Onteco 10Q/A 2012 Q3 Quarterly report (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

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	o	Accelerated Filer o	o
Non-accelerated Filer o	o	Smaller reporting company x	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 November 15, 2012 the registrant had 1,209,550,635 shares of its Common Stock, $0.001 par value, outstanding.

ONTECO CORPORATION AND SUBSIDIARY

FORM 10-Q

SEPTEMBER 30, 2012

INDEX

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	3
	Consolidated Balance Sheets as of September 30, 2012 (unaudited) and December 31, 2011	3
	Consolidated Statements of Operations for the Three and Nine months Ended September 30, 2012 and 2011 and for the period December 31, 2007 (Inception) to September 30, 2012 (unaudited)	4
	Consolidated Statements of Cash Flows for the Nine months Ended September 30, 2012 and 2011 and for the period December 31, 2007 (Inception) to September 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	35
Item 3	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	39

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	40
Item 1.A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	42
Item 4.	Mine Safety Disclosures	42
Item 5.	Other Information	42
Item 6.	Exhibits	43

SIGNATURES		44

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

ONTECO CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Balance Sheets

	September 30,			December 31,
	2012			2011
	(unaudited)

ASSETS

Current assets:
Cash in banks	$	-		$	676
Due from NexPhase Lighting		659,220			405,528
Assets attributable to discontinued operations		6,043,458			3,209,574

Total current assets		6,702,678			3,615,778

Fixed assets:
Property and equipment, net		4,890			5,865

Other assets:
Security deposits		7,589			7,589
Deposit on acquisition		105,000			-

Total other assets		112,589			7,589

Total assets	$	6,820,157		$	3,629,232

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
Bank overdraft	$	4,721		$	-
Accounts payable		12,815			-
Accrued interest		62,657			26,767
Accrued employee compensation		-			538,000
Advances from non-affiliated related parties		35,490			1,100
Notes payable, non-affiliated related parties		562,798			330,206
Notes payable, third parties		274,486			229,545
Liabilities attributable to discontinued operations		3,679,880			801,110
Total current liabilities		4,632,847			1,926,728

Other liabilities		-			-

Total liabilities		4,632,847			1,926,728

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 September 30, 2012 and December 31, 2011, respectively		150			150
Series B preferred stock, nil shares issued and outstanding
at September 30, 2012 and December 31, 2011, respectively		-			-
Common stock $.001 par value 5,000,000,000 and 2,000,000,000 shares authorized,
648,391,560 and 923,444 shares issued and 648,391,316 and 923,200
shares outstanding at September 30, 2012 and December 31, 2011, respectively		648,391			923
Additional paid-in capital		6,094,884			4,353,363
Treasury stock, at cost (244 shares)		(61,000	)		(61,000	)
Deficit accumulated during the development stage		(4,495,115	)		(2,590,932	)
Total stockholders' equity (deficit)		2,187,310			1,702,504

Total liabilities and stockholders' equity (deficit)	$	6,820,157		$	3,629,232

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 Nine Months Ended						(Inception) to
	September 30,			September 30,			September 30,			September 30,			September 30,
	2012			2011			2012			2011			2012

Revenue	$	-		$	-		$	-		$	-		$	-

Cost of goods sold		-			-			-			-			-

Gross profit		-			-			-			-			-

Operating expenses:
General and administrative		21,276			19,793			59,424			42,337			276,210
Investor relations		-			6,060			-			124,072			124,072
Occupancy - Headquarters		12,691			12,428			39,251			33,140			90,121
Officer compensation		(90,000	)		45,000			-			135,000			455,000
Professional fees		33,142			54,290			80,144			83,224			215,236
Staff compensation		48,361			11,496			70,372			38,766			239,953
Stock-based compensation		25,000			-			25,000			-			430,205
Depreciation		325			325			975			975			2,275
Total operating expenses		50,795			149,392			275,166			457,514			1,833,072

Loss from operations		(50,795	)		(149,392	)		(275,166	)		(457,514	)		(1,833,072	)

Other expenses:
Loss on dispotion of assets		-			-			-			-			567
Loss on settlement of debt (Note 11)		73,702			-			711,702			-			711,702
Interest expense		565,351			10,927			862,430			45,786			1,327,265
Write-off of project development costs		-			-			-			27,600			27,600
Write-off of amount due from other		-			-			-			-			1,000
Total other expenses		639,053			10,927			1,574,132			73,386			2,068,134

Net loss from continuing operations		(689,848	)		(160,319	)		(1,849,298	)		(530,900	)		(3,901,206	)

Net loss from discontinued operations		80,222			18,200			(54,885	)		(196,748	)		(593,909	)

Net loss	$	(609,626	)	$	(142,119	)	$	(1,904,183	)	$	(727,648	)	$	(4,495,115	)


Net loss per share - Basic and diluted - continuing operations	$	(0.00	)	$	(0.55	)	$	(0.01	)	$	(2.40	)
Net loss per share - Basic and diluted - discontinued operations	$	0.00		$	0.06		$	(0.00	)	$	(0.89	)
Net loss per share - Basic and diluted	$	(0.00	)	$	(0.49	)	$	(0.01	)	$	(3.29	)

Weighted average number of shares
oustanding during the period -
Basic and diluted		302,575,501			291,980			162,231,875			221,345

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 Nine Months Ended						(Inception) to
	September 30,			September 30,			September 30,
	2012			2011			2012

Cash flows used in operating activities:
Net loss	$	(1,904,183	)	$	(727,648	)	$	(4,495,115	)
Adjustments to reconcile net loss to net cash used in operations:
License fee revenue realized		-			-			-
Depreciation		975			975			2,275
Loss on settlement of debt		711,702			-			711,702
Stock-based compensation		25,000			-			195,055
Stock issued for services		-			80,685			315,834
Cancellation of stock issued for services		-			(84,000	)		(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		52,582			62,295			149,337
Interest accrued on notes payable, third parties		17,138			12,105			29,490
Accretion of beneficial conversion feature as interest expense		770,023			-			1,307,692
Changes in operating assets and liabilities:
Due from NexPhase Lighting		(66,060	)		(129,804	)		(133,984	)
Assets attributable to discontinued operations		(2,833,884	)		-			(2,833,884	)
Bank overdraft		4,721			-			4,721
Accounts payable		12,815			-			12,815
Sales tax payable		-			-			-
Accrued compensation		-			135,000			538,000
Liabilities attributable to discontinued operations		2,878,770			-			2,878,770
Net cash used in operating activities		(330,401	)		(622,792	)		(1,373,125	)

Cash flows used in investing activities:
Purchase of property and equipment		-			-			(567	)
Project development costs		-			-			(27,600	)
Net cash used in investing activities		-			-			(28,167	)

Cash flows from financing activities:
Proceeds from issuance of note payable, non-affiliated related parties		73,650			400,450			837,105
Payments on notes payable, non-affiliated related parties		(34,000	)		(14,905	)		(60,655	)
Proceeds from issuance of notes payable, third parties		308,000			259,000			636,100
Payments on notes payable, third parties		(52,315	)		-			(52,315	)
Advances from non-affiliated related parties, net		34,390			-			35,490
Proceeds from sale of common stock		-			-			5,567
Net cash provided by financing activities		329,725			644,545			1,401,292

Net increase (decrease) in cash		(676	)		21,753			-

Cash at beginning of period		676			62,428			-

Cash at end of period	$	-		$	84,181		$	-

Continued

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 Nine Months Ended						Exploration Stage) to
	September 30,			September 30,			September 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	$	(204,150	)	$	-		$	(358,366	)
Conversion of accrued interest, related parties to common stock		(5,480	)					(23,480	)
Common stock issued		52,043			-			67,591
Additional paid in capital on stock issued		157,587			-			314,255

Conversion of note payable, third parties to common stock		(207,140	)		-			(466,064	)
Conversion of accrued interest, third parties to common stock		(10,385	)		-			(15,785	)
Common stock issued		156,338			-			156,819
Additional paid in capital on stock issued		61,187			-			325,030

Benefical conversion feature discount to notes payable, related parties		(575,066	)		-			(1,054,389	)
Benefical conversion feature discount to notes payable, third parties		(435,123	)		-			(766,240	)
Additional paid in capital		1,010,189			-			1,820,629

Conversion of accrued compensation to common stock		(50,000	)		-			(50,000	)
Common stock issued		50,000			-			50,000

Deposit on acquisition		(105,000	)		-			(105,000	)
Common stock issued		150,000			-			150,000
Additional paid in capital on stock issued		(45,000	)		-			(45,000	)

Conversion of accrued compensation to notes payable, related parties:
Notes payable, related parties		501,425			-			501,425
Accrued compensation		(501,425	)		-			(501,425	)

Conversion of NexPhase notes payable, related parties to notes payable, third parties:
Due from NexPhase		(75,674	)		-			(75,674	)
Notes payable, third parties		75,674			-			75,674

Conversion of NexPhase notes payable, related parties to common stock:
Due from NexPhase		(111,958	)		-			(111,958	)
Common stock		189,087			-			189,087
Additional paid in capital on stock issued		(77,129	)		-			(77,129	)

Conversion of notes payable, related parties to notes payable, third parties:
Notes payable, related parties		(36,580	)		(118,000	)		(254,672	)
Accrued interest		(2,225	)		-			(28,247	)
Notes payable, third parties		38,805			118,000			282,919

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

(A Development Stage Company)

Notes to Consolidated Financial Statements

September 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.

The Company’s Board of Directors has unanimously adopted a resolution, and has received shareholder approval, to authorize the Board to effectuate a Spin-Off of NexPhase upon receipt of all necessary regulatory approvals and the passage of all necessary waiting periods. The Board of Directors had determined that it would be in the Company’s best interest to effect the Spin-Off and has received the consent of holders of over 100% of the voting rights and power of the Company’s securities to authorize the Board of Directors to effect the Spin-Off. The Company will issue shares of NexPhase to the existing shareholders of the Company on a pro-rated basis on or about November 15, 2012. See Note 6 – Spin-Off of NexPhase Lighting and Note 7 – Licensing, Manufacturing and Distribution Agreement.

Effective October 25, 2012, the Company’s Board of Directors approved and authorized the execution of a share exchange agreement (the “Share Exchange Agreement”) with Cyber Centers Worldwide Corporation, a private Florida corporation (“CCWC”), and the shareholders of CCWC (the "CCWC Shareholders"). In accordance with the terms and provisions of the Share Exchange Agreement, the Company will acquire approximately 150,000,000 shares of common stock of CCWC and 1,000,000 shares of Series B preferred stock of CCWC, which represents 100% of the total issued and outstanding shares held of record by the CCWC Shareholders. In exchange for the acquisition of the capital shares of CCWC, the Company shall issue to the CCWC Shareholders on a pro rata basis 150,000,000 restricted shares of common stock of the Company and 1,000,000 shares of Series B preferred stock of the Company. This resulted in CCWC becoming the wholly-owned subsidiary of the Company. Prior to this share exchange, CCWC changed its name from Cyber Centers International Corporation ("CCIC"). See Note 5 – Acquisition of Cyber Centers Worldwide Corporation.

ONTECO CORPORATION

(A Development Stage Company)

Notes to Consolidated Financial Statements

September 30, 2012

(unaudited)

Note 1 – Nature of Business, Presentation, and Going Concern (Continued)

Organization (Continued)

In accordance with the Share Exchange Agreement and anticipated consummation of the spin-off of the Company's wholly-owned subsidiary, NexPhase Lighting Inc., the operations of the Company will change from 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 business operations of the Company will be conducted through its new wholly-owned subsidiary, CCWC, which involves interactive online gaming within the entertainment industry. Over the past years, the founders of CCIC have invested private capital, time and effort and innovative technology in its product development. CCWC today is capitalizing on the emerging trends in interactive gaming and social marketing with a vision to become the benchmark in the gaming industry with a reputation for customer safety, security and quality customer service, while also upholding the interests of shareholders.

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.

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.

Reclassifications

Certain items on the 2011 balance sheet, statement of operations and statement of cash flows have been reclassified to conform to current period presentation.

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 $1,904,183 for the nine months ended September 30, 2012 and has incurred cumulative losses since inception of $4,495,115. 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.

ONTECO CORPORATION

(A Development Stage Company)

Notes to Consolidated Financial Statements

September 30, 2012

(unaudited)

Note 1 – Nature of Business, Presentation, and Going Concern (Continued)

Going Concern (Continued)

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 September 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 September 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

September 30, 2012

(unaudited)

Note 3 – Notes Payable – Non-affiliated Related Parties

	September 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

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

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 nine months ended September 30, 2012, a portion of the note in the amount of $5,000 was converted to Common Stock.		-		-		-		5,000		-		5,000

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

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 nine months ended September 30, 2012, the note in the amount of $20,000 was converted to Common Stock.		-		-		-		20,000		-		20,000

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

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 nine months ended September 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

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

September 30, 2012

(unaudited)

Note 3 – Notes Payable – Non-affiliated Related Parties (Continued)

	September 30, 2012						December 31, 2011
					Principal,							Principal,
			Unamortized		net of				Unamortized			net of
	Principal		Discount		Discounts		Principal		Discount			Discounts

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. During the nine months ended September 30, 2012, the note in the amount of $5,500 was converted to Common Stock.		-		-		-		5,500		-			5,500

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 nine months ended September 30, 2012, the note in the amount of $28,000 was converted to Common Stock.		-		-		-		28,000		-			28,000

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. During the nine months ended September 30, 2012, the note in the amount of $9,300, plus $930 of bonus interest, was converted to Common Stock.		-		-		-		9,300		-			9,300

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. The note is currently in default.		15,500		-		15,500		15,500		-			15,500

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

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

September 30, 2012

(unaudited)

Note 3 – Notes Payable – Non-affiliated Related Parties (Continued)

	September 30, 2012						December 31, 2011
					Principal,							Principal,
			Unamortized		net of				Unamortized			net of
	Principal		Discount		Discounts		Principal		Discount			Discounts

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

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

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 nine months ended September 30, 2012, the note plus $600 of accrued interest has been converted to Common Stock.		-		-		-		5,500		(1,367	)		4,133

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 nine months ended September 30, 2012, 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

ONTECO CORPORATION

(A Development Stage Company)

Notes to Consolidated Financial Statements

September 30, 2012

(unaudited)

Note 3 – Notes Payable – Non-affiliated Related Parties (Continued)

	September 30, 2012						December 31, 2011
					Principal,							Principal,
			Unamortized		net of				Unamortized			net of
	Principal		Discount		Discounts		Principal		Discount			Discounts

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 nine months ended September 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

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 nine months ended September 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

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 nine months ended September 30, 2012, the note in the amount of $1,000 was converted to Common Stock. The note is currently in default.		-		-		-		1,000		(298	)		702

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

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

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

September 30, 2012

(unaudited)

Note 3 – Notes Payable – Non-affiliated Related Parties (Continued)

	September 30, 2012						December 31, 2011
					Principal,							Principal,
			Unamortized		net of				Unamortized			net of
	Principal		Discount		Discounts		Principal		Discount			Discounts

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

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

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

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

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. During the nine months ended September 30, 2012, the note balance of $6,500, plus accrued interest of $671, was converted to Common Stock.		-		-		-		6,500		(3,054	)		3,446

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. During the nine months ended September 30, 2012, a portion of the note in the amount of $250, plus accrued interest of $11, was converted to Common Stock.		1,750		-		1,750		2,000		(961	)		1,039

ONTECO CORPORATION

(A Development Stage Company)

Notes to Consolidated Financial Statements

September 30, 2012

(unaudited)

Note 3 – Notes Payable – Non-affiliated Related Parties (Continued)

	September 30, 2012							December 31, 2011
						Principal,							Principal,
			Unamortized			net of				Unamortized			net of
	Principal		Discount			Discounts		Principal		Discount			Discounts

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 nine months ended September 30, 2012, the note balance of $15,000, plus accrued interest of $868, was converted to Common Stock.		-		-			-		15,000		(8,893	)		6,107

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 nine months ended September 30, 2012, a portion of the note in the amount of $18,000 was converted to Common Stock.		2,000		-			2,000		20,000		(11,857	)		8,143

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		-			2,500		2,500		(1,577	)		923

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		-			6,000		6,000		(4,212	)		1,788

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		-			1,000		1,000		(726	)		274

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		-			2,000		2,000		(1,189	)		811

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		(10	)		5,790		5,800		(444	)		5,356

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		(39	)		1,661		1,700		(548	)		1,152

ONTECO CORPORATION

(A Development Stage Company)

Notes to Consolidated Financial Statements

September 30, 2012

(unaudited)

Note 3 – Notes Payable – Non-affiliated Related Parties (Continued)

	September 30, 2012							December 31, 2011
						Principal,							Principal,
			Unamortized			net of				Unamortized			net of
	Principal		Discount			Discounts		Principal		Discount			Discounts

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		(118	)		1,882		2,000		(717	)		1,283

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		(830	)		10,670		11,500		(4,273	)		7,227

On January 8, 2012 the Company converted accrued compensation and entered into a convertible promissory note with its former Chief Executive Officer in the amount of $501,425. Terms include simple interest at six and one-quarter percent (6.25%), the note is due on January 8, 2013 and is convertible at the lower of 1) a price of $0.001, or 2) a seventy-five percent discount to the previous day's closing bid price if the closing bid price is $0.0015 per share or less. During the nine months ended September 30, 2012, $20,000 has been paid on the note.		481,425		(137,001	)		344,424		-		-			-

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. On August 15, 2012, the note plus accrued interest of $2,225 was assigned to a third party investment firm.		-		-			-		-		-			-

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		(368	)		532		-		-			-

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		(754	)		846		-		-			-

ONTECO CORPORATION

(A Development Stage Company)

Notes to Consolidated Financial Statements

September 30, 2012

(unaudited)

Note 3 – Notes Payable – Non-affiliated Related Parties (Continued)

	September 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 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 (10.0%), the note is due on July 9, 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.		1,000		(772	)		228		-		-			-

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


Notes Payable -- Related Parties	$	702,690	$	(139,892	)	$	562,798	$	402,345	$	(72,139	)	$	330,206

ONTECO CORPORATION

(A Development Stage Company)

Notes to Consolidated Financial Statements

September 30, 2012

(unaudited)

Note 4 – Notes Payable – Third Parties

	September 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

September 30, 2012

(unaudited)

Note 4 – Notes Payable – Third Parties (Continued)

	September 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

ONTECO CORPORATION

(A Development Stage Company)

Notes to Consolidated Financial Statements

September 30, 2012

(unaudited)

Note 4 – Notes Payable – Third Parties (Continued)

	September 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

September 30, 2012

(unaudited)

Note 4 – Notes Payable – Third Parties (Continued)

	September 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 nine months ended September 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. During the nine months ended September 30, 2012, a portion of the note in the amount of $21,300 was converted to Common Stock.		11,200		(1,272	)		9,928		-		-			-

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		(6,904	)		12,096		-		-			-

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		(37,808	)		37,192		-		-			-

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		(11,015	)		26,485		-		-			-

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		(13,874	)		18,626		-		-			-

ONTECO CORPORATION

(A Development Stage Company)

Notes to Consolidated Financial Statements

September 30, 2012

(unaudited)

Note 4 – Notes Payable – Third Parties (Continued)

	September 30, 2012							December 31, 2011
						Principal,						Principal,
			Unamortized			net of				Unamortized		net of
	Principal		Discount			Discounts		Principal		Discount		Discounts
On December 15, 2010 the Company entered into a convertible promissory note with a non affiliate related party in the amount of $40,000. Terms include simple interest at twelve percent (12%), the note was due on December 15, 2011 and was convertible 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. On July 12, 2012, the note was assigned from the non affiliate related party to a thrid party investor firm. The balance of the note assigned, including accrued interest, was $52,015. The Company replaced the original note with a new convertible promissory note to the thrid party investment firm. Terms include simple interest at twelve percent (12.0%), the note is due on July 12, 2013 and is convertible at the option of the holder at a price calculated at a fifty percent discount to the lowest trading price during the three days prior to the date of the conversionon notice. No payments have been made on this note. During the nine months ended September 30, 2012, a portion of the note in the amount of $24,915 was converted to Common Stock.		27,100		(21,160	)		5,940		-		-		-

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 (12.0%), the note is due on March 12, 2013 and is convertible at the option of the holder at a price calculated at a fifty percent discount to average of the lowest three trading prices during the ten day period prior to the date of the conversion notice. No payments have been made on this note.		26,500		(20,691	)		5,809		-		-		-

On December 10, 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. 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. On July 31, 2012, the notes were assigned from the non affiliate related parties to a thrid party investor firm. The balance of the notes assigned, including accrued interest, was $75,674. The Company replaced the original note with a new convertible promissory note to the thrid party investment firm. Terms include simple interest at twelve percent (12.0%), the note is due on July 31, 2013 and is convertible at the option of the holder at a price calculated at a fifty percent discount to the lowest trading price during the three days prior to the date of the conversionon notice. No payments have been made on this note.		75,674		(63,026	)		12,648		-		-		-

On August 1, 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 May 3, 2013 and is convertible at the option of the holder at a price calculated at a forty-five percent discount to the avaerage of the two lowest trading prices during the thirty trading day period prior to the date of the conversion notice. No payments have been made on this note.		32,500		(20,789	)		11,711		-		-		-

On August 14, 2012 the Company entered into a convertible promissory note with a an investment firm in the amount of $42,500. Terms include simple interest at eight percent (8.0%), the note is due on May 16, 2013 and is convertible at the option of the holder at a price calculated at a forty-five percent discount to the avaerage of the three lowest trading prices during the ten trading day period prior to the date of he conversion notice. No payments have been made on this note.		42,500		(28,830	)		13,670		-		-		-

ONTECO CORPORATION

(A Development Stage Company)

Notes to Consolidated Financial Statements

September 30, 2012

(unaudited)

Note 4 – Notes Payable – Third Parties (Continued)

	September 30, 2012							December 31, 2011
						Principal,							Principal,
			Unamortized			net of				Unamortized			net of
	Principal		Discount			Discounts		Principal		Discount			Discounts
On January 26, 2012 the Company entered into a convertible promissory note with a non affiliate related party in the amount of $36,580. Terms include simple interest at twelve percent (10%), the note was due on January 26, 2013 and was convertible at the option of the holder at a price of $0.001 per share. On August 15, 2012, the note was assigned from the non affiliate related party to a thrid party investment firm. The balance of the note assigned, including accrued interest, was $38,805. The Company replaced the original note with a new convertible promissory note to the thrid party investment firm. 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 calculated at a forty-five percent discount to the average of the three lowest trading price during the ten day period prior to the date of the conversionon notice. No payments have been made on this note. During the nine months ended September 30, 2012, a portion of the note in the amount of $2,225 was converted to Common Stock.		36,580		(21,543	)		15,037		-		-			-

On August 16, 2012 the Company entered into a convertible promissory note with a an investment firm in the amount of $5,000. Terms include simple interest at ten percent (10.0%), the note is due on August 16, 2013 and is convertible at the option of the holder at the lower of 1) a price of $0.001, or 2) a seventy-five percent discount to the previous day's closing bid price if the closing bid price is $0.0015 per share or less. No payments have been made on this note.		5,000		(4,383	)		617		-		-			-

On September 20, 2012 the Company entered into a convertible promissory note with a an investment firm in the amount of $5,000. Terms include simple interest at ten percent (10.0%), the note is due on September 20, 2013 and is convertible at the option of the holder at the lower of 1) a price of $0.001, or 2) a seventy-five percent discount to the previous day's closing bid price if the closing bid price is $0.0015 per share or less. No payments have been made on this note.		5,000		(4,862	)		138		-		-			-


Total - Notes Payable -- Third Parties	$	530,644	$	(256,157	)	$	274,487	$	313,290	$	(83,745	)	$	229,545

ONTECO CORPORATION

(A Development Stage Company)

Notes to Consolidated Financial Statements

September 30, 2012

(unaudited)

Note 5 – Acquisition of Cyber Centers Worldwide Corporation

On September 11, 2012, the Company issued the 150,000,000 shares of common stock to the shareholders of CCWC. The shares were valued at the market price per share on the date of issue of $0.0007, for a total of $105,000, and are classified on the balance sheet as a deposit on acquisition.

Note 6 – Spin-Off of NexPhase Lighting

Since the acquisition of NexPhase, the Company has provided working capital to NexPhase. Amounts due from NexPhase are $659,220 and $405,528 at September 30, 2012 and December 31, 2011, respectively.

Due to the transfer of the assets and liabilities of NexPhase to the shareholders, the accounting for NexPhase in this period and historically would be classified as a discontinued operation. Accordingly, the Company has excluded results for NexPhase from its continuing operations in the Consolidated Statement of Operations for all periods presented. The following table shows the results of NexPhase included in the loss from discontinued operations:

ONTECO CORPORATION

(A Development Stage Company)

Notes to Consolidated Financial Statements

September 30, 2012

(unaudited)

Note 6 – Spin-Off of NexPhase Lighting (Continued)

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2012		2011		2012			2011

Revenue	$	102,782	$	203,024	$	171,303		$	282,461
Cost of goods sold		-		219		828			36,229
Gross profit		102,782		202,805		170,475			246,232

Operating expenses:
General and administrative		713		27,661		11,911			57,175
Investor relations		-		-		-			21,440
Occupancy - Headquarters		-		6,939		-			20,406
Professional fees		-		730		-			14,609
Staff compensation		-		135,909		42,504			294,309
Depreciation		5,646		2,142		18,895			6,427
Total operating expenses		6,359		173,381		73,310			414,366

Income (loss) from discontinued operations		96,423		29,424		97,165			(168,134	)

Other expenses:
Interest expense		16,201		11,224		152,050			28,614

Net income (loss) from discontinued operations	$	80,222	$	18,200	$	(54,885	)	$	(196,748	)

The major classes of assets and liabilities of discontinued operations on the balance sheet are as follows:

	September 30,		December 31,
	2012		2011
ASSETS
Current assets:
Cash in banks	$	7,720	$	41,128
Accounts receivable		-		2,251
Due from licensee		200,000		-
Inventories		79,345		74,947
Total current assets		287,065		118,326

Property and equipment, net		85,234		97,979
Marketable securities		2,677,890		-
Intellectual property		2,989,149		2,989,149
Security deposits		4,120		4,120

Total assets of discontinued operations	$	6,043,458	$	3,209,574

LIABILITIES
Current liabilities:
Accounts payable	$	56,117	$	112,046
Accrued interest		46,968		38,244
Sales tax payable		2,679		2,678
Due to Onteco		659,220		405,528
Deferred license fee revenue, current		411,128		-
Notes payable, non-affiliated related parties		208,309		242,614
Deferred license fee revenue, non current		2,295,459		-

Total liabilities of discontinued operations	$	3,679,880	$	801,110

ONTECO CORPORATION

(A Development Stage Company)

Notes to Consolidated Financial Statements

September 30, 2012

(unaudited)

Note 7 – 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. The Company has assigned the licensing, manufacturing and distribution agreement, along with its related assets and deferred revenues, to NexPhase which will be included in the spin-off (See Note 6 – Spin-Off of NexPhase Lighting)

Note 8 – 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.

Oh January 8, 2012, the Company and its former Chief Executive Officer entered into an agreement to terminate the executive compensation agreement and the Company issued a convertible promissory note for the accrued compensation and interest thereon totally $501,425. The note is due January 8, 2013, bears interest at 6.25% and is convertible at the lower of 1) a price of $0.001, or 2) a seventy-five percent discount to the previous day's closing bid price if the closing bid price is $0.0015 per share or less.

Note 9 – Stockholders’ Equity (Deficit) and Common Stock

On August 22, 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 August 22, 2012 increasing our authorized capital from 300,000,000 shares of common stock to 5,000,000,000 shares of common stock, par value $0.001. The authorized capital of preferred stock remained unchanged at 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.

ONTECO CORPORATION

(A Development Stage Company)

Notes to Consolidated Financial Statements

September 30, 2012

(unaudited)

Note 9 – Stockholders’ Equity (Deficit) and Common Stock (Continued)

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.

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.

ONTECO CORPORATION

(A Development Stage Company)

Notes to Consolidated Financial Statements

September 30, 2012

(unaudited)

Note 9 – Stockholders’ Equity (Deficit) and Common Stock (Continued)

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.

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.

ONTECO CORPORATION

(A Development Stage Company)

Notes to Consolidated Financial Statements

September 30, 2012

(unaudited)

Note 9 – Stockholders’ Equity (Deficit) and Common Stock (Continued)

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.

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.

ONTECO CORPORATION

(A Development Stage Company)

Notes to Consolidated Financial Statements

September 30, 2012

(unaudited)

Note 9 – Stockholders’ Equity (Deficit) and Common Stock (Continued)

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.

On July 1, 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 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 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 July 12, 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 November 8, 2010 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 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.

ONTECO CORPORATION

(A Development Stage Company)

Notes to Consolidated Financial Statements

September 30, 2012

(unaudited)

Note 9 – Stockholders’ Equity (Deficit) and Common Stock (Continued)

On August 13, 2012, the Board of Directors approved the issuance of 11,111,112 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 $0.0004 per share.

On August 21, 2012, the Board of Directors approved the issuance of 10,576,923 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated February 7, 2012 in the amount of $5,500. In accordance with the terms of the note, the shares were issued at $0.0005 per share.

On August 22, 2012, the Board of Directors approved the issuance of 11,200,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated July 12, 2012 in the amount of $4,480. In accordance with the terms of the note, the shares were issued at $0.0004 per share.

On August 31, 2012, the Board of Directors authorized the issuance of 50,000,000 shares of its restricted common stock at a per share price of $0.001 to Jorge Schcolnik as partial compensation in connection with his appointment as the President and a Director of the Company. The shares were valued at $0.0005, the market value of the shares on the date of issuance, for a total of $25,000.

On September 4, 2012, the Board of Directors approved the issuance of 14,141,360 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated July 12, 2012 in the amount of $3,535. In accordance with the terms of the note, the shares were issued at $0.0003 per share.

On September 11, 2012, the Board of Directors approved the issuance of 150,000,000 unregistered common shares to the shareholders of CCWC as an initial deposit relating to the acquisition of CCWC. The shares were valued at $0.0007, the market value per share on the date of issuance, for a total of $105,000.

On September 13, 2012, the Board of Directors approved the issuance of 10,714,286 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated February 7, 2012 in the amount of $3,000. In accordance with the terms of the note, the shares were issued at $0.0003 per share.

On September 13, 2012, the Board of Directors approved the issuance of 7,945,964 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 15, 2012 in the amount of $2,225. In accordance with the terms of the note, the shares were issued at $0.0003 per share.

On September 13, 2012, the Board of Directors approved the issuance of 23,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated July 12, 2012 in the amount of $6,900. In accordance with the terms of the note, the shares were issued at $0.0003 per share.

On September 14, 2012, the Board of Directors approved the issuance of 23,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 23, 2011 in the amount of $3,067. In accordance with the terms of the note, the shares were issued at $0.0001 per share.

On September 17, 2012, the Board of Directors approved the issuance of 24,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated February 11, 2011 in the amount of $3,200. In accordance with the terms of the note, the shares were issued at $0.0001 per share.

On September 18, 2012, the Board of Directors approved the issuance of 25,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated March 02, 2011 in the amount of $3,542. In accordance with the terms of the note, the shares were issued at $0.0001 per share.

On September 19, 2012, the Board of Directors approved the issuance of 25,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 23, 2011 in the amount of $3,750. In accordance with the terms of the note, the shares were issued at $0.0001 per share.

ONTECO CORPORATION

(A Development Stage Company)

Notes to Consolidated Financial Statements

September 30, 2012

(unaudited)

Note 9 – Stockholders’ Equity (Deficit) and Common Stock (Continued)

On September 20, 2012, the Board of Directors approved the issuance of 22,857,143 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated February 7, 2011 in the amount of $6,400. In accordance with the terms of the note, the shares were issued at $0.0003 per share.

On September 27, 2012, the Board of Directors approved the issuance of 22,857,143 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated February 7, 2011 in the amount of $6,400. In accordance with the terms of the note, the shares were issued at $0.0003 per share.

Note 10 – 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 9 – Stockholders’ Equity (Deficit) and Common Stock for additional related party disclosures.

Note 11 – Loss on Settlement of Debt

During the nine months ended September 30, 2012, the Company issued 34,530,000 shares of common stock to related parties in conversion of $68,730 of notes payable in accordance with the terms of the notes. The fair value of the common stock issued was $780,432 at the date of the conversions, resulting in a loss on the settlements of $711,702.

Note 12 – Commitments and Contingencies

As of the date of this Report, we have entered into the following material commitments:

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	$	11,383
2013	$	45,528
2014	$	3,794

Note 13 – Subsequent Events

On October 3, 2012, the Board of Directors approved the issuance of 22,857,143 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated February 7, 2012 in the amount of $6,400. In accordance with the terms of the note, the shares were issued at $0.0003 per share.

On October 3, 2012, the Board of Directors approved the issuance of 33,495,298 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated May 16, 2011 in the amount of $6,978. In accordance with the terms of the note, the shares were issued at $0.0002 per share.

On October 3, 2012, the Board of Directors approved the issuance of 23,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated July 12, 2012 in the amount of $6,900. In accordance with the terms of the note, the shares were issued at $0.0003 per share.

ONTECO CORPORATION

(A Development Stage Company)

Notes to Consolidated Financial Statements

September 30, 2012

(unaudited)

Note 13 – Subsequent Events (Continued)

On October 3, 2012 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%), the note is due on October 3, 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 October 4, 2012, the Board of Directors approved the issuance of 35,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated April 2, 2011 in the amount of $7,292. In accordance with the terms of the note, the shares were issued at $0.0002 per share.

On October 5, 2012, the Board of Directors approved the issuance of 36,000,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated January 20, 2012 in the amount of $12,900. In accordance with the terms of the note, the shares were issued at $0.0004 per share.

On October 10, 2012, the Board of Directors approved the issuance of 38,500,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated January 10, 2010 in the amount of $13,796. In accordance with the terms of the note, the shares were issued at $0.0004 per share.

On October 18, 2012, the Board of Directors approved the issuance of 21,785,714 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated February 7, 2012 in the amount of $6,100. In accordance with the terms of the note, the shares were issued at $0.0003 per share.

On October 18, 2012, the Board of Directors approved the issuance of 43,874,263 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated May 16, 2011 in the amount of $5,850. In accordance with the terms of the note, the shares were issued at $0.0001 per share.

On November 5, 2012, the Board of Directors approved the issuance of 47,500,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated October 18, 2012 in the amount of $3,563. In accordance with the terms of the note, the shares were issued at $0.0001 per share.

On November 5, 2012, the Board of Directors approved the issuance of 124,005,725 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated October 18, 2012 in the amount of $49,602. In accordance with the terms of the note, the shares were issued at $0.0004 per share.

On November 8, 2012, the Board of Directors approved the issuance of 22,941,176 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated April 3, 2012 in the amount of $3,900. In accordance with the terms of the note, the shares were issued at $0.0002 per share.

On November 9, 2012, the Board of Directors approved the issuance of 54,750,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated May 16, 2011 in the amount of $3,650. In accordance with the terms of the note, the shares were issued at $0.0001 per share.

On November 12, 2012, the Board of Directors approved the issuance of 57,450,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated April 2, 2012 in the amount of $3,351. In accordance with the terms of the note, the shares were issued at $0.0001 per share.

ONTECO CORPORATION

(A Development Stage Company)

Notes to Consolidated Financial Statements

September 30, 2012

(unaudited)

Note 13 – 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", “Onteco”, “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.

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) downlight troffer; (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 nine 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.

Additionally, we are currently identifying other potential acquisition opportunities.

Results of Operations

For the three months ended September 30, 2012 compared to the three months ended September 30, 2011

Revenues

The Company had no revenue or cost of goods sold for the three months ended September 30, 2012 and September 30, 2011.

Operating Expenses and Other Expenses

For the three months ended September 30, 2012 our total operating expenses were $50,795 compared to $149,392 for the three months ended September 30, 2011 resulting in a decrease of $98,597. The decrease is attributable to decreases in professional fees of $21,148, investor relations of $6,060, and officer compensation of $135,000, offset by increases in general and administrative expenses of $1,483, staff compensation of $36,865, occupancy costs of $263 and stock based compensation of $25,000.

Other expenses consisted of a loss on the settlement of debt with related parties of $73,702 and interest expense (including beneficial conversion feature accretion of $516,375) of $565,351 for the three months ended September 30, 2012 compared to interest expense of $10,927 for the three months ended September 30, 2011.

For the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011 and For the Period December 31, 2007 (Inception) to September 30, 2012

Revenues

The Company had no revenue or cost of goods sold for the period December 31, 2007 (Inception) to September 30, 2012.

Operating Expenses and Other Expenses

For the nine months ended September 30, 2012 our total operating expenses were $275,166 compared to $457,514 for the nine months ended September 30, 2011 resulting in a decrease of $182,348. The decrease is attributable to decreases in professional fees of $3,080, investor relations of $124,072, and officer compensation of $135,000, offset by increases in general and administrative expenses of $17,087, staff compensation of $31,606, occupancy costs of $6,111 and stock based compensation of $25,000.

Other expenses consisted of a loss on the settlement of debt with related parties of $711,702 and interest expense (including beneficial conversion feature accretion of $770,025) of $862,430 for the nine months ended September 30, 2012 compared to interest expense of $45,786 for the nine months ended September 30, 2011. We incurred a write-off of project development costs of $27,600 for the nine months ended September 30, 2011. Net loss from discontinued operations was $54,885 for the nine months ended September 30, 2012.

For the period from December 31, 2007 (inception) to September 30, 2012, total operating expenses were $1,833,072 and other expenses were $2,068,134 resulting in a net loss of $3,949,248. Operating costs are composed of general and administrative expenses of $276,210, investor relations of $124,072, occupancy costs of $90,121, officer compensation of $455,000, professional fees of $215,236, staff compensation of $239,953, stock-based compensation of $430,205, and depreciation of $2,275. Other expenses are comprised of loss on disposal of assets of $567, loss on the settlement of debt of $711,702, interest expense (including beneficial conversion feature accretion of $1,157,912) of $1,327,265, 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 nine months ended September 30, 2012, we funded our operations through the issuance of notes payable to related parties and third parties and advances from our chief executive officer and related parties, while for the nine months ended September 30, 2011 we funded our operations through financing activities consisting of the issuance of notes payable to related parties and third parties. Our principal use of funds during the nine months ended September 30, 2012 has been for general operating expenses and working capital purposes.

Liquidity and Capital Resources during the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011

As of September 30, 2012, we had no cash and deficit in working capital of $293,747 (excluding assets and liabilities of discontinued operations). The Company generated a negative cash flow from operations of $330,401 for the nine months ended September 30, 2012 compared to cash used in operations of $621,959 for the nine months ended September 30, 2011. The negative cash flow from operating activities for the nine months ended September 30, 2012 is primarily attributable to the Company's net loss of $1,904,183, offset by depreciation of $975, loss on the settlement of debt of $711,702, stock based compensation of $25,000, interest accrued on notes payable of $69,720, accretion of beneficial conversion feature discounts to notes payable of $770,023, and increased by net changes in operating assets and liabilities of $3,638. Cash used in operations for the nine months ended September 30, 2011 is primarily attributable to the Company's net loss of $727,648, offset by depreciation of $975, stock issued for services of $80,685, the write-off of project development costs of $27,600, interest accrued on notes payable of $62,295, and net changes in operating assets and liabilities of $5,196, and increased by the cancellation of stock issued for services of $84,000.

Investing activities were $nil for the nine months ended September 30, 2012 and 2011.

Financing activities for the nine months ended September 30, 2012 consisted of proceeds from the issuance of notes payable to related parties of $73,560, the issuance of notes payable to third parties of $308,000, and the advances received from our chief executive officer and related parties of $34,390, offset by payments on notes payable to related parties of $34,000 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 $400,450, the issuance of notes payable to third parties of $259,000, offset by payments on notes payable to related parties of $14,905 during the nine months ended September 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.

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.

Item 1A. Risk Factors

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.

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.

Item 6. Exhibits

	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: November 19, 2012	By:	/s/Jorge Schcolnik
		Jorge Schcolnik
		President
		(Principal Executive Officer) Chief Financial Officer (Principal Financial Officer)

Onteco Inactive 10-Q/A2012 Q3 Quarterly report (amended)