstanding 54,830,680 and 4,830,680 shares at | ||||||||
December 31, 2019 and 2018, respectively | 54,831 | 4,831 | ||||||
Additional paid-in capital | 1,919,059 | 1,942,619 | ||||||
Accumulated deficit | (2,099,876 | ) | (1,574,492 | ) | ||||
Total Stockholders' Equity (Deficit) | (95,986 | ) | 402,958 | |||||
Total Liabilities and Stockholders' Equity (Deficit) | $ | 8,246 | $ | 428,086 |
The accompanying notes are an integral part of these audited financial statements
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ECO INNOVATION GROUP, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
For the years ended | ||||||||
December 31, | ||||||||
2019 | 2018 | |||||||
Revenues | $ | — | $ | — | ||||
Cost of revenues | — | — | ||||||
Gross Profit | — | — | ||||||
Operating expenses | ||||||||
General and administrative | 201,968 | 655,907 | ||||||
201,968 | 655,907 | |||||||
Operating loss | (201,968 | ) | (655,907 | ) | ||||
Other expenses | ||||||||
Interest expense | 3,572 | — | ||||||
Derivative expense | 60,658 | — | ||||||
Unrealized loss on investments | — | 52,067 | ||||||
Loss on sale of investments | 259,186 | 56,250 | ||||||
323,416 | 108,317 | |||||||
Loss from continuing operations | (525,384 | ) | (764,224 | ) | ||||
Discontinued operations | ||||||||
Loss on disposal of discontinued operations | — | (55,508 | ) | |||||
Income from operations of discontinued operations | — | 91,004 | ||||||
— | 35,496 | |||||||
Net loss | $ | (525,384 | ) | $ | (728,728 | ) | ||
Loss per share, basic and diluted | ||||||||
Continuing operations | $ | (0.03 | ) | $ | (0.37 | ) | ||
Discontinued operations | — | 0.02 | ||||||
$ | (0.03 | ) | $ | (0.35 | ) | |||
Weighted average shares outstanding | 15,521,348 | 2,093,647 |
The accompanying notes are an integral part of these audited financial statements
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ECO INNOVATION GROUP, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' AND MEMBER'S DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
Preferred Stock | Common Stock | Additional Paid-in | Accumulated | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
Balance, December 31, 2017 | 36,000,000 | $ | 36,000 | 1,830,613 | $ | 1,831 | $ | 769,613 | $ | (845,764 | ) | $ | (38,320 | ) | ||||||||||||||
Contribution of Investment | — | — | — | — | 600,000 | — | 600,000 | |||||||||||||||||||||
Preferred Stock Retired | (6,000,000 | ) | (6,000 | ) | — | — | 6,000 | — | — | |||||||||||||||||||
Shares Issued for Services | — | — | 3,000,067 | 3,000 | 567,006 | — | 570,006 | |||||||||||||||||||||
Net loss for the year ended December 31, 2018 | — | — | — | — | — | (728,728 | ) | (728,728 | ) | |||||||||||||||||||
Balance, December 31, 2018 | 30,000,000 | 30,000 | 4,830,680 | 4,831 | 1,942,619 | (1,574,492 | ) | 402,958 | ||||||||||||||||||||
Debt Conversion | — | — | 50,000,000 | 50,000 | (45,098 | ) | — | 4,902 | ||||||||||||||||||||
Derivative liabilities | — | — | — | — | 21,538 | — | 21,538 | |||||||||||||||||||||
Net loss for the year ended December 31, 2019 | — | — | — | — | (525,384 | ) | (525,384 | ) | ||||||||||||||||||||
Balance, December 31, 2019 | 30,000,000 | $ | 30,000 | 54,830,680 | $ | 54,831 | $ | 1,919,059 | $ | (2,099,876 | ) | $ | (95,986 | ) | ||||||||||||||
The accompanying notes are an integral part of these audited financial statements
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ECO INNOVATION GROUP, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2019
For the years ended | ||||||||
December 31, | ||||||||
2019 | 2018 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (525,384 | ) | $ | (728,728 | ) | ||
Income from discontinued operations | — | 35,496 | ||||||
Loss from continuing operations | (525,384 | ) | (764,224 | ) | ||||
Adjustments to reconcile net loss to net cash | ||||||||
used by operating activities: | ||||||||
Loss on sale of investments | 259,186 | 56,250 | ||||||
Unrealized loss on investments | — | 52,067 | ||||||
Amortization of debt discount | 3,413 | |||||||
Derivative expense | 60,658 | — | ||||||
Stock based compensation | — | 570,006 | ||||||
Changes in operating assets and liabilities | ||||||||
Increase (decrease) in accounts payable and accrued expenses | 1,472 | (33,107 | ) | |||||
Net cash used by operating activities- continuing operations | (200,655 | ) | (119,008 | ) | ||||
Net cash used by operating activities- discontinuing operations | — | 35,496 | ||||||
Net cash used by operating activities | (200,655 | ) | (83,512 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Proceeds from sale of investment | 138,748 | 93,750 | ||||||
Net cash provided by investing activities- continuing operations | 138,748 | 93,750 | ||||||
Net cash provided by investing activities- discontinuing operations | — | — | ||||||
Net cash provided by investing activities | 138,748 | 93,750 | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from convertible debenture | 40,000 | — | ||||||
Net cash provided by financing activities- continuing operations | 40,000 | — | ||||||
Net cash provided by financing activities- discontinuing operations | ��� | — | ||||||
Net cash provided by financing activities | 40,000 | — | ||||||
Change in cash | (21,907 | ) | 10,238 | |||||
Cash, beginning of year | 22,153 | 11,915 | ||||||
Cash, end of year | $ | 246 | $ | 22,153 | ||||
SUPPLEMENTAL NON-CASH DISCLOSURES: | ||||||||
Cash paid for interest | $ | — | $ | — | ||||
Cash paid for taxes | $ | — | $ | — | ||||
SUPPLEMENTAL NON-CASH FINANCING ACTIVITIES: | ||||||||
Conversion of related party convertible notes to common stock | $ | 4,902 | $ | — |
The accompanying notes are an integral part of these audited financial statements
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ECO INNOVATION GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019 AND 2018
NOTE 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES
Nature of Business
Eco Innovation Group, Inc. (the “Company”), was originally incorporated March 5, 2001 as Dig-It Underground, Inc., a Nevada corporation that initially operated as an underground cable contractor. On September 29, 2008, the Company entered into a share exchange agreement with Haydin Group Enterprises (“Haydin”), a sole proprietorship, and concurrently resolved to wind down its cable installation business.
By virtue of the share exchange agreement, the Company acquired an interest in Haydin’s salon equipment, office equipment, lease assignments for salon locations, reception office equipment, salon stations, and remodeled salon facilities that included upgraded and permitted electrical, plumbing and signage. The Company’s business focused on the operation of a string of high-end beauty salons in the Cedar Hill, Texas area.
On September 1, 2011, the Company entered into a share exchange agreement with Get Down Art, LLC, a Nevada limited liability company. The consummation of the share exchange provided the Company with original art and agreements with artists with licensing agreements with businesses. The Company acquired art inventory, accounts receivable, office leasing and build out. The Company resolved to unwind its previous acquisition of Haydin Group Enterprises, Inc. dated September 29, 2008.
On August 30, 2012, the Company acquired the Haydin Group Enterprises as a wholly owned subsidiary of the Company through a share exchange agreement wherein the Company issued fifty million shares of its common stock in exchange for all of the legal right title and interest in the assets of Haydin Group Enterprises. Haydin Group Enterprises owned a chain of high-end beauty salons that focused on skin and hair care and nail care. Haydin also promoted sales of beauty supplies and products and sold to other salons in Texas. The Haydin beauty salons retained highly trained experienced cosmetologists who had a long history with the business. Concurrently, the Company discontinued its business with Get Down Art, LLC and resolved to unwind that acquisition.
On January 5, 2016, the Company acquired Expressions Property Limited, LP, a Texas limited partnership and Expressions Chiropractic and Rehab Center, PA in a share exchange agreements. These acquisitions allowed the Company to enter into the natural healing and chiropractic business in Cedar Hill and North Richland Hills, Texas.
Effective June 30, 2018, the Company resolved and agreed to spin out Haydin Group Enterprises, Expressions Property Limited, LP and Expressions Chiropractic and Rehab Center, PA as private entities and thereby unwinding the share exchange agreements entered into on August 30, 2012 and January 5, 2016, respectively.
On July 1, 2018, the Company approved a reverse split of its common stock in a ratio of 1:1,000; a change of the Company’s name to Eco Innovation Group, Inc.; and the change of the Company’s trading symbol. The reverse split of the Company’s common stock was effective August 29, 2018.
On August 19, 2019, the Company incorporated Steel Hemp Homes Inc. in the state of California as a wholly owned subsidiary.
On December 31, 2019, the Company filed and increase in authorized shares with the Secretary of State of Nevada. The total authorized common shares are increased to 500,000,000 with a par value $0.001. On February 12, 2020, Julia Otey-Raudes was appointed as CEO and President of the Company upon John English’s resignation. She also acquired 30,000,000 Preferred Series A shares, representing all of the issued and outstanding preferred stock of the Company.
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The Company’s plan is to initially develop a revolutionary Power Booster for your home and office that will reduce electric bills and other energy saving related technologies. The Company anticipates joint ventures in the sustainable renewable energy field.
Accounting policies and procedures are listed below. The Company has adopted a December 31 year-end.
Accounting Basis
The Company has prepared the financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP).
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Steel Hemp Homes Inc. All intercompany transactions have been eliminated in consolidation.
Cash and Cash Equivalents
The company considers all highly liquid investments with original maturities of three months or less as cash equivalents. As of December 31, 2019 and 2018, the Company had no cash or cash equivalent balances in excess of the federally insured amounts. The company’s policy is to invest excess funds in only well capitalized financial institutions.
Earnings per share
Basic EPS is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS includes the potential dilution that could occur if options or other contracts to issue common stock were exercised or converted.
The company has not issued any options or warrants or similar securities since inception.
Marketable Securities
The Company’s investment in marketable securities are classified as trading and are carried at fair value.
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company evaluates its’ financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The Company used a Black Scholes valuation model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.
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Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
· | Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; |
· | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
· | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
The estimated fair values for financial instruments are determined at discrete points in time based on relevant market information. These estimates involve uncertainties and cannot be determined with precision. We measure our investment in marketable securities at fair value on a recurring basis. The Company’s trading securities are valued using inputs observable in active markets and are therefore classified as Level 1 within the fair value hierarchy. Investments and derivative liabilities are valued on a recurring basis.
The following summarizes the fair value of assets and liabilities measured on a recurring basis:
December 31, 2018 | |||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||
Assets | |||||||||
Investments | $ 397,933 | $ - | $ - | $ 397,933 | |||||
Liabilities | |||||||||
Derivative liability | - | - | - | - | |||||
December 31, 2019 | |||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||
Assets | |||||||||
Investments | $ - | $ - | $ - | $ - | |||||
Liabilities | |||||||||
Derivative liability | - | - | 60,658 | 60,658 |
Stock Based Compensation
Stock-based compensation is computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 718. FASB ASC 718 requires all share-based payments to employees and non-employees be recognized as compensation expense in the consolidated financial statements based on their fair values. The expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). As of December 31, 2019 and 2018, the Company has not formed a Stock Option Plan and has not issued any options.
Fixed Assets
Fixed assets are carried at cost. Depreciation is computed using the straight-line method of depreciation over the assets’ estimated useful lives. Maintenance and repairs are charged to expense as incurred; major renewals and improvements are capitalized. When items of fixed assets are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in income.
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Income Taxes
The provision for income taxes is the total of the current taxes payable and the net of the change in the deferred income taxes. Provision is made for the deferred income taxes where differences exist between the period in which transactions affect current taxable income and the period in which they enter into the determination of net income in the financial statements.
Advertising
Advertising is expensed when incurred.
Revenue Recognition
Effective January 1, 2018, the Company recognizes revenue in accordance with Accounting Standards Codification 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific revenue recognition guidance throughout the Industry Topics of the Accounting Standards Codification. The updated guidance states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also provides for additional disclosures with respect to revenues and cash flows arising from contracts with customers. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2017, and the Company adopted the standard using the modified retrospective approach effective January 1, 2018.
At the time of each transaction, management assesses whether the fee associated with the transaction is fixed or determinable and whether or not collection is reasonably assured. The assessment of whether the fee is fixed or determinable is based upon the payment terms of the transaction. Collectability is assessed based on a number of factors, including past transaction history with the client and the creditworthiness of the client.
The Company had no revenues during the years ended December 31, 2019 and 2018.
NOTE 2. GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying consolidated financial statements, the Company had net losses during the years ended December 31, 2018 and 2019 and an accumulated deficit at December 31, 2019. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. Management’s plans are to obtain additional financing in the debt and equity markets while its develops its business model. The Company’s existence is dependent upon management’s ability to develop profitable operations and to obtain additional funding sources. There can be no assurance that the Company’s financing efforts will result in profitable operations or the resolution of the Company’s liquidity problems. The accompanying statements do not include any adjustments that might result should the Company be unable to continue as a going concern.
NOTE 3. RECENTLY ISSUED ACCOUNTING STANDARDS
Management does not believe that any recently issued but not yet adopted accounting will have a material effect on the Company’s results of operation or on the reported amounted of its assets and liabilities upon adoption.
NOTE 4. PROVISION FOR INCOME TAXES
Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss and credit carry forwards and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. The Company records an estimated valuation allowance on its deferred income tax assets if it is not more likely than not that these deferred income tax assets will be realized.
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The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. As of December 31, 2019, and 2018, the Company has not recorded any unrecognized tax benefits.
The components of the Company’s net deferred tax assets at December 31 are as follows:
December 31, | ||||||||
2019 | 2018 | |||||||
Net operating loss carryforward | $ | 441,000 | $ | 331,000 | ||||
Unrealized investment losses | — | 52,000 | ||||||
Deferred tax assets | 441,000 | 383,000 | ||||||
Valuation allowance | (441,000 | ) | (383,000 | ) | ||||
$ | — | $ | — |
At December 31, 2019 the Company had net operating loss carry forwards of approximately $2,100,000 for federal and state purposes.
The reconciliation of the federal income tax rate and the Company’s tax provision (benefit) is as follows:
Year Ended | ||||||||
December 31, | ||||||||
2019 | 2018 | |||||||
Provision (benefit) computed using the statutory rate | $ | (110,000 | ) | $ | (153,000 | ) | ||
Temporary differences | 52,000 | (52,000 | ) | |||||
Change in valuation allowance | 58,000 | 205,000 | ||||||
$ | — | $ | — |
NOTE 5. STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred Stock
The Company has created one class of preferred stock, which has been designated “Preferred Series A”. The Company has designated 50,000,000 shares of Preferred Series A, of which 50,000,000 have been authorized, of which 30,000,000 shares have been issued and are outstanding. Holders of Preferred Series A shares hold rights to vote on all matter requiring a Stockholder vote at 100 common shares vote equivalent for each share of Preferred Series A held. As of the date of this filing, our CEO, CFO, board chair and sole director, Julia Otey-Raudes, is the sole holder of the 30,000,000 Preferred Series A shares outstanding. Holders of Preferred Series A have no liquidation rights that are superior to common Stockholders.
Common Stock
The Company has 500,000,000 shares of $0.001 par value common stock authorized. On July 1, 2018, the Company approved a reverse split of its common stock in a ratio of 1:1,000. The reverse split of the Company’s common stock was effective August 29, 2018. All share and per share information has be retroactively adjusted to give effect to the reverse stock split.
On September 11, 2018, the Company issued 67 shares to a consultant for $0.09 per share valued at $6 for services.
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On November 1, 2018, the Company issued 1,000,000 shares to a consultant for $0.08 per share valued at $100,000 for services.
On December 13, 2018, the Company issued 1,000,000 shares to a consultant for $0.235 per share valued at $235,000 for services.
On December 13, 2018, the Company issued 1,000,000 shares to a consultant for $0.235 per share valued at $235,000 for services.
On October 14, 2019, the Company issued 50,000,000 shares for the conversion of a $4,902 convertible notes.
NOTE 6. RELATED PARTY TRANSACTIONS
On March 1, 2016, the Company executed two convertible notes of $4,901.96 each with former executives of the Company. These notes are each convertible into 50,000,000 shares of common stock. These notes are non-interest bearing. On October 14, 2019, one of these notes converted into common stock.
On August 25, 2020, the Company signed a Master Outsourcing Contract Manufacturing Agreement with Eco-Gen, pursuant to which the Company, as Manufacturer, will produce products for Eco-Gen, as Buyer. The Master Outsourcing Contract Manufacturing Agreement with Eco-Gen is a related party transaction insofar as our CEO and controlling Stockholder, Julia Otey-Raudes, is a director of Eco-Gen.
NOTE 7. CONVERTIBLE NOTES
On December 9, 2019, the Company executed a convertible note with Pinnacle Consulting Services Inc. for $40,000 due on June, 9, 2020. This note bears interest at 5% per annum, which is convertible into shares of the Company’s common stock.
The Note is convertible (in whole or in part), at the option of the Holder, into such number of fully paid and non-assessable shares of common stock as is determined by dividing that portion of the outstanding principal balance under this Note by the Conversion Price, which is a 35% discount of the lowest reported sale price of the common stock for the 15 trading days immediately prior to the date of conversion.
The Company determined that the conversion option in the note met the definition of a liability in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity’s Own Stock. The Company bifurcated the embedded conversion option in the note once the note becomes convertible and account for it as a derivative liability.
The Company valued the conversion features using the Black Scholes valuation model. The fair value of the derivative liability amounted to $61,073 upon inception, with $21,538 recognized as a debt discount, and $60,658 at December 31, 2019. Interest expense consisted of $3,413 in amortization of the debt discount and $159 in accrued interest.
NOTE 8. INVESTMENTS
On September 17, 2018, a contribution of 20,000,000 common shares of Marijuana Company of America, Inc. (OTC: MCOA) was made to the Company. The shares were valued at $600,000, the fair value of the shares on contribution date. The shares were classified as trading securities as the intention of the Company was to sell these shares and all shares were sold within six months of contribution. The following summarizes the activity of the investments.
Fair value, contribution date | $ | 600,000 | ||
Sale of securities | (150,000 | ) | ||
Unrealized loss | (52,067 | ) | ||
Fair value, December 31, 2018 | $ | 397,933 | ||
Sale of securities | (397,933 | ) | ||
Fair value, December 31, 2019 | $ | — |
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The Company recognized losses of $56,250 and $259,186 for the years ended December 31, 2018 and 2019, respectively.
NOTE 9. SUBSEQUENT EVENTS
On July 23, 2020, our Board of Directors created a class of preferred stock, designated “Series B Convertible Preferred Stock”, by filing an amendment to the Company’s existing certificate of designations that reduced the Company’s designated Series A Preferred by one million shares and created one million shares of Series B Convertible Preferred Stock, and renamed the Company’s Preferred Series A preferred shares as “Series A Convertible Preferred Stock”. As a result, the Company now has 50,000,000 authorized shares of preferred stock, designated as 49,000,000 shares of Series A Convertible Preferred Stock, of which 30,000,000 shares have been issued and are outstanding, and 1,000,000 shares of Series B Convertible Preferred Stock, of which no shares are issued or outstanding. For complete information on the Company’s authorized capital stock, please see “Description of Securities,” beginning on page 28.
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INTERIM FINANCIAL STATEMENTS
The following tables set forth our most recent interim financial statements. Our unaudited quarterly results of operations data have been prepared on the same basis as our audited financial statements included elsewhere in this Prospectus. In the opinion of management, the financial information set forth in the table below reflects all normal recurring adjustments necessary for the fair statement of results of operations for these periods in accordance with generally accepted accounting principles in the United States. Our historical results are not necessarily indicative of the results that may be expected in the future and the results of a particular quarter or other interim period are not necessarily indicative of the results for a full year. This data should be read in conjunction with the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this Prospectus.
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ECO INNOVATION GROUP, INC. | ||||||||
Unaudited Interim Condensed Consolidated Balance Sheets | ||||||||
As of June 30, 2020 and December 31, 2019 | ||||||||
(Amounts Expressed in United States Dollars, Except for Share Amounts) | ||||||||
June 30, 2020 | December 31, 2019 | |||||||
(Unaudited) | (Audited) | |||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 21,007 | $ | 246 | ||||
Accounts receivable- net | — | — | ||||||
Total Current Assets | 21,007 | 246 | ||||||
Other Assets | ||||||||
Investment in Marijuana Company of America | — | — | ||||||
Deposits and other assets | 8,000 | 8,000 | ||||||
Total Other Assets | 8,000 | 8,000 | ||||||
Total Assets | $ | 29,007 | $ | 8,246 | ||||
Liabilities and Stockholders' Equity (Deficit) | ||||||||
Current Liabilities | ||||||||
Accounts Payable and accrued expenses | 58,124 | 1,797 | ||||||
Convertible Notes Payable | 50,336 | 21,875 | ||||||
Derivative liabilities | 85,494 | 60,658 | ||||||
Convertible Notes Payable Related party | 4,875 | 4,902 | ||||||
Related Party Loans | 15,000 | 15,000 | ||||||
Total Current Liabilities | 213,829 | 104,232 | ||||||
Total Liabilities | 213,829 | 104,232 | ||||||
Stockholders' Equity | ||||||||
Preferred stock, par value $0.001, authorized 50,000,000 shares, | ||||||||
issued and outstanding 30,000,000 shares | 30,000 | 30,000 | ||||||
Common stock, par value $0.001, authorized 500,000,000 shares, | ||||||||
issued and outstanding 135,930,680 and 54,830,680 shares at | ||||||||
June 30, 2020 and Dec 31, 2019, respectively | 135,931 | 54,831 | ||||||
Additional paid-in capital | 4,883,002 | 1,919,059 | ||||||
Accumulated deficit | (5,233,755 | ) | (2,099,876 | ) | ||||
Total Stockholders' Equity (Deficit) | (184,822 | ) | (95,986 | ) | ||||
TOTAL LIABILITIES and Stockholders' Equity (Deficit) | $ | 29,007 | $ | 8,246 | ||||
See the accompanying notes to these unaudited consolidated financial statements |
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ECO INNOVATION GROUP, INC. | ||||||||||||||||
Unaudited Interim Condensed Consolidated Statements of Operations | ||||||||||||||||
Three and Six Months Ended June 30, 2020 and 2019 | ||||||||||||||||
(Amounts Expressed in United States Dollars, Except Share Amounts) | ||||||||||||||||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30 | June 30 | June 30 | June 30 | |||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Revenue | ||||||||||||||||
Sales | — | — | — | — | ||||||||||||
Operating Expenses | ||||||||||||||||
General and Administrative | 4,519 | 16,578 | 47,166 | 17,772 | ||||||||||||
Development and Manufacture Expenses | 650,000 | — | 650,000 | — | ||||||||||||
Executive Compensation | 260,000 | — | 260,000 | — | ||||||||||||
Consulting Fee | 2,130,750 | — | 2,130,750 | — | ||||||||||||
Total Operating Expense | 3,045,269 | 16,578 | 3,087,916 | 17,772 | ||||||||||||
Operating Loss | (3,045,269 | ) | (16,578 | ) | (3,087,916 | ) | (17,772 | ) | ||||||||
Other Income (Expenses) | ||||||||||||||||
Derivative expense | (39,629 | ) | — | 8,500 | — | |||||||||||
Interest expense | (39,681 | ) | — | (54,463 | ) | — | ||||||||||
Total Other Income (Loss) | (79,310 | ) | — | (45,963 | ) | — | ||||||||||
Net Income | $ | (3,124,579 | ) | $ | (16,578 | ) | $ | (3,133,879 | ) | $ | (17,772 | ) | ||||
Basic & Diluted Loss per common shares | $ | (0.03 | ) | $ | (0.00 | ) | $ | (0.03 | ) | $ | (0.00 | ) | ||||
Weighted Average common shares Outstanding | 100,066,944 | 54,830,680 | 100,066,944 | 54,830,680 | ||||||||||||
See the accompanying notes to these unaudited consolidated financial statements |
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ECO INNOVATION GROUP, INC. | ||||||||||||||||||||||||||||
Unaudited Interim Condensed Consolidated Statements of Changes in Stockholders’ Equity | ||||||||||||||||||||||||||||
Six Months Ended June 30, 2020 and 2019 | ||||||||||||||||||||||||||||
(Amounts Expressed in United States Dollars) | ||||||||||||||||||||||||||||
Preferred Stock | Common Stock | Additional Paid-in | Accumulated | Total | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
Balance, December 31, 2019 | 30,000,000 | $ | 30,000 | 54,830,680 | $ | 54,831 | $ | 1,919,059 | $ | (2,099,876 | ) | $ | (95,986 | ) | ||||||||||||||
Net loss for the three months ended Jun 30, 2020 | — | — | — | — | (9,300 | ) | (9,300 | ) | ||||||||||||||||||||
Balance, June 30, 2020 | 30,000,000 | 30,000 | 54,830,680 | 54,831 | 1,919,059 | (2,109,176 | ) | (105,286 | ) | |||||||||||||||||||
Common Stock issued for services rendered | — | — | 56,100,000 | 56,100 | 2,961,650 | — | 3,017,750 | |||||||||||||||||||||
Common stock issued for conversion of notes payable | — | — | 25,000,000 | 25,000 | (22,549 | ) | — | 2,451 | ||||||||||||||||||||
Discount on Convertible notes | — | — | — | — | 24,842 | — | 24,842 | |||||||||||||||||||||
Net loss for the three months ended June 30, 2020 | — | — | — | — | (3,124,579 | ) | (3,124,579 | ) | ||||||||||||||||||||
Balance, June 30, 2020 | 30,000,000 | $ | 30,000 | 135,930,680 | $ | 135,931 | $ | 4,883,002 | $ | (5,233,755 | ) | $ | (184,822 | ) | ||||||||||||||
The accompanying notes are an integral part of these interim condensed consolidated financial statements. |
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ECO INNOVATION GROUP, INC. | ||||||||
Unaudited Interim Condensed Consolidated Statements of Cash Flows | ||||||||
Six Months Ended June 30, 2020 and 2019 | ||||||||
(Amounts Expressed in United States Dollars) | ||||||||
For the Six Months Ended | ||||||||
June 30, | ||||||||
2020 | 2019 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (3,133,879 | ) | $ | (17,772 | ) | ||
Adjustments to reconcile net loss to net cash | ||||||||
used by operating activities: | ||||||||
Amortization of debt discount | 19,803 | — | ||||||
Interest expense on derivative issuance | 33,336 | — | ||||||
Derivative (gain) loss | (8,500 | ) | — | |||||
Stock based compensation | 3,017,750 | — | ||||||
Changes in operating assets and liabilities | ||||||||
Increase (decrease) in accounts payable and accrued expenses | 56,327 | 17,863 | ||||||
Net cash used by operating activities | (15,163 | ) | 91 | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from convertible debenture | 33,500 | — | ||||||
Proceeds from convertible notes payable, related party | 2,424 | — | ||||||
Net cash provided by financing activities | 35,924 | — | ||||||
Change in cash | 20,761 | 91 | ||||||
Cash, beginning of year | 246 | — | ||||||
Cash, end of year | $ | 21,007 | $ | 91 | ||||
Non-Cash transactions | ||||||||
Common stock issued for conversion of notes payable | $ | 2,451 | $ | — | ||||
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
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ECO INNOVATION GROUP, INC.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
NOTE 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES
Nature of Business
Eco Innovation Group, Inc. (the “Company”), was originally incorporated March 5, 2001 as Dig-It Underground, Inc., a Nevada corporation that initially operated as an underground cable contractor. On September 29, 2008, the Company entered into a share exchange agreement with Haydin Group Enterprises, a sole proprietorship, and concurrently resolved to wind down its cable installation business.
By virtue of the share exchange agreement, the Company acquired an interest in Haydin’s salon equipment, office equipment, lease assignments for salon locations, reception office equipment, salon stations, and remodeled salon facilities that included upgraded and permitted electrical, plumbing and signage. The Company’s business focused on the operation of a string of high-end beauty salons in the Cedar Hill, Texas area.
On September 1, 2011, the Company entered into a share exchange agreement with Get Down Art, LLC, a Nevada limited liability company. The consummation of the share exchange provided the Company with original art and agreements with artists with licensing agreements with businesses. The Company acquired art inventory, accounts receivable, office leasing and build out. The Company resolved to unwind its previous acquisition of Haydin Group Enterprises, Inc., dated September 29, 2008.
On August 30, 2012, the Company acquired the Haydin Group Enterprises as a wholly owned subsidiary of the Company through a share exchange agreement wherein the Company issued f if ty million shares of its common stock in exchange for all of the legal right title and interest in the assets of Haydin Group Enterprises. Haydin Group Enterprises owned a chain of high-end beauty salons that focused on skin and hair care and nail care. Haydin also promoted sales of beauty supplies and products and sold to other salons in Texas. The Haydin beauty salons retained highly trained experienced cosmetologists who had a long history with the business. Concurrently, the Company discontinued its business with Get Down Art, LLC and resolved to unwind that acquisition.
On January 5, 2016, the Company acquired Expressions Property Limited, LP, a Texas limited partnership and Expressions Chiropractic and Rehab Center, PA pursuant to share exchange agreements. These acquisitions allowed the Company to enter the natural healing and chiropractic business in Cedar Hill and North Richland Hills, Texas.
Effective June 30, 2018, the Company resolved and agreed to spin out Haydin Group Enterprises, Expressions Property Limited, LP and Expressions Chiropractic and Rehab Center, PA as private entities and thereby unwinding the share exchange agreements entered into on August 30, 2012 and January 5, 2016, respectively.
On July 1, 2018, the Company approved a reverse split of its common stock in a ratio of 1:1,000; a change of the Company’s name to Eco Innovation Group, Inc.; and the change of the Company’s trading symbol. The reverse split of the Company’s common stock was effective August 29, 2018. The Company was an innovation incubator platform from 2018 until early 2020 that focusing on developing a more af fordable, fire, hurricane and earthquake resilient steel framing system.
On August 19, 2019, the Company incorporated Steel Hemp Homes Inc. in the state of California as a wholly owned subsidiary.
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On December 31, 2019, the Company filed an increase in authorized shares with the Secretary of State of Nevada. The total authorized common shares are increased to 500,000,000 with a par value $0.001. On February 12, 2020, Julie Otey-Raudes was appointed as CEO and President of the Company upon John English’s resignation. She also acquired 30,000,000 shares of Series A Preferred Stock, which represent all of the outstanding preferred stock of the Company.
The Company’s plan is to initially develop a revolutionary Power Booster for your home and office that will reduce electric bills and other energy saving related technologies. The Company anticipates Joint Ventures in the sustainable renewable energy field.
Accounting policies and procedures are listed below. The Company has adopted a December 31 year-end.
Accounting Basis
The Company has prepared the financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP).
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Consolidation
The consolidated financial statements include the accounts of the Company and its’ wholly owned subsidiary, Steel Hemp Homes Inc. All intercompany transactions have been eliminated in consolidation.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less as cash equivalents. As of June 30, 2020, and December 31, 2019, the Company had cash or cash equivalent balances in excess of federally insured amounts. The Company’s policy is to invest excess funds in only well capitalized financial institutions.
Earnings per share
Basic EPS is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS includes the potential dilution that could occur if options or other contracts to issue common stock were exercised or converted.
The Company has not issued any options or warrants or similar securities since inception.
Marketable Securities
The Company’s investment in marketable securities are classified as trading and are carried at fair value.
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Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company evaluates its’ financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the f air value reported in the statements of operations. The Company used a Black Scholes valuation model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 establishes a three-tier f air value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
· Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;
· Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
· Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
The estimated fair values for financial instruments are determined at discrete points in time based on relevant market information. These estimates involve uncertainties and cannot be determined with precision. We measure our investment in marketable securities at fair value on a recurring basis. The Company’s trading securities are valued using inputs observable in active markets and are therefore classified as Level 1 within the fair value hierarchy. Investments and derivative liabilities are valued on a recurring basis.
The following summarizes the fair value of assets and liabilities measured on a recurring basis:
June 30, 2020 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets | ||||||||||||||||
Investments | $ | — | $ | — | $ | — | $ | — | ||||||||
Liabilities | ||||||||||||||||
Derivative liability | $ | — | $ | — | $ | 85,494 | $ | 85,494 |
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December 31, 2019 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets | ||||||||||||||||
Investments | $ | — | $ | — | $ | — | $ | — | ||||||||
Liabilities | ||||||||||||||||
Derivative liability | $ | — | $ | — | $ | 60,658 | $ | 60,658 |
Stock-Based Compensation
Stock-based compensation is computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 718. FASB ASC 718 requires all share-based payments to employees and non-employees be recognized as compensation expense in the consolidated financial statements based on their f air values. The expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). As of June 30, 2020, and 2019, the Company has not formed a Stock Option Plan and has not issued any options.
Fixed Assets
Fixed assets are carried at cost. Depreciation is computed using the straight-line method of depreciation over the assets’ estimated useful lives. Maintenance and repairs are charged to expense as incurred; major renewals and improvements are capitalized. When items of fixed assets are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in income.
Income Taxes
The provision for income taxes is the total of the current taxes payable and the net of the change in the def erred income taxes. Provision is made for the def erred income taxes where differences exist between the period in which transactions affect current taxable income and the period in which they enter into the determination of net income in the financial statements.
Advertising
Advertising is expensed when incurred.
Revenue Recognition
Effective January 1, 2018, the Company recognizes revenue in accordance with Accounting Standards Codification 2014- 09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific revenue recognition guidance throughout the Industry Topics of the Accounting Standards Codification. The updated guidance states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also provides for additional disclosures with respect to revenues and cash f lows arising from contracts with customers. The standard will be effective f or the first interim period within annual reporting periods beginning after December 15, 2017, and the Company adopted the standard using the modified retrospective approach effective January 1, 2018.
At the time of each transaction, management assesses whether the fee associated with the transaction is fixed or determinable, and whether or not collection is reasonably assured. The assessment of whether the fee is fixed or determinable is based upon the payment terms of the transaction. Collectability is assessed based on a number of factors, including past transaction history with the client and the creditworthiness of the client.
The Company had no revenues during the three and six months ended June 30, 2020 and 2019.
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NOTE 2. GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying consolidated financial statements, the Company had net losses during the years ended December 31, 2018, 2019 and quarter ended June 30, 2020 and an accumulated deficit at June 30, 2020. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. Management’s plans are to obtain additional financing in the debt and equity markets while it develops its business model. The Company’s existence is dependent upon management’s ability to develop profitable operations and to obtain additional funding sources. There can be no assurance that the Company’s financing efforts will result in profitable operations or the resolution of the Company’s liquidity problems. The accompanying statements do not include any adjustments that might result should the Company be unable to continue as a going concern.
NOTE 3. RECENTLY ISSUED ACCOUNTING STANDARDS
Management does not believe that any recently issued but not yet adopted accounting will have a material effect on the Company’s results of operation or on the reported amounted of its assets and liabilities upon adoption.
NOTE 4. PROVISION FOR INCOME TAXES
Def erred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss and credit carry forwards and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. The Company records an estimated valuation allowance on its def erred income tax assets if it is not more likely than not that these def erred income tax assets will be realized.
The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. As of June 30, 2020, and December 31, 2019, the Company has not recorded any unrecognized tax benefits.
NOTE 5. STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred Stock
The Company has two classes of shares of preferred stock, designated “Series A Convertible Pref erred Stock” and “Series B Convertible Pref erred Stock”. The Company has designated 49,000,000 shares of Series A Convertible Pref erred Stock, of which 30,000,000 shares have been issued and are outstanding. Holders of Series A Convertible Pref erred Stock hold rights to vote on all matter requiring a Stockholder vote at 100 common shares vote equivalent for each share of Series A Convertible Pref erred Stock held. As of the date of this filing, our CEO, CFO, board chair and sole director, Julia Otey-Raudes, is the sole holder of the 30,000,000 Series A Convertible Preferred Stock outstanding. As of August 14, 2020, the filing date of this Prospectus, there are no shares of Series B Convertible Pref erred Stock issued or outstanding.
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Common Stock
The Company has 500,000,000 shares of $0.001 par value common stock authorized. On July 1, 2018, the Company approved a reverse split of its common stock in a ratio of 1:1,000. The reverse split of the Company’s common stock was effective August 29, 2018. All share and per share information has be retroactively adjusted to give effect to the reverse stock split.
On September 11, 2018, the Company issued 67 shares to a consultant for $0.09 per share valued at $6 for services.
On November 1, 2018, the Company issued 1,000,000 shares to a consultant for $0.08 per share valued at $100,000 for services.
On December 13, 2018, the Company issued 1,000,000 shares to a consultant for $0.235 per share valued at $235,000 for services.
On December 13, 2018, the Company issued 1,000,000 shares to a consultant for $0.235 per share valued at $235,000 for services.
On October 14, 2019, the Company issued 50,000,000 shares for the conversion of a $4,902 convertible note.
On May 18, 2020, the company issued 8,000,000 shares to a consultant for $0.098 per share valued at $784,000 for services.
On May 26, 2020, the company issued 25,000,000 shares to its former Chief Executive Officer John English for the conversion of a $2,451 convertible note.
On June 26, 2020, the company issued 12,500,000 shares to Pinnacle Consulting Services for $0.099 per share valued at $1,248,750 for consulting services
On June 26, 2020, the company issued 10,000,000 shares to its Chief Executive Officer Julia Otey -Raud es for $0.026 per share valued at $260,000 for compensation
On June 26, 2020, the company issued 25,000,000 shares to Bellagio IP Trust for $0.026 per share valued at $650,000 for services in development of the Power Booster technology.
On June 26, 2020, the company issued 600,000 shares to Tabular Investments, LLC for $0.125 per share valued at $75,000 for services.
NOTE 6. RELATED PARTY TRANSACTIONS
On March 1, 2016, the Company executed two convertible notes of $4,902 each with former executives of the Company. These notes are each convertible into 50,000,000 shares of common stock. These notes are non-interest bearing. On October 14, 2019, one of these notes converted into common stock.
The Company has a $12,500 loan due to Robert L. Hymers III. The loan bears interest at 10% per annum and is convertible to 5,000,000 shares with a 4.99% equity blocker upon demand. The Company also has a $21,000 loan to Robert L. Hymers III which bears interest at 10% and is convertible at an exercise price of 65% of the lowest traded price of the Company’s stock for the 15 days prior to conversion. The Company also has a $40,000 loan due to Robert L. Hymers III which bears interest at 10% and is convertible at an exercise price of 65% of the lowest traded price of the Company’s stock for the 15 days prior to conversion.
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NOTE 7. CONVERTIBLE NOTES
On December 9, 2019, the Company executed a convertible note with Pinnacle Consulting Services Inc. for $40,000 which matured on June, 9, 2020. This note bears interest at 5% per annum, which is convertible into shares of the Company’s common stock.
The Note is convertible (in whole or in part), at the option of the Holder, into such number of fully paid and non-assessable shares of common stock as is determined by dividing that portion of the outstanding principal balance under this Note by the Conversion Price, which is a 35% discount of the lowest reported sale price of the common stock for the 15 trading days immediately prior to the date of conversion.
In May 2016, a consultant was awarded the right to receive 100,000,000 shares of common stock. In May 2018, this right was assigned to Heritage Funding, Inc. and John English equally in exchange for $9,9038 to be paid by the Company. The promissory note was convertible into 100,000,000 shares of common stock at a fixed price of $0.0009. In October 2019, Heritage Funding entered into a private transaction to sell the right to 45,000,000 of its 50,000,000 shares to Blue Ridge Enterprises. Also, in October 2019, Blue Ridge Enterprises and Heritage Funding converted principal into 45,000,000 and 5,000,000 shares of common stock, respectively. In May 2020, Robert L. Hymers purchased half of the remaining convertible promissory note and its related conversion rights from John English in a private transaction. In May 2020, John English converted principal of $2,451 into 25,000,000 shares of common stock. The remaining principal balance owed to Robert L. Hymers of $2,451 is convertible into 25,000,000 shares of stock at June 30, 2020.
On May 12, 2020, the Company executed a convertible note with Pinnacle Consulting Services Inc. for $12,500 due on May 12, 2021. This note bears interest at 10% per annum and is convertible (in whole or in part), at the option of the Holder, into such number of fully paid and non-assessable shares of common stock as is determined by dividing that portion of the outstanding principal balance under this Note by the Conversion Price, which is fixed at $0.0025 per share.
On June 30, 2020, the Company executed a convertible note with Pinnacle Consulting Services Inc. for $21,000 due on June 30, 2021. This note bears interest at 10% per annum and is convertible (in whole or in part), at the option of the Holder, into such number of fully paid and non-assessable shares of common stock as is determined by dividing that portion of the outstanding principal balance under this Note by the Conversion Price, which is a 35% discount of the lowest reported sale price of the common stock for the 15 trading days immediately prior to the date of conversion.
The Company determined that the conversion options in the certain of the notes discussed above met the definition of a liability in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity’s Own Stock. The Company bifurcated the embedded conversion option in the note once the note becomes convertible and account for it as a derivative liability.
During the year ended December 31, 2019, the Company valued the conversion features using the Black Scholes valuation model and recognized a new derivative liability with a f air value of $60,658, and a beneficial conversion feature of $21,538 recognized as debt discount. During the six months ended June 30, 2020, the f air value of new derivative liabilities on the new issuance of debt amounted to $33,336 upon inception, with a beneficial conversion feature of $12,342 recognized. The Derivative liability had a f air value of $85,494 as of June 30, 2020 The Company recognized a loss on the change in f air value of the derivative liability of $39,629 during the six months ended June 30, 2020. The Black Scholes valuation model included inputs of volatility of between 400% and 739%, a dividend yield of 0%, risk free rate of 0.16%-0.18% and a term of between 0.5 years and one year.
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As of June 30, 2020, and December 31, 2019, unamortized debt discount was $23,164 and $18,125, respectively. During the six months ended June 30, 2020, the Company amortized debt discount of $19,803 to interest expense. Accrued interest on convertible notes was $1,324 as of June 30, 2020.
NOTE 8. SUBSEQUENT EVENTS
On August 6, 2020, the Company amended its articles of incorporation with an effective date of July 23, 2020, to create a new class of preferred stock, designated the “Series B Convertible Pref erred Stock” and to rename the existing preferred stock as the “Series A Convertible Pref erred Stock”. As a result, the Company has two classes of shares of preferred stock, designated “Series A Convertible Pref erred Stock” and “Series B Convertible Pref erred Stock”. The Company has designated 49,000,000 shares of Series A Convertible Pref erred Stock, of which 30,000,000 shares have been issued and are outstanding. Holders of Series A Convertible Pref erred Stock hold rights to vote on all matter requiring a Stockholder vote at 100 common shares vote equivalent for each share of Series A Convertible Pref erred Stock held. As of the date of this filing, our CEO, CFO, board chair and sole director, Julia Otey-Raudes, is the sole holder of the 30,000,000 Series A Convertible Pref erred Stock outstanding. As of August 24, 2020, the filing date of this Prospectus, there are no shares of Series B Convertible Pref erred Stock issued or outstanding.
On June 29, 2020, the Company executed a stock purchase agreement with Pinnacle Consulting Services, Inc., whereby the Company sold 4,000,000 shares of the Company’s common stock at a price of $0.05 per share, in exchange for a cash payment of $20,000.00, received on August 14, 2020. According to the stock purchase agreement, the issuance of the shares must take place within 5 days from performance, or no later than August 19, 2020. Pursuant to the stock purchase agreement, the common shares have registration rights.
On August 25, 2020, the Company signed a Master Outsourcing Contract Manufacturing Agreement with Eco-Gen, pursuant to which the Company, as Manufacturer, will produce products for Eco-Gen, as Buyer. The Master Outsourcing Contract Manufacturing Agreement with Eco-Gen is a related party transaction insofar as our CEO and controlling Stockholder, Julia Otey-Raudes, is a director of Eco-Gen.
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WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a Registration Statement on Form S-1 under the Securities Act, and the rules and regulations promulgated thereunder, with respect to the common stock offered hereby. This Prospectus, which constitutes a part of the Registration Statement, does not contain all of the information set forth in the Registration Statement and the exhibits thereto. While we have summarized the material terms of all agreements and exhibits included in the scope of this Registration Statement, for further information regarding the terms and conditions of any exhibit, reference is made to such exhibits. Upon effectiveness of this Prospectus, we will be subject to the reporting and other requirements of Section 15(d) of the Securities Exchange Act of 1934 and will file periodic reports with the Securities and Exchange Commission, including a Form 10-K for the year ended December 31, 2020 and periodic reports on Form 10-Q during that period, if applicable. We will make available to our Stockholders annual reports containing financial statements audited by our independent auditors and our quarterly reports containing unaudited financial statements for each of the first three quarters of each year; however, we will not send the annual report to our Stockholders unless requested by an individual Stockholder.
For further information with respect to us and the common stock, reference is hereby made to the Registration Statement and the exhibits thereto, which may be inspected and copied at the principal office of the SEC, 100 F Street NE, Washington, D.C. 20549, and copies of all or any part thereof may be obtained at prescribed rates from the Commission’s Public Reference Section at such addresses. Also, the SEC maintains a website at http://www.sec.gov that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. To request such materials, please contact Julia Otey-Raudes, our Chief Executive Officer.
PROSPECTUS
Eco Innovation Group, Inc.
16525 Sherman Way, Suite C-1
VAN NUYS, CA 91406
(747-224-2453)
50,000,000 SHARES OF COMMON STOCK
DEALER PROSPECTUS DELIVERY OBLIGATION
Until February 28, 2021, all dealers that effect transactions in these securities, whether or not participating in this Offering, may be required to deliver a Prospectus. This is in addition to the dealers’ obligation to deliver a Prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
September 18, 2020
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses payable by us in connection with the issuance and distribution of the securities being registered hereunder. The Selling Stockholder will bear no expenses associated with this offering except for any broker discounts and commissions or equivalent expenses and expenses of the Selling Stockholder’s legal counsel applicable to the sale of its Shares. All of the amounts shown are estimates, except for the SEC registration fees.
Item | Amount to be paid | |||
SEC registration fee | $ | 519.20 | ||
Legal fees and expenses | $ | 2,500.00 | ||
Accounting fees and expenses | $ | 3,000.00 | ||
Miscellaneous fees and expenses | $ | 0 | ||
Total | $ | 6,019.20 |
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our Articles of Incorporation provide that we shall indemnify our directors and officers to the fullest extent permitted by Nevada law and that none of our directors will be personally liable to the Company or its Stockholders for monetary damages for breach of fiduciary duty as a director, except for liability:
· | for any breach of the director’s duty of loyalty to the Company or its Stockholders; | |
· | for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of the law; | |
· | under Nevada General Corporation Law for the unlawful payment of dividends; or | |
· | for any transaction from which the director derives an improper personal benefit. |
These provisions require us to indemnify our directors and officers unless restricted by Nevada law and eliminate our rights and those of our Stockholders to recover monetary damages from a director for breach of his or her fiduciary duty of care as a director except in the situations described above. The limitations summarized above, however, do not affect our ability or that of our Stockholders to seek non-monetary remedies, such as an injunction or rescission, against a director for breach of his or her fiduciary duty.
To the extent that our directors and officers are indemnified under the provisions contained in our bylaws, Nevada law or contractual arrangements against liabilities arising under the Securities Act, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Shares of common stock
Except as otherwise noted, the securities in these transactions were sold in reliance on the exemption from registration provided in Section 4(a)(2) of the Securities Act for transactions not involving any public offering. Each of the persons acquiring the foregoing securities was an accredited investor (as defined in Rule 501(a) of Regulation D) and confirmed the foregoing and acknowledged, in writing, that the securities must be acquired and held for investment. All certificates evidencing the shares sold bore a restrictive legend. The Company took reasonable steps to verify that the investors were accredited investors. No underwriter participated in the offer and sale of these securities, and no commission or other remuneration was paid or given directly or indirectly in connection therewith.
The proceeds from these sales were used for general corporate purposes.
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ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
Exhibit Index
Exhibit No. | Description | |
3.1 | Articles of Incorporation (incorporated by reference from our Registration Statement on Form S-1 filed on September 17, 2020) | |
3.2 | Certificate of Amendment to Articles of Incorporation (incorporated by reference from our Registration Statement on Form S-1 filed on September 17, 2020) | |
3.3 | Certificate of Amendment to Articles of Incorporation (incorporated by reference from our Registration Statement on Form S-1 filed on September 17, 2020) | |
3.4 | Bylaws (incorporated by reference from our Registration Statement on Form S-1 filed on September 17, 2020). | |
4.1 | Reference is made to Exhibits 3.1 to 3.4 (incorporated by reference from our Registration Statement on Form S-1 filed on September 17, 2020) | |
4.2 | Debt Purchase Agreement, dated May 10, 2018, by and between John English and Robert L. Hymers, III (incorporated by reference from our Registration Statement on Form S-1 filed on September 17, 2020) | |
4.3 | Convertible Promissory Note, dated December 2, 2019, issued to Pinnacle Consulting Services, Inc. (incorporated by reference from our Registration Statement on Form S-1 filed on September 17, 2020) | |
4.4 | Convertible Promissory Note, dated May 12, 2020, issued to Pinnacle Consulting Services, Inc. (incorporated by reference from our Registration Statement on Form S-1 filed on September 17, 2020) | |
4.5 | Convertible Promissory Note, dated June 30, 2020, issued Pinnacle Consulting Services, Inc. (incorporated by reference from our Registration Statement on Form S-1 filed on September 17, 2020) | |
5.1* | Opinion of Independent Law PLLC | |
10.1 | Master Outsourcing Contract Manufacturing Agreement, dated August 25, 2020, between Eco Innovation Group, Inc., as Manufacturer, and Eco-Gen Energy, Inc., as Buyer (incorporated by reference from our Registration Statement on Form S-1 filed on September 17, 2020) | |
10.2 | Master Exclusive Licensing, Marketing, Distribution and Sales Agreement, dated June 16, 2020 between Bellagio IP Trust and Eco Innovation Group, Inc. (incorporated by reference from our Registration Statement on Form S-1 filed on September 17, 2020) | |
10.3 | Consulting Agreement, dated December 2, 2019, by and between Eco Innovation Group, Inc. and Pinnacle Consulting Services, Inc. (incorporated by reference from our Registration Statement on Form S-1 filed on September 17, 2020) | |
10.4 | Independent Consulting Agreement, dated June 20, 2020, by and between Eco Innovation Group, Inc. and Pinnacle Consulting Services, Inc., as Consultant (incorporated by reference from our Registration Statement on Form S-1 filed on September 17, 2020) | |
10.5 | Preferred Stock Purchase Agreement, dated February 12, 2020, by and between John English and Heritage Funding, Inc., as Sellers, and Julia Otey as Purchaser (incorporated by reference from our Registration Statement on Form S-1 filed on September 17, 2020) | |
10.6 | Stock Purchase Agreement, dated October 10, 2019, by and between Heritage Funding, Inc., as Seller, and John English, as Buyer (incorporated by reference from our Registration Statement on Form S-1 filed on September 17, 2020) | |
10.7 | Stock Purchase Agreement, dated February 12, 2020, by and between Blue Ridge Enterprises, LLC, as Seller, and Eco-Gen Energy, Inc., as Buyer (incorporated by reference from our Registration Statement on Form S-1 filed on September 17, 2020) | |
10.8 | Resignation Letter of John English, dated February 12, 2020 (incorporated by reference from our Registration Statement on Form S-1 filed on September 17, 2020) | |
10.9 | Lock-up and Leak-out Agreement, dated June 19, 2020, by and between John English and Eco Innovation Group, Inc. (incorporated by reference from our Registration Statement on Form S-1 filed on September 17, 2020) | |
10.10 | Executive Employment Agreement, dated May 1, 2020, by and between Julia Otey-Raudes and Eco Innovation Group, Inc. (incorporated by reference from our Registration Statement on Form S-1 filed on September 17, 2020) | |
10.11 | Independent Consulting Agreement, dated June 20, 2020, by and between Tabular Investments, LLC, as Consultant, and Eco Innovation Group, Inc. (incorporated by reference from our Registration Statement on Form S-1 filed on September 17, 2020) | |
23.1* | Consent of Boyle CPA, LLC | |
23.2* | Consent of Independent Law PLLC (included in Exhibit 5.1) | |
* Filed herewith. ** In accordance with Rule 406T of Regulation S-T, this information is deemed not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. |
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ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1.) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i.) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;
(ii.) To reflect in the Prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and
(iii.) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
(2.) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof;
(3.) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; and
(4.) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
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(5.) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a Direct Public Offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i.) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii.) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii.) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv.) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Van Nuys, State of California, on September 18, 2020.
By: | /s/ Julia Otey-Raudes | |
Julia Otey-Raudes | ||
Chief Executive Officer and Chief Financial Officer | ||
(Principal Executive and Financial Officer) |
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POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Julia Otey-Raudes as his or her true and lawful attorney-in-fact and agent with full power of substitution, for him or her in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments or any abbreviated registration statement and any amendments thereto filed pursuant to Rule 462(b) under the Securities Act of 1933 increasing the number of securities for which registration is sought), and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact, proxy, and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact, proxy and agent, or his substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following person in the capacities and on the dates indicated.
Signature | Title | Date | ||
/s/ Julia Otey-Raudes
| Chief Executive Officer, Chief Financial Officer and Chairperson (Principal Executive and Financial Officer) | September 18, 2020 |
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