UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
(
Mark One)
|
o
|
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
quarterly period ended March 31, 2010
or
|
o
|
TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
transition period
from
to
Commission
File number: 333-148664
ECOLOGIX
RESOURCE GROUP INC.
(Exact
name of small business issuer as specified in its charter)
Delaware
(State or
other jurisdiction of Incorporation or organization)
98-0533882
(IRS
Employee Identification No.)
9903
Santa Monica Blvd.
Suite
918
Beverly
Hills, CA. 90212
Phone
number: 888-564-4974
(Address
of principal executive offices)
(Former
name, former address and former fiscal year, if changed since last
report)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes
¨
No
¨
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
¨
No
¨
Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer,” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
|
Large
accelerated filer
|
¨
|
Accelerated
Filer
|
¨
|
|
Non-accelerated
filer
|
¨
|
Smaller
reporting company
|
x
|
|
(Do
not check if a smaller reporting
company)
|
APPLICABLE
ONLY TO CORPORATE ISSUERS
State the
number of shares outstanding of each of the issuer's classes of common stock, as
of the latest practicable date:
|
Class
|
|
Shares
outstanding
|
|
Date
|
|
Common,
$.0001 par value
|
|
|
512,000,000
|
|
May
21, 2010
|
ECOLOGIX
RESOURCE GROUP INC.
Form
10-Q
Index
|
|
|
Page
|
|
Part
I – FINANCIAL INFORMATION
|
|
|
|
|
|
|
|
Item
1. Financial Statements (Unaudited)
|
|
F-1
|
|
|
|
|
|
Condensed
Balance Sheet
|
|
F-2
|
|
|
|
|
|
Condensed
Statements of Operations
|
|
F-3
|
|
|
|
|
|
Condensed
Statements of Cash Flows
|
|
F-5
|
|
|
|
|
|
Notes
on Condensed Financial Information
|
|
F-6
|
|
|
|
|
|
Item
2 Management’s Discussion and Analysis or Plan of
Operation
|
|
3
|
|
|
|
|
|
Item
3 Control and Procedures
|
|
7
|
|
|
|
|
|
Part
II. OTHER INFORMATION
|
|
|
|
|
|
|
|
Item
1. Legal Proceedings
|
|
7
|
|
|
|
|
|
Item
2. Changes in Securities
|
|
7
|
|
|
|
|
|
Item
3. Defaults Upon Senior Securities
|
|
7
|
|
|
|
|
|
Item
4. Submission Of Matters To A Vote of Security
Holders
|
|
7
|
|
|
|
|
|
Item
5. Other Information
|
|
7
|
|
|
|
|
|
Item
6. Exhibits and Reports on Form 8 -K
|
|
8
|
|
|
|
|
|
Signatures
|
|
9
|
|
|
|
|
|
Certifications
|
|
|
Part
I: Financial Information
Item
1. Financial Statements
ECOLOGIX
RESOURCE GROUP, INC.
INDEX
TO FINANCIAL STATEMENTS
MARCH
31, 2010
|
Financial
Statements-
|
|
|
|
|
|
Consolidated
Balance Sheets as of March 31, 2010 and December 31, 2009
|
F-2
|
|
|
|
|
Consolidated
Statements of Operations and Comprehensive Income for the Three Months
Ended March 31, 2010 and 2009
|
F-3
|
|
|
|
|
Consolidated
Statement of Changes in Stockholders’ Deficit for the Period January 1,
2009
Through
March 31, 2010
|
F-4
|
|
|
|
|
Consolidated
Statements of Cash Flows for the Three Months Ended March 31, 2010 and
2009
|
F-5
|
|
|
|
|
Notes
to Consolidated Financial Statements
|
F-6
|
ECOLOGIX
RESOURCE GROUP, INC.
CONSOLIDATED
BALANCE SHEETS
AS
OF MARCH 31, 2010 AND DECEMBER 31, 2009
|
|
|
As of
|
|
|
As of
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
ASSETS
|
|
2010
|
|
|
2009
|
|
|
Current
Assets:
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
Cash
in bank
|
|
|
91,437
|
|
|
$
|
9,974
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
91,437
|
|
|
|
9,974
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Assets:
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net of depreciation
|
|
|
214,402
|
|
|
|
169,592
|
|
|
Timber
rights, net
|
|
|
2,000,000
|
|
|
|
2,000,000
|
|
|
Due
to/from Subsidiary
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other assets
|
|
|
2,214,402
|
|
|
|
2,169,592
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
2,305,839
|
|
|
$
|
2,179,566
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
-
|
|
|
$
|
105,532
|
|
|
Accrued
liabilities
|
|
|
219,375
|
|
|
|
239,541
|
|
|
Convertible
Debt
|
|
|
547,700
|
|
|
|
312,729
|
|
|
Derivative
Liability
|
|
|
10,131,710
|
|
|
|
4,049,512
|
|
|
Loans
from related parties - Directors and stockholders
|
|
|
546,517
|
|
|
|
306,457
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
11,445,302
|
|
|
|
5,013,771
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
(Deficit)
|
|
|
|
|
|
|
|
|
|
Preferred
stock, par value $.0001 per share, 2,000,000,000 shares authorized;
10,000 and 10,000
shares issued
and outstanding, respectively
|
|
|
100
|
|
|
|
100
|
|
|
Common
stock, par value $.0001 per share, 2,000,000,000 shares authorized;
512,000,000 and
501,000,000
shares issued and outstanding, respectively
|
|
|
51,200
|
|
|
|
50,100
|
|
|
Additional
paid-in capital
|
|
|
950,769
|
|
|
|
851,869
|
|
|
Discount
on common stock
|
|
|
(2,700
|
)
|
|
|
(2,700
|
)
|
|
Accumulated
other comprehensive (loss) income
|
|
|
31,045
|
|
|
|
(17,460
|
)
|
|
Net
Loss
|
|
|
(10,169,877
|
)
|
|
|
(3,716,114
|
)
|
|
(Total
stockholders' (deficit)
|
|
|
(9,139,463
|
)
|
|
|
(2,834,205
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders' (Deficit)
|
|
$
|
2,305,839
|
|
|
$
|
2,179,566
|
|
ECOLOGIX
RESOURCE GROUP, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPEHENSIVE LOSS
FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009
(Unaudited)
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
203,437
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
General
and administrative-
|
|
|
281,156
|
|
|
|
|
|
|
Professional
fees
|
|
|
7,500
|
|
|
|
8,238
|
|
|
Consulting
|
|
|
7,500
|
|
|
|
-
|
|
|
Amortization
|
|
|
-
|
|
|
|
228
|
|
|
Other
|
|
|
-
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
general and administrative expenses
|
|
|
296,156
|
|
|
|
8,516
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)
from Operations
|
|
|
(92,719
|
)
|
|
|
(8,516
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income (Expense)
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(278,846
|
)
|
|
|
-
|
|
|
Gain
or loss on Derivative Liability
|
|
|
(6,082,198
|
)
|
|
|
-
|
|
|
Provision
for income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(Loss)
|
|
$
|
(6,453,763
|
)
|
|
$
|
(8,516
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency exchange
|
|
|
48,505
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
comprehensive loss
|
|
$
|
(6,405,258)
|
|
|
$
|
(8,516
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)
Per Common Share:
|
|
|
|
|
|
|
|
|
|
(Loss)
per common share - Basic and Diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Number of Common Shares Outstanding - Basic and
Diluted
|
|
|
508,333,332
|
|
|
|
500,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes to financial statements are
an
integral part of these statements.
ECOLOGIX
RESOURCE GROUP, INC.
CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR
THE PERIOD FROM JANUARY 1, 2009
THROUGH
MARCH 31, 2010
(Unaudited)
|
|
|
Preferred
stock
|
|
|
Common stock
|
|
|
Paid-in
|
|
|
on Common
|
|
|
Accumulated
|
|
|
|
|
|
Other
Comprehensive
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stock
|
|
|
Deficit
|
|
|
Receivable
|
|
|
Income
|
|
|
Totals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
– January 1, 2009
|
|
|
-
|
|
|
|
-
|
|
|
|
500,000,000
|
|
|
$
|
50,000
|
|
|
$
|
5,966
|
|
|
$
|
(2,700
|
)
|
|
$
|
(85,852
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(32,586
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for cash
|
|
|
-
|
|
|
$
|
-
|
|
|
|
1,000,000
|
|
|
$
|
100
|
|
|
$
|
94,343
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
94,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
preferred stock issued for intangible assets
|
|
|
10,000
|
|
|
|
100
|
|
|
|
-
|
|
|
|
-
|
|
|
|
751,560
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
751,660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(17,460
|
)
|
|
|
(17,460
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,630,262
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,630,262
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- December 31, 2009
|
|
|
10,000
|
|
|
|
100
|
|
|
|
501,000,000
|
|
|
$
|
50,100
|
|
|
$
|
851,869
|
|
|
$
|
(2,700
|
)
|
|
$
|
(3,716,114
|
)
|
|
$
|
-
|
|
|
$
|
(17,460
|
)
|
|
|
(2,834,205
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for services
|
|
|
|
|
|
|
|
|
|
|
11,000,000
|
|
|
|
1,100
|
|
|
|
98,900
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
48,505
|
|
|
|
48,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,453,763
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,453,763
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- March 31, 2010
|
|
|
10,000
|
|
|
|
100
|
|
|
|
512,000,000
|
|
|
$
|
51,200
|
|
|
$
|
950,769
|
|
|
$
|
(2,700
|
)
|
|
$
|
(10,169,877
|
)
|
|
$
|
-
|
|
|
$
|
31,045
|
|
|
|
(9,139,463
|
)
|
The
accompanying notes to financial statements are
an
integral part of these statements.
ECOLOGIX
RESOURCE GROUP, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009,
(Unaudited)
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Operating
Activities:
|
|
|
|
|
|
|
|
Net
(loss)
|
|
$
|
(6,453,763
|
)
|
|
$
|
(8,516
|
)
|
|
Adjustments
to reconcile net (loss) to net cash (used in) operating
activities:
|
|
|
|
|
|
|
|
|
|
Amortization
of discount on note payable
|
|
|
234,971
|
|
|
|
-
|
|
|
Amortization
and depreciation
|
|
|
11,029
|
|
|
|
228
|
|
|
Derivative
liabilities
|
|
|
6,082,198
|
|
|
|
|
|
|
Changes
in net assets and liabilities-
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
(105,532)
|
|
|
|
-
|
|
|
Accrued
liabilities
|
|
|
79,836
|
|
|
|
4,452
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Used in Operating Activities
|
|
|
(151,261
|
)
|
|
|
(3,836
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Investing
Activities:
|
|
|
|
|
|
|
|
|
|
Purchases
of Property Plant and Equipment
|
|
|
(72,713
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Used in Investing Activities
|
|
|
(72,713)
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
Activities:
|
|
|
|
|
|
|
|
|
|
Loans
from related parties - Directors and stockholders
|
|
|
240,060
|
|
|
|
3,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Provided by Financing Activities
|
|
|
240,060
|
|
|
|
3,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of Exchange rates on Cash
|
|
|
65,379
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(Decrease) Increase in Cash
|
|
|
81,465
|
|
|
|
(836
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
- Beginning of Period
|
|
|
9,974
|
|
|
|
1,381
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
- End of Period
|
|
$
|
91,439
|
|
|
$
|
545
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosure of Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
Cash
paid during the period for:
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Income
taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental schedule of noncash investing and financing
activities:
|
|
|
|
|
|
|
|
|
|
Warrants issued to promissory note
holder
|
|
$
|
-
|
|
|
$
|
-
|
|
The
accompanying notes to financial statements are
an
integral part of these statements.
ECOLOGIX
RESOURCE GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(1)
Summary of Significant Accounting
Policies
Basis
of Presentation and Organization
Ecologix
Resource Group (“Ecologix” or the “Company”) is a natural resource company
focused on the harvesting, and marketing of high quality timber while pursuing
the production of alternative energy solutions. The Company manages tropical
hardwood forest in the Republic of Cameroon in Central Africa. The Company
harvests a variety of species of hardwood.
The
Company was incorporated under the laws of the State of Delaware on November 7,
2007. The Company was formerly known as Battery Control Corp. and changed its
name to Ecologix Resource Group, Inc. on July 14, 2009. Due to the
overwhelming opportunities regarding our timber business, the Company has
decided that it is necessary to apply all personnel, finances and other
resources towards the timber operations and discontinue the patented pending
technology of Battery Control Corp.
The
accompanying financial statements were prepared from the accounts of the Company
under the accrual basis of accounting.
Unaudited
Interim Financial Statements
The
interim financial statements of the Company as of March 31, 2010, and 2009, and
for the periods ended, are unaudited. However, in the opinion of management, the
interim financial statements include all adjustments, consisting of only normal
recurring adjustments, necessary to present fairly the Company’s financial
position as of March 31, 2010, and the results of its operations and its cash
flows for the periods ended March 31, 2010, and 2009. The accompanying financial
statements and notes thereto do not reflect all disclosures required under
accounting principles generally accepted in the United States. Refer to the
Company’s audited financial statements as of December 31, 2009, filed with the
SEC, for additional information, including significant accounting
policies.
Cash and Cash Equivalents
For
purposes of reporting within the statement of cash flows, the Company considers
all cash on hand, cash accounts not subject to withdrawal restrictions or
penalties, and all highly liquid debt instruments purchased with a maturity of
three months or less to be cash and cash equivalents.
Property,
Plant And Equipment
The
Company depreciates its assets over their estimated useful lives. The estimated
useful lives are 5 years for machinery and equipment, 5 years for furniture and
fixtures and the shorter of the useful life or the term of the lease for
leasehold improvements. Plant and equipment are carried at historical cost and
are depreciated using primarily the straight-line method. Repair and maintenance
expenditures are expensed as incurred.
Timber
Rights
The
Company carried timber rights at historical cost less accumulated amortization.
We capitalized the acquisition costs of the user right and allocated that cost
to the timberland. Amortization of the user right on timberland is primarily
determined using the straight-line method over the life of usage
right.
The
Company reviews the carrying value of its long-lived assets annually or whenever
events or changes in circumstances indicate that the historical-cost carrying
value of an asset may no longer be appropriate. The Company assesses
recoverability of the asset by comparing the undiscounted future net cash flows
expected to result from the asset to its carrying value. If the carrying value
exceeds the undiscounted future net cash flows of the asset, an impairment loss
is measured and recognized. An impairment loss is measured as the difference
between the net book value and the fair value of the long-lived asset. Fair
value is estimated based upon either discounted cash flow analysis or estimated
salvage value.
Revenue
Recognition
The
Company will recognize revenues when delivery of goods or completion of services
has occurred provided there is persuasive evidence of an agreement, acceptance
has been approved by its customers, the fee is fixed or determinable based on
the completion of stated terms and conditions, and collection of any related
receivable is probable.
Stock
Splits
On
December 1, 2008, the Company implemented a 5 for 1 forward stock split on
its issued and outstanding shares of common stock. On March 24, 2009,
the Company implemented a 2 for 1 forward stock split on its issued and
outstanding shares of common stock. On December 4, 2009, the Company
implemented a 10 for 1 forward stock split on its issued and outstanding shares
of common stock. The accompanying financial statements and related
notes thereto have been adjusted accordingly to reflect the forward stock
splits.
Loss
per Common Share
Basic
loss per share is computed by dividing the net loss attributable to the common
stockholders by the weighted average number of shares of common stock
outstanding during the period. Fully diluted loss per share is computed similar
to basic loss per share except that the denominator is increased to include the
number of additional common shares that would have been outstanding if the
potential common shares had been issued and if the additional common shares were
dilutive. Potentially dilutive financial instruments excluded from the
calculation of loss per share for the period ended March 31, 2010 and 2009
totaled 9,750,000 and none, respectively.
Income
Taxes
The
Company accounts for income taxes using the asset and liability method, which
requires the establishment of deferred tax assets and liabilities for the
temporary differences between the bases of certain assets and liabilities for
income tax and financial reporting purposes. The deferred tax assets and
liabilities are classified according to the financial statement classification
of the assets and liabilities generating the differences.
The
Company maintains a valuation allowance with respect to deferred tax assets. The
Company establishes a valuation allowance based upon the potential likelihood of
realizing the deferred tax asset and taking into consideration the Company’s
financial position and results of operations for the current period. Future
realization of the deferred tax benefit depends on the existence of sufficient
taxable income within the carryforward period under the Federal tax
laws.
Changes
in circumstances, such as the Company generating taxable income, could cause a
change in judgment about the realizability of the related deferred tax asset.
Any change in the valuation allowance will be included in income in the year of
the change in estimate.
Fair
Value of Financial Instruments
The
Company estimates the fair value of financial instruments using the available
market information and valuation methods. Considerable judgment is required in
estimating fair value. Accordingly, the estimates of fair value may not be
indicative of the amounts the Company could realize in a current market
exchange.
Translation
of Foreign Currencies
All
assets and liabilities of foreign subsidiaries are translated into dollars at
the fiscal year-end (current) exchange rates and components of revenue and
expense are translated at average rates for the fiscal year. The resulting
translation adjustments are included in shareholders' equity. Gains and losses
on foreign currency exchange transactions are reflected in the statement of
operations. Net transaction gains and losses debited to “Other comprehensive
income” for the three months ended March 31, 2010 and 2009 were $48,506 and $0,
respectively
.
Impairment
of Long-Lived Assets—Timber Rights
The
Company continually monitors events and changes in circumstances that could
indicate carrying amounts of long-lived assets may not be recoverable. When such
events or changes in circumstances are present, the Company assesses the
recoverability of long-lived assets by determining whether the carrying value of
such assets will be recovered through undiscounted expected future cash flows.
If the total of the future cash flows is less than the carrying amount of those
assets, the Company recognizes an impairment loss based on the excess of the
carrying amount over the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or the fair value less costs to
sell.
Estimates
The
financial statements are prepared on the basis of accounting principles
generally accepted in the United States. The preparation of financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities as of March 31, 2010 and 2009, and expenses for the period ended
March 31, 2010 and 2009. Actual results could differ from those estimates made
by management.
Recent
Accounting Pronouncements
In
February 2010, FASB issued ASU 2010-9 Subsequent Events (Topic 855) Amendments
to Certain Recognition and Disclosure Requirements ("ASU 2010-9"). ASU 2010-9
amends disclosure requirements within Subtopic 855-10. An entity that is an SEC
filer is not required to disclose the date through which subsequent events have
been evaluated. This change alleviates potential conflicts between Subtopic
855-10 and the SEC's requirements. ASU 2010-9 is effective for interim and
annual periods ending after June 15, 2010. The Company does not expect the
adoption of ASU 2010-09 to have a material impact on its consolidated results of
operations or financial position.
In
January 2010, FASB issued ASU 2010-6 Improving Disclosures about Fair
Measurements ("ASU 2010-6"). ASU 2010-6 provides amendments to subtopic
820-10 that require separate disclosure of significant transfers in and out of
Level 1 and Level 2 fair value measurements and the presentation of
separate information regarding purchases, sales, issuances and settlements for
Level 3 fair value measurements. Additionally, ASU 2010-6 provides
amendments to subtopic 820-10 that clarify existing disclosures about the level
of disaggregation and inputs and valuation techniques. ASU 2010-6 is effective
for financial statements issued for interim and annual periods ending after
December 15, 2010. The Company does not expect the adoption of ASU 2010-06
to have a material impact on its consolidated results of operations or financial
position.
In
January 2010, FASB issued ASU 2010-2 Accounting and Reporting for Decreases in
Ownership of a Subsidiary- a Scope Clarification ("ASU 2010-2"). ASU 2010-2
addresses implementation issues related to the changes in ownership provisions
in the Consolidation—Overall Subtopic (Subtopic 810-10) of the FASB Accounting
Standards Codification, originally issued as FASB Statement No. 160,
Noncontrolling Interests in Consolidated Financial Statements. Subtopic 810-10
establishes the accounting and reporting guidance for noncontrolling interests
and changes in ownership interests of a subsidiary. An entity is required to
deconsolidate a subsidiary when the entity ceases to have a controlling
financial interest in the subsidiary. Upon deconsolidation of a subsidiary, an
entity recognizes a gain or loss on the transaction and measures any
retained investment in the subsidiary at fair value. The gain or loss
includes any gain or loss associated with the difference between the fair value
of the retained investment in the subsidiary and its carrying amount at the date
the subsidiary is deconsolidated. In contrast, an entity is required to
account for a decrease in ownership interest of a subsidiary that does not
result in a change of control of the subsidiary as an equity transaction.
ASU 2010-2 is effective for the Company starting January 3, 2010. The
Company does not expect the adoption of ASU 2010-2 to have a material impact on
the Company's consolidated results of operations or financial
position.
In
December 2009, FASB issued ASU 2009-17 Consolidations (Topic 810) Improvements
to Financial Reporting by Enterprises Involved with Variable Interest Entities
("ASU 2009-17"). ASU 2009-17 amends the FASB ASC for the issuance of FASB
Statement No. 167, Amendments to FASB Interpretation No. 46(R). The
amendments in ASU 2009-17 replace the quantitative-based risks and rewards
calculation for determining which enterprise, if any, has a controlling
financial interest in a variable interest entity with an approach focused on
identifying which enterprise has the power to direct the activities of a
variable interest entity that most significantly impact the entity's economic
performance and (1) the obligation to absorb losses of the entity or
(2) the right to receive benefits from the entity. ASU 2009-17 also
requires additional disclosures about an enterprise's involvement in
variable interest entities. ASU 2009-17 is effective as of the beginning of each
reporting entity's first annual reporting period that begins after
November 15, 2009. The adoption of ASU 2009-17 did not have a material
impact on its consolidated results of operations or financial
position.
In
December 2009, FASB issued ASU 2009-16 Transfers and Servicing (Topic 860)
Accounting for Transfers of Financial Assets ("ASU 2009-16"). ASU 2009-16 amends
the FASB Accounting Standards Codification for the issuance of FASB Statement
No. 166, Accounting for Transfers of Financial Assets—an amendment of FASB
Statement No. 140. The amendments in ASU 2009-16 improve financial
reporting by eliminating the exceptions for qualifying special-purpose entities
from the consolidation guidance and the exception that permitted sale accounting
for certain mortgage securitizations when a transferor has not surrendered
control over the transferred financial assets. In addition, the amendments
require enhanced disclosures about the risks that a transferor continues to be
exposed to because of its continuing involvement in transferred financial
assets. ASU 2009-16 is effective as of the beginning of each reporting entity's
first annual reporting period that begins after November 15,
2009. The adoption of ASU 2009-16 did not have a material impact on
its consolidated results of operations or financial position.
In
October 2009, the Financial Accounting Standards Board (“FASB”) issued new
revenue recognition standards for arrangements with multiple deliverables, where
certain of those deliverables are non-software related. The new standards permit
entities to initially use management’s best estimate of selling price to value
individual deliverables when those deliverables do not have Vendor Specific
Objective Evidence (“VSOE”) of fair value or when third-party evidence is not
available. Additionally, these new standards modify the manner in which the
transaction consideration is allocated across the separately identified
deliverables by no longer permitting the residual method of allocating
arrangement consideration. These new standards are effective for annual periods
ending after June 15, 2010 and early adoption is permitted. The Company is
currently evaluating the impact of adopting this standard, if any, on the
Company’s consolidated financial position, results of operations and cash
flows.
(2)
Going Concern
The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplate continuation of the Company as a going concern. The Company has not
established sufficient revenue to cover its operating costs, and as such, has
incurred operating losses since inception. Further, as of March 31, 2010, the
cash resources of the Company were insufficient to meet its current business
plan, and the Company had negative working capital. These and other factors
raise substantial doubt about the Company’s ability to continue as a going
concern. The accompanying financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from the
possible inability of the Company to continue as a going concern
.
(4)
Timber Rights
As of
January 12, 2009 the Company issued convertible preferred shares for timber
rights in the Masaka region of Cameroon. The timber rights were valued at the
fair value of the preferred stock issued for the use of the timber rights. The
balance of the timber rights as of the year ended March 31, 2010 was
$2,000,000.
(5)
Property, Plant and
Equipment
The
following is a summary of property and equipment:
|
|
March
31,
2010
|
|
December
31,
2009
|
|
|
|
|
|
|
|
|
|
Plant
and Machinery
|
$
|
236,557
|
|
$
|
181,935
|
|
|
Less
– Accumulated Deprecation
|
|
(22,155
|
)
|
|
(12,343
|
)
|
|
|
|
|
|
|
|
|
|
Total
net Property, Plant and Equipment
|
$
|
214,402
|
|
$
|
169,592
|
|
Depreciation
expenses for the three months ended March 31, 2010 and 2009 were $11,092 and $0
respectively.
(6)
Loans from related
parties
During
the year ended December 31, 2009, a stockholder began making loans to
the Company for working capital needs. These loans were unsecured,
non-interest bearing and due on demand. As of December 31, 2009, the balance due
to this stockholder was $166,957. As of March 31,
2010, the balance due to the stock holder was $407,017.
As of
December 31, 2009 and March 31, 2010, the Company had a payable due to an
officer of the Company for $139,500 which consisted of accrued compensation of
$112,500 and reimbursement for expenses paid by the officer on behalf of the
company of $27,000.
(7)
Convertible Debt
On April
9, 2009, the Company entered into a $100,000 Convertible Promissory Note with
Greenburg (“Greenburg” or “Lender”) with an interest rate of 18% per annum. The
convertible promissory note is convertible in whole or in part at the Company's
option into shares of the Company’s common stock (the “Common Stock”) at $0.25
per share. However if the Company is in default of payment, the
Holder may elect to convert, by a written notice of conversion at a $0.25
conversion price less a penalty for the default. Interest shall accrue to and
through the day prior to the date of conversion. The number of shares of Common
Stock issuable upon conversion shall be determined by dividing the sum of the
outstanding principal of this Note being converted plus the accrued and unpaid
interest payable with respect to the principal amount of this Note being
converted by the Conversion Price then in effect. In connection with the above
note the Company issued the lender 1,000,000 warrants with an exercise price of
$0.001 a share. The fair value of the warrants issued in connection with the
convertible debt will be treated as debt discount and amortized over the life of
the convertible note.
On June
29, 2009, the Company entered into a $750,000 Convertible Promissory Note with
Marvin Mermelstein (“Mermelstein” or “Lender”) with an interest rate of 18% per
annum. The convertible promissory note is convertible in whole or in part at the
Company's option into shares of the Company’s common stock (the “Common Stock”)
at $0.25 per share. However if the Company is in default of payment,
the Holder may elect to convert, by a written notice of conversion at a $0.25
conversion price less a penalty for the default. Interest shall accrue to and
through the day prior to the date of conversion. The number of shares of Common
Stock issuable upon conversion shall be determined by dividing the sum of the
outstanding principal of this Note being converted plus the accrued and unpaid
interest payable with respect to the principal amount of this Note being
converted by the Conversion Price then in effect. In connection with the above
note the Company issued the lender 75,000,000 warrants with an exercise price of
$0.001 a share. The fair value of the warrants issued in connection with the
convertible debt will be treated as debt discount and amortized over the life of
the convertible note.
On
November 12, 2009, the Company entered into a $100,000 Convertible Promissory
Note with MKM (“MKM” or “Lender”) with an interest rate of 18% per annum. The
convertible promissory note is convertible in whole or in part at the Company's
option into shares of the Company’s common stock (the “Common Stock”) at $0.25
per share. However if the Company is in default of payment, the
Holder may elect to convert, by a written notice of conversion at a $0.25
conversion price less a penalty for the default. Interest shall accrue to and
through the day prior to the date of conversion. The number of shares of Common
Stock issuable upon conversion shall be determined by dividing the sum of the
outstanding principal of this Note being converted plus the accrued and unpaid
interest payable with respect to the principal amount of this Note being
converted by the Conversion Price then in effect. In connection with the above
note the Company issued the lender 1,000,000 warrants with an exercise price of
$0.001 a share. The fair value of the warrants issued in connection with the
convertible debt will be treated as debt discount and amortized over the life of
the convertible note.
On
November 12, 2009, the Company entered into a $25,000 Convertible Promissory
Note with Fuse Management Corporation (“Fuse” or “Lender”) with an interest rate
of 18% per annum. The convertible promissory note is convertible in whole or in
part at the Company's option into shares of the Company’s common stock (the
“Common Stock”) at $0.25 per share. However if the Company is in
default of payment, the Holder may elect to convert, by a written notice of
conversion at a $0.25 conversion price less a penalty for the default. Interest
shall accrue to and through the day prior to the date of conversion. The number
of shares of Common Stock issuable upon conversion shall be determined by
dividing the sum of the outstanding principal of this Note being converted plus
the accrued and unpaid interest payable with respect to the principal amount of
this Note being converted by the Conversion Price then in effect. In connection
with the above note the Company issued the lender 250,000 warrants with an
exercise price of $0.001 a share. The fair value of the warrants issued in
connection with the convertible debt will be treated as debt discount and
amortized over the life of the convertible note.
The
Company evaluated the convertible debt and the warrants under ASC 815 (SFAS 133
"Accounting for Derivatives" and EITF00-19 "Accounting for Derivative Financial
Instruments Indexed to and Potentially Settled in a Company's Own Stock"). The
Company determined the convertible debentures contained an embedded derivative
for the conversion option and the warrants qualified as free standing
derivatives. The conversion option allows for an indeterminate number of shares
to potentially be issued upon conversion. This results the Company being unable
to determine with certainty they will have enough shares available to settle any
and all outstanding common stock equivalent instruments. The Company would be
required to obtain shareholder approval to increase the number of authorized
shares needed to settle those contracts. Because increasing the number of
shares authorized is outside of the Company's control, this results in these
instruments being classified as liabilities under ASC 815( EITF 00-19 and
derivatives under SFAS 133).
The
carrying values of the notes were determined as follows:
|
|
|
|
December 31,
2009
|
|
|
|
|
|
|
|
|
Notes
payable to Greenberg due April 9, 2010, interest rate 18%.
|
|
$
|
100,000
|
|
|
Notes
payable to Mermelstein due December 29, 2010, interest rate
18%.
|
|
|
750,000
|
|
|
Notes
payable to MKM due November 12, 2010, interest rate 18%.
|
|
|
100,000
|
|
|
Notes
payable to Fuse due November 12, 2010, interest rate 18%.
|
|
|
25,000
|
|
|
|
|
|
975,000
|
|
|
(Less)
Debt Discount
|
|
|
(670,771
|
)
|
|
Convertible
Debt net of discount
|
|
$
|
304,229
|
|
|
|
|
|
March
31, 2010
|
|
|
|
|
|
|
|
|
Notes
payable to Greenberg due April 9, 2010, interest rate 18%.
|
|
$
|
100,000
|
|
|
Notes
payable to Mermelstein due December 29, 2010, interest rate
18%.
|
|
|
750,000
|
|
|
Notes
payable to MKM due November 12, 2010, interest rate 18%.
|
|
|
100,000
|
|
|
Notes
payable to Fuse due November 12, 2010, interest rate 18%.
|
|
|
25,000
|
|
|
|
|
|
975,000
|
|
|
(Less)
Debt Discount
|
|
|
(427,300
|
)
|
|
Convertible
Debt net of discount
|
|
$
|
547,700
|
|
(9)
Convertible Preferred
Stock
The
Company issued 10,000 convertible preferred shares to Spectra Timber on January
12, 2009 in exchange for timber rights in the Massaka region of Cameroon. The
preferred stock will bear dividends, payable in stock, semi-annually in arrears,
at the rate of five per cent (5%) per annum, beginning June 1, 2011. Each
preferred share is convertible into a common share, subject to the vote of the
preferred share holders, at the option of the holder at any time after January
12, 2021 at the conversion ratio to be determined by multiplying the aggregate
number of preferred shares to be converted times 200 and dividing the product by
the Conversion Price in effect on the applicable Conversion Date. The conversion
ratio is subject to adjustment for events, such as a unit split, unit dividend,
or a specified issuance of units.
The
conversion right of the convertible preferred stock represents an embedded
derivative as defined in ASC 815 (FASB Statement No. 133, Accounting for
Derivative Instruments and Hedging Activities). The Company estimated the fair
value of the embedded derivative to be $3,918,415 on December 31, 2009 which was
reclassified from the initial value ascribed to the convertible preferred stock.
The Company has evaluated the fair value as of March 31, 2010 and has
assessed that value to be $10,090,396. The increase in the value of the
derivative instrument resulted in an unrealized loss of $6,171,981 attributed to
the conversion option Convertible Preferred Stock for the three months ended
March 31, 2010.
(10)
Derivatives
The fair
values and changes in the derivative liabilities for the year ended December 31,
2009 and the period ended March 31, 2010 are as follows:
|
|
|
December
31,
2009
|
|
|
March
31,
2010
|
|
|
Gain/(Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
(Warrants)
|
|
$
|
94,058
|
|
|
$
|
5,989
|
|
|
$
|
88,069
|
|
|
Embedded
derivative (Convertible Debt)
|
|
$
|
37,039
|
|
|
$
|
35,325
|
|
|
$
|
1,714
|
|
|
Embedded
derivative (Conversion Right Preferred)
|
|
$
|
3,918,415
|
|
|
$
|
10,090,396
|
|
|
$
|
(6,171,981)
|
|
|
Total
|
|
$
|
4,049,512
|
|
|
$
|
10,131,710
|
|
|
$
|
(6,082,198)
|
|
The
adjustment to fair value for the changes in the derivative liabilities resulted
in a loss for the three months ended March 31, 2010 of $6,082,198. This amount
has been debited to expense, and recorded in “Other income and expense” in the
accompanying consolidated statement of operations.
(11)
Warrants
Warrant
Transactions are as follows:
|
|
|
Numbers
of
warrants
|
|
|
Weight
Average
Exercise
Price
|
|
|
Outstanding,
January 1, 2009
|
|
|
-
|
|
|
$
|
-
|
|
|
Granted
|
|
|
9,750,000
|
|
|
|
0.001
|
|
|
Exercise
|
|
|
-
|
|
|
|
-
|
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding,
December 31, 2009
|
|
|
9,750,000
|
|
|
|
0.001
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
Exercise
|
|
|
-
|
|
|
|
-
|
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding,
March 31, 2010
|
|
|
9,750,000
|
|
|
$
|
0.001
|
|
|
Exercisable,
March 31, 2010
|
|
|
9,750,000
|
|
|
$
|
0.001
|
|
(12) Fair
Value Measurements
ASC 820,
“Fair Value Measurements and Disclosures,” defines fair value as the exchange
price that would be received for selling an asset or paid to transfer a
liability (an exit price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market participants on the
measurement date. ASC 820 also establishes a fair value hierarchy which requires
an entity to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value. The standard describes three
levels of inputs that may be used to measure fair value:
Level 1
— Quoted prices in
active markets for identical assets or liabilities.
Level 2
— Observable inputs
other than Level 1 prices such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or other inputs that
are observable or can be corroborated by observable market data for
substantially the full term of the assets or liabilities.
Level 3
— Unobservable inputs
that are supported by little or no market activity and that are significant to
the fair value of the assets or liabilities.
For the
Company, this statement derivative instruments related to warrants, convertible
debt and the conversion right of convertible preferred shares. The Company
utilizes the market approach to measure fair value for its financial assets and
liabilities. The market approach uses prices and other relevant information
generated by market transactions involving similar assets or
liabilities.
Liabilities
measured at fair value on a recurring basis are summarized below:
|
Fair Value Measurements as of
December 31, 2009
|
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
|
Description
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
(Warrants)
|
|
$
|
|
|
|
$
|
94,058
|
|
|
$
|
|
|
|
$
|
94,058
|
|
|
Embedded
derivative (Convertible Debt)
|
|
|
|
|
|
|
37,039
|
|
|
|
|
|
|
|
37,039
|
|
|
Embedded
derivative (Conversion Right Preferred)
|
|
|
|
|
|
|
3,918,415
|
|
|
|
|
|
|
|
3,918,415
|
|
|
Total
|
|
$
|
-
|
|
|
$
|
4,049,512
|
|
|
$
|
-
|
|
|
$
|
4,049,512
|
|
|
Fair Value Measurements as of
March 31, 2010
|
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
|
Description
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
(Warrants)
|
|
$
|
|
|
|
$
|
5,989
|
|
|
$
|
|
|
|
$
|
5,989
|
|
|
Embedded
derivative (Convertible Debt)
|
|
|
|
|
|
|
35,325
|
|
|
|
|
|
|
|
35,325
|
|
|
Embedded
derivative (Conversion Right Preferred)
|
|
|
|
|
|
|
10,090,396
|
|
|
|
|
|
|
|
10,090,396
|
|
|
Total
|
|
$
|
-
|
|
|
$
|
10,131,710
|
|
|
$
|
-
|
|
|
$
|
10,131,710
|
|
Unrealized
gains or losses on derivatives are recorded in “Interest and other expense, net”
in the consolidated statement of operations at each measurement date. See Note
10,
Derivatives
.
Item
2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and
analysis is based on, and should be read in conjunction with the unaudited
condensed consolidated financial statements and the notes thereto included
elsewhere in this Form 10-Q and the audited consolidated financial statements
and notes thereto and management’s discussion and analysis of financial
condition and results of operations included in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2009, which was filed
with the Securities and Exchange Commission on May 17, 2010. This
Quarterly Report on Form 10-Q contains “forward-looking statements” within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended.
These statements are often identified by the use of words such as “may,” “will,”
“expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue,”
and similar expressions or variations. Such forward-looking statements are
subject to risks, uncertainties and other factors that could cause actual
results and the timing of certain events to differ materially from future
results expressed or implied by such forward-looking statements. The
forward-looking statements in this Quarterly Report on Form 10-Q represent our
views as of the date of this Quarterly Report on Form 10-Q. We anticipate that
subsequent events and developments will cause our views to change. However,
while we may elect to update these forward-looking statements at some point in
the future, we have no current intention of doing so except to the extent
required by applicable law. You should, therefore, not rely on these
forward-looking statements as representing our views as of any date subsequent
to the date of this Report on Form 10-Q.
All amounts are expressed in United
States dollars.
RESULTS
OF OPERATIONS FOR THREE MONTHS ENDED
MARCH
31, 2010 COMPARED TO MARCH 31, 2009
Overall
Results
For the
three months ended March 31, 2010, the Company had $203,437 in sales and cost of
sales of $0. This is in comparison to total sales of $0 and cost of
sales of $0 for the three month period ended year ended March 31,
2009.
General
and administrative expenses increased by approximately $287,640 for the three
month period ended March 31, 2010 vs. the same period ended as March 31, 2009.
This increase was due to professional fees and the set up of operations in
the Cameroon.
The net
loss increased from $8,516 ($0 per share) to $6,453,763 ($0.013 per share.) For
the three month period ended March 31, 2010 vs. the three month period ended
March 31, 2009, respectively. This increase of approximately $287,640
was directly related to the increase in general and administrative expenses
described above.
We have,
in our history, generated limited income from operations, have incurred
substantial expenses and have sustained losses. In addition, we expect to
continue to incur significant operating expenses. As a result, we will need to
generate significant revenues to achieve profitability, which may not occur. We
expect our operating expenses to increase as a result of our planned expansion.
Even if we do achieve profitability, we may be unable to sustain or increase
profitability on a quarterly or annual basis in the future. We expect to have
quarter-to-quarter fluctuations in revenues, expenses, losses and cash flow,
some of which could be significant. Results of operations will depend upon
numerous factors, some beyond our control, including regulatory actions, market
acceptance of our products and services, new products and service introductions,
and competition.
CONSOLIDATED
FINANCIAL CONDITION AND LIQUIDITY
Liquidity
and Capital Resources
The
Company’s strategic plans include continued expansion and support of our timber
business in the Cameroon. Further purchases of capital equipment will
be needed to increase the volume of our operations and the satisfaction of our
customer demand. As a result of the working capital investments
necessary to support these plans, the Company will continue to require cash and
financing resources to meet and exceed its objectives. We may also seek to raise
additional capital in public or private equity offerings.
Cash
Flows from Operating Activities
The net
amount of cash used in the Company’s operating activities during three months
ended March 31, 2010 was $151,261, which primarily included loss from operations
that were offset by increase in derivative liability. For three
months ended March 31, 2009, the net amount of cash used in the Company’s
operating activities was $3,836, which primarily included loss from operations
and offset by increase in accrued liabilities.
Cash
Flows from Investing Activities
The net
amount of cash used in investing activities during three months ended March 31,
2010 was $72,713 which was the result of the purchase of property, plant and
equipment. For three months ended March 31, 2009, the net amount of cash
used in investing activities was $0.
Cash
Flows from Financing Activities
The net
amount of cash provided by financing activities during three months ended March
31, 2010 was $240,060. For three months ended March 31, 2009, the net amount of
cash generated by financing activities was $3,000, both were provided by loans
from related parties.
OFF-BALANCE
SHEET ARRANGEMENTS
We do not
have any off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to our
investors.
CRITICAL
ACCOUNTING POLICIES
See Note
1, Summary of Significant Accounting Policies and Organization, of the Notes to
Condensed Consolidated Financial Statements in Part I, Item 1 herein for a
discussion of critical accounting policies.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk
Our
international operations have exposure to foreign currency rate risks, primarily
due to fluctuations in the Cameroon Franc (CFA). We historically have not
entered into currency rate hedges with respect to our exposure from operations,
although we may do so in the future.
Some of
our products are sold as commodities and therefore sales prices fluctuate daily
based on market factors over which we have little or no control.
Item 4T. Controls and Procedures
Disclosure
Controls and Procedures
Pursuant
to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”),
the Company carried out an evaluation, with the participation of the Company’s
management, including the Company’s Chief Executive Officer (“CEO”) and Chief
Financial Officer (“CFO”) (the Company’s principal financial and accounting
officer), of the effectiveness of the Company’s disclosure controls and
procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the
end of the period covered by this report. Based upon that evaluation,
the Company’s CEO and CFO concluded that the Company’s disclosure controls and
procedures were effective as of March 31, 2010 to ensure that information
required to be disclosed by the Company in the reports that the Company files or
submits under the Exchange Act, is recorded, processed, summarized and reported,
within the time periods specified in the SEC’s rules and forms, and that such
information is accumulated and communicated to the Company’s management,
including the Company’s CEO and CFO, as appropriate, to allow timely decisions
regarding required disclosure.
Changes
in Internal Control Over Financial Reporting
There
have not been any changes in the Company's internal control over financial
reporting (as such term is defined in Rules 13a-15(f) under the Exchange Act)
during the fiscal period to which this report relates that have materially
affected, or are reasonably likely to materially affect, the Company's internal
control over financial reporting.
The
Company’s management, including the Company’s CEO and CFO, does not expect that
the Company’s internal control over financial reporting will prevent all errors
and all fraud. Because of its inherent limitations, internal control
over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree or compliance with the
policies or procedures may deteriorate.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
As a
“smaller reporting company” as defined by Item 10 of Regulation S-K, we are not
required to provide the information requested by this item.
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Reserved
Item 5. Other Information
None.
Item
6. Exhibits
|
Exhibit No.
|
|
Title
of Document
|
|
|
|
|
|
31.1
|
|
Certification
of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a),
promulgated under the Securities and Exchange Act of 1934, as
amended
|
|
|
|
|
|
31.2
|
|
Certification
of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d 14(a),
promulgated under the Securities and Exchange Act of 1934, as
amended
|
|
|
|
|
|
32.1*
|
|
Certification
pursuant to Section 906 of Sarbanes Oxley Act of 2002 (Chief Executive
Officer)
|
|
|
|
|
|
32.2*
|
|
Certification
pursuant to Section 906 of Sarbanes Oxley Act of 2002 (Chief Financial
Officer)
|
*These
certificates are furnished to, but shall not be deemed to be filed with, the
Securities and Exchange Commission.
Signatures
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, Ecologix Resource Group Inc. has duly caused this Report to be signed on
behalf of the undersigned thereunto duly authorized on May 21,
2010.
|
|
Ecologix
Resource Group Inc.
|
|
|
|
|
|
|
|
|
By:
|
/s/ Jason
Fine
|
|
|
|
|
Jason
Fine, CEO
|
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this Report has been
signed by the following persons in the capacities indicated and on May 21,
2010.
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
/s/ Jason
Fine
|
|
President
and CEO
|
|
May
21, 2010
|
|
Jason
Fine
|
|
and
Director
|
|
|
|
|
|
|
|
|
|
/s/
Robert Radoff
|
|
President
|
|
May
21, 2010
|
|
Robert
Radoff
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Dr. Juan Avila
|
|
Director
|
|
May
21, 2010
|
|
Dr.
Juan Avila
|
|
|
|
|
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