SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2012
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______.
Commission File Number: 000-53104
ONTECO CORPORATION
(Exact name of registrant as specified in its charter)
Nevada | | 90-0335743 |
(State or other jurisdiction of incorporation or organization) | | (IRS Employer Identification No.) |
| | |
19495 Biscayne Blvd., Suite 411 Aventura, FL | | 33180 |
(Address of principal executive offices) | | (Zip Code) |
(305) 932-9795
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act:
Large accelerated Filer | o | Accelerated Filer | o |
Non-accelerated Filer | o | Smaller reporting company | x |
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes o No x
As of as of August 14, 2012 the registrant had 216,987,385 shares of its Common Stock, $0.001 par value, outstanding.
ONTECO CORPORATION AND SUBSIDIARY
FORM 10-Q
JUNE 30, 2012
INDEX
PART I – FINANCIAL INFORMATION | | | |
| | | | |
Item 1. | Financial Statements | | | 3 | |
| Consolidated Balance Sheets as of June 30, 2012 (unaudited) and December 31, 2011 | | | 3 | |
| Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2012 and 2011and for the period December 31, 2007 (Inception) to June 30, 2012 (unaudited) | | | 4 | |
| Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2012 and 2011 and for the period December 31, 2007 (Inception) to June 30, 2012 (unaudited) | | | 5 | |
| Notes to Consolidated Financial Statements (unaudited) | | | 7 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | | | 32 | |
Item 3 | Quantitative and Qualitative Disclosures About Market Risk | | | 37 | |
Item 4. | Controls and Procedures | | | 37 | |
| | | | | |
PART II – OTHER INFORMATION | | | | |
| | | | | |
Item 1. | Legal Proceedings | | | 38 | |
Item 1.A. | Risk Factors | | | 38 | |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | | | 38 | |
Item 3. | Defaults Upon Senior Securities | | | 39 | |
Item 4. | Mine Safety Disclosures | | | 39 | |
Item 5. | Other Information | | | 39 | |
Item 6. | Exhibits | | | 40 | |
| | | | | |
SIGNATURES | | | 41 | |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
ONTECO CORPORATION AND SUBSIDIARY |
(A Development Stage Company) |
Consolidated Balance Sheets |
|
| | June 30, | | | December 31, | |
| | 2012 | | | 2011 | |
| | (unaudited) | | | | |
| | | | | | |
ASSETS |
| | | | | | |
Current assets: | | | | | | |
Cash in banks | | $ | 2,368 | | | $ | 41,804 | |
Accounts receivable | | | - | | | | 2,251 | |
Due from licensee | | | 2,877,890 | | | | - | |
Inventories | | | 79,345 | | | | 74,947 | |
| | | | | | | | |
Total current assets | | | 2,959,603 | | | | 119,002 | |
| | | | | | | | |
Fixed assets: | | | | | | | | |
Property and equipment, net | | | 96,095 | | | | 103,844 | |
| | | | | | | | |
Other assets: | | | | | | | | |
Security deposits | | | 11,709 | | | | 11,709 | |
Intellectual property | | | 2,989,149 | | | | 2,989,149 | |
| | | | | | | | |
Total other assets | | | 3,000,858 | | | | 3,000,858 | |
| | | | | | | | |
Total assets | | $ | 6,056,556 | | | $ | 3,223,704 | |
| | | | | | | | |
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
| | | | | | | | |
Current liabilities: | | | | | | | | |
Accounts payable | | $ | 56,118 | | | $ | 112,046 | |
Accrued interest | | | 88,935 | | | | 65,011 | |
Accrued employee compensation | | | 578,000 | | | | 538,000 | |
Sales tax payable | | | 2,678 | | | | 2,678 | |
Deferred license fee revenue, current | | | 411,128 | | | | - | |
Advances from non-affiliated related parties | | | 23,990 | | | | 1,100 | |
Notes payable, non-affiliated related parties | | | 553,272 | | | | 572,820 | |
Notes payable, third parties | | | 176,195 | | | | 229,545 | |
Total current liabilities | | | 1,890,316 | | | | 1,521,200 | |
| | | | | | | | |
Deferred license fee revenue, non-current | | | 2,398,241 | | | | - | |
| | | | | | | | |
Total liabilities | | | 4,288,557 | | | | 1,521,200 | |
| | | | | | | | |
Commitments and contingencies (Note 10) | | | - | | | | - | |
| | | | | | | | |
Stockholders' equity (deficit): | | | | | | | | |
Preferred stock $.001 par value 10,000,000 and 100,000,000 shares authorized, | | | | | | | | |
Series A preferred stock, 150,000 shares issued and outstanding | | | | | | | | |
at June 30, 2012 andDecember 31, 2011, respectively | | | 150 | | | | 150 | |
Series B preferred stock, nil shares issued and outstanding | | | | | | | | |
at June 30, 2012 and December 31, 2011, respectively | | | - | | | | - | |
Common stock $.001 par value 300,000,000 and 2,000,000,000 shares authorized, | | | | | | | | |
151,457,629 and 923,444 shares issued and 151,457,385 and 923,200 | | | | | | | | |
shares outstanding at June 30, 2012 and December 31, 2011, respectively | | | 151,457 | | | | 923 | |
Additional paid-in capital | | | 5,562,881 | | | | 4,353,363 | |
Treasury stock, at cost (244 shares) | | | (61,000 | ) | | | (61,000 | ) |
Deficit accumulated during the development stage | | | (3,885,489 | ) | | | (2,590,932 | ) |
Total stockholders' equity (deficit) | | | 1,767,999 | | | | 1,702,504 | |
| | | | | | | | |
Total liabilities and stockholders' equity (deficit) | | $ | 6,056,556 | | | $ | 3,223,704 | |
See accompanying notes to consolidated financial statements.
ONTECO CORPORATION AND SUBSIDIARY |
(A Development Stage Company) |
Consolidated Statements of Operations |
(unaudited) |
| | | | | | | | | | | | | | For the Period | |
| | | | | | | | | | | | | | December 31, 2007 | |
| | For the Three Months Ended | | | For the Six Months Ended | | | (Inception) to | |
| | June 30, | | | June 30, | | | June 30, | | | June 30, | | | June 30, | |
| | 2012 | | | 2011 | | | 2012 | | | 2011 | | | 2012 | |
| | | | | | | | | | | | | | | |
Revenue | | $ | 68,521 | | | $ | 34,271 | | | $ | 68,521 | | | $ | 79,437 | | | $ | 448,737 | |
| | | | | | | | | | | | | | | | | | | | |
Cost of goods sold | | | - | | | | 25,704 | | | | 828 | | | | 36,010 | | | | 188,590 | |
| | | | | | | | | | | | | | | | | | | | |
Gross profit | | | 68,521 | | | | 8,567 | | | | 67,693 | | | | 43,427 | | | | 260,147 | |
| | | | | | | | | | | | | | | | | | | | |
Operating expenses: | | | | | | | | | | | | | | | | | | | | |
General and administrative | | | 7,176 | | | | 21,760 | | | | 49,346 | | | | 52,058 | | | | 344,765 | |
Investor relations | | | - | | | | 63,834 | | | | - | | | | - | | | | 145,512 | |
Occupancy - Headquarters | | | 13,619 | | | | 19,161 | | | | 26,560 | | | | 34,179 | | | | 104,466 | |
Officer compensation | | | 45,000 | | | | 36,500 | | | | 108,000 | | | | 73,000 | | | | 721,676 | |
Professional fees | | | 40,802 | | | | 27,698 | | | | 47,002 | | | | 64,253 | | | | 196,957 | |
Staff compensation | | | 10,147 | | | | 104,920 | | | | 46,515 | | | | 202,670 | | | | 468,163 | |
Stock-based compensation | | | - | | | | - | | | | - | | | | 118,012 | | | | 405,205 | |
Depreciation | | | 5,971 | | | | 2,521 | | | | 13,899 | | | | 4,935 | | | | 23,768 | |
Total operating expenses | | | 122,715 | | | | 276,394 | | | | 291,322 | | | | 549,107 | | | | 2,410,512 | |
| | | | | | | | | | | | | | | | | | | | |
Loss from operations | | | (54,194 | ) | | | (267,827 | ) | | | (223,629 | ) | | | (505,680 | ) | | | (2,150,365 | ) |
| | | | | | | | | | | | | | | | | | | | |
Other expenses: | | | | | | | | | | | | | | | | | | | | |
Loss on dispotion of assets | | | | | | | | | | | - | | | | | | | | 567 | |
Loss on settlement of debt (Note 8) | | | 87,000 | | | | - | | | | 638,000 | | | | - | | | | 638,000 | |
Interest expense | | | 172,207 | | | | 25,956 | | | | 432,928 | | | | 52,249 | | | | 1,067,957 | |
Write-off of project development costs | | | - | | | | 27,600 | | | | - | | | | 27,600 | | | | 27,600 | |
Write-off of amount due from other | | | - | | | | - | | | | - | | | | - | | | | 1,000 | |
Total other expenses | | | 259,207 | | | | 53,556 | | | | 1,070,928 | | | | 79,849 | | | | 1,735,124 | |
| | | | | | | | | | | | | | | | | | | | |
Net loss | | $ | (313,401 | ) | | $ | (321,383 | ) | | $ | (1,294,557 | ) | | $ | (585,529 | ) | | $ | (3,885,489 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net loss per share - Basic and diluted | | $ | (0.00 | ) | | $ | (1.48 | ) | | $ | (0.01 | ) | | $ | (3.16 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | |
Weighted average number of shares | | | | | | | | | | | | | | | | | | | | |
oustanding during the period - | | | | | | | | | | | | | | | | | | | | |
Basic and diluted | | | 129,492,668 | | | | 216,954 | | | | 91,288,942 | | | | 185,442 | | | | | |
See accompanying notes to consolidated financial statements.
ONTECO CORPORATION AND SUBSIDIARY |
(A Development Stage Company) |
Consolidated Statements of Cash Flows |
(unaudited) |
| | | | | | | | For the Period | |
| | | | | | | | December 31, 2007 | |
| | For the Six Months Ended | | | (Inception) to | |
| | June 30, | | | June 30, | | | June 30, | |
| | 2012 | | | 2011 | | | 2012 | |
| | | | | | | | | |
Cash flows used in operating activities: | | | | | | | | | |
Net loss | | $ | (1,294,557 | ) | | $ | (585,529 | ) | | $ | (3,885,489 | ) |
Adjustments to reconcile net loss to net cash used in operations: | | | | | | | | | | | | |
License fee revenue realized | | | (68,521 | ) | | | - | | | | (68,521 | ) |
Depreciation | | | 13,899 | | | | 4,935 | | | | 23,768 | |
Loss on settlement of debt | | | 638,000 | | | | - | | | | 638,000 | |
Stock-based compensation | | | - | | | | - | | | | 170,055 | |
Stock issued for services | | | - | | | | - | | | | 315,834 | |
Cancellation of stock issued for services | | | - | | | | - | | | | (84,000 | ) |
Write-off of project development costs | | | - | | | | 27,600 | | | | 27,600 | |
Loss on disposition of software | | | - | | | | - | | | | 567 | |
Interest accrued on notes payable, non-affiliated related parties | | | 31,905 | | | | 45,645 | | | | 128,660 | |
Interest accrued on notes payable, third parties | | | 8,819 | | | | - | | | | 21,171 | |
Accretion of beneficial conversion feature as interest expense | | | 369,519 | | | | - | | | | 907,188 | |
Changes in operating assets and liabilities: | | | | | | | | | | | | |
Accounts receivable | | | 2,251 | | | | (37,500 | ) | | | - | |
Inventories | | | (4,398 | ) | | | (7,500 | ) | | | (79,345 | ) |
Prepaid expenses | | | - | | | | (541 | ) | | | - | |
Security deposits | | | - | | | | (7,589 | ) | | | (7,589 | ) |
Accounts payable | | | (55,928 | ) | | | 1,043 | | | | 55,569 | |
Sales tax payable | | | - | | | | 2,678 | | | | 2,678 | |
Accrued compensation | | | 90,000 | | | | 90,000 | | | | 628,000 | |
Net cash used in operating activities | | | (269,011 | ) | | | (466,758 | ) | | | (1,205,854 | ) |
| | | | | | | | | | | | |
Cash flows used in investing activities: | | | | | | | | | | | | |
Net cash received from acquisition | | | - | | | | - | | | | 14,942 | |
Purchase of property and equipment | | | (6,150 | ) | | | (12,201 | ) | | | (86,412 | ) |
Project development costs | | | - | | | | - | | | | (27,600 | ) |
Net cash used in investing activities | | | (6,150 | ) | | | (12,201 | ) | | | (99,070 | ) |
| | | | | | | | | | | | |
Cash flows from financing activities: | | | | | | | | | | | | |
Proceeds from issuance of note payable, non-affiliated related parties | | | 82,650 | | | | 488,434 | | | | 846,105 | |
Payments on notes payable, non-affiliated related parties | | | (14,000 | ) | | | - | | | | (40,655 | ) |
Proceeds from issuance of notes payable, third parties | | | 196,500 | | | | - | | | | 524,600 | |
Payments on notes payable, third parties | | | (52,315 | ) | | | - | | | | (52,315 | ) |
Advances from non-affiliated related parties, net | | | 22,890 | | | | - | | | | 23,990 | |
Proceeds from sale of common stock | | | - | | | | - | | | | 5,567 | |
Net cash provided by financing activities | | | 235,725 | | | | 488,434 | | | | 1,307,292 | |
| | | | | | | | | | | | |
Net increase (decrease) in cash | | | (39,436 | ) | | | 9,475 | | | | 2,368 | |
| | | | | | | | | | | | |
Cash at beginning of period | | | 41,804 | | | | 77,370 | | | | - | |
| | | | | | | | | | | | |
Cash at end of period | | $ | 2,368 | | | $ | 86,845 | | | $ | 2,368 | |
See accompanying notes to consolidated financial statements.
ONTECO CORPORATION AND SUBSIDIARY |
(A Development Stage Company) |
Statements of Cash Flows (Continued) |
(unaudited) |
| | | | | | | | For the Period | |
| | | | | | | | December 31, 2007 | |
| | | | | | | | (Inception of | |
| | For the Six Months Ended | | | Exploration Stage) to | |
| | June 30, | | | June 30, | | | June 30, | |
| | 2012 | | | 2011 | | | 2012 | |
| | | | | | | | | |
Supplemental disclosure of cash flow information: | | | | | | | | | |
| | | | | | | | | |
Cash paid for interest | | $ | - | | | $ | - | | | $ | - | |
| | | | | | | | | | | | |
Cash paid for taxes | | $ | - | | | $ | - | | | $ | - | |
| | | | | | | | | | | | |
Non-cash investing and financing activities: | | | | | | | | | | | | |
| | | | | | | | | | | | |
Conversion of note payable, related parties to common stock | | $ | (238,400 | ) | | $ | - | | | $ | (392,616 | ) |
Conversion of accrued interest, related parties to common stock | | | (4,100 | ) | | | | | | | (22,100 | ) |
Common stock issued | | | 88,600 | | | | - | | | | 104,148 | |
Additional paid in capital on stock issued | | | 153,900 | | | | - | | | | 310,568 | |
| | | | | | | | | | | | |
Conversion of note payable, third parties to common stock | | | (158,700 | ) | | | - | | | | (417,624 | ) |
Conversion of accrued interest, third parties to common stock | | | (10,385 | ) | | | - | | | | (15,785 | ) |
Common stock issued | | | 11,934 | | | | - | | | | 12,415 | |
Additional paid in capital on stock issued | | | 157,151 | | | | - | | | | 420,994 | |
| | | | | | | | | | | | |
Benefical conversion feature discount to notes payable, related parties | | | (82,642 | ) | | | - | | | | (561,965 | ) |
Benefical conversion feature discount to notes payable, third parties | | | (177,825 | ) | | | - | | | | (508,942 | ) |
Additional paid in capital | | | 260,467 | | | | - | | | | 1,070,907 | |
| | | | | | | | | | | | |
Conversion of accrued compensation to common stock | | | (50,000 | ) | | | - | | | | (50,000 | ) |
Common stock issued | | | 50,000 | | | | - | | | | 50,000 | |
| | | | | | | | | | | | |
Due from licensee for licene fee | | | (2,877,890 | ) | | | - | | | | (2,877,890 | ) |
Deferred license fee revenue | | | 2,877,890 | | | | - | | | | 2,877,890 | |
| | | | | | | | | | | | |
Conversion of notes payable, related parties to notes payable, third parties: | | | | | | | | | |
Notes payable, related parties | | | - | | | | (118,000 | ) | | | (218,092 | ) |
Accrued interest | | | - | | | | - | | | | (26,022 | ) |
Notes payable, third parties | | | - | | | | 118,000 | | | | 244,114 | |
| | | | | | | | | | | | |
Net assets acquired in acquisition of NexPhase Lighting | | | - | | | | - | | | | (2,700,000 | ) |
Common stock issued | | | - | | | | - | | | | 67,500 | |
Additional paid in capital on stock issued | | | - | | | | - | | | | 2,632,500 | |
| | | | | | | | | | | | |
244,000 shares of stock acquired and placed in treasury | | | - | | | | (61,000 | ) | | | (61,000 | ) |
Issuance of notes payable to former investors in NexPhase | | | - | | | | 61,000 | | | | 61,000 | |
See accompanying notes to consolidated financial statements.
ONTECO CORPORATION
(ADevelopment Stage Company)
Notes to Consolidated Financial Statements
June 30, 2012
(unaudited)
Note 1 – Nature of Business, Presentation, and Going Concern
Organization
Onteco Corporation ("the Company") was organized under the laws of the State of Nevada on December 31, 2007. The Company was established as part of the implementation of the Chapter 11 plan of reorganization of Arrin Systems, Inc. ("Arrin"). Arrin filed for Chapter 11 Bankruptcy in April 2007 in the U.S. Bankruptcy Court for the Southern District of California. Arrin’s plan of reorganization was confirmed by the Court on December 12, 2007 and became effective on December 30, 2007. The plan of reorganization provided for the establishment of the Issuer and the sale to the Issuer of Arrin’s proprietary software (used in the employee background screening industry) in exchange for 568 shares of InfoSpi’s common stock which were distributed to Arrin’s general unsecured creditors.
At that time, management believed the Company lacked the resources to effectively market its services on its own and therefore engaged in a search for a merger or acquisition partner with the resources to either develop this business or enter another line of business which will bring value to the Issuer's shareholders.
The Company was founded to develop innovative, practical and cost-effective solutions to some of the most significant environmental challenges facing industries and governments around the world. Additionally, these solutions must show promise of generating profits for the company. Specifically the company has determined that one industry that meets both of the above-mentioned prongs of criteria is the Energy Saving Lighting Industry.
Effective on February 14, 2011, the Board of Directors of the Company approved and authorized the execution of a definitive agreement dated February 14, 2011 (the “Agreement”) among the Company, NexPhase Lighting, Inc., a privately held Florida corporation (“NexPhase”)., and the shareholders of NexPhase (the “NexPhase Shareholders”). In accordance with the terms and provisions of the Agreement: (i) the Company acquired from the NexPhase Shareholders an aggregate 55,622,000 shares of common stock of NexPhase representing the total issued and outstanding shares of NexPhase; (ii) in exchange thereof, the Company issued to the NexPhase Shareholders an aggregate 67,500 shares of its restricted common stock generally in proportion to the equity holdings of the NexPhase Shareholders; (iii) NexPhase transferred and assigned to the Company all existing material contracts including those related to distribution, licensing and marketing and those dealing with the grant of rights for the use of any and all intellectual property; (iv) the Company assumed all other assets of NexPhase, including licenses, royalty rights, equipment, product designs, marketing and sale materials, logos, trademarks, copyrights and website; and (v) the Company further assumed all liabilities of NexPhase, including all trade and debt obligations. Therefore, as of the February 14, 2011, NexPhase has become a wholly-owned subsidiary of the Company.
NexPhase is in the business of designing, developing, manufacturing and marketing a high quality and high efficiency full line of LED intelligent lighting fixtures and control systems for commercial applications and projects involving both new construction and retrofits (the “LED Lighting Fixtures”), as well as licensing its technologies to territories outside of the United States.
Stock Splits
On November 2, 2011, the Company's Board of Directors declared a one for one-thousand reverse stock split of all outstanding shares of common stock. All common share and per common share data in these consolidated financial statements and related notes hereto have been retroactively adjusted to account for the effect of the reverse stock split for all periods presented prior to November 2, 2011. The total number of authorized common shares and the par value thereof was not changed by the split.
Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) for interim financial statement presentation and in accordance with Form 10-Q. Accordingly, they do not include all of the information and footnotes required in annual financial statements. In the opinion of management, the unaudited financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position and results of operations and cash flows. All intercompany transactions and accounts have been eliminated in consolidation. The results of operations presented are not necessarily indicative of the results to be expected for any other interim period or for the entire year.
ONTECO CORPORATION
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2012
(unaudited)
Note 1 – Nature of Business, Presentation, and Going Concern (Continued)
Basis of Presentation (Continued)
These unaudited financial statements should be read in conjunction with our 2011 annual financial statements included in our Annual Report on Form 10-K/A, filed with the U.S. Securities and Exchange Commission (“SEC”) on May 21, 2012.
Development Stage Enterprise
Since its formation on December 31, 2007, the Company became a “development stage company” as defined in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) ASC Topic 915 “Development Stage Entities”. To date, the Company's planned principal operations have not fully commenced.
Going Concern
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. The Company has incurred a net loss of $1,294,557 for the six months ended June 30, 2012 and has incurred cumulative losses since inception of $3,885,489. These factors raise substantial doubt about the ability of the Company to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to generate revenues, its ability to continue to raise investment capital, and to implement its business plan. No assurance can be given that the Company will be successful in these efforts.
The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern.
Note 2 – Project Development Costs
On January 15, 2010 the Company engaged an engineering firm to design, plan and supervise the development of proprietary “critical reactor” equipment to be used in environmentally friendly sewer and sludge conversion and used tire and plastic recovery. The initial cost of this project, in the amount of $27,600 was capitalized pending the results of the Company’s efforts to commercialize this technology. On June 30, 2011, Management determined that although the critical reactor project was commercially feasible, it was in the best interest of the company to commit all future funding to the NexPhase Lighting subsidiary. Therefore, on June 30, 2011, the project development cost in the amount of $27,600 was written off.
ONTECO CORPORATION
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2012
(unaudited)
Note 3 – Notes Payable – Non-affiliated Related Parties
| | June 30, 2012 | | | December 31, 2011 | |
| | | | | | | | Principal, | | | | | | | | | Principal, | |
| | | | | Unamortized | | | net of | | | | | | Unamortized | | | net of | |
| | Principal | | | Discount | | | Discounts | | | Principal | | | Discount | | | Discounts | |
Notes Payable -- Related Parties - Onteco | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
On February 10, 2010 the Company entered into a convertible promissory note with a web designer for services rendered in the amount of $3,150. Terms include bonus interest of $315, the note is payable on demand and has no stated interest rate or due date. On January 3, 2011 the parties amended the terms and conditions of the promissory note as follows: On January 5, 2011, the note was assigned from the web designer to a non-affiliated related party investment firm. The “Note Conversion Price” shall be adjusted from $0.03 to the par value of the common stock, or $0.001 per share representing 3,465,000 unregistered common shares. No payments have been made on this note. On February 25, 2011 a portion of the note in the amount of $1,316 was converted to Common Stock. The note is currently in default. | | $ | 2,149 | | | $ | - | | | $ | 2,149 | | | $ | 2,149 | | | $ | - | | | $ | 2,149 | |
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On June 7, 2010 the Company entered into a convertible promissory note with an investor in the amount of $5,000. The note is payable on demand, has no stated interest rate or due date and is convertible at a rate of $0.03. No payments have been made on this note. | | | 5,000 | | | | - | | | | 5,000 | | | | 5,000 | | | | - | | | | 5,000 | |
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On August 9, 2010 the Company entered into a convertible promissory note with an investor in the amount of $5,000. The note is payable on demand, has no stated interest rate or due date and is convertible at a rate of $0.001. No payments have been made on this note. During the six months ended June 30, 2012, a portion of the note in the amount of $5,000 was converted to Common Stock. | | | - | | | | - | | | | - | | | | 5,000 | | | | - | | | | 5,000 | |
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On August 25, 2010 the Company entered into a convertible promissory note with an investor in the amount of $4,000. The note is payable on demand, has no stated interest rate or due date and is convertible at a rate of $0.001. No payments have been made on this note. | | | 4,000 | | | | - | | | | 4,000 | | | | 4,000 | | | | - | | | | 4,000 | |
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On September 2, 2010 the Company entered into a convertible promissory note with an investor in the amount of $20,000. The note is payable on demand, has no stated interest rate or due date and is convertible at a rate of $0.001 per share. No payments have been made on this note. During the six months ended June 30, 2012, the note in the amount of $20,000 was converted to Common Stock. | | | - | | | | - | | | | - | | | | 20,000 | | | | - | | | | 20,000 | |
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On October 13, 2010 the Company entered into a convertible promissory note with an investor in the amount of $3,000. The note is payable on demand, has no stated interest rate or due date and is convertible at a rate of $0.001 per share. No payments have been made on this note. | | | 3,000 | | | | - | | | | 3,000 | | | | 3,000 | | | | - | | | | 3,000 | |
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On October 29, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $30,000. Terms include simple interest at twelve percent (12.0%), the note is due on October 29, 2011 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. The note is currently in default. During the six months ended June 30, 2012, a portion of the note in the amount of $27,000 was converted to Common Stock. | | | 3,000 | | | | - | | | | 3,000 | | | | 30,000 | | | | - | | | | 30,000 | |
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On November 4, 2010 the Company entered into a convertible promissory note with an investor in the amount of $19,600. The note is payable on demand, includes bonus interest of $1,600, has no due date and is convertible at a rate of $0.001 per share. No payments have been made on this note. | | | 19,600 | | | | - | | | | 19,600 | | | | 19,600 | | | | - | | | | 19,600 | |
ONTECO CORPORATION
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2012
(unaudited)
Note 3 – Notes Payable – Non-affiliated Related Parties (Continued)
| | June 30, 2012 | | | December 31, 2011 | |
| | | | | | | | Principal, | | | | | | | | | Principal, | |
| | | | | Unamortized | | | net of | | | | | | Unamortized | | | net of | |
| | Principal | | | Discount | | | Discounts | | | Principal | | | Discount | | | Discounts | |
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On November 8, 2010 the Company entered into a convertible promissory note with an investment firm in the amount of $5,500. Terms include bonus interest of $500, the note is payable on demand and is convertible at a rate of $0.001 per share. No payments have been made on this note. | | | 5,500 | | | | - | | | | 5,500 | | | | 5,500 | | | | - | | | | 5,500 | |
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On November 15, 2010 the Company entered into a convertible promissory note with an investor in the amount of $28,000. The note is payable on demand, has no stated interest rate or due date and is convertible at a rate of $0.001. No payments have been made on this note .During the six months ended June 30, 2012, the note in the amount of $28,000 was converted to Common Stock. | | | - | | | | - | | | | - | | | | 28,000 | | | | - | | | | 28,000 | |
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On November 30, 2010 the Company entered into a convertible promissory note with an investment firm in the amount of $9,300. Terms include bonus interest of $930, the note is payable on demand and has no stated interest rate or due date and is convertible at a rate of $0.001 per share. No payments have been made on this note. | | | 9,300 | | | | - | | | | 9,300 | | | | 9,300 | | | | - | | | | 9,300 | |
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On December 15, 2010 the Company entered into a convertible promissory note with an investment firm in the amount of $15,500. Terms include simple interest at ten percent (10.0%), the note is due on December 15, 2011 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. | | | 15,500 | | | | - | | | | 15,500 | | | | 15,500 | | | | - | | | | 15,500 | |
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On January 10, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $1,000. Terms include simple interest at ten percent (10.0%), the note is due on January 10, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. The note is currently in default. | | | 1,000 | | | | - | | | | 1,000 | | | | 1,000 | | | | (27 | ) | | | 973 | |
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On February 23, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $21,600. Terms include simple interest at ten percent (10.0%), the note is due on February 23, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. During the six months ended June 30, 2012, the note in the amount of $21,600 was converted to Common Stock. | | | - | | | | - | | | | - | | | | 21,600 | | | | (3,195 | ) | | | 18,405 | |
ONTECO CORPORATION
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2012
(unaudited)
Note 3 – Notes Payable – Non-affiliated Related Parties (Continued)
| | June 30, 2012 | | | December 31, 2011 | |
| | | | | | | | Principal, | | | | | | | | | Principal, | |
| | | | | Unamortized | | | net of | | | | | | Unamortized | | | net of | |
| | Principal | | | Discount | | | Discounts | | | Principal | | | Discount | | | Discounts | |
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On March 1, 2011 the Company entered into a convertible promissory note assigned from NexPhase in the amount of $60,000. Terms include simple interest at ten percent (10.0%), the note is due on March 1, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. As of December 31, 2011, a portion of the note in the amount of $49,000 has been converted to Common Stock. The note is currently in default. | | | 11,000 | | | | - | | | | 11,000 | | | | 11,000 | | | | (1,833 | ) | | | 9,167 | |
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On March 10, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $3,000. Terms include simple interest at ten percent (10.0%), the note is due on March 10, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. The note is currently in default. | | | 3,000 | | | | - | | | | 3,000 | | | | 3,000 | | | | (574 | ) | | | 2,426 | |
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On March 31, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $5,500. Terms include simple interest at ten percent (10.0%), the note is due on March 31, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. During the six months ended June 30, 2012, the note plus $600 of accrued interest has been converted to Common Stock. | | | - | | | | - | | | | - | | | | 5,500 | | | | (1,367 | ) | | | 4,133 | |
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On March 31, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $6,500. Terms include simple interest at ten percent (10.0%), the note is due on March 31, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. During the six months ended June 30, 2011, a portion of the note in the amount of $5,500 has been converted to Common Stock. The note is currently in default. | | | 1,000 | | | | - | | | | 1,000 | | | | 6,500 | | | | (1,616 | ) | | | 4,884 | |
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2012
(unaudited)
Note 3 – Notes Payable – Non-affiliated Related Parties (Continued)
| | June 30, 2012 | | | December 31, 2011 | |
| | | | | | | | Principal, | | | | | | | | | Principal, | |
| | | | | Unamortized | | | net of | | | | | | Unamortized | | | net of | |
| | Principal | | | Discount | | | Discounts | | | Principal | | | Discount | | | Discounts | |
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On April 14, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $17,500. Terms include simple interest at ten percent (10.0%), the note is due on April 14, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. During the six months ended June 30, 2012, a portion of the note in the amount of $11,000 was converted to Common Stock. The note is currently in default. | | | 6,500 | | | | - | | | | 6,500 | | | | 17,500 | | | | (5,020 | ) | | | 12,480 | |
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On April 15, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $27,000. Terms include simple interest at ten percent (10.0%), the note is due on April 15, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. During the six months ended June 30, 2012, a portion of the note in the amount of $25,000 was converted to Common Stock. The note is currently in default. | | | 2,000 | | | | - | | | | 2,000 | | | | 27,000 | | | | (7,819 | ) | | | 19,181 | |
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On April 18, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $1,000. Terms include simple interest at ten percent (10.0%), the note is due on April 18, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. During the six months ended June 30, 2012, the note in the amount of $1,000 was converted to Common Stock. | | | - | | | | - | | | | - | | | | 1,000 | | | | (298 | ) | | | 702 | |
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On April 18, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $2,000. Terms include simple interest at ten percent (10.0%), the note is due on April 18, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. The note is currently in default. | | | 2,000 | | | | - | | | | 2,000 | | | | 2,000 | | | | (595 | ) | | | 1,405 | |
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On April 21, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $5,000. Terms include simple interest at ten percent (10.0%), the note is due on April 21, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. The note is currently in default. | | | 5,000 | | | | - | | | | 5,000 | | | | 5,000 | | | | (1,530 | ) | | | 3,470 | |
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On April 27, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $2,500. Terms include simple interest at ten percent (10.0%), the note is due on April 27, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. The note is currently in default. | | | 2,500 | | | | - | | | | 2,500 | | | | 2,500 | | | | (806 | ) | | | 1,694 | |
ONTECO CORPORATION
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2012
(unaudited)
Note 3 – Notes Payable – Non-affiliated Related Parties (Continued)
| | June 30, 2012 | | | December 31, 2011 | |
| | | | | | | | Principal, | | | | | | | | | Principal, | |
| | | | | Unamortized | | | net of | | | | | | Unamortized | | | net of | |
| | Principal | | | Discount | | | Discounts | | | Principal | | | Discount | | | Discounts | |
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On April 28, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $2,500. Terms include simple interest at ten percent (10.0%), the note is due on April 28, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. The note is currently in default. | | | 2,500 | | | | - | | | | 2,500 | | | | 2,500 | | | | (813 | ) | | | 1,687 | |
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On May 16, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $15,000. Terms include simple interest at ten percent (10.0%), the note is due on May 16, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. The note is currently in default. | | | 15,000 | | | | - | | | | 15,000 | | | | 15,000 | | | | (5,614 | ) | | | 9,386 | |
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On June 1, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $3,000. Terms include simple interest at ten percent (10.0%), the note is due on June 1, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. The note is currently in default. | | | 3,000 | | | | - | | | | 3,000 | | | | 3,000 | | | | (1,254 | ) | | | 1,746 | |
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On June 10, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $3,000. Terms include simple interest at ten percent (10.0%), the note is due on June 10, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. The note is currently in default. | | | 3,000 | | | | - | | | | 3,000 | | | | 3,000 | | | | (1,327 | ) | | | 1,673 | |
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On June 20, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $6,500. Terms include simple interest at ten percent (10.0%), the note is due on June 20, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. The note is currently in default. | | | 6,500 | | | | - | | | | 6,500 | | | | 6,500 | | | | (3,054 | ) | | | 3,446 | |
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On June 24, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $2,000. Terms include simple interest at ten percent (10.0%), the note is due on June 24, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. The note is currently in default. | | | 2,000 | | | | - | | | | 2,000 | | | | 2,000 | | | | (961 | ) | | | 1,039 | |
ONTECO CORPORATION
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2012
(unaudited)
Note 3 – Notes Payable – Non-affiliated Related Parties (Continued)
| | June 30, 2012 | | | December 31, 2011 | |
| | | | | | | | Principal, | | | | | | | | | Principal, | |
| | | | | Unamortized | | | net of | | | | | | Unamortized | | | net of | |
| | Principal | | | Discount | | | Discounts | | | Principal | | | Discount | | | Discounts | |
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On August 4, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $15,000. Terms include simple interest at ten percent (10.0%), the note is due on August 4, 2012 and is convertible at the option of the holder at a price of $0.001 per share. No payments have been made on this note. During the six months ended June 30, 2012, a portion of the note in the amount of $14,800 was converted to Common Stock. | | | 200 | | | | (22 | ) | | | 178 | | | | 15,000 | | | | (8,893 | ) | | | 6,107 | |
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On August 4, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $20,000. Terms include simple interest at ten percent (10.0%), the note is due on August 4, 2012 and is convertible at the option of the holder at a price of $0.001 per share. No payments have been made on this note. During the six months ended June 30, 2012, a portion of the note in the amount of $18,000 was converted to Common Stock. | | | 2,000 | | | | (191 | ) | | | 1,809 | | | | 20,000 | | | | (11,857 | ) | | | 8,143 | |
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On August 18, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $2,500. Terms include simple interest at ten percent (10.0%), the note is due on August 18, 2012 and is convertible at the option of the holder at a price of $0.001 per share. No payments have been made on this note. | | | 2,500 | | | | (335 | ) | | | 2,165 | | | | 2,500 | | | | (1,577 | ) | | | 923 | |
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On September 13, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $6,000. Terms include simple interest at ten percent (10.0%), the note is due on September 13, 2012 and is convertible at the option of the holder at a price of $0.001 per share. No payments have been made on this note. | | | 6,000 | | | | (1,229 | ) | | | 4,771 | | | | 6,000 | | | | (4,212 | ) | | | 1,788 | |
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On September 22, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $1,000. Terms include simple interest at ten percent (10.0%), the note is due on September 22, 2012 and is convertible at the option of the holder at a price of $0.001 per share. No payments have been made on this note. | | | 1,000 | | | | (229 | ) | | | 771 | | | | 1,000 | | | | (726 | ) | | | 274 | |
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On September 28, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $2,000. Terms include simple interest at ten percent (10.0%), the note is due on September 28, 2012 and is convertible at the option of the holder at a price of $0.001 per share. No payments have been made on this note. | | | 2,000 | | | | (393 | ) | | | 1,607 | | | | 2,000 | | | | (1,189 | ) | | | 811 | |
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On October 6, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $5,800. Terms include simple interest at ten percent (10.0%), the note is due on October 6, 2012 and is convertible at the option of the holder at a price of $0.001 per share. No payments have been made on this note. | | | 5,800 | | | | (155 | ) | | | 5,645 | | | | 5,800 | | | | (444 | ) | | | 5,356 | |
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On October 21, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $1,700. Terms include simple interest at ten percent (10.0%), the note is due on October 21, 2012 and is convertible at the option of the holder at a price of $0.001 per share. No payments have been made on this note. | | | 1,700 | | | | (210 | ) | | | 1,490 | | | | 1,700 | | | | (548 | ) | | | 1,152 | |
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2012
(unaudited)
Note 3 – Notes Payable – Non-affiliated Related Parties (Continued)
| | June 30, 2012 | | | December 31, 2011 | |
| | | | | | | | Principal, | | | | | | | | | Principal, | |
| | | | | Unamortized | | | net of | | | | | | Unamortized | | | net of | |
| | Principal | | | Discount | | | Discounts | | | Principal | | | Discount | | | Discounts | |
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On November 23, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $2,000. Terms include simple interest at ten percent (10.0%), the note is due on November 23, 2012 and is convertible at the option of the holder at a price of $0.001 per share. No payments have been made on this note. | | | 2,000 | | | | (319 | ) | | | 1,681 | | | | 2,000 | | | | (717 | ) | | | 1,283 | |
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On December 5, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $11,500. Terms include simple interest at ten percent (10.0%), the note is due on December 5, 2012 and is convertible at the option of the holder at a price of $0.001 per share. No payments have been made on this note. | | | 11,500 | | | | (1,986 | ) | | | 9,514 | | | | 11,500 | | | | (4,273 | ) | | | 7,227 | |
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On January 20, 2012 the Company entered into a convertible promissory note with an investment firm in the amount of $17,700. Terms include simple interest at ten percent (10.0%), the note is due on demand and is convertible at the option of the holder at a price of $0.001 per share. No payments have been made on this note. | | | 17,700 | | | | - | | | | 17,700 | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On January 26, 2012 the Company entered into a convertible promissory note with an investment firm in the amount of $36,580. Terms include simple interest at ten percent (10.0%), the note is due on January 26, 2013 and is convertible at the option of the holder at a price of $0.001 per share. No payments have been made on this note. | | | 36,580 | | | | (20,988 | ) | | | 15,592 | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On February 3, 2012 the Company entered into a convertible promissory note with an investment firm in the amount of $3,000. Terms include simple interest at ten percent (10.0%), the note is due on demand and is convertible at the option of the holder at a price of $0.001 per share. No payments have been made on this note. | | | 3,000 | | | | - | | | | 3,000 | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On February 27, 2012 the Company entered into a convertible promissory note with an investment firm in the amount of $900. Terms include simple interest at ten percent (10.0%), the note is due on February 27, 2013 and is convertible at the option of the holder at a price of $0.001 per share. No payments have been made on this note. | | | 900 | | | | (594 | ) | | | 306 | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On March 20, 2012 the Company entered into a convertible promissory note with an investment firm in the amount of $1,370. Terms include simple interest at ten percent (10.0%), the note is due on demand and is convertible at the option of the holder at a price of $0.001 per share. No payments have been made on this note. | | | 1,370 | | | | - | | | | 1,370 | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On March 21, 2012 the Company entered into a convertible promissory note with an investment firm in the amount of $1,600. Terms include simple interest at ten percent (10.0%), the note is due on March 21, 2013 and is convertible at the option of the holder at a price of $0.001 per share. No payments have been made on this note. | | | 1,600 | | | | (1,157 | ) | | | 443 | | | | - | | | | - | | | | - | |
ONTECO CORPORATION
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2012
(unaudited)
Note 3 – Notes Payable – Non-affiliated Related Parties (Continued)
| | June 30, 2012 | | | December 31, 2011 | |
| | | | | | | | Principal, | | | | | | | | | Principal, | |
| | | | | Unamortized | | | net of | | | | | | Unamortized | | | net of | |
| | Principal | | | Discount | | | Discounts | | | Principal | | | Discount | | | Discounts | |
| | | | | | | | | | | | | | | | | | |
On March 28, 2012 the Company entered into a convertible promissory note with an investment firm in the amount of $11,500. Terms include simple interest at ten percent (10.0%), the note is due on demand and is convertible at the option of the holder at a price of $0.001 per share. No payments have been made on this note. | | | 11,500 | | | | - | | | | 11,500 | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On March 31, 2011 the Company entered into a stock repurchase agreement with a NexPhase investor to repurchase 100,000 shares of Common Stock acquired in the NexPhase acquisition. Terms include principal in the amount of $27,500 including premium interest of ten percent (10.0%) ($2,500), the note is due on June 30, 2012. Payments totaling $7,453 have been made on this note during the year ended December 31, 2011. Payments totaling $12,000 have been made on this note during the six months ended June 30, 2012. The note is currently in default. | | | 8,048 | | | | - | | | | 8,048 | | | | 20,048 | | | | - | | | | 20,048 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On March 31, 2011 the Company entered into a stock repurchase agreement with a NexPhase investor to repurchase 20,000 shares of Common Stock acquired in the NexPhase acquisition. Terms include principal in the amount of $5,500 including premium interest of ten percent (10.0%) ($500), the note is due on June 30, 2012. No payments have been made on this note. Payments totaling $1,490 have been made on this note during the year ended December 31, 2011. The note is currently in default. | | | 4,010 | | | | - | | | | 4,010 | | | | 4,010 | | | | - | | | | 4,010 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On March 31, 2011 the Company entered into a stock repurchase agreement with a NexPhase investor to repurchase 24,000 shares of Common Stock acquired in the NexPhase acquisition. Terms include principal in the amount of $6,600 including premium interest of ten percent (10.0%) ($600), the note is due on June 30, 2012. No payments have been made on this note. The note is currently in default. | | | 6,600 | | | | - | | | | 6,600 | | | | 6,600 | | | | - | | | | 6,600 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On March 31, 2011the Company entered into a stock repurchase agreement with a NexPhase investor to repurchase 20,000 shares of Common Stock acquired in the NexPhase acquisition. Terms include principal in the amount of $5,500 including premium interest of ten percent (10.0%) ($500), the note is due on June 30, 2012. No payments have been made on this note. The note is currently in default. | | | 5,500 | | | | - | | | | 5,500 | | | | 5,500 | | | | - | | | | 5,500 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On March 31, 2011 the Company entered into a stock repurchase agreement with a NexPhase investor to repurchase 80,000 shares of Common Stock acquired in the NexPhase acquisition. Terms include principal in the amount of $22,000 including premium interest of ten percent (10.0%) ($2000), the note is due on June 30, 2012. On June 21 2011, a payment in the amount of $2,200 was made on this note. Payments totaling $5,962 have been made on this note during the year ended December 31, 2011. Payments totaling $2,000 have been made on this note during the six months ended June 30, 2012. The note is currently in default. | | | 14,038 | | | | - | | | | 14,038 | | | | 16,038 | | | | - | | | | 16,038 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal Notes Payable -- Related Parties - Onteco | | | 278,595 | | | | (27,808 | ) | | | 250,787 | | | | 402,345 | | | | (72,139 | ) | | | 330,206 | |
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2012
(unaudited)
Note 3 – Notes Payable – Non-affiliated Related Parties (Continued)
| | June 30, 2012 | | | December 31, 2011 | |
| | | | | | | | Principal, | | | | | | | | | Principal, | |
| | | | | Unamortized | | | net of | | | | | | Unamortized | | | net of | |
| | Principal | | | Discount | | | Discounts | | | Principal | | | Discount | | | Discounts | |
Notes Payable -- Related Parties - NexPhase | | | | | | | | | | | | | | | | | | |
On June 21, 2010 the Company entered into a convertible promissory note with an investment firm in the amount of $105,000. Terms include simple interest at twelve percent (12.0%), the note is due on June 21, 2011 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. On March 8, 2011, the Note was assigned to Onteco. | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On August 4, 2010 the Company entered into a convertible promissory note with an investment firm in the amount of $60,000. Terms include simple interest at twelve percent (12.0%), the note is due on August 4, 2011 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. On March 1, 2011, the Note was assigned to Onteco. | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On November 1, 2010 the Company entered into a convertible promissory note with an investment firm in the amount of $70,000. Terms include simple interest at twelve percent (12.0%), the note is due on November 1, 2011 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. On October 26, 2011, the note, plus accrued interest of $8,124, was sold and assigned to a thrid party investment firm by the holder. | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On December 1, 2010 the Company entered into a convertible promissory note with an investment firm in the amount of $10,000. Terms include simple interest at twelve percent (12.0%), the note is due on December 1, 2011 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. The note is currently in default. | | | 10,000 | | | | - | | | | 10,000 | | | | 10,000 | | | | - | | | | 10,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On December 8, 2010 the Company entered into a convertible promissory note with an investment firm in the amount of $40,000. Terms include simple interest at twelve percent (12.0%), the note is due on December 8, 2011 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. The note is currently in default. | | | 40,000 | | | | - | | | | 40,000 | | | | 40,000 | | | | - | | | | 40,000 | |
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2012
(unaudited)
Note 3 – Notes Payable – Non-affiliated Related Parties (Continued)
| | June 30, 2012 | | | December 31, 2011 | |
| | | | | | | | Principal, | | | | | | | | | Principal, | |
| | | | | Unamortized | | | net of | | | | | | Unamortized | | | net of | |
| | Principal | | | Discount | | | Discounts | | | Principal | | | Discount | | | Discounts | |
| | | | | | | | | | | | | | | | | | |
On December 23, 2010 the Company entered into a convertible promissory note with an investment firm in the amount of $10,000. Terms include simple interest at twelve percent (12.0%), the note is due on December 23, 2011 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. The note is currently in default. | | | 10,000 | | | | - | | | | 10,000 | | | | 10,000 | | | | - | | | | 10,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On January 10, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $15,000. Terms include simple interest at twelve percent (12.0%), the note is due on January 10, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. The note is currently in default. | | | 15,000 | | | | - | | | | 15,000 | | | | 15,000 | | | | - | | | | 15,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On February 7, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $10,000. Terms include simple interest at twelve percent (12.0%), the note is due on February 7, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. During the six months ended June 30, 2012, the note plus accrued interest of $500 was converted to Common Stock. | | | - | | | | - | | | | - | | | | 10,000 | | | | - | | | | 10,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On February 11, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $12,000. Terms include simple interest at twelve percent (12.0%), the note is due on February 11, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. The note is currently in default. | | | 12,000 | | | | - | | | | 12,000 | | | | 12,000 | | | | - | | | | 12,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On March 2, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $12,500. Terms include simple interest at twelve percent (12.0%), the note is due on March 2, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. The note is currently in default. | | | 12,500 | | | | - | | | | 12,500 | | | | 12,500 | | | | (2,117 | ) | | | 10,383 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On March 11, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $20,000. Terms include simple interest at twelve percent (12.0%), the note is due on March 11, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. The note is currently in default. | | | 20,000 | | | | - | | | | 20,000 | | | | 20,000 | | | | (3,880 | ) | | | 16,120 | |
ONTECO CORPORATION
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2012
(unaudited)
Note 3 – Notes Payable – Non-affiliated Related Parties (Continued)
| | June 30, 2012 | | | December 31, 2011 | |
| | | | | | | | Principal, | | | | | | | | | Principal, | |
| | | | | Unamortized | | | net of | | | | | | Unamortized | | | net of | |
| | Principal | | | Discount | | | Discounts | | | Principal | | | Discount | | | Discounts | |
| | | | | | | | | | | | | | | | | | |
On May 9, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $10,000. Terms include simple interest at twelve percent (12.0%), the note is due on May 9, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. The note is currently in default. | | | 10,000 | | | | - | | | | 10,000 | | | | 10,000 | | | | (3,552 | ) | | | 6,448 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On May 24, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $30,000. Terms include simple interest at twelve percent (12.0%), the note is due on May 24, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. During the six months ended June 30, 2012, the note in the amount of $30,000 was converted to Common Stock. | | | - | | | | - | | | | - | | | | 30,000 | | | | (11,885 | ) | | | 18,115 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On June 1, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $15,000. Terms include simple interest at twelve percent (12.0%), the note is due on June 1, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. The note is currently in default. | | | 15,000 | | | | - | | | | 15,000 | | | | 15,000 | | | | (6,270 | ) | | | 8,730 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On June 20, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $16,000. Terms include simple interest at twelve percent (12.0%), the note is due on June 20, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. During the six months ended June 30, 2012, the note in the amount of $16,000 plus accrued interest of $600 was converted to Common Stock. | | | - | | | | - | | | | - | | | | 16,000 | | | | (7,519 | ) | | | 8,481 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On June 23, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $50,000. Terms include simple interest at twelve percent (12.0%), the note is due on June 23, 2012 and is convertible at the option of the holder at a price which is the greater of (i) twice the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. The note is currently in default. | | | 50,000 | | | | - | | | | 50,000 | | | | 50,000 | | | | (23,907 | ) | | | 26,093 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On July 13, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $14,000. Terms include simple interest at twelve percent (12.0%), the note is due on July 13, 2012 and is convertible at the option of the holder at a price which is the lesser of (i) the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. | | | 14,000 | | | | (497 | ) | | | 13,503 | | | | 14,000 | | | | (7,458 | ) | | | 6,542 | |
ONTECO CORPORATION
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2012
(unaudited)
Note 3 – Notes Payable – Non-affiliated Related Parties (Continued)
| | June 30, 2012 | | | December 31, 2011 | |
| | | | | | | | Principal, | | | | | | | | | Principal, | |
| | | | | Unamortized | | | net of | | | | | | Unamortized | | | net of | |
| | Principal | | | Discount | | | Discounts | | | Principal | | | Discount | | | Discounts | |
| | | | | | | | | | | | | | | | | | |
On July 27, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $15,000. Terms include simple interest at twelve percent (12.0%), the note is due on July 27, 2012 and is convertible at the option of the holder at a price which is the lesser of (i) the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. | | | 15,000 | | | | (1,106 | ) | | | 13,894 | | | | 15,000 | | | | (8,565 | ) | | | 6,435 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On August 1, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $40,000. Terms include simple interest at twelve percent (12.0%), the note is due on August 1, 2012 and is convertible at the option of the holder at a price of $0.001. No payments have been made on this note. | | | 40,000 | | | | (3,497 | ) | | | 36,503 | | | | 40,000 | | | | (23,387 | ) | | | 16,613 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On August 30, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $5,000. Terms include simple interest at twelve percent (12.0%), the note is due on August 30, 2012 and is convertible at the option of the holder at a price which is the lesser of (i) the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. | | | 5,000 | | | | (833 | ) | | | 4,167 | | | | 5,000 | | | | (3,319 | ) | | | 1,681 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On August 31, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $10,000. Terms include simple interest at twelve percent (12.0%), the note is due on August 31, 2012 and is convertible at the option of the holder at a price which is the lesser of (i) the par value of the common stock, or (ii) a seventy-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. | | | 10,000 | | | | (1,694 | ) | | | 8,306 | | | | 10,000 | | | | (6,666 | ) | | | 3,334 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On November 1, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $25,000. Terms include simple interest at twelve percent (12.0%), the note is due on November 1, 2012 and is convertible at the option of the holder at a price of $0.001 per share. No payments have been made on this note. | | | 25,000 | | | | (3,388 | ) | | | 21,612 | | | | 25,000 | | | | (8,361 | ) | | | 16,639 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On January 9, 2012 the Company entered into a convertible promissory note with an investment firm in the amount of $10,000. Terms include simple interest at ten percent (10.0%), the note is due on demand and is convertible at the option of the holder at a price of $0.001 per share. No payments have been made on this note. | | | 10,000 | | | | - | | | | 10,000 | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Subtotal Notes Payable -- Related Parties -- NexPhase | | | 313,500 | | | | (11,015 | ) | | | 302,485 | | | | 359,500 | | | | (116,886 | ) | | | 242,614 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total Notes Payable -- Related Parties | | $ | 592,095 | | | $ | (38,823 | ) | | $ | 553,272 | | | $ | 761,845 | | | $ | (189,025 | ) | | $ | 572,820 | |
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2012
(unaudited)
Note 4 – Notes Payable – Third Parties
| | June 30, 2012 | | | December 31, 2011 | |
| | | | | | | | Principal, | | | | | | | | | Principal, | |
| | | | | Unamortized | | | net of | | | | | | Unamortized | | | net of | |
| | Principal | | | Discount | | | Discounts | | | Principal | | | Discount | | | Discounts | |
| | | | | | | | | | | | | | | | | | |
On January 17, 2010 the Company entered into a convertible promissory note with an advisory firm for services rendered in the amount of $59,000. Terms include bonus interest of $5,900, the note is payable on demand and has no stated interest rate or due date and is convertible at a rate of $0.03 per share or 1,771,667 unregistered common shares. Total payments of $11,750 have been made on this note. | | $ | 53,150 | | | $ | - | | | $ | 53,150 | | | $ | 53,150 | | | $ | - | | | $ | 53,150 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On February 10, 2010 the Company entered into a convertible promissory note with a project consultant for services rendered in the amount of $7,800. Terms include bonus interest of $780, the note is payable on demand and has no stated interest rate or due date and is convertible at a rate of $0.03 per share or 286,000 unregistered common shares. No payments have been made on this note. | | | 8,580 | | | | - | | | | 8,580 | | | | 8,580 | | | | - | | | | 8,580 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On February 10, 2010 the Company entered into a convertible promissory note with an engineering firm for services rendered in the amount of $27,600. Terms include bonus interest of $2,760, the note is payable on demand and has no stated interest rate or due date and is convertible at a rate of $0.03 per share or 1,012,000 unregistered common shares. No payments have been made on this note. | | | 30,360 | | | | - | | | | 30,360 | | | | 30,360 | | | | - | | | | 30,360 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On June 7, 2010 the Company entered into a convertible promissory note with an investor in the amount of $10,000. The note is payable on demand and has no stated interest rate or due date and is convertible at a rate of $0.03 per share or 333,333 unregistered common shares. No payments have been made on this note. | | | 10,000 | | | | - | | | | 10,000 | | | | 10,000 | | | | - | | | | 10,000 | |
ONTECO CORPORATION
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2012
(unaudited)
Note 4 – Notes Payable – Third Parties (Continued)
| | June 30, 2012 | | | December 31, 2011 | |
| | | | | | | | Principal, | | | | | | | | | Principal, | |
| | | | | Unamortized | | | net of | | | | | | Unamortized | | | net of | |
| | Principal | | | Discount | | | Discounts | | | Principal | | | Discount | | | Discounts | |
| | | | | | | | | | | | | | | | | | |
On July 19, 2010 the Company entered into a convertible promissory note with an investor in the amount of $2,500. The note is payable on demand and has no stated interest rate or due date and is convertible at a rate of $0.03 per share or 83,333 unregistered common shares. No payments have been made on this note. | | | 2,500 | | | | - | | | | 2,500 | | | | 2,500 | | | | - | | | | 2,500 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On April 28 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $56,000. Terms include simple interest at eight percent (8.0%), the note is due on January 31 2012 and is convertible at the option of the holder at a price calculated at a forty percent discount to the market closing bid price on the date of the conversion notice. As of December 31, 2011, a portion of the note in the amount of $35,500 has been converted to Common Stock. During the six months ended June 30, 2012, the remainder of the note in the amount of $20,500 was converted to Common Stock. | | | - | | | | - | | | | - | | | | 20,500 | | | | (1,524 | ) | | | 18,976 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On June 20, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $53,000. Terms include simple interest at eight percent (8.0%), the note is due on March 22, 2012 and is convertible at the option of the holder at a price calculated at a forty percent discount to the market closing bid price on the date of the conversion notice. During the six months ended June 30, 2012, the note in the amount of $53,000 was converted to Common Stock. | | | - | | | | - | | | | - | | | | 53,000 | | | | (10,497 | ) | | | 42,503 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On August 24, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $15,000. Terms include simple interest at ten percent (10.0%), the note is due on April 24, 2012 and is convertible at the option of the holder at a price calculated at a fifty percent discount to the market closing bid price on the date of the conversion notice. During the six months ended June 30, 2012, the note in the amount of $15,000 plus accrued interest of $2,425 was converted to Common Stock. | | | - | | | | - | | | | - | | | | 15,000 | | | | (7,069 | ) | | | 7,931 | |
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2012
(unaudited)
Note 4 – Notes Payable – Third Parties (Continued)
| | June 30, 2012 | | | December 31, 2011 | |
| | | | | | | | Principal, | | | | | | | | | Principal, | |
| | | | | Unamortized | | | net of | | | | | | Unamortized | | | net of | |
| | Principal | | | Discount | | | Discounts | | | Principal | | | Discount | | | Discounts | |
| | | | | | | | | | | | | | | | | | |
On September 1, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $50,000. Terms include simple interest at eight percent (8.0%), the note is due on June 6, 2012 and is convertible at the option of the holder at a price calculated at a forty percent discount to the market closing bid price on the date of the conversion notice. During the six months ended June 30, 2012, the note in the amount of $50,000 was paid plus accrued interest of $2,315 and a redemption premium of $22,685. | | | - | | | | - | | | | - | | | | 50,000 | | | | (18,877 | ) | | | 31,123 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On October 26, 2011 the Company entered into a convertible promissory note with an investment firm in the amount of $12,000. Terms include simple interest at twelve percent (12.0%), the note is due on October 26, 2012 and is convertible at the option of the holder at a price calculated at a fifty percent discount to the market closing bid price on the date of the conversion notice. During the six months ended June 30, 2012, the note in the amount of $12,000 plus accrued interest of $2,175 was converted to Common Stock. | | | - | | | | - | | | | - | | | | 12,000 | | | | (9,835 | ) | | | 2,165 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On October 26, 2011 the Company entered into a convertible promissory note with a an investment firm in the amount of $78,124. Terms include simple interest at twelve percent (12.0%), the note is due on June 26, 2012 and is convertible at the option of the holder at a price calculated at a fifty percent discount to the market closing bid price on the date of the conversion notice. The note was assigned from a non-affiliated related party investment firm. No payments have been made on this note. As of December 31, 2011, a portion of the note in the amount of $38,124 has been converted to Common Stock. During the six months ended June 30, 2012, the remainder of the note in the amount of $40,000 was converted to Common Stock. | | | - | | | | - | | | | - | | | | 40,000 | | | | (29,180 | ) | | | 10,820 | |
ONTECO CORPORATION
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2012
(unaudited)
Note 4 – Notes Payable – Third Parties (Continued)
| | June 30, 2012 | | | December 31, 2011 | |
| | | | | | | | Principal, | | | | | | | | | Principal, | |
| | | | | Unamortized | | | net of | | | | | | Unamortized | | | net of | |
| | Principal | | | Discount | | | Discounts | | | Principal | | | Discount | | | Discounts | |
| | | | | | | | | | | | | | | | | | |
On December 5, 2011 the Company entered into a convertible promissory note with a an investment firm in the amount of $25,000. Terms include simple interest at ten percent (10.0%), the note is due on December 5, 2012 and is convertible at the option of the holder at a the lesser of par ($0.001) or a price calculated at a fifty percent discount to the market closing bid price on the date of the conversion notice. The note was assigned from a non-affiliated related party investment firm. No payments have been made on this note. As of December 31, 2011, a portion of the note in the amount of $6,800 has been converted to Common Stock. During the six months ended June 30, 2012, the remainder of the note in the amount of $18,200 was converted to Common Stock. | | | - | | | | - | | | | - | | | | 18,200 | | | | (6,763 | ) | | | 11,437 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On February 7, 2012 the Company entered into a convertible promissory note with a an investment firm in the amount of $32,500. Terms include simple interest at eight percent (8.0%), the note is due on November 9, 2012 and is convertible at the option of the holder at a price calculated at a forty-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. | | | 32,500 | | | | (12,717 | ) | | | 19,783 | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On February 10, 2012 the Company entered into a convertible promissory note with a an investment firm in the amount of $19,000. Terms include simple interest at ten percent (10.0%), the note is due on February 10, 2013 and is convertible at the option of the holder at a price of $0.001. No payments have been made on this note. | | | 19,000 | | | | (11,680 | ) | | | 7,320 | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On April 2, 2012 the Company entered into a convertible promissory note with a an investment firm in the amount of $75,000. Terms include simple interest at ten percent (10.0%), the note is due on April 2, 2013 and is convertible at the option of the holder at a price of $0.001. The note was assigned from a non-affiliated related party investment firm. No payments have been made on this note. | | | 75,000 | | | | (56,712 | ) | | | 18,288 | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On April 3, 2012 the Company entered into a convertible promissory note with a an investment firm in the amount of $37,500. Terms include simple interest at eight percent (8.0%), the note is due on January 9, 2013 and is convertible at the option of the holder at a price calculated at a forty-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. | | | 37,500 | | | | (21,049 | ) | | | 16,451 | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | |
On May 21, 2012 the Company entered into a convertible promissory note with a an investment firm in the amount of $37,500. Terms include simple interest at eight percent (8.0%), the note is due on February 25, 2013 and is convertible at the option of the holder at a price calculated at a forty-five percent discount to the market closing bid price on the date of the conversion notice. No payments have been made on this note. | | | 32,500 | | | | (22,737 | ) | | | 9,763 | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total - Notes Payable -- Third Parties | | $ | 301,090 | | | $ | (124,895 | ) | | $ | 176,195 | | | $ | 313,290 | | | $ | (83,745 | ) | | $ | 229,545 | |
ONTECO CORPORATION
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2012
(unaudited)
Note 5 – Licensing, Manufacturing and Distribution Agreement
Effective on April 30, 2012, the Board of Directors of Onteco Corporation, a Nevada corporation (the “Company”), approved and authorized the execution of a licensing, manufacturing and distribution agreement (the “Agreement”) with Jarlyn S.A., an Uruguayan corporation (“Jarlyn”). In accordance with the terms and provisions of the Agreement, Jarlyn shall be designated the exclusive licensee, manufacturer, distributor and re-seller of certain licensed technologies within the Oriental Republic of Uruguay (the “Territory”).
In accordance with the terms and provisions of the Agreement: (i) the Company shall grant to Jarlyn an exclusive license to the Licensed Technology Products, for the manufacturing and distribution of the Licensed Technologies, and for the use of the trademark in the Territory; (ii) the Company shall grant to Jarlyn exclusive distribution rights for the direct sale and resale to resellers or other channels of the Licensed Technology Products in the Territory; (iii) Jarlyn shall compensate the Company for the granting of the license and rights pertaining to the Licensed Technology Products by the transfer to the Company of 1,000,000 shares of common stock held of record by Jarlyn in a publicly traded company acceptable to the Company; (iv) Jarlyn shall further compensate the Company for the granting of the license and rights pertaining to the Licensed Technology Products by the payment of the sum of $200,000 U.S. Dollars as a one-time cash licensing fee; and (v) Jarlyn shall pay to the Company a royalty of ten percent (10%) of all gross revenues received by Jarlyn or its affiliates relating to sales, installation and services associated with the Licensed Technologies in the Territory. The agreement is for a period of seven (7) years.
As of June 30, 2012, the Company has valued the common stock to be received at $2,677,890. Payment of the one-time licensing fee of $200,000,nor the common stock, has been received under the Agreement as of June 30, 2012. The entire amount due of $2,877,890 is being amortized as revenue over the term of the license. For the six months ended June 30, 2012, $68,521 has been recognized as revenue.
Note 6 – Executive Compensation Agreement
On January 8, 2010, the Company entered an Executive Employment Agreement effective January 11, 2010 with its Chief Executive Officer. Terms of the agreement include an inception bonus of $150,000 and monthly payments of $15,000. The agreement expires on December 31, 2013.
During the years ended December 31, 2011 and 2010, the Company recorded executive compensation expenses to the Company's chief executive officer; $180,000 and $180,000 respectively, resulting in an accrued employee compensation liability of $488,000 at December 31, 2011.
On November 25, 2010, effective with the change in control, the chief executive officer resigned. The executive compensation agreement remains in effect through December 31, 2013.
Note 7 – Stockholders’ Equity (Deficit) and Common Stock
On April 3, 2012, our Board of Directors and shareholders holding a majority of the total issued and outstanding shares of common stock pursuant to written consents in lieu of a meeting approved a further amendment to our Articles of Incorporation to increase the authorized capital (the “2012 Amendment”). The 2012 Amendment was filed with the Nevada Secretary of State on April 3, 2012 reducing our authorized capital from 2,000,000,000 shares of common stock to 300,000,000 shares of common stock, par value $0.001, and reducing the authorized capital of preferred stock from 100,000,000 to 10,000,000 shares, par value $0.001.
On January 4, 2012, the Board of Directors approved the issuance of 18,422 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated April 28, 2011 in the amount of $3,500. In accordance with the terms of the note, the shares were issued at $0.19 per share.
On January 4, 2012, the Board of Directors approved the issuance of 40,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated October 26, 2011 in the amount of $6,000. In accordance with the terms of the note, the shares were issued at $0.15 per share.
ONTECO CORPORATION
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2012
(unaudited)
Note 7 – Stockholders’ Equity (Deficit) and Common Stock (Continued)
On January 24, 2012, the Board of Directors authorized the issuance of an aggregate 50,000,000 shares of its restricted common stock at a per share price of $0.001. Of the 50,000,000 shares of restricted common stock issued, an aggregate 30,000,000 shares were issued to Dror Svorai, the President/Chief Executive Officer of the Company, in recognition of his outstanding services, loyalty and dedication to the Company during the period of November 23, 2011 through January 23, 2011. Of the 50,000,000 shares of restricted common stock issued, an aggregate 20,000,000 shares were issued to Jon Cooper, the President of NexPhase Lighting Inc., in recognition of his business accomplishments to the Company during fiscal year 2011.
On January 17, 2012, the Board of Directors approved the issuance of 45,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated October 26, 2011 in the amount of $1,350. In accordance with the terms of the note, the shares were issued at $0.03 per share.
On January 25, 2012, the Board of Directors approved the issuance of 2,357,951 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated February 23, 2011 in the amount of $23,600. In accordance with the terms of the note, the shares were issued at $0.01 per share.
On January 25, 2012, the Board of Directors approved the issuance of 107,767 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated April 18, 2011 in the amount of $1,078. In accordance with the terms of the note, the shares were issued at $0.01 per share.
On January 25, 2012, the Board of Directors approved the issuance of 34,282 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated April 21, 2011 in the amount of $343. In accordance with the terms of the note, the shares were issued at $0.01 per share.
On January 27, 2012, the Board of Directors approved the issuance of 214,286 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated April 28, 2011 in the amount of $12,000. In accordance with the terms of the note, the shares were issued at $0.056 per share.
On January 30, 2012, the Board of Directors approved the issuance of 2,700,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated October 29, 2010 in the amount of $27,000. In accordance with the terms of the note, the shares were issued at $0.01 per share.
On January 30, 2012, the Board of Directors approved the issuance of 227,500 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated December 5, 2011 in the amount of $18,200. In accordance with the terms of the note, the shares were issued at $0.08 per share.
On February 1, 2012, the Board of Directors approved the issuance of 2,800,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated November 15, 2010 in the amount of $28,000. In accordance with the terms of the note, the shares were issued at $0.01 per share.
On February 2, 2012, the Board of Directors approved the issuance of 67,115 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated October 26, 2011 in the amount of $5,000. In accordance with the terms of the note, the shares were issued at $0.0745 per share.
On February 15, 2012, the Board of Directors approved the issuance of 148,148 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 20, 2011 in the amount of $10,000. In accordance with the terms of the note, the shares were issued at $0.0675 per share.
On February 15, 2012, the Board of Directors approved the issuance of 107,259 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated April 28, 2011 in the amount of $7,240. In accordance with the terms of the note, the shares were issued at $0.0675 per share.
ONTECO CORPORATION
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2012
(unaudited)
Note 7 – Stockholders’ Equity (Deficit) and Common Stock (Continued)
On February 17, 2012, the Board of Directors approved the issuance of 274,726 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated October 26, 2011 in the amount of $12,500. In accordance with the terms of the note, the shares were issued at $0.0455 per share.
On February 21, 2012, the Board of Directors approved the issuance of 277,778 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 20, 2011 in the amount of $15,000. In accordance with the terms of the note, the shares were issued at $0.054 per share.
On February 21, 2012, the Board of Directors approved the issuance of 2,500,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated February 15, 2012 in the amount of $25,000. In accordance with the terms of the note, the shares were issued at $0.01 per share.
On February 27, 2012, the Board of Directors approved the issuance of 3,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated May 24, 2011 in the amount of $30,000. In accordance with the terms of the note, the shares were issued at $0.01 per share.
On March 1, 2012, the Board of Directors approved the issuance of 3,400,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 4, 2011 in the amount of $3,400. In accordance with the terms of the note, the shares were issued at $0.001 per share.
On March 1, 2012, the Board of Directors approved the issuance of 3,600,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 4, 2011 in the amount of $3,600. In accordance with the terms of the note, the shares were issued at $0.001 per share.
On March 1, 2012, the Board of Directors approved the issuance of 3,800,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 4, 2011 in the amount of $3,800. In accordance with the terms of the note, the shares were issued at $0.001 per share.
On March 1, 2012, the Board of Directors approved the issuance of 4,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 4, 2011 in the amount of $4,000. In accordance with the terms of the note, the shares were issued at $0.001 per share.
On March 8, 2012, the Board of Directors approved the issuance of 434,783 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 20, 2011 in the amount of $12,000. In accordance with the terms of the note, the shares were issued at $0.0276 per share.
On March 14, 2012, the Board of Directors approved the issuance of 434,783 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 20, 2011 in the amount of $10,000. In accordance with the terms of the note, the shares were issued at $0.023 per share.
On March 15, 2012, the Board of Directors approved the issuance of 1,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated September 2, 2010 in the amount of $10,000. In accordance with the terms of the note, the shares were issued at $0.01 per share.
On March 20, 2012, the Board of Directors approved the issuance of 2,200,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated February 23, 2011 in the amount of $11,000. In accordance with the terms of the note, the shares were issued at $0.005 per share.
On March 20, 2012, the Board of Directors approved the issuance of 1,800,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 4, 2011 in the amount of $9,000. In accordance with the terms of the note, the shares were issued at $0.005 per share.
ONTECO CORPORATION
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2012
(unaudited)
Note 7 – Stockholders’ Equity (Deficit) and Common Stock (Continued)
On March 22, 2012, the Board of Directors approved the issuance of 426,394 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated October 26, 2011 in the amount of $6,395. In accordance with the terms of the note, the shares were issued at $0.015 per share.
On March 27, 2012, the Board of Directors approved the issuance of 469,364 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 20, 2011 in the amount of $8,120. In accordance with the terms of the note, the shares were issued at $0.0173 per share.
On March 29, 2012, the Board of Directors approved the issuance of 5,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 9, 2010 in the amount of $5,000. In accordance with the terms of the note, the shares were issued at $0.001 per share.
On March 30, 2012, the Board of Directors approved the issuance of 1,357,302 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated October 26, 2011 in the amount of $10,180. In accordance with the terms of the note, the shares were issued at $0.0745 per share.
On April 9, 2012, the Board of Directors approved the issuance of 2,700,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated March 31, 2011 in the amount of $5,600. In accordance with the terms of the note, the shares were issued at $0.0021 per share.
On April 9, 2012, the Board of Directors approved the issuance of 4,500,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 4, 2011 in the amount of $9,000. In accordance with the terms of the note, the shares were issued at $0.002 per share.
On April 17, 2012, the Board of Directors approved the issuance of 2,158,429 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 24, 2011 in the amount of $10,000. In accordance with the terms of the note, the shares were issued at $0.0046 per share.
On April 25, 2012, the Board of Directors approved the issuance of 5,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated September 2, 2010 in the amount of $5,000. In accordance with the terms of the note, the shares were issued at $0.001 per share.
On April 25, 2012, the Board of Directors approved the issuance of 5,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 20, 2011 in the amount of $5,000. In accordance with the terms of the note, the shares were issued at $0.001 per share.
On April 25, 2012, the Board of Directors approved the issuance of 5,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated February 7, 2011 in the amount of $5,000. In accordance with the terms of the note, the shares were issued at $0.001 per share.
On April 26, 2012, the Board of Directors approved the issuance of 6,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 20, 2011 in the amount of $6,000. In accordance with the terms of the note, the shares were issued at $0.001 per share.
On May 2, 2012, the Board of Directors approved the issuance of 1,598,280 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 24, 2011 in the amount of $5,000. In accordance with the terms of the note, the shares were issued at $0.0046 per share.
On May 8, 2012, the Board of Directors approved the issuance of 5,500,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated February 7, 2011 in the amount of $5,500. In accordance with the terms of the note, the shares were issued at $0.001 per share.
ONTECO CORPORATION
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2012
(unaudited)
Note 7 – Stockholders’ Equity (Deficit) and Common Stock (Continued)
On May 23, 2012, the Board of Directors approved the issuance of 5,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated September 2, 2010 in the amount of $5,000. In accordance with the terms of the note, the shares were issued at $0.001 per share.
On May 29, 2012, the Board of Directors approved the issuance of 3,634,616 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated October 26, 2011 in the amount of $12,000. In accordance with the terms of the note, the shares were issued at $0.0039 per share.
On May 29, 2012, the Board of Directors approved the issuance of 5,600,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 20, 2011 in the amount of $5,600. In accordance with the terms of the note, the shares were issued at $0.001 per share.
On May 29, 2012, the Board of Directors approved the issuance of 6,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated March 31, 2011 in the amount of $6,000. In accordance with the terms of the note, the shares were issued at $0.001 per share.
Effective June 8, 2012, the Board of Directors of the Company authorized the designation of 1,000,000 shares of Series B preferred stock from the Corporation’s authorized capital. The shares of Series B Preferred stock carry certain rights and preferences, including voting rights consisting of one hundred votes for each one share of Series B Preferred stock. The shares of Series B preferred stock are convertible into shares of common stock on a one-to-one thousand share basis. No shares of Series B Preferred stock have been issued at June 30, 2012.
Note 8 – Related Party Transactions
The officers and directors for the Company are involved in other business activities and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interest. The Company has not formulated a policy for the resolution of such conflicts.
See Note 3 – Notes Payable – Non-affiliated Related Parties and Note 7 – Stockholders’ Equity (Deficit) and Common Stock for additional related party disclosures.
Note 9 – Loss on Settlement of Debt
During the six months ended June 30, 2012, the Company issued 18,800,000 shares of common stock to a related party in conversion of $53,000 of notes payable in accordance with the terms of the notes. The fair value of the common stock issued was $691,000 at the date of the conversions, resulting in a loss on the settlements of $638,000.
Note 10 – Commitments and Contingencies
As of the date of this Report, we have entered into the following material commitments:
On January 8, 2010, the Company entered an Executive Employment Agreement effective January 11, 2010 with the previous Chief Executive Officer. Terms of the agreement include an (inception bonus) of $150,000 and monthly payments of $15,000. The agreement expires on December 31, 2013.
On January 1, 2011, we entered into a three-year office building lease for our corporate headquarters located in Aventura, Florida. The lease terms include: (i) monthly rent commencing on February 1, 2011 in the amount of $3,794.35 plus sales tax; (ii) triple-net provisions; and (iii) our responsibility for the cost of build-out and partitioning of the space. Future annual lease payments over the term of the lease are as follows:
Remainder of 2012 | | $ | 22,764 | |
2013 | | $ | 45,528 | |
2014 | | $ | 3,794 | |
ONTECO CORPORATION
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2012
(unaudited)
Note 10 – Subsequent Events
On July 2, 2012, the Board of Directors approved the issuance of 5,800,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 1, 2011 in the amount of $5,800. In accordance with the terms of the note, the shares were issued at $0.001 per share.
On July 4, 2012, our Board of Directors and shareholders holding a majority of the total issued and outstanding shares of common stock pursuant to written consents in lieu of a meeting approved a further amendment to our Articles of Incorporation to increase the authorized capital (the “2012 Amendment No. 2”). The 2012 Amendment No. 2 increases our authorized capital from 300,000,000 shares of common stock to 750,000,000 shares of common stock, par value $0.001. Authorized preferred stock remains unchanged at 10,000,000 shares, par value $0.001.
On July 9, 2012 the Company entered into a convertible promissory note with an investment firm in the amount of $1,000. Terms include simple interest at ten percent (10%), the note is due on demand and is convertible at the option of the holder at a price of $0.001.
On July 9, 2012, the Board of Directors approved the issuance of 5,500,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated November 8, 2010 in the amount of $5,500. In accordance with the terms of the note, the shares were issued at $0.001 per share.
On July12, 2012 the Company entered into a convertible promissory note with an investment firm in the amount of $26,500. Terms include simple interest at twelve percent (12%), the note is due on March 12, 2013 and is convertible at the option of the holder at a price of 50% of the average of the three lowest trading prices during the ten days prior to the conversion.
On July 12, 2012, the Board of Directors approved the issuance of 17,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 1, 2011 in the amount of $17,000. In accordance with the terms of the note, the shares were issued at $0.001 per share.
On July 13, 2012, the Board of Directors approved the issuance of 8,500,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 20, 2011 in the amount of $8,500. In accordance with the terms of the note, the shares were issued at $0.001 per share.
On July 16, 2012, the Board of Directors approved the issuance of 8,500,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 1, 2011 in the amount of $8,500. In accordance with the terms of the note, the shares were issued at $0.001 per share.
On July 26, 2012, the Board of Directors approved the issuance of 10,230,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated November 30, 2010 in the amount of $10,230. In accordance with the terms of the note, the shares were issued at $0.001 per share.
On July 31, 2012, the Board of Directors approved the issuance of 10,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated July 12, 2012 in the amount of $5,000. In accordance with the terms of the note, the shares were issued at $0.0005 per share.
On August 1, 2012 the Company entered into a convertible promissory note with an investment firm in the amount of $32,500. Terms include simple interest at eight percent (8%), the note is due on May 3, 2013 and is convertible at the option of the holder at a price of 55% of the average of the two lowest trading prices during the thirty days prior to the conversion.
In accordance with the terms and provisions of the Licensing, Manufacturing and Distribution Agreement with Jarlyn S.A. (see Note 5 – Licensing, Manufacturing and Distribution Agreement), the Company received from Jarlyn 2,037,948 shares of common stock of a publicly-traded company currently listed on the Frankfurt Stock Exchange on August 13, 2012 as part of the payment due. On August 13, 2012, the stock was valued at $2,878,075, based on its market trading price of the common stock. A gain on the settlement of the amount due from the licensee of $200,185 will be recognized in the third quarter 2012.
ONTECO CORPORATION
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2012
(unaudited)
Note 10 – Subsequent Events (Continued)
The Company has evaluated subsequent events through the date the financial statements were issued and filed with Securities and Exchange Commission. The Company has determined that there are no other events that warrant disclosure or recognition in the financial statements.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS
We believe that it is important to communicate our future expectations to our security holders and to the public. This report, therefore, contains statements about future events and expectations which are “forward-looking statements” within the meaning of Sections 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934, including the statements about our plans, objectives, expectations and prospects under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You can expect to identify these statements by forward-looking words such as “may,” “might,” “could,” “would,” ”will,” “anticipate,” “believe,” “plan,” “estimate,” “project,” “expect,” “intend,” “seek” and other similar expressions. Any statement contained in this report that is not a statement of historical fact may be deemed to be a forward-looking statement. Although we believe that the plans, objectives, expectations and prospects reflected in or suggested by our forward-looking statements are reasonable, those statements involve risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements, and we can give no assurance that our plans, objectives, expectations and prospects will be achieved.
Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in the “Risk Factors” section of and elsewhere in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and in our subsequent filings with the Securities and Exchange Commission. The following discussion of our results of operations should be read together with our financial statements and related notes included elsewhere in this report.
Company Overview
Onteco Corporation (the "Company", “Spartan”, “we”, “us” or “our”) was founded to develop innovative, practical and cost-effective solutions to some of the most significant environmental challenges facing industries and governments around the world. Additionally, these solutions must show promise of generating profits for the company. Specifically the company has determined that one industry that meets both of the above-mentioned prongs of criteria is the Energy Saving Lighting Industry.
Effective on February 14, 2011, the Board of Directors of the Company approved and authorized the execution of a definitive agreement dated February 14, 2011 (the “Agreement”) among the Company, NexPhase Lighting, Inc., a privately held Florida corporation (“NexPhase”)., and the shareholders of NexPhase (the “NexPhase Shareholders”). In accordance with the terms and provisions of the Agreement: (i) the Company acquired from the NexPhase Shareholders an aggregate 55,622,000 shares of common stock of NexPhase representing the total issued and outstanding shares of NexPhase; (ii) in exchange thereof, the Company issued to the NexPhase Shareholders an aggregate 67,500 shares of its restricted common stock generally in proportion to the equity holdings of the NexPhase Shareholders; (iii) NexPhase transferred and assigned to the Company all existing material contracts including those related to distribution, licensing and marketing and those dealing with the grant of rights for the use of any and all intellectual property; (iv) the Company assumed all other assets of NexPhase, including licenses, royalty rights, equipment, product designs, marketing and sale materials, logos, trademarks, copyrights and website; and (v) the Company further assumed all liabilities of NexPhase, including all trade and debt obligations. Therefore, as of the February 14, 2011, NexPhase became a wholly-owned subsidiary of the Company.
NexPhase is in the business of designing, developing, manufacturing and marketing a high quality and high efficiency full line of LED intelligent lighting fixtures and control systems for commercial applications and projects involving both new construction and retrofits (the “LED Lighting Fixtures”). NexPhase uses the highest quality products in the manufacture of its LED Lighting Fixtures which provides customers with an approximate six-year or 50,000 hour warrant y on its fixtures. By utilizing Cree LEDs and photo-metrics and thermal management in the manufacture of the LED Lighting Fixtures, management believes that the NexPhase LED Lighting Fixtures of are of the highest quality and most reliable in lighting products. The LED Lighting Fixtures are as follows: (i) downlighttroffer; (ii) reflective troffer, which adds an architectural flair to any space; (iii) high-bay fixtures, which provide a 50-70% energy savings over metal halide and high pressure sodium high bays; (iv) low-bay and parking garage fixtures, which provide a 50-70% savings over metal halide and high pressure sodium high bays; (v) MR-16 lamps with approximate 90% energy savings over conventional MR-16 with significantly less heat; and (vi) PAR 38 lamsp with approximately 90% energy savings over conventional MR-16 with significantly less heat.
Plan of Operation
NexPhase was unable to generate revenues in the first six months of 2012 and currently has no backlog. The immediate goal of the Company’s management is to license NexPhase’s proprietary technologies and execute licensing, manufacturing and distribution agreements with parties on a global basis. The Company has recently executed its first of such agreements.
Effective on April 30, 2012, the Board of Directors of Onteco Corporation, a Nevada corporation (the “Company”), approved and authorized the execution of a licensing, manufacturing and distribution agreement (the “Agreement”) with Jarlyn S.A., an Uruguayan corporation (“Jarlyn”). In accordance with the terms and provisions of the Agreement, Jarlyn shall be designated the exclusive licensee, manufacturer, distributor and re-seller of certain licensed technologies within the Oriental Republic of Uruguay (the “Territory”).
Additionally, we are currently identifying other potential acquisition opportunities.
Results of Operations
For the three months ended June 30, 2012 compared to the three months ended June 30, 2011
Revenues
The Company had revenue of $68,521 for the three months ended June 30, 2012 compared to $34,271 for the three months ended June 30, 2011. We had cost of goods sold of $nil for the three months ended June 30, 2012 compared to $25,704 for the same period in 2011, resulting in a gross profit of $68,521 in 2012 compared to $8,567 in 2011. The revenue in 2012 is from license fees while 2011 revenue was from the sale and installation of our NexPhase lighting products.
Operating Expenses and Other Expenses
For the three months ended June 30, 2012 our total operating expenses were $122,715 compared to $276,394 for the three months ended June 30, 2011 resulting in a decrease of $153,679. The decrease is attributable to decreases in general and administrative expenses of $14,584, staff compensation of $94,773, occupancy costs of $5,542, investor relations of $63,834, offset by increases in officer compensation of $8,500, professional fees of $13,104, and depreciation of $3,450.
Other expenses consisted of a loss on the settlement of debt with related parties of $87,000 and interest expense (including beneficial conversion feature accretion of $127,300) of $172,207 for the three months ended June 30, 2012 compared to interest expense of $25,956 for the three months ended June 30, 2011. We incurred a write-off of project development costs of $27,600 for the three months ended June 30, 2011.
For the six months ended June 30, 2012 compared to the six months ended June 30, 2011 and For the Period December 31, 2007 (Inception) to June 30, 2012
Revenues
The Company had revenue of $68,521 for the six months ended June 30, 2012 compared to $79,437 for the six months ended June 30, 2011. We had cost of goods sold of $828 for the six months ended June 30, 2012 compared to $36,010 for the same period in 2011, resulting in a gross profit of $68,521 in 2012 compared to a gross profit of $43,427 in 2011. The revenue in 2012 is from license fees while 2011 revenue was from the sale and installation of our NexPhase lighting products.
For the period December 31, 2007 (inception) to June 30, 2012, the Company had revenue of $448,737, cost of goods sold of $188,590 and a gross profit of $260,147. All revenues and cost of goods sold prior to the quarter ended June 30, 2012 are from the sale of our NexPhase lighting products. We were unable to generate sales from these products in the six months ended June 30, 2012 and currently have no backlog.Revenues for the quarter ended June 30, 2012 were from license fees.
Operating Expensesand Other Expenses
For the six months ended June 30, 2012 our total operating expenses were $291,322 compared to $549,107 for the six months ended June 30, 2011 resulting in a decrease of $257,785. The decrease is attributable to decreases in general and administrative expenses of $2,712, professional fees of $17,251, staff compensation of $156,155, stock based compensation of $118,012, occupancy costs of $7,619, offset by increases in officer compensation of $35,500, and depreciation of $8,964.
Other expenses consisted of a loss on the settlement of debt with related parties of $638,000 and interest expense (including beneficial conversion feature accretion of $369,519) of $432,928 for the six months ended June 30, 2012 compared to interest expense of $52,249 for the six months ended June 30, 2011. We incurred a write-off of project development costs of $27,600 for the six months ended June 30, 2011.
For the period from December31, 2007 (inception) to June 30, 2012, total operating expenses were $2,410,512 and other expenses were $1,735,124 resulting in a net loss of $3,949,248. Operating costs are composed of general and administrative expenses of $344,765, investor relations of $145,512, occupancy costs of $104,466, officer compensation of $721,676, professional fees of $196,957, staff compensation of $468,163, stock-based compensation of $405,205, and depreciation of $23,768. Other expenses are comprised of loss on disposal of assets of $567, loss on the settlement of debt of $638,000, interest expense (including beneficial conversion feature accretion of $907,188) of $1,067,957, the write-off of project development costs of $27,600 and the write-off of amount due from other of $1,000.
Liquidity and Capital Resources
Overview
For the six months ended June 30, 2012, we funded our operations throughthe issuance of notes payable and advances from our chief executive officer and related parties,while for the six months ended June 30, 2011 we funded our operations through financing activities consisting of the issuance of notes payable to related parties. Our principal use of funds during the six months ended June 30, 2012 has been for general operating expenses and working capital purposes.
Liquidity and Capital Resources during the six months ended June 30, 2012 compared to the six months ended June 30, 2011
As of June 30, 2012, we had cash of $2,368 and deficit in working capitalof $1,226,047. The Company generated a negative cash flow from operations of $268,957 for the six months ended June 30, 2012 compared to cash used in operations of $466,758 for the six months ended June 30, 2011. The negative cash flow from operating activities for the six months ended June 30, 2012 is primarily attributable to the Company's net loss from operations of $1,358,316, offset by depreciation of $13,953, loss on the settlement of debt of $638,000, interest accrued on notes payable of $40,724, accretion of beneficial conversion feature discounts to notes payable of $369,519, and increased by net changes in operating assets and liabilities of $31,925, and increased by the realization of license fee revenue of $4,762. Cash used in operations for the six months ended June 30, 2011 is primarily attributable to the Company's net loss from operations of $585,529, offset by depreciation of $4,935, the write-off of project development costs of $27,600, interest accrued on notes payable of $45,645, and changes in operating assets and liabilities of $40,591.
Investing activities decreased $5,997 for the six months ended June 30, 2012 compared to 2011. The decrease is attributable thedecrease in the purchase of equipment during the six months ended June 30, 2012.
Financing activities for the six months ended June 30, 2012 consisted of proceeds from the issuance of notes payable to related parties of $82,560, the issuance of notes payable to third parties of $196,500, and the advances received from our chief executive officer and related parties of $22,890, offset by payments on notes payable to related parties of $14,000 and payments on notes payable to third parties of 52,315 compared to proceeds received from the issuance of notes payable to related parties of $488,434 during the six months ended June 30, 2011.
We will require additional financing during the current fiscal year to meet our planned activities and debt obligations. We presently do not have sufficient financing to enable us to complete these activities and will require additional financing. We expect to finance these expenses with further issuances of securities and debt issuances. We expect we would need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities would result in dilution to our current shareholders. Further, such securities may have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all.
Effective on April 30, 2012, the Board of Directors of Onteco Corporation, a Nevada corporation (the “Company”), approved and authorized the execution of a licensing, manufacturing and distribution agreement (the “Agreement”) with Jarlyn S.A., an Uruguayan corporation (“Jarlyn”). In accordance with the terms and provisions of the Agreement, Jarlyn shall be designated the exclusive licensee, manufacturer, distributor and re-seller of certain licensed technologies within the Oriental Republic of Uruguay (the “Territory”).
In accordance with the terms and provisions of the Agreement: (i) the Company shall grant to Jarlyn an exclusive license to the Licensed Technology Products, for the manufacturing and distribution of the Licensed Technologies, and for the use of the trademark in the Territory; (ii) the Company shall grant to Jarlyn exclusive distribution rights for the direct sale and resale to resellers or other channels of the Licensed Technology Products in the Territory; (iii) Jarlyn shall compensate the Company for the granting of the license and rights pertaining to the Licensed Technology Products by the transfer to the Company of 1,000,000 shares of common stock held of record by Jarlyn in a publicly traded company acceptable to the Company; (iv) Jarlyn shall further compensate the Company for the granting of the license and rights pertaining to the Licensed Technology Products by the payment of the sum of $200,000 U.S. Dollars as a one-time cash licensing fee; and (v) Jarlyn shall pay to the Company a royalty of ten percent (10%) of all gross revenues received by Jarlyn or its affiliates relating to sales, installation and services associated with the Licensed Technologies in the Territory. The agreement is for a period of seven (7) years.
As of June 30, 2012, the Company has valued the common stock to be received at $2,677,890. On August 13, 2012, the Company received from Jarlyn 2,037,948 shares of common stock of a publicly-traded company currently listed on the Frankfurt Stock Exchange as part of the payment due. On August 13, 2012, the stock was valued at $2,878,075, based on its market trading price of the common stock. A gain on the settlement of the amount due from the licensee of $200,185 will be recognized in the third quarter 2012.
On July 9, 2012 the Company entered into a convertible promissory note with an investment firm in the amount of $1,000. Terms include simple interest at ten percent (10%), the note is due on demand and is convertible at the option of the holder at a price of $0.001.
On July 12, 2012 the Company entered into a convertible promissory note with an investment firm in the amount of $26,500. Terms include simple interest at twelve percent (12%), the note is due on March 12, 2013 and is convertible at the option of the holder at a price of 50% of the average of the three lowest trading prices during the ten days prior to the conversion.
On August 1, 2012 the Company entered into a convertible promissory note with an investment firm in the amount of $32,500. Terms include simple interest at eight percent (8%), the note is due on May 3, 2013 and is convertible at the option of the holder at a price of 55% of the average of the two lowest trading prices during the thirty days prior to the conversion.
Going Concern
Due to the uncertainty of our ability to meet our current operating and capital expenses, our independent auditors included an explanatory paragraph in their report on the financial statements for the year ended December 31, 2011 regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.
Our unaudited financial statements have been prepared on a going concern basis, which assumes the realization of assets and settlement of liabilities in the normal course of business. Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they become due. The outcome of these matters cannot be predicted with any certainty at this time and raise substantial doubt that we will be able to continue as a going concern. Our unaudited financial statements do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.
There is no assurance that our operations will be profitable. Our continued existence and plans for future growth depend on our ability to obtain the additional capital necessary to operate either through the generation of revenue or the issuance of additional debt or equity.
Off-Balance Sheet Arrangements
We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make a number of 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. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experiences and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions and conditions. We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions.
See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 2, “Summary of Significant Accounting Policies” in our audited consolidated financial statements for the year ended December 31, 2011, included in our Annual Report on Form 10-K/A as filed on May 21, 2012, for a discussion of our critical accounting policies and estimates.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The disclosure required under this item is not required to be reported by smaller reporting companies; as such term is defined by Item 503(e) of Regulation S-K.
Item 4. Controls and Procedures.
(a) | Evaluation of Disclosure Controls and Procedures |
The Company’s principal executive officer (“PEO”), who is also the principal financial officer (“PFO”), evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on this evaluation, the PEO/PFO concluded that, as of the end of such period, the Company’s disclosure controls and procedures were not effective to ensure that information that is required to be disclosed by the Company in the reports it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the Company’s management, including the PEO/PFO, as appropriate, to allow timely decisions regarding required disclosure.
(b) | Changes in Internal Control over Financial Reporting |
There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
Management is not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this Quarterly Report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against us or our properties.
The disclosure required under this item is not required to be reported by smaller reporting companies; as such term is defined by Item 503(e) of Regulation S-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On April 9, 2012, the Board of Directors approved the issuance of 2,700,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated March 31, 2011 in the amount of $5,600. In accordance with the terms of the note, the shares were issued at $0.0021 per share.
On April 9, 2012, the Board of Directors approved the issuance of 4,500,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 4, 2011 in the amount of $9,000. In accordance with the terms of the note, the shares were issued at $0.002 per share.
On April 17, 2012, the Board of Directors approved the issuance of 2,158,429 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 24, 2011 in the amount of $10,000. In accordance with the terms of the note, the shares were issued at $0.0046 per share.
On April 25, 2012, the Board of Directors approved the issuance of 5,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated September 2, 2010 in the amount of $5,000. In accordance with the terms of the note, the shares were issued at $0.001 per share.
On April 25, 2012, the Board of Directors approved the issuance of 5,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 20, 2011 in the amount of $5,000. In accordance with the terms of the note, the shares were issued at $0.001 per share.
On April 25, 2012, the Board of Directors approved the issuance of 5,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated February 7, 2011 in the amount of $5,000. In accordance with the terms of the note, the shares were issued at $0.001 per share.
On April 26, 2012, the Board of Directors approved the issuance of 6,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 20, 2011 in the amount of $6,000. In accordance with the terms of the note, the shares were issued at $0.001 per share.
On May 2, 2012, the Board of Directors approved the issuance of 1,598,280 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 24, 2011 in the amount of $5,000. In accordance with the terms of the note, the shares were issued at $0.0046 per share.
On May 8, 2012, the Board of Directors approved the issuance of 5,500,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated February 7, 2011 in the amount of $5,500. In accordance with the terms of the note, the shares were issued at $0.001 per share.
On May 23, 2012, the Board of Directors approved the issuance of 5,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated September 2, 2010 in the amount of $5,000. In accordance with the terms of the note, the shares were issued at $0.001 per share.
On May 29, 2012, the Board of Directors approved the issuance of 3,634,616 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated October 26, 2011 in the amount of $12,000. In accordance with the terms of the note, the shares were issued at $0.0039 per share.
On May 29, 2012, the Board of Directors approved the issuance of 5,600,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 20, 2011 in the amount of $5,600. In accordance with the terms of the note, the shares were issued at $0.001 per share.
On May 29, 2012, the Board of Directors approved the issuance of 6,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated March 31, 2011 in the amount of $6,000. In accordance with the terms of the note, the shares were issued at $0.001 per share.
These securities were not registered under the Securities Act of 1933, as amended (the “Securities Act”), but qualified for exemption under Section 4(2) of the Securities Act. The securities were exempt from registration under Section 4(2) of the Securities Act because the issuance of such securities by the Company did not involve a “public offering,” as defined in Section 4(2) of the Securities Act, due to the insubstantial number of persons involved in the transaction, size of the offering, manner of the offering and number of securities offered.
Item 3. Defaults Upon Senior Securities.
No report required.
Item 4. Mine Safety Disclosures.
This item is not applicable.
Item 5. Other Information.
None.
| Exhibit 31.1 | Rule 13a-14(a) Certification by the Principal Executive Officer |
| Exhibit 31.2 | Rule 13a-14(a) Certification by the Principal Financial Officer |
| Exhibit 32.1 | Certification by the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| Exhibit 32.2 | Certification by the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| Exhibit 101.INS ** | XBRL Instance Document |
| Exhibit 101.SCH ** | XBRL Schema Document |
| Exhibit 101.CAL ** | XBRL Calculation Linkbase Document |
| Exhibit 101.DEF ** | XBRL Definition Linkbase Document |
| Exhibit 101.LAB ** | XBRL Label Linkbase Document |
| Exhibit 101.PRE ** | XBRL Presentation Linkbase Document |
__________
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: August 20, 2012 | By: | /s/ Dror Svorai | |
| | Dror Svorai | |
| | Chief Executive Officer (Principal Executive Officer) Chief Financial Officer (Principal Financial Officer) | |