UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
(Mark one)
[X] Annual Report Under Section 13 or 15(d) of The Securities Exchange Act
of 1934
For the quarterly period ending September 30, 2004
[_] Transition Report Under Section 13 or 15(d) of The Securities Exchange
Act of 1934
For the transition period from ______________ to _____________
ECOLOCLEAN INDUSTRIES, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 98-0420750
------------------------ ------------------------
(State of incorporation) (IRS Employer ID Number)
2242 South Hwy #83, Crystal City, TX 78839
(Address of principal executive offices)
(830) 374-9100
(Issuer's telephone number)
Securities registered under Section 12 (b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock - $0.001 par value
Check whether the issuer has (1) filed all reports required to be files by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period the Company was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
As of September 30, 2004, there were 37,575,664 shares of Common Stock issued
and outstanding.
Transitional Small Business Disclosure Format : Yes No X
--- ---
ECOLOCLEAN INDUSTRIES, INC.
FORM 10-QSB
INDEX
Page
PART I - Financial Information
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets as of
September 30, 2004 and December 31, 2003......................... 3-4
Condensed Consolidated Statements of Operations
For the Three Months Ended September 30, 2004 and 2003............ 5
Condensed Consolidated Statements of Operations
For the Nine Months Ended September 30, 2004 and 2003............. 6
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2004 and 2003............. 7-8
Notes to Condensed Consolidated Financial Statements.............. 9-12
Item 2 - Management's Discussion and Analysis or Plan of Operation ........13-16
Item 3 - Controls and Procedures........................................... 17
PART II - Other Information
Item 1 - Legal Proceedings ................................................ 17
Item 2 - Changes in Securities and Use of Proceeds......................... 17
Item 3 - Defaults Upon Senior Securities................................... 18
Item 4 - Submission of Matters to a Vote of Security Holdings.............. 18
Item 5 - Other Information................................................. 18
Item 6 - Exhibits and Reports on Form 8K .................................. 18
Signature ................................................................ 19
2
ECOLOCLEAN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
------
September 30, 2004 December 31, 2003
------------------ ------------------
(Unaudited)
Current Assets:
Cash $ 14,696 $ 2,532
Accounts Receivable 184,850 77,037
Prepaid Expenses 160,265 19,616
------------------ ------------------
Total Current Assets 359,811 99,185
------------------ ------------------
Property Plant and Equipment, Net 938,711 425,718
------------------ ------------------
Other Assets:
Deposits 12,970 200
License, Net 16,329 20,528
Intangible Asset 33,585 33,585
------------------ ------------------
Total Other Assets 62,884 54,313
------------------ ------------------
Total Assets $ 1,361,406 $ 579,216
================== ==================
See Accompanying Notes to Condensed Consolidated Financial Statements
3
ECOLOCLEAN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(CONTINUED)
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
---------------------------------------
September 30, 2004 December 31, 2003
------------------ ------------------
(Unaudited)
Current Liabilities:
Accounts Payable and
Accrued Expenses $ 957,021 $ 488,823
Note Payable 106,793 27,414
------------------ ------------------
Total Current Liabilities 1,063,814 516,237
Long-Term Debt 11,287 0
Due to Related Parties 1,786,557 775,369
------------------ ------------------
Total Liabilities 2,861,658 1,291,606
------------------ ------------------
Commitments and Contingencies -- --
Stockholders' (Deficit):
Preferred Stock, $0.001 par value
1,000,000 shares authorized, none issued
Common Stock, $.0001 par value per share,
50,000,000 shares authorized;
32,500,664 shares issued and
outstanding December 31, 2003
37,575,664 shares issued and outstanding
September 30, 2004 3,758 3,250
Additional Paid-in Capital 1,545,388 190,558
Accumulated (Deficit) (3,049,398) (906,198)
------------------ ------------------
Total Stockholders' (Deficit) (1,500,252) (712,390)
------------------ ------------------
Total Liabilities and
Stockholders' (Deficit) $ 1,361,406 $ 579,216
================== ==================
See Accompanying Notes to Condensed Consolidated Financial Statements
4
ECOLOCLEAN INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Three Months Ended
September 30, 2004 September 30, 2003
------------------ ------------------
Revenues: $ 300,680 $ 102,698
------------------ ------------------
Expenses:
Cost of Sales 205,190 57,763
Expenses 240,241 34,133
Depreciation & Amortization 47,619 9,456
Interest 27,152 7,278
Officer's Salary 30,000 30,000
General and Administrative 622,051 189,890
------------------ ------------------
Total Expenses 1,172,253 328,520
------------------ ------------------
Net (Loss) $ (871,573) $ (225,822)
================== ==================
Net (Loss) Per Common Share
Basic and Diluted $ (0.02) $ (0.01)
----------------- ================== ==================
Weighted Average Number of Common
Shares Outstanding, Basic and Diluted 36,813,164 31,975,664
================== ==================
See Accompanying Notes to Condensed Consolidated Financial Statements
5
ECOLOCLEAN INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine Months Ended Nine Months Ended
September 30, 2004 September 30, 2003
------------------ ------------------
Revenues: $ 571,738 $ 167,138
------------------ ------------------
Expenses:
Cost of Sales 357,085 72,103
Operating Expenses 523,500 86,858
Depreciation & Amortization 96,903 26,436
Interest 60,141 15,092
Officer's Salary 90,000 90,000
General and Administrative 1,587,309 474,429
------------------ ------------------
Total Expenses 2,714,938 764,918
------------------ ------------------
Net (Loss) $ (2,143,200) $ (597,780)
================== ==================
Net (Loss) Per Common Share
Basic and Diluted $ (0.06) $ (0.02)
================== ==================
Weighted Average Number of Common
Shares Outstanding, Basic and Diluted 35,038,164 31,283,850
================== ==================
See Accompanying Notes to Condensed Consolidated Financial Statements
6
ECOLOCLEAN INDUSTRIES, INC.
STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS
(UNAUDITED)
Nine Months Ended Nine Months Ended
September 30, 2004 September 30, 2003
------------------ ------------------
Cash Flows Provided (Required) By
Operating Activities:
Net (Loss) $ (2,143,200) $ (597,780)
Adjustments to Reconcile Net (Loss)
to Net Cash Provided (Required) By
Operating Activities:
Depreciation and Amortization 96,903 26,436
Issuance of Common Stock
For Services Provided 783,838 144,800
Officer's Salary Accrual 90,000 90,000
Changes in:
Accounts Receivable (107,813) (86,431)
Prepaid Expenses (69,149) (10,195)
Deposits (12,770) (200)
Accounts Payable and Accrued Expenses 378,198 186,963
Customer Deposits 0 (65,000)
------------------ ------------------
Net Cash (Required)
by Operating Activities (983,993) (311,407)
------------------ ------------------
Cash Flows (Required)
by Investing Activities:
Acquisitions of Property, Plant & Equipment (605,697) (198,245)
------------------ ------------------
Net Cash (Required)
By Investing Activities (605,697) (198,245)
------------------ ------------------
See Accompanying Notes to Condensed Consolidated Financial Statements
7
ECOLOCLEAN INDUSTRIES, INC.
STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS
(UNAUDITED)
(CONTINUED)
Nine Months Nine Months
Ended Ended
September 30, 2004 September 30, 2003
------------------ ------------------
Cash Flows Provided by Financing Activities:
Proceeds From Collection of
Stock Subscriptions 0 10,000
Note Payable Paid By Stockholder 0 6,000
Proceeds From Issuance
of Common Stock 500,000 25,000
Proceeds (Payments) of Notes Payable 90,666 (33,847)
Proceeds of Loans From
Related Parties 1,011,188 505,406
------------------ ------------------
Net Cash Provided by Financing Activities 1,601,854 512,559
------------------ ------------------
Net Increase in Cash 12,164 2,907
Cash at Beginning of Period 2,532 704
------------------ ------------------
Cash at End of Period $ 14,696 $ 3,611
================== ==================
Supplemental Disclosures of
Cash Flow Information
Cash Payments for Interest $ 2,693 $ 672
================== ==================
Cash Payments for Income Taxes $ 0 $ 0
================== ==================
Non-Cash Financing Activities:
Issuance of Common Stock:
Operating Activities $ 783,838 $ 144,800
Payment of Prepaid Expense 71,500 0
Payment of Accounts Payable 0 82,234
------------------ ------------------
Total Non-Cash Financing Activities $ 855,338 $ 227,074
================== ==================
See Accompanying Notes to Condensed Consolidated Financial Statements
8
ECOLOCLEAN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
NOTE 1 - BASIS OF PRESENTATION
------ ---------------------
The accompanying unaudited condensed consolidated financial statements
for the nine month periods ended September 30, 2004 and 2003 have been
prepared in conformity with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-QSB and Regulation S-B. The financial information as of September
30, 2004 is derived from the registrant's Form 10-KSB for the year
ended December 31, 2003. Certain information or footnote disclosures
normally included in financial statements prepared in accordance with
accounting principles generally accepted in the United States of
America have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission.
The preparation of condensed consolidated financial statements in
conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date
of the condensed consolidated financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. In the opinion of
management, the accompanying consolidated financial statements include
all adjustments necessary (which are of a normal and recurring nature)
for the fair presentation of the results of the interim periods
presented. While the registrant believes that the disclosures presented
are adequate to keep the information from being misleading, it is
suggested that these accompanying financial statements be read in
conjunction with the registrant's audited consolidated financial
statements and notes included in the registrant's Form 10-KSB for the
year ended December 31, 2003.
Operating results for the nine-month period ended September 30, 2004
are not necessarily indicative of the results that may be expected for
the remainder of the fiscal year ending December 31, 2004. The
accompanying unaudited condensed consolidated financial statements
include the accounts of the registrant and its wholly-owned
subsidiaries. All significant inter-company accounts and transactions
have been eliminated in consolidation.
9
ECOLOCLEAN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
NOTE 2 - LICENSE COSTS
------ -------------
The Company acquired an industry exclusive, perpetual worldwide license
to commercialize the inventions on patents and market, manufacture,
sell, lease and, or utilize, for processing electrocoagulation units
for the treatment of effluent water. Royalties are $3,000 per unit
manufactured and 2% of gross processing revenues.
A summary of license costs amortized over a 5-year life are as follows:
September 30, December 31,
2004 2003
------------- -------------
License $ 27,993 $ 27,993
Less: Accumulated Amortization 11,664 7,465
------------- -------------
$ 16,329 $ 20,528
============= =============
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
------ -----------------------------
Summaries of property, plant and equipment at September 30, 2004 and
December 31, 2003 are as follows:
September 30, December 31,
2004 2003
------------- -------------
Land $ 80,000 $ 80,000 N/A
Warehouse 34,120 29,726 40 Years
Electrocoagulation Units 239,406 184,358 5 Years
Machinery & Equipment 655,039 137,996 5 Years
Office Furniture and Equipment 7,903 2,911 5 Years
Computers & Related Equipment 14,720 7,236 5 Years
Transportation Equipment 42,448 25,713 5 Years
------------- -------------
Total 1,073,636 467,940
Less Accumulated Depreciation 134,925 42,222
------------- -------------
Net Property, Plant & Equipment $ 938,711 425,718
============= =============
Depreciation expense for the nine months ended September 30, 2004 and
September 30, 2003 amounted to $92,704 and $22,237 respectively.
10
ECOLOCLEAN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
NOTE 4 - RELATED PARTY TRANSACTIONS
------ --------------------------
The Board of Directors has approved a salary for services provided. At
September 30, 2004 the cumulative amount of unpaid officer's salary was
$250,000 and is included in accounts payable and accrued expenses.
At September 30, 2004 cumulative advances bearing interest at 5% per
annum due to officers of the Company amounted to $1,786,557 plus
$73,968 accrued interest. The accrued interest is included in accounts
payable and accrued expenses. The advances are due January 10, 2005
with the right of prepayment, and it is anticipated that the maturity
date will be extended.
NOTE 5 - COMMON STOCK TRANSACTIONS
------- --------------------------
On January 2, 2004, the Company approved the issuance of 100,000 shares
of restricted common stock for consulting services valued at $50,000.
These shares were issued March 15, 2004.
On April 14, 2004, the Company issued 100,000 shares of its restricted
common stock for investor and public relations services valued at
$44,000.
On April 15, 2004, the Company issued 500,000 shares of its restricted
common stock for consulting services valued at $212,000.
On June 15, 2004, the Company issued 350,000 shares of its restricted
common stock for consulting services valued at $108,500.
On June 22, 2004, the Company approved the issuance of 800,000 shares
of its restricted common stock valued at $176,000 and 200,000 shares
under its 2004 Stock Grant and Option Plan valued at $110,000 for legal
services.
On June 30, 2004, the Company issued 1,000,000 shares of its restricted
common stock for $500,000.
On June 30, 2004, the Company issued 500,000 shares of its restricted
common stock valued at $130,000 for services regarding the private
placement of the Company's common stock.
On August 1, 2004, the Company issued 25,000 shares of its restricted
common stock for an employee stock bonus valued at $4,214.
On September 7, 2004, the Company issued 500,000 shares of its
restricted common stock for consulting services valued at $73,125.
On September 22, 2004, the Company issued 1,000,000 shares of its
restricted common stock for legal services valued at $77,500.
11
ECOLOCLEAN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
NOTE 6 - SUBSEQUENT EVENTS
------ -----------------
On October 27, 2004, the Company completed a worldwide exclusive
license for the "Coale Separator" which is a device that decreases and
substantially eliminates contaminants in diesel fuel and other fuels
and lubricants.
This exclusive license is applicable for all combustion engines using
fewer than five (5) gallons of fuel per minute.
12
Item 2. Management's Discussion and Analysis or Plan of Operation
OVERVIEW AND PLAN OF OPERATION
Background
During the quarter ended September 30, 2004, Ecoloclean Industries, Inc.
("ECCI"), had gross operating revenues of $300,680, which were generated by its
Louisiana subsidiary, Reliant Drilling Systems, Inc. ("RDS"), and its Texas
Subsidiary, Ecoloclean Of Texas, Inc. ("ECOT").
Current Operations
A. Industrial Field Services
Since initiation, ECOT has successfully completed cleaning two lagoons for
industrial customers followed by completing a specialized industrial tank
cleaning for another industrial customer. Additional lagoon cleaning operations
should begin shortly along with a group of industrial tank cleanings and
refinery piping maintenance engagements. ECOT continues to actively bid other
industrial cleaning and maintenance jobs.
B. Drilling Support for Oil Exploration & Production Companies
RDS, which specializes in drilling support services, has employed local managers
with strong industry reputations to assist the Company in realizing its mission
of becoming a leader in oil field services. During the next 12 months, the
Company anticipates that all solids control equipment presently owned by RDS
will be in operation on a virtually continual basis at various drilling sites
including the sites we are now servicing. Currently, RDS is handling the solids
control programs at several wells for oil exploration and production companies
and is on stand-by to support additional locations for other oil exploration and
production companies. RDS has signed Master Service Agreements with several
operators with active drilling programs which will start in the near future.
C. Industrial and Exploration Liquid Waste Remediation Services
World Environmental Technologies, Inc. ("WET"), a wholly owned subsidiary of
ECCI, has utilized its Louisiana statewide Water Discharge Permit and its
patented Electro Coagulation ("EC") treatment systems to market it services for
oil field and industrial liquid waste remediation. These efforts have resulted
in WET acquiring Master Service Agreements from several Refinery Groups and
Petroleum Operators, which it is waiting to implement.
13
D. Agricultural Clean Up
Ecoloclean, Inc. ("ECI"), a wholly owned subsidiary of the Company, continues to
devote efforts to the Dairy Industries as it pertains to the animal waste
created by cows, swine and chickens. Currently, as per a notification received
from Texas A & M University, ECI plans to move its equipment to a dairy farm in
Bosque County, Texas, in order to demonstrate the successful removing of
phosphates from the produced animal waste.
ECI was unsuccessful in efforts to removed phosphates from the produced swine
waste in Arkansas after several attempts. Subsequently, it withdrew its
equipment for further modifications and adjustments. ECI believes after such
changes, it can successfully meet the requirements of removal of the contained
phosphates after such modifications have been completed.
E. New Development
ECCI has obtained the Worldwide Exclusive Rights for the patented Coale
Separator through an agreement with Coale's Environmental Systems, Inc.
("Coale"). As previously announced on June 2, 2004, ECCI entered into a General
Revenue Sharing Agreement with Coale. The new license agreement and
international marketing rights will allow ECCI the opportunity to market,
manufacture, install and commercialize the inventions and to operate and use
such process apparatus, machinery and devices to remove contaminants from fuels
used in combustion engines using fewer than five (5) gallons of fuel per minute.
The exclusive rights are inclusive of two patents currently in place and any
future related patents, improved or applications. This acquisition will be
developed and marketed under ECCI's WET subsidiary.
The Coale Separator decreases and substantially eliminates contaminants in
diesel fuel. It is designed to operate as a mobile fuel-scrubbing unit that
reduces abrasive sediments and corrosive degradation by removing contaminants
such as water, oxidation, dirt, sand and sludge. The Coale Separator effectively
separates these liquid and solid particles from diesel fuel, thereby allowing
only purified fuel to reach combustions engines. This device is easily installed
without any modifications to the existing engine.
This process increases horsepower and engine efficiency by burning a cleaner
fuel. The Coale Separator is effective for use with diesel fuel, gasoline,
kerosene, hydraulic oil transmission fluid and JP8 jet fuel. In addition, it
extends filter life resulting in measurable cost savings. Other benefits include
a reduction of fuel system problems, broken injector tips, excessive engine wear
and power losses, thereby improving overall engine performance. The Company
anticipates the potential customer base will include owner/operators of
combustion engines, including, but not limited to, offshore/onshore drilling
rigs, tugboats and transportation departments of government agencies. Production
is expected to begin within 90 days.
14
Financial Considerations
Currently, there are not sufficient revenues to offset annual operating
overhead, which is now to be approximately $1,500,000. Until the Company obtains
the amount of working capital required to meet its operating overhead, it may be
necessary to continue to call upon the investment community and/or the Company's
officers and directors for financial assistance.
During the quarter, the Company's officers have provided $101,457 in loans to
the Company. The officers have indicated a willingness to continue such advances
until such time as cash flows can offset the monthly operating overhead. We have
no written agreement with the officers and no assurances can be given that they
will indefinitely provide our Company with funds. All of these funds have been
utilized to obtain additional equipment and to offset monthly overhead operating
expenses.
Conclusion
The Company has expended substantial financial resources to establish an
infrastructure of personnel and equipment capable of meeting the needs of our
expanding business. It is anticipated that the Company's marketing efforts and
industry reputation will create a level of business activities sufficient to
meet the future operating overhead costs on a monthly basis within the near
future.
At this time, the Company is completing marketing and distribution planning for
the Coale Separator in order to commence sales efforts for this device within
the US and worldwide in the near future.
RESULTS OF OPERATIONS
REVENUES: The Company reported revenues of $571,738 for the nine months ended
September 30, 2004 as compared with $167,138 revenues for the nine months ended
September 30, 2003. The increased revenue was due to increased revenues from our
solids control subsidiary and our recently activated environmental clean-up
subsidiary.
TOTAL COSTS AND EXPENSES: Total costs and expenses increased from $764,918 for
the nine months ended September 30, 2003 to $2,714,938 for the nine months ended
September 30, 2004.
OPERATING EXPENSES: Operating expenses increased from $72,103 for the nine
months ended September 30, 2003 to $357,085 for the nine months ended September
30, 2004. The increase of $284,982 was primarily due to continuation of ramping
up our infra-structure/ support activities in anticipation of increased business
activities.
SELLING, GENERAL AND ADMINSTRATIVE EXPENSES: Selling, general and administrative
expenses increased from $474,429 for the nine months ended September 30, 2003 to
$1,587,309 for the nine months ended September 30, 2004. The increase of
$1,112,880 was primarily due to increased sales expense including demo and
testing costs incurred in our efforts to obtain long-term contracts, increased
15
consulting fees, increased legal fees and additional management and
administrative salaries as we seek to expand our customer base. $639,039 of the
increase was due to issuances of common stock for consulting fees - ($398,825),
legal fees - ($192,000), investor public relations - ($44,000) and an employee
stock bonus - ($4,214).
NET LOSS FROM OPERATIONS: The pretax loss increased from $(597,780) for the nine
months ended September 30, 2003 to $(2,143,200) for the nine months ended
September 30, 2004, an increased loss of $1,545,420, an increase of 358.5%.
Diluted net loss per common share increased 300.0% to $(0.06). The net loss per
share calculation for the nine months ended September 30, 2004 included an
increase in actual and equivalent shares outstanding.
The non-cash component of the increased loss was $639,039 as noted in the above
discussion of selling, general and administrative expenses.
LIQUIDITY AND CAPITAL RESOURCES: Capital expenditures during the nine months
ended September 30, 2004 totaled $605,696 as compared with $198,245 for the nine
months ended September 30, 2003.
The increase of $407,451 consists of capital asset purchases of $517,367 for
equipment needed by our solids control and enviro clean-up affiliates, $67,950
for E/C Units and related equipment construction, and $20,379 for office
furniture, office equipment, computers and building improvements which total
$605,696 less the increase of $198,245 for the nine months ended September 30,
2003.
Total debt increased from $1,291,606 at December 31, 2003 to $2,861,688 at
September 30, 2004. Total debt as of September 30, 2004 and December 31, 2003
expressed as a percentage of total debt and shareholder equity is 223.0% and
210.2% respectively. $1,011,188 of the $1,570,082 increase was due to loans from
the officers of the Company.
FORWARD-LOOKING STATEMENTS:
We have included forward-looking statements in this report. For this purpose,
any statements contained in this report that are not statements of historical
fact may be deemed to be forward looking statements. Without limiting the
foregoing, words such as "may", "will", "expect", "believe", "anticipate",
"estimate", "plan" or "continue" or the negative or other variations thereof or
comparable terminology are intended to identify forward-looking statements.
These statements by their nature involve substantial risks and uncertainties,
and actual results may differ materially depending on a variety of factors.
Factors that might cause forward-looking statements to differ materially from
actual results include, among other things, overall economic and business
conditions, demand for the Company's products, competitive factors in the
industries in which we compete or intend to compete, impact and other
uncertainties of our future acquisition plans.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:
The Company does not issue or invest in financial instruments or their
derivatives for trading or speculative purposes. The operations of the Company
are conducted primarily in the United States, and, are not subject to material
foreign currency exchange risk. Although the Company has outstanding debt and
related interest expense, market risk of interest rate exposure in the United
States is currently not material.
16
Item 3. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures.
Within the 90 days prior to the date of this Quarterly Report for the
period ended September 30, 2004, we carried out an evaluation, under the
supervision and with the participation of our management, including the
Company's Chairman and Chief Executive Officer and the Chief Financial Officer,
of the effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Rule 13a-14 of the Securities Exchange Act of 1934 (the
"Exchange Act"), which disclosure controls and procedures are designed to insure
that information required to be disclosed by a company in the reports that it
files under the Exchange Act is recorded, processed, summarized and reported
within required time periods specified by the SEC's rules and forms. Based upon
that evaluation, the Chairman and the Chief Financial Officer concluded that our
disclosure controls and procedures are effective in timely alerting them to
material information relating to the Company required to be included in the
Company's period SEC filings.
(b) Changes in Internal Control.
Subsequent to the date of such evaluation as described in subparagraph
(a)above, there were no significant changes in our internal controls or other
factors that could significantly affect these controls, including any corrective
action with regard to significant deficiencies and material weaknesses.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the third quarter of 2004 the Company authorized, offered and,
or sold the following securities pursuant to exemptions from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act").
On August 1, 2004, we issued 25,000 shares to a company employee as
bonus compensation valued at $4,214.
17
On September 7, 2004, we issued 500,000 shares to Carl Hessel for
business consulting services valued at $73,125.
On September 22, 2004, we issued 1,000,000 shares to G. Wilson for
legal services retainer valued at $77,500.
We believe the shares issued above were issued in private transactions
pursuant to Section 4(2) of the Securities Act of 1933, as amended, (the
"Securities Act"). These shares are considered restricted securities and may not
be publicly resold unless registered for resale with appropriate governmental
agencies or unless exempt from any applicable registration requirements.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of the security holders, through the
solicitation of proxies or otherwise, during the quarter of the fiscal year
covered by this report.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit No. Exhibit Name
31.1 Chief Executive Officer-Section 302 Certification
pursuant to Sarbane-Oxley Act.
31.2 Chief Financial Officer- Section 302 Certification
pursuant to Sarbane-Oxley Act.
32.1 Chief Executive Officer-Section 906 Certification
pursuant to Sarbane-Oxley Act.
32.2 Chief Financial Officer- Section 906 Certification
pursuant to Sarbane-Oxley Act.
(b) Reports on Form 8-K. None.
18
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ECOLOCLEAN INDUSTRIES, INC.
Dated: November 15, 2004 /s/ Royis Ward
---------------------------
By: Royis Ward
Title: President, CEO
Dated: November 15, 2004 /s/ Michael Ward
---------------------------
By: Michael Ward
Title: Secretary, CFO
19