UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended: February 28, 2018

 

OR

 

[  ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______________ to ______________

 

Commission file number: 000-54525

 

ECOSCIENCES, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Nevada   27-2692640
(State of Other Jurisdiction of   (I.R.S. Employer
Incorporation or Organization)   Identification Number)

 

420 Jericho Turnpike, Suite 110    
Jericho, NY 11753   11753
(Address of Principal Executive Offices)   (Zip Code)

 

(516) 465-3964

(Registrant’s Telephone Number, Including Area Code)

 

With a copy to:

Philip Magri, Esq.

Magri Law, LLC

2642 NE 9th Avenue

Fort Lauderdale, FL 33334

T: (646) 502-5900

F: (646) 826-9200

pmagri@magrilaw.com

www.magrilaw.com

 

N/A

(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 [X] 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 [X]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer”, “smaller reporting company”, and “emerging growth 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) Emerging growth company [  ]

 

If an emerging growth company, indicate by checkmark if the registrant has not elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ] No [X]

 

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date. As of April 16, 2018, there were 251,808,027 shares of Common Stock, $0.0001 par value per share, issued and outstanding.

 

 

 

 
 

 

Table of Contents

 

    Page
     
PART I - FINANCIAL INFORMATION   3
item 1. financial statements (unaudited)    
item 2. management’s discussion and analysis of financial condition and results of operations   4
Forward Looking Statements   4
Corporate History    
Overview   4
Product Development   5
Growth Strategy of the Company   5
Critical Accounting Policies, Estimates, and Judgments   5
Results of Operations   6
Financial Condition, Liquidity and Capital Resources   9
Working Capital   10
Cash and Cash Equivalents   10
Off-Balance Sheet Operations   10
item 3. quantitative and qualitative disclosures about market risk   10
item 4. controls and procedures   10
Evaluation of Disclosure Controls and Procedures.   10
Changes in Internal Control over Financial Reporting   10
PART II – OTHER INFORMATION   11
item 1. legal proceedings   11
item 1 risk factors   11
item 2. unregistered sale of equity securities and use of proceeds   11
item 3. defaults upon senior securities   13
item 5. other information   14
Subsequent Events   14
item 6. exhibits   15
SIGNATURES   16

 

  2  
 

 

Ecosciences, Inc.

Consolidated Financial Statements

(Unaudited)

 

    Index
     
Table of Contents    
     
Unaudited Consolidated Balance Sheets   F-1
     
Unaudited Consolidated Statements of Operations   F-2
     
Unaudited Consolidated Statements of Cash Flows   F-3
     
Notes to the Unaudited Consolidated Financial Statements   F-4

 

  3  
 

 

Ecosciences, Inc.

Consolidated Balance Sheets

As of February 28, 2018 and May 31, 2017

(Unaudited)

 

    February 28, 2018     May 31, 2017  
             
ASSETS                
                 
Current Assets                
                 
Cash   $ 110,721     $ 3,357  
Accounts receivable, net of allowance of $2,600 and $379, respectively     8,313       6,967  
Inventory    

13,120

      3,256  
Prepaid expenses           29,700  
                 
Total Assets   $

132,154

    $ 43,280  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT                
                 
Current Liabilities                
                 
Accounts payable   $ 302,023     $ 258,949  
Accrued liabilities     557,625       447,140  
Due to related parties     119,466       93,598  
Notes payable     119,528       300,666  
Convertible notes payable, net of discount     562,411       86,137  
Derivative liabilities     704,948       596,743  
                 
Total Liabilities     2,366,001       1,783,233  
                 
Stockholders’ Deficit                
                 
Preferred Stock 50,000,000 shares authorized, $0.0001 par value;                
Series A Redeemable and Convertible Preferred Stock: 3,000,000 shares authorized; 1,358,380 and 1,593,630 shares issued and outstanding, respectively     136       160  
Series B Preferred Stock: 200,000 shares authorized, issued and outstanding     20       20  
Series C Redeemable and Convertible Preferred Stock: 10,000,000 shares authorized; 4,700,000 shares issued and outstanding     470       470  
Series D Convertible Preferred Stock: 10,000,000 shares authorized; 5,033,290 and 710,000 shares issued and outstanding, respectively     503       71  
Common Stock 1,950,000,000 shares authorized, $0.0001 par value; 221,555,127 shares and 48,075,065 issued and outstanding, respectively     22,156       4,808  
Additional paid-in capital    

2,829,395

      817,879  
Accumulated deficit     (5,086,527 )     (2,563,361 )
                 
Total Stockholders’ Deficit     (2,233,847 )     (1,739,953 )
                 
Total Liabilities and Stockholders’ Deficit   $

132,154

    $ 43,280  

 

See accompanying notes to the unaudited financial statements.

 

  F- 1  
 

 

Ecosciences, Inc.

Consolidated Statements of Operations

For the Three and Nine Months Ended February 28, 2018 and 2017

(Unaudited)

 

    Three Months
Ended
    Three Months
Ended
    Nine Months
Ended
    Nine Months
Ended
 
    February 28, 2018     February 28, 2017     February 28, 2018     February 28, 2017  
                         
Revenues   $ 21,160     $ 4,836     $ 67,021     $ 14,223  
Cost of revenues     (5,320 )     (954 )     (22,621 )     (7,650 )
                                 
Gross Profit     15,840       3,882       44,400       6,573  
                                 
Operating Expenses:                                
General and administrative     71,448       53,879       263,093       348,546  
Professional fees     138,053       102,714       447,400       360,870  
Research and development     2,532             8,186        
                                 
Total Operating Expenses     212,033       156,593       718,679       709,416  
                                 
Loss from Operations     (196,193 )     (152,711 )     (674,279 )     (702,843 )
                                 
Other Income (Expenses):                                
Interest expense     (1,264,596 )     (208,822 )     (1,839,938 )     (435,263 )
Gain on settlement of debt     4,931             21,467        
Loss on settlement of related party debt     (274,895 )           (274,895 )      
Change in fair value of derivative liabilities     946,324       79,207       244,479       98,436  
                                 
Net Loss   $ (784,429 )   $ (282,326 )   $ (2,523,166 )   $ (1,039,670 )
                                 
Loss Per Common Share – Basic and Diluted   $ (0.00   $ (15.94 )   $ (0.03 )   $ (79.09 )
Weighted-average Common Shares Outstanding – Basic and Diluted     165,904,460       17,708       88,962,303       13,146  

 

See accompanying notes to the unaudited financial statements.

 

  F- 2  
 

 

Ecosciences, Inc.

Consolidated Statements of Cash Flows

For the Nine Months Ended February 28, 2018 and 2017

(Unaudited)

 

    Nine Months
Ended
February 28, 2018
  Nine Months
Ended
February 28, 2017
         
Cash Flows from Operating Activities                
                 
Net loss   $ (2,523,166 )   $ (1,039,670 )
                 
Adjustments to reconcile net loss to net cash used in operating activities:                
Amortization of debt discount     473,341       101,971  
Interest expense on derivative liability that exceeds notes payable     1,323,824       287,924  
Change in fair value of derivative liabilities     (244,479 )     (98,436 )
Gain on settlement of debt     (21,467 )      
Loss on settlement of related party debt     274,895        
Shares issued for fees upon conversion of convertible debt     2,500        
Stock-based compensation           252,260  
Changes in operating assets and liabilities:                
Accounts receivable     (1,346 )      
Inventory     (9,864 )     (6,388 )
Prepaid expenses     29,700       (1,729 )
Accounts payable     43,074       106,732  
Accrued liabilities     155,501       163,300  
                 
Net Cash Used in Operating Activities     (497,487 )     (234,036 )
                 
Cash Flows from Financing Activities                
                 
Advances from related party, net     34,001       47,815  
Proceeds from notes payable     55,100       48,250  
Payment of notes payable           (41,068 )
Proceeds from convertible notes payable     515,750       189,000  
                 
Net Cash Provided by Financing Activities     604,851       243,997  
                 
Change in Cash     107,364       9,961  
                 
Cash - Beginning of Period     3,357       4,220  
                 
Cash - End of Period   $ 110,721     $ 14,181  
                 
Supplemental Disclosures of Cash Flow Information:                
                 
Interest paid   $     $ 332  
Income taxes paid   $     $  
                 
Non-Cash Investing and Financing Activities:                
                 
Common shares issued to settle convertible debt and accrued interest   $ 1,624,960     $ 123,484  
Preferred shares issued upon conversions of convertible notes payable   $ 7,403     $  
Conversion of preferred stock to common stock   $ 13,311     $  
Recognition of derivative liabilities from embedded conversion feature   $ 392,000     $  
Reclassification of notes payable and accrued interest to convertible notes payable   $ 240,963     $  

 

 

See accompanying notes to the unaudited financial statements.

 

  F- 3  
 

 

Ecosciences, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

 

1. Nature of Operations

 

Ecosciences, Inc. (the “Company”) was incorporated in the State of Nevada on May 26, 2010. The Company’s principal business is focused on the development, production and sale of environmentally focused wastewater products. It currently produces organic tablets and powders to be used regularly and in lieu of harmful chemical cleaning products in grease trap and septic tank systems. The Company intends to generate revenue through the sale of tablets and powders to domestic and international customers in the food and sanitation industries as well as residential consumers.

 

The accompanying unaudited consolidated financial statements of the Company should be read in conjunction with the consolidated financial statements and accompanying notes filed with the U.S. Securities and Exchange Commission in the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2017. In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments of a recurring nature considered necessary to present fairly the Company’s financial position and the results of its operations and its cash flows for the periods shown.

 

The preparation of unaudited consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those estimates. The results of operations and cash flows for the periods shown are not necessarily indicative of the results to be expected for the full year.

 

2. Going Concern

 

These unaudited consolidated financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated significant revenue since inception and has not generated significant earnings. As of February 28, 2018, the Company has accumulated losses of $5,086,527 and a working capital deficit of $2,233,847. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. These unaudited consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

3. Inventory

 

Inventory consists of the following:

 

    February 28, 2018     May 31, 2017  
             
Raw Materials   $ -     $ 22  
Finished Goods     12,776       3,187  
Packaging Supplies     344       47  
                 
Total   $ 13,120     $ 3,256  

 

4. Related Party Transactions

 

a) During the nine months ended February 28, 2018 and 2017, the Company incurred management services fees of $63,000 and $284,360, respectively, to the President of the Company.
     
b) During the nine months ended February 28, 2018 and 2017, the Company incurred management services fees of $65,333 and $36,900, respectively, to the Chief Operating Officer of the Company.
     
c) During the nine months ended February 28, 2018 and 2017, the Company incurred rent fees of $6,750 and $3,000, respectively, to a company controlled by the President of the Company.
     
d) At February 28, 2018, and May 31, 2017, the Company was indebted to the President of the Company and a company controlled by the President of the Company for $119,466 and $83,098, respectively. The amount is unsecured, non-interest bearing and due on demand.
     
e) At February 28, 2018, and May 31, 2017, the Company was indebted to the Chief Operating Officer of the Company for $nil and $10,500, respectively. The amount is unsecured, non-interest bearing and due on demand.

 

  F- 4  
 

 

Ecosciences, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

 

5. Notes Payable

 

Notes payable consist of the following:   February 28, 2018     May 31, 2017  
               
a) Notes payable that are unsecured, non-guaranteed, non-interest bearing and due on demand.   $ 5,528     $ 5,528  
b) Note payable which is unsecured, non-guaranteed, and non-interest bearing. The note was due on February 12, 2014.     8,000       8,000  
c) Note payable which is unsecured, non-guaranteed, and bears interest at 10% per annum and 16% when in default. The note is due 60 days following demand.     13,000       13,000  
d) Notes payable which are unsecured, non-guaranteed, and bear interest at 8% per annum. The notes were due from May 2015 to August 2015.     (i)     65,000 (i)
e) Note payable which is unsecured, non-guaranteed, and bears interest at 8% per annum. The note was due on August 26, 2015.     2,500       2,500  
f) Notes payable which are unsecured, non-guaranteed, and bear interest at 8% per annum. The notes were due in May 2016 ($12,000) and October 2016 ($20,000).     32,000 (ii)     46,000  
g) Note payable which is unsecured, non-guaranteed, and bears interest at 10% per annum. The note was due on July 15, 2016.     1,300       1,300  
h) Note payable which is unsecured, non-guaranteed, and bears interest at 10% per annum. The note was due on August 1, 2016.     1,000       1,000  
i) Note payable which is unsecured, non-guaranteed, and bears interest at 10% per annum. The note was due on August 12, 2016.     1,200       1,200  
j) Notes payable which are unsecured, non-guaranteed, and bear interest at 8% per annum. The notes are due from November 2017 to April 2018.     (iii)     42,750  
k) Notes payable which are unsecured, non-guaranteed, and bear interest at 8% per annum. The note was due on January 2018.     5,000       5,000  
l) Notes payable which are unsecured, non-guaranteed, and non-interest bearing. The notes are due on demand.     (iii)     98,388  
m) Note payable which is unsecured, non-guaranteed, and bears interest at 8% per annum. The note is due on May 8, 2018.     (iii)     11,000  
n) Note payable which is unsecured, non-guaranteed, and bears interest at 8% per annum. The note is due on June 1, 2018.     25,000        
o) Note payable which is unsecured, non-guaranteed, and bears interest at 8% per annum. The note is due on April 23, 2018.     5,000        
p) Note payable which is unsecured, non-guaranteed, and bears interest at 8% per annum. The note is due on November 23, 2018.     20,000        
                   
      $ 119,528     $ 300,666  

 

  i)

On May 9, 2014, the Company entered into a Master Loan Agreement (the “Loan Agreement”), whereby the lender agreed, from time to time, to purchase from the Company one or more Promissory Notes for the account of the Company, provided, however, that the aggregate principal amount of all Promissory Notes then outstanding shall not exceed $500,000 and that no Event of Default has occurred and remains uncured. Amounts borrowed under the Loan Agreement are evidenced by an unsecured, non-recourse Promissory Note, bearing interest at a rate of 8% per annum, maturing on the first anniversary date thereof, and may be prepaid by the Company before the maturity date. Amounts borrowed under the Loan Agreement and repaid or prepaid may not be re-borrowed. The Loan Agreement will automatically terminate and be of no further force and effect upon the earlier to occur of (i) the satisfaction of all indebtedness, including the promissory notes and any additional indebtedness issued thereafter, between the Company and the lender and (ii) written termination notice is delivered by the Company or the lender to the other party. Several notes matured in 2015 and were not repaid. Therefore, under the default terms of the Loan Agreement, all remaining promissory notes immediately become due and payable.

 

During the nine months ended February 28, 2018, the lender assigned a total of $65,000 of promissory notes payable and accrued expense of $18,725 to a third-party lender. The Company agreed to add conversion rights (Notes 6(f) and 6(g)). During the nine months ended February 28, 2018, a total of $27,940 was converted to shares of common stock.

 

  ii) In September 2017, the Company agreed to add conversion rights to notes payable of $14,000, whereby the principal and accrued interest of each note is convertible into shares of common or preferred stock at 0.0127. Upon entering into the Debt Conversion Agreement, the terms of the note were determined to be substantially different and debt extinguishment accounting under ASC 470-50 Modifications and Extinguishments was required. There was no difference between the reacquisition price of the debt and the net carrying amount of the extinguished debt. As a result, there was no gain or loss on extinguishment of debt recognized. The Company recognized debt discount of $14,000 from beneficial conversion feature.  The $14,000 convertible notes payable was converted into 1,148,631 shares of common stock in December 2017.

 

  iii) During the nine months ended February 28, 2018, the Company entered into Promissory Note Addendum Agreements to add conversion rights to notes payable of $42,750 (Note 6 (m), (o), (p), (t), (x)), $98,388 (Note 6 (l), (n), (u)), and $11,000 (Note 6(z)), whereby the principal and accrued interest of each note is convertible into shares of common or preferred stock at a conversion price to be mutually finalized between the Company and the holder within 48 hours of the conversion request.

 

As of February 28, 2018, $69,528 and $124,000 of notes payable were in default, respectively. At February 28, 2018 and May 31, 2017, the Company owed accrued interest on notes payable of $17,420 and $28,975, respectively.

 

  F- 5  
 

 

Ecosciences, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

 

6. Convertible Notes Payable

 

Convertible notes payable consist of the following:

 

    Original Issuance Date   Maturity Date   Interest Rate
(Per Annum)
    Principal Outstanding
as at
February 28,
2018
    Principal Outstanding
as at
May 31,
2017
    Carrying Value as at
February 28,
2018
    Carrying Value as at
May 31,
2017
 
                                       
a)   December 22, 2011   Due 60 days following demand     10 %   $ 4,000     $ 4,000     $ 4,000 (i)   $ 4,000  
b)   December 22, 2011   Due 60 days following demand     10 %     1,177       1,177       1,177 (ii)     1,177  
c)   October 23, 2012   Due 60 days following demand     10 %     1,000       1,000       1,000 (iii)     1,000  
d)   April 12, 2013   Due on demand     16 %     7,000       7,000       7,000 (v)     7,000  
e)   May 9, 2014   May 9, 2015     8 %           6,825             6,825  
f)   May 19, 2014   May 19, 2015     8 %     30,359             30,359 (vi)      
g)   August 18, 2014   August 18, 2015     8 %     25,426             25,426 (vi)      
h)   August 25, 2014   August 25, 2015     8 %     5,100             5,100 (iv)      
i)   March 16, 2015   March 16, 2016     8 %     1,325       1,325       1,325 (vi)     1,325  
j)   July 19, 2016   April 19, 2017     12 %           5,266             5,266  
k)   August 25, 2016   August 25, 2017     8 %     10,000       10,000       10,000 (iv)     10,000  
l)   October 1, 2016   Due on demand     0 %     73,388             73,388 (iv)      
m)   November 1, 2016   November 1, 2017     8 %     10,500             10,500 (iv)      
n)   December 1, 2016   Due on demand     0 %     10,000             10,000 (iv)      
o)   January 13, 2017   January 13, 2018     8 %     7,500             7,500 (iv)      
p)   January 17, 2017   January 17, 2018     8 %     5,000             5,000 (iv)      
r)   January 31, 2017   January 31, 2018     8 %           50,000             3,901  
s)   February 10, 2017   November 10, 2017     8 %           69,500       (x)     27,249  
t)   February 21, 2017   February 21, 2018     8 %     5,750             5,750 (iv)      
u)   March 1, 2017   Due on demand     0 %     15,000             15,000 (iv)      
v)   March 30, 2017   March 30, 2018     12 %           52,250             7,610  
w)   May 1, 2017   March 30, 2018     12 %           29,150             5,984  
x)   May 3, 2017   May 3, 2018     8 %     7,000             7,000 (iv)      
y)   May 5, 2017   Due on demand     0 %     4,800       4,800       4,800 (ix)     4,800  
z)   May 8, 2017   May 8, 2018     8 %     11,000             11,000 (iv)      
aa)   June 5, 2017   March 30, 2018     12 %     29,150             23,728 (viii)      
bb)   July 3, 2017   July 3, 2018     8 %     7,500             7,500 (iv)      
cc)   July 25, 2017   March 30, 2018     12 %     58,300             45,582 (viii)      
dd)   July 26, 2017   July 26, 2018     12 %     29,150             22,767 (viii)      
ee)   August 22, 2017   August 22, 2018     8 %     5,000             5,000 (iv)      
ff)   August 29, 2017   March 30, 2018     12 %     29,150             21,599 (viii)      
gg)   August 31, 2017   August 31, 2018     8 %     10,000             10,000 (iv)      
hh)   September 1, 2017   Due on demand     0 %     30,000             30,000 (iv)      
ii)   September 12, 2017   March 30, 2018     12 %     29,150             21,182 (viii)      
jj)   September 22, 2017   September 22, 2018     8 %     15,000             15,000 (iv)      
kk)   October 17, 2017   March 30, 2018     12 %     29,150             19,957 (viii)      
ll)   October 31, 2017   October 31, 2018     8 %     5,000             5,000 (iv)      
mm)   November 1, 2017   March 30, 2018     12 %     29,150             19,193 (viii)      
nn)   January 4, 2018   January 4, 2019     8 %     14,000             14,000 (iv)      
oo)   January 11, 2018   July 26, 2018     12 %     58,300             15,986 (viii)      
pp)   January 12, 2018   January 12, 2019     8 %     6,250             6,250 (iv)      
qq)   February 2, 2018   February 2, 2019     8 %     20,000             20,000 (iv)      
rr)   February 15, 2018   February 15, 2019     8 %     11,000             11,000 (iv)      
ss)   February 27, 2018   February 27, 2019     12 %     165,000             13,342 (viii)      
                                                 
                    $ 815,575     $ 242,293     $ 562,411     $ 86,137  

 

  F- 6  
 

 

Ecosciences, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

 

6. Convertible Notes Payable (continued)

 

  i) The notes are convertible into shares of common stock of the Company’s subsidiary, Eco-logical Concepts, Inc., at $0.01 per share.
     
  ii) The notes are convertible into shares of common stock of the Company’s subsidiary, Eco-logical Concepts, Inc., at $0.01 per share. In addition, as a condition precedent to the right to convert the debt to common stock of the Company, the holder must purchase 3,000,000 shares of common stock of the Company’s subsidiary at $0.01 per share.
     
  iii) The note is convertible into shares of common stock of the Company’s subsidiary, Eco-logical Concepts, Inc., at $0.001 per share
     
  iv) The note is convertible into shares of common stock at a conversion price to be mutually finalized between the Company and the holder within 48 hours of the conversion request.
     
  v) The note is convertible into shares of common stock at a conversion price equal to $0.0043 per share.
     
  vi) The note is convertible into shares of common stock at a conversion price equal to $0.0127 per share.
     
  vii) The Convertible Promissory Note is convertible into shares of common stock at any time at a conversion price equal to 50% of the lowest trading price of the common stock for the twenty-five prior trading days ending on the last complete trading day prior to the conversion date. If at any time while the note is outstanding the lowest trading price of the Company’s common stock is equal to or lower than $30 per share, then an additional 10% discount shall be factored into the conversion price until the note is no longer outstanding. In addition, at any time the trading price of the Company’s common stock is equal to or lower than $10 per share, additional $10,000 shall be immediately added to the balance of the note. See Note 7.
     
  viii) The note is convertible into shares of common stock at any time at a conversion price equal to 50% of the average of the lowest trading price of the common stock for the twenty days, including the day upon which a notice of conversion is received by the Company, prior to conversion. The embedded conversion option qualifies for derivative accounting and bifurcation. See Note 7.
     
  ix) The note is convertible into shares of common stock at a conversion price equal to $0.225 per share.

 

During the nine months ended February 28, 2018, lenders converted approximately $244,931 convertible notes payable and the related accrued interest of $25,426 into 40,376,511 shares of common stock. The Company recognized $21,467 gain from settlement of debt upon conversion. See Note 8 (a).

 

During the nine months ended February 28, 2018, a lender converted approximately $7,000 convertible notes payable and the related accrued interest of $403 into 7,403,290 shares of Series D Preferred Stock. See Note 9 (c).

 

At February 28, 2018 and May 31, 2017, the Company owed accrued interest on convertible notes payable of approximately $45,000 and $35,000, respectively. As of February 28, 2018, the Company had approximately $103,000 of convertible notes payable in default.

 

7. Derivative Liabilities

 

The embedded conversion options of the Company’s convertible debentures described in Note 6 contain conversion features that qualify for embedded derivative classification. The fair value of these liabilities will be re-measured at the end of every reporting period and the change in fair value will be reported in the statement of operations as a gain or loss on derivative financial instruments.

 

The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities:

 

    Nine Months Ended
February 28, 2018
    Nine Months Ended
February 28, 2017
 
             
Balance at the beginning of the period   596,743     $  
                 
Addition of new derivative liabilities     1,715,824       359,571  
Change due to conversion of debt     (1,363,140 )      
Change in fair value of embedded conversion option     (244,479 )     (98,436 )
                 
Balance at the end of the period   $ 704,948     $ 261,135  

 

The Company uses Level 3 inputs for its valuation methodology for the warrant derivative liabilities and embedded conversion option liabilities as their fair values were determined by using the Black-Scholes option pricing model based on various assumptions. The model incorporates the price of a share of the Company’s common stock (as quoted on the Over the Counter Bulletin Board), volatility, risk free rate, dividend rate and estimated life. Significant changes in any of these inputs in isolation would result in a significant change in the fair value measurement. As required, these are classified based on the lowest level of input that is significant to the fair value measurement. The following table shows the assumptions used in the calculations:

 

  Expected Volatility   Risk-free Interest Rate   Expected Dividend Yield     Expected Life (in years)
                   
At issuance   241% - 363%   1.08% - 2.08%     0 %   0.41 – 1.00
At February 28, 2018   242% - 396%   1.50% - 2.07%     0 %   0.08 – 1.00

 

  F- 7  
 

 

Ecosciences, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

 

8. Common Stock

 

a) During the nine months ended February 28, 2018, the Company issued 40,376,511 shares of common stock in aggregate pursuant to the conversion of $244,931 of convertible notes payable, $1,363,140 of related derivative liabilities from embedded conversion feature, $25,427 of accrued interest and $2,500 of share transfer fees upon conversion. The Company recognized gain from settlement of debt of $21,467 for the nine months ended February 28, 2018.
     
b) During the nine months ended February 28, 2018, the Company issued 4,705,000 shares of common stock in aggregate pursuant to the conversion of 235,250 shares of Series A preferred stock.
     
c) During the nine months ended February 28, 2018, the Company issued 97,596,600 shares of common stock in aggregate pursuant to the conversion of 8,133,050 shares of Series C preferred stock.
     
d) During the nine months ended February 28, 2018, the Company issued 30,800,000 shares of common stock in aggregate pursuant to the conversion of 3,080,000 shares of Series D preferred stock.
     
e) On June 22, 2017, the Company issued 1,951 shares to a third party free of charge due to the round-up feature of the Company’s 1 for 10,000 reverse stock split completed on May 19, 2017.

 

9. Preferred Stock

 

  a)

Pursuant to the certificate of designation, the Company’s preferred stock may be converted into common stock based on the following ratio:

 

Series A Preferred stock – 1 to 20 share of common stock

Series B Preferred stock – Not convertible

Series C Preferred stock – 1 to 12 share of common stock

Series D Preferred stock – 1 to 10 share of common stock

 

For shares of Series A convertible preferred stock issued prior to September 11, 2015, the holders shall have the right to convert the shares from the first anniversary date of issuance. For shares of Series A convertible preferred stock issued on or after September 11, 2015, the holders shall have the right to convert the shares from October 1, 2016. The Company may also redeem all, or any portion of, the outstanding shares of Series A convertible preferred stock for $0.40 per share.

 

Each share of Series D convertible preferred stock is convertible into 10 shares of common stock of the Company; provided, however, that the holder is prohibited from converting such number of shares of Series D convertible preferred stock that would result in the stockholder beneficially owning more than 4.99% of the common stock of the Company.

     
  b) On December 14, 2017, the Company issued 8,133,050 shares of Series C Convertible Preferred stock with a fair value of $283,028 to the President of the Company to settle payable to the President of $8,133, resulting in a loss on settlement of related party debt of $274,895. The Company issued 97,596,600 shares of common stock on the same date pursuant to the conversion of 8,133,050 shares of Series C preferred stock. See note 8 (c).
     
  c) During the nine months ended February 28, 2018, the Company issued 7,403,290 shares of Series D Preferred stock in aggregate pursuant to the conversion of $7,000 of convertible notes payable, and $403 of accrued interest.

 

  F- 8  
 

 

Ecosciences, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

 

10. Commitments

 

a) On June 4, 2015, the Company entered into a Management Services Agreement with the President, CEO, Secretary and Treasurer of the Company. In consideration for his services, the Company agreed to pay $31,200 per year and to issue an aggregate of 1,000,000 shares of the Company’s Series D convertible preferred stock, of which 100,000 shares were issued upon the execution of the Management Services Agreement, and the remaining 900,000 shares of which shall vest in increments upon the achievement by the Company of the milestones set forth in the Management Services Agreement, including the completion of product line expansion, and signing distributors nationally and internationally. The term of the Management Services Agreement is for one year, commencing on the date of the agreement, and is automatically renewable for successive one year terms unless mutually agreed to in writing.

 

On November 2, 2016, the Company and the President amended the Management Service Agreement. As amended, the Company agreed to pay $84,000 per year and to issue an aggregate of 900,000 shares of the Company’s Series D convertible preferred stock, which shall vest in increments upon the achievement by the Company of the milestones set forth in the Amended and Restated Management Services Agreement, including the completion of product line expansion, and signing distributors nationally and internationally. In addition, the Company agreed to pay a signing bonus of $31,200, convertible or payable into shares of common stock at $0.001 per share. The Company also agreed to determine a commission structure within 90 days of the agreement, and shall reimburse the President for a health insurance plan beginning January 1, 2017. The term of the amendment agreement is for one year, commencing on the date of the agreement, and is automatically renewable for successive one year terms unless mutually agreed to in writing. As of February 28, 2018, the Company had issued 100,000 shares of the Company’s Series D convertible preferred stock. The executive continues to work on achieving milestones.

 

b) On June 4, 2015, the Company entered into service agreements with four third parties. In consideration for services rendered, the Company agreed to pay an aggregate $96,000 per year and issue an aggregate 4,000,000 shares of the Company’s Series D convertible preferred stock, of which 400,000 shares were issued upon the execution of the agreements and the remaining 3,600,000 shares shall vest in increments upon the achievement by the Company of the milestones set forth in the agreements, including the completion of product line expansion, and signing distributors nationally and internationally. The terms of the agreements are for one year, commencing on the date of the agreements, and are automatically renewable for successive one year terms unless mutually agreed to in writing. As of February 28, 2018, the Company had issued 400,000 shares of the Company’s Series D convertible preferred stock. The third parties continue to work on achieving milestones.
     
c) On June 11, 2015, the Company entered into a Services Agreement with a third party. In consideration for services rendered, the Company agreed to pay $60,000 annual fee and issue 500,000 shares of the Company’s Series D convertible preferred stock, of which 50,000 shares were issued upon the execution of the Services Agreement, and the remaining 450,000 shares of which shall vest in increments upon the achievement by the Company of the milestones set forth in the Services Agreement, including the completion of product line expansion, and signing distributors nationally and internationally. The terms of the Services Agreement is for one year, commencing on the date of the agreement, and is automatically renewable for successive one year terms unless mutually agreed to in writing. As of February 28, 2018, the Company had issued 50,000 shares of the Company’s Series D convertible preferred stock. The third party continues to work on achieving milestones.
     
d) On June 11, 2015, the Company entered into Services Agreements with two third parties. In consideration for these services, the Company agreed to issue an aggregate 600,000 shares of the Company’s Series D convertible preferred stock, of which 60,000 shares were issued upon the execution of the Services Agreements, and the remaining 540,000 shares of which shall vest in increments upon the achievement by the Company of the milestones set forth in the Services Agreements, including the completion of product line expansion, and signing distributors nationally and internationally. The terms of the Services Agreements are for one year, commencing on the date of the agreements, and are automatically renewable for successive one year terms unless mutually agreed to in writing. As of February 28, 2018, the Company had issued 60,000 shares of the Company’s Series D convertible preferred stock. The third parties continue to work on achieving milestones.

 

  F- 9  
 

 

Ecosciences, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

 

10. Commitments (continued)

 

e) On November 1, 2016, the Company entered into a Management Services Agreement with the Chief Operating Officer of the Company. In consideration for his services, the Company agreed to pay $84,000 per year and commission of 3% of all gross sales and issue an aggregate of 1,000,000 shares of the Company’s Series D convertible preferred stock, of which 100,000 shares were issued upon the execution of the Management Services Agreement, and the remaining 900,000 shares of which shall vest in increments upon the achievement by the Company of the milestones set forth in the Management Services Agreement, including the completion of product line expansion, and signing distributors nationally and internationally. The Company also agreed to reimburse the Chief Operating Officer for a health insurance plan beginning January 1, 2017. The term of the Management Services Agreement is for six months, commencing on the date of the agreement, and is automatically renewable for successive one year terms unless mutually agreed to in writing. As of February 28, 2018, the Company had issued 100,000 shares of the Company’s Series D convertible preferred stock. The executive continues to work on achieving milestones.

 

11. Concentrations

 

The Company’s revenues were concentrated among three customers for the nine months ended February 28, 2018, and 2017:

 

Customer   Revenue for the
Nine Months Ended
February 28, 2018
    Revenue for the
Nine Months Ended
February 28, 2017
 
             
1     16 %     52 %
2     12 %     16 %
3     12 %     10 %

 

The Company’s receivables were concentrated among four customers as at February 28, 2018, and two customers as at May 31, 2017:

 

Customer   Receivables as at February 28, 2018     Receivables as at May 31, 2017  
             
1     25 %     67 %
2     18 %     11 %
3     15 %     *  
4     12 %     *  

 

* not greater than 10%

 

12. Subsequent Events

 

  Conversions of convertible notes payable

 

In March 2018 and April 2018, the Company issued 6,980,733 shares of common stock in aggregate pursuant to the conversion of approximately $29,150 of convertible notes payable. 

 

  Issuances of notes payable

 

On March 1, 2018, the Company sold a Promissory Note to an unaffiliated lender for the aggregate principal amount of $4,000, bearing interest at a rate of 8% per annum and maturing the first year anniversary of the date of issuance. The Company may prepay the principal and accrued interest at any time without penalty. Pursuant to the agreement, the note is convertible into shares of common or preferred stock at a conversion price to be mutually finalized within 48 hours of the conversion request.

 

On April 3, 2018, the Company sold a Promissory Note to an unaffiliated lender for the aggregate principal amount of $10,000, bearing interest at a rate of 8% per annum and maturing the first year anniversary of the date of issuance. The Company may prepay the principal and accrued interest at any time without penalty. Pursuant to the agreement, the note is convertible into shares of common or preferred stock at a conversion price to be mutually finalized within 48 hours of the conversion request.

 

  Other issuances

 

In March 2018 and April 2018, the Company issued 25,332,900 shares of common stock in aggregate pursuant to the conversion of approximately 2,533,290 of Series D convertible preferred stock.

 

In April 10, 2018, the Company received a conversion notice. The Company will convert 1,000,000 of Series D convertible preferred stock to 10,000,000 shares common shares. As of the issuance date of these financial statements, the common shares have not been issued.

 

  F- 10  
 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

You should read the following discussion together with our unaudited consolidated financial statements and the related notes included elsewhere in this report. This discussion contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ materially from those we currently anticipate as a result of many factors, including the factors we describe in this report and our other reports filed with the Securities and Exchange Commission.

 

Forward Looking Statements

 

Some of the information in this section contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue,” or similar words. You should read statements that contain these words carefully because they:

 

  discuss our future expectations;
     
  contain projections of our future results of operations or of our financial condition; and
     
  state other “forward-looking” information.

 

We believe it is important to communicate our expectations. However, there may be events in the future that we are not able to accurately predict or over which we have no control. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth elsewhere in this Report.

 

Unless stated otherwise, the words “we,” “us,” “our,” the “Company” or “Ecosciences” in this section collectively refer to Ecosciences, Inc. and its wholly-owned subsidiary, Eco-Logical Concepts, Inc., a Delaware corporation.

 

The following discussion highlights Ecosciences’ results of operations and the principal factors that have affected our consolidated financial condition as well as our liquidity and capital resources for the periods described, and provides information that management believes is relevant for an assessment and understanding of our consolidated financial condition and results of operations presented herein. The following discussion and analysis is based on Ecosciences’ unaudited consolidated financial statements contained in this Report, which have been prepared in accordance with generally accepted accounting principles in the United States. You should read the discussion and analysis together with such financial statements and the related notes thereto.

 

Overview

 

Located in Jericho, New York, the Company provides bio-remediation products for septic tanks, drains and pipes, grease traps, lift and pump stations, sewers, ponds, lakes, lagoons, farms, car washes, portable sanitation facilities, boats, RVs, and wastewater treatment facilities. We provide a suite of tablet-based products that can be added to waste systems. The active ingredients in our tablets oxygenate wastewater, remove hydrogen sulfide odors, prevent corrosion in wastewater systems, and initiate aerobic biological breakdown of organic solids, waste, as well as fats, oils, and grease. The tablets are non-hazardous, environmentally friendly, and biodegradable. . The product is simple to use directly by the end consumer or commercial customer.

 

The Company’s bioremediation products are sold under the product names Trap-Eze, Waste-Eze, Septic Oxy-Tabs and Drain & Pipe Oxy-Tabs. The Company also recently re-branded the products under the brand EcoNow to better create consumer brand awareness and to align with the company’s mission of solving ecological issues that affect our environment.

 

  4  
 

 

The Company has formulated a business model that management believes can help it grow and achieve economies of scale over time. We have undertaken the necessary due diligence and prepared a business that will enable us to compete in the market for bio-remediation products.

 

The Company is focused on building, acquiring and investing in businesses around ecological and life sciences. From waste water remediation to healthcare and more, the Company is committed to building a better living environment for all people.

 

Product Development

 

The Company plans in this quarter or the next fiscal quarter to begin testing new formulations designed to address and remediate other water pollution problems.

 

Growth Strategy of the Company

 

Our mission is to maximize stockholder value through expanding the scope of products offered. We intend to conduct research and development to bring new, improved products to market to ensure we are competitive in our market space. We intend to focus on growing our distribution channels using master-distributor relationships, full-line distributors, sales representatives and other similar sales channels. We intend to build product and brand awareness through a direct retail channel using online marketing and info-commercials, which we believe will provide a feedback benefit for the growth of our other distribution channels as well as to establish opportunities for retail sales channels, such as through chain stores and small retailers.

 

We have been working to set up sales representatives and distributors in several different market segments, such as the consumer retail market, foodservice industry, and wastewater industry. Our revenues for this fiscal year have primarily been in the United States. All sales were completed in US dollars and have not been subject to any foreign taxes.

 

During the fourth quarter ended May 31, 2017, we commenced developing additional eco-based products in order to introduce a retail product line. These products included Septic Oxy-Tabs to treat and maintain Septic Systems and Drain & Pipe Oxy-Tabs to remove build-up in drains, sinks pipes and traps, garbage disposals and main lines leading to sewers. The Company will soon begin testing new formulations designed to address and remediate other significant water pollution problems. We also intend to develop a line of eco-friendly certified green cleaning solutions.

 

Critical Accounting Policies, Estimates, and Judgments

 

Our unaudited consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. We continually evaluate our estimates and judgments, our commitments to strategic alliance partners and the timing of the achievement of collaboration milestones. We base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known. Besides the estimates identified above that are considered critical, we make many other accounting estimates in preparing our financial statements and related disclosures. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenues and expenses, as well as disclosures of contingent assets and liabilities. These estimates and judgments are also based on historical experience and other factors that are believed to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known, even for estimates and judgments that are not deemed critical.

 

  5  
 

 

Results of Operations

 

Three Months Ended February 28, 2018 Compared to the Three Months Ended February, 28, 2017

 

The following table presents the Company’s results of operations for the periods indicated and as a percentage of total revenue. Historical results are not necessarily indicative of results for future periods.

 

    Three-Month Period Ended  
    February 28, 2018     February 28, 2017  
    $     % of Revenue     $     % of Revenue  
                         
Revenues   $ 21,160       100 %   $ 4,836       100 %
Cost of revenues     (5,320 )     25 %     (954 )     20 %
Gross profit     15,840       75 %     3,882       80 %
                                 
Operating expenses:                                
General and administrative     71,448       338 %     53,879       1,114 %
Research and development     2,532        12 %     -       - %
Professional fees     138,053       652 %     102,714       2,124 %
Total expenses     212,033       1,002 %     156,593       3,238 %
                                 
Net loss before other expenses:     (196,193 )     (927 )%     (152,711 )     (3158 )%
                                 
Other income (expenses):                                
                                 
Interest expense     (1,264,596 )     (5,976 )%     (208,822 )     (4,318 )%
Gain on settlement of debt     4,931       23 %     -       - %
Loss on settlement of related party debt     (274,895 )     (1,299 )%     -       - %
Change in fair value of derivative liabilities     946,324       4,472 %     79,207       1,638 %
                                 
Net loss   $ (784,429 )     (3,707 )%   $ (282,326 )     (5,838 )%

 

The following tables present our revenue and operating expenses for the periods indicated.

 

Revenue

 

    Three-Month Period Ended        
    February 28, 2018     February 28, 2017     % Change  
                         
Revenue   $ 21,160     $ 4,836       338 %

 

Our revenue increased by $16,324, or 338%, for the three months ended February 28, 2018 as compared to the three months ended February 28, 2017. The increase is attributed to increased marketing efforts.

 

  6  
 

 

Costs and Expenses

 

Costs of Sales

 

    Three-Month Period Ended        
    February 28, 2018     February 28, 2017     % Change  
                         
Cost of Sales   $

5,320

    $ 954      

458

%

 

Our costs of sales increased $4,366, or 458%, for the three months ended February 28, 2018 as compared to the three months ended February 28, 2017. The increase is mainly due to increase in sales. The change in our gross margin is mainly because of the increase in purchase price of inventory.

 

Operating Expenses

 

    Three-Month Period Ended        
    February 28, 2018     February 28, 2017     % Change  
                         
Operating Expenses   $ 212,033     $ 156,593       35 %

 

Our operating expenses increased 55,440, or 35%, for the three months ended February 28, 2018 as compared to the three months ended February 28, 2017. The increase is mainly due to the increase in marketing expenses.

 

Other Income (Expenses)

 

    Three-Month Period Ended        
    February 28, 2018     February 28, 2017     % Change  
                   
Interest Expense   $ (1,264,596 )   $ (208,822 )     506 %
Gain on settlement of debt   $ 4,931     $ -       100 %
Loss on settlement of related party debt   $ (274,895   $ -       100 %
Change in fair value of derivative liabilities   $ 946,324     $ 79,207       1,095 %

 

Our interest expense increased $1,055,774, or 506%, for the three months ended February 28, 2018 as compared to the three months ended February 28, 2017. The increase is attributable to the issuance of additional promissory notes and convertible notes payable to finance operations and the recognitions of interest expenses on derivative liabilities that exceed convertible notes payable at issuance of debts.

 

Our net loss from settlement of debt increased approximately $270,000 for the three months ended February 28, 2018 as compared to the three months ended February 28, 2017. The increase is attributable to the issuance of preferred stock to settle accounts payable to our Chief Executive Officer.

 

Our gain from change in fair value of derivative liabilities increased $867,117, or 1,095%, for the three months ended February 28, 2018 as compared to the three months ended February 28, 2017. The derivative liabilities are affected by factors including the Company’s stock price that are subject to significant fluctuations and are not under the Company’s control.

 

  7  
 

 

Nine Months Ended February 28, 2018 Compared to the Nine Months Ended February 28, 2017

 

The following table presents the Company’s results of operations for the periods indicated and as a percentage of total revenue. Historical results are not necessarily indicative of results for future periods.

 

    Nine-Month Period Ended  
    February 28, 2018     February 28, 2017  
    $     % of Revenue     $     % of Revenue  
                         
Revenues   $ 67,021       100 %   $ 14,223       100 %
Cost of revenues     (22,621 )     34 %     (7,650 )     54 %
Gross profit     44,400       66 %     6,573       46 %
                                 
Operating expenses:                                
General and administrative     263,093       393 %     348,546       2,451 %
Research and development     8,186       12 %                
Professional fees     447,400       668 %     360,870       2,537 %
Total Expenses     718,679       1,072 %     709,416       4,988 %
                                 
Net loss before other expenses:     (674,279 )     (1,006 )%     (702,843 )     (4,942 )%
                                 
Other income (expenses):                                
                                 
Interest expense     (1,839,938 )     (2,745 )%     (435,263 )     (3,060 )%
Gain on settlement of debt     21,467       32 %     -       - %
Loss on settlement of debt     (274,895 )     (410 )%     -       - %
Change in fair value of derivative liabilities     244,479       365 %     98,436       692 %
                                 
Net loss   $ (2,523,166 )     (3,764 )%   $ (1,039,670 )     (7,310 )%

 

The following tables present our revenue and operating expenses for the periods indicated.

 

Revenues

 

      Nine-Month Period Ended          
      February 28, 2018       February 28, 2017       % Change  
                         
Revenue   $ 67,021     $ 14,223       371 %

 

Our revenue increased by $52,798, or 371%, for the nine months ended February 28, 2018 as compared to the nine months ended February 28, 2017. The increase is attributed to increased marketing efforts.

 

Costs and Expenses

 

Costs of Sales

 

    Nine-Month Period Ended        
    February 28, 2018     February 28, 2017     % Change  
                         
Cost of Sales   $

22,621

    $ 7,650      

196

%

 

Our costs of sales increased $14,971, or 196%, for the nine months ended February 28, 2018 as compared to the nine months ended February 28, 2017. The increase is mainly due to increase in sales.

 

Operating Expenses

 

    Nine-Month Period Ended        
    February 28, 2018     February 28, 2017     % Change  
                   
Operating Expenses   $ 718,679     $ 709,416       1 %

 

Our operating expenses increased 9,263, or 1%, for the nine months ended February as compared to the nine months ended February. The change is mainly resulted from the increase in marketing expenses offsetting by the decrease in management service fees.

 

  8  
 

 

Other Income (Expenses)

 

    Nine-Month Period Ended        
    February 28, 2018     February 28, 2017     % Change  
                   
Interest Expense   $ (1,839,938 )   $ (435,263 )     323 %
Gain on settlement of debt   $ 21,467     $ -       100 %
Loss on settlement of related party debt   $ (274,895   $ -       100 %
Change in fair value of derivative liabilities   $ 244,479     $ 98,436       148 %

 

Our interest expense increased $1,404,675, or 323%, for the nine months ended February 28, 2018 as compared to the nine months ended February 28, 2017. The increase is attributable to the issuance of additional promissory notes and convertible notes payable to finance operations and the recognitions of interest expenses on derivative liabilities that exceed convertible notes payable at issuance of debts.

 

Our net loss from settlement of debt increased approximately $270,000 for the nine months ended February 28, 2018 as compared to the nine months ended February 28, 2017. The increase is attributable to the issuance of preferred stock to settle accounts payable to our Chief Executive Officer.

 

Our loss from change in fair value of derivative liabilities increased $146,043, or 148%, for the nine months ended February 28, 2018 as compared to the nine months ended February 28, 2017. The derivative liabilities are affected by factors including the Company’s stock price that are subject to significant fluctuations and are not under the Company’s control.

 

Financial Condition, Liquidity and Capital Resources

 

At February 28, 2018, we had $110,721 in cash on hand and an accumulated deficit of $5,086,527. We had $67,021 in revenues for the nine-month period ended February 29, 2018. For the nine months ended February 28, 2018, we had net cash used in operating activities of $497,487 and net cash provided from financing activities of $604,851. Our auditors have expressed that there is substantial doubt as to our ability to continue as a going concern in their report for the fiscal year ended May 31, 2017,

 

Since inception, we have financed our operations primarily through the issuance of notes payable and convertible notes payable and the issuances and sales of equity securities for cash consideration.

 

We expect to incur losses and negative operating cash flows for the foreseeable future and may never become profitable. We also expect to continue to incur significant operating and capital expenditures for the next several years and anticipate that our expenses will increase substantially in the foreseeable future. We also expect to experience negative cash flow for the foreseeable future as we fund our operating losses and capital expenditures.

 

As a result, we will need to generate significant revenues in order to achieve and maintain profitability. We may not be able to generate these revenues or achieve profitability in the future. Our failure to achieve or maintain profitability could negatively impact the value of our common stock.

 

We have no agreements to obtain funds through bank loans, lines of credit or any other traditional sources. Since we have no financing committed, our inability to realize financing to maintain operations and grow our business would materially restrict our business operations. Previous convertible debt financing the Company has accepted have not been on favorable terms and has been significantly dilutive to our existing common equity and as a result the Company executed a consolidation of its common stock on May 19, 2017 to attract financing and maintain its business. Future financing may not be available upon acceptable terms, or at all. Should we be successful in securing future financing new issuances of equity or convertible debt would dilute our current shareholders, possibly significantly, might require a significant increase to our authorized stock, and might have rights, preferences, or privileges senior to our common or preferred stock. If financing is not available to us on favorable terms, such severe limitation might cause us to consider another consolidation of existing common equity at any time as a means to attract financing and maintain our business.

 

  9  
 

 

Working Capital

 

As of February 28, 2018, we had a working capital deficit of $2,233,847, an accumulated deficit of $5,086,527.

 

At February 28, 2018, the Company was indebted to the President and CEO of the Company and a company controlled by the President of the Company for $119,466. The amount is unsecured, non-interest bearing and due on demand.

 

We do not believe our cash resources are sufficient to implement our current business plan, support operations, and meet current obligations for the next 12 months. We expect that our working capital requirements will be funded over this period by a combination of revenue, issuances of promissory notes or private equity placements of our securities and, if available, shareholder loans. Our business plan does anticipate increases in operating expenses and capital expenditures over the next twelve months in relation to: (i) product development; (ii) research and development to enhance existing products and innovate new ones (iii) employee salaries and professional fees; and (iv) marketing expenses. The company expects to continue to realize cash flow from financing activities until such time as it can increase revenue to the point at which it can maintain operations and fund business growth.

 

We plan to raise additional capital to finance our operations. There can be no assurance that financing will be available when required in sufficient amounts, on acceptable terms or at all. In the event that the necessary additional financing is not obtained, we may be required to reduce our discretionary overhead costs substantially, including research and development, general and administrative and sales and marketing expenses or otherwise curtail operations.

 

Cash and Cash Equivalents

 

The following table summarizes the sources and uses of cash for the periods stated. The Company held no cash equivalents for any of the periods presented.

 

    For the Nine Months Ended
    February 28, 2018   February 28, 2017
Cash, beginning of period   $ 3,357     $ 4,220  
Net cash used in operating activities     (497,487 )     (234,036 )
Net cash provided by investing activities            
Net cash provided by financing activities     604,851       243,997  
Cash, end of period   $ 110,721     $ 14,181  

 

Off-Balance Sheet Operations

 

The Company does not have any off-balance sheet transactions.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

N/A

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures.

 

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

An evaluation was conducted under the supervision and with the participation of our management of the effectiveness of the design and operation of our disclosure controls and procedures as of February 28, 2018. Based on that evaluation, our management concluded that our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms as a result of the following material weaknesses:

 

The specific material weakness identified by our management was ineffective controls over certain aspects of the financial reporting process because of a lack of a sufficient complement of personnel with a level of accounting expertise and an adequate supervisory review structure that is commensurate with our financial reporting requirements and inadequate segregation of duties. A “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements would not be prevented or detected on a timely basis.

 

We expect to be materially dependent upon a third party to provide us with accounting consulting services for the foreseeable future. Until such time as we have a chief financial officer with the requisite expertise in U.S. GAAP, there are no assurances that the material weaknesses in our disclosure controls and procedures and internal control over financial reporting will not result in errors in our financial statements which could lead to a restatement of those financial statements.

 

Changes in Internal Control over Financial Reporting

 

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended February 28, 2018 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

  10  
 

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

None

 

Item 1A. Risk Factors

 

N/A

 

Item 2. Unregistered Sale of Equity Securities and Use of Proceeds

 

Issuances of convertible notes payable

 

On June 2, 2017, the Company sold a Promissory Note to an unaffiliated lender for the aggregate principal amount of $25,000, bearing interest at a rate of 8% per annum and maturing the first year anniversary of the date of issuance. The Company may prepay the principal and accrued interest at any time without penalty. Pursuant to the agreement, the note is convertible into shares of common stock at a conversion price to be mutually finalized within 48 hours of the conversion request.

 

On July 3, 2017, the Company sold a Promissory Note to an unaffiliated lender for the aggregate principal amount of $7,500, bearing interest at a rate of 8% per annum and maturing the first year anniversary of the date of issuance. The Company may prepay the principal and accrued interest at any time without penalty. Pursuant to the agreement, the note is convertible into shares of common stock at a conversion price to be mutually finalized within 48 hours of the conversion request.

 

On August 22, 2017, the Company sold a Promissory Note to an unaffiliated lender for the aggregate principal amount of $5,000, bearing interest at a rate of 8% per annum and maturing the first year anniversary of the date of issuance. The Company may prepay the principal and accrued interest at any time without penalty. Pursuant to the agreement, the note is convertible into shares of common stock at a conversion price to be mutually finalized within 48 hours of the conversion request.

 

On August 31, 2017, the Company sold a Promissory Note to an unaffiliated lender for the aggregate principal amount of $10,000, bearing interest at a rate of 8% per annum and maturing the first year anniversary of the date of issuance. The Company may prepay the principal and accrued interest at any time without penalty. Pursuant to the agreement, the note is convertible into shares of common stock at a conversion price to be mutually finalized within 48 hours of the conversion request.

 

On July 26, 2017, the Company entered a Securities Purchase Agreement whereby the Company agreed to issue three Convertible Redeemable Back End Notes for an aggregate of $87,450. The principal amount and any interest thereon are due on July 26, 2018. The notes bear interest at 12% per annum and contain a 10% original issue discount, such that the purchase price of each note is $26,500. On July 26, 2017, in consideration for the first note, the Company received cash proceeds of $25,000. The proceeds for the two remaining notes will be funded on April 26, 2018 and May 26, 2018. The closing of the two remaining notes shall be contingent on the following condition: (i) the Company must maintain a bid of $0.001 per share over 5 consecutive trading days. Pursuant to the agreements, the notes are convertible into shares of common stock at any time at a conversion price equal to 50% of the average of the three lowest trading prices of the common stock for the twenty prior trading days including the day upon which a notice of conversion is received by the Company. During the first six months that the first note is in effect, the Company may redeem the first note at 140% of the par value plus accrued interest. The notes may not be prepaid except if the first note is redeemed by the Company.

 

  11  
 

 

On September 1, 2017 the Company entered into a Promissory Note for $30,000 with a vendor to convert amounts owing for services to a convertible promissory note. The note is convertible into shares of common or preferred stock at a conversion price to be mutually finalized within 48 hours of the conversion request. The Promissory Note is unsecured, non-interest bearing and due on demand.

 

On September 22, 2017, the Company sold a Promissory Note to an unaffiliated lender for the aggregate principal amount of $15,000, bearing interest at a rate of 8% per annum and maturing the first year anniversary of the date of issuance. The Company may prepay the principal and accrued interest at any time without penalty. Pursuant to the agreement, the note is convertible into shares of common or preferred stock at a conversion price to be mutually finalized within 48 hours of the conversion request.

 

On October 31, 2017, the Company sold a Promissory Note to an unaffiliated lender for the aggregate principal amount of $5,000, bearing interest at a rate of 8% per annum and maturing the first year anniversary of the date of issuance. The Company may prepay the principal and accrued interest at any time without penalty. Pursuant to the agreement, the note is convertible into shares of common or preferred stock at a conversion price to be mutually finalized within 48 hours of the conversion request.

 

On January 4, 2018, the Company sold a Promissory Note to an unaffiliated lender for the aggregate principal amount of $14,000, bearing interest at a rate of 8% per annum and maturing the first year anniversary of the date of issuance. The Company may prepay the principal and accrued interest at any time without penalty. Pursuant to the agreement, the note is convertible into shares of common or preferred stock at a conversion price to be mutually finalized within 48 hours of the conversion request.

 

On January 12, 2018, the Company sold a Promissory Note to an unaffiliated lender for the aggregate principal amount of $6,250, bearing interest at a rate of 8% per annum and maturing the first year anniversary of the date of issuance. The Company may prepay the principal and accrued interest at any time without penalty. Pursuant to the agreement, the note is convertible into shares of common or preferred stock at a conversion price to be mutually finalized within 48 hours of the conversion request.

 

On February 1, 2018, the Company sold a Promissory Note to an unaffiliated lender for the aggregate principal amount of $20,000, bearing interest at a rate of 8% per annum and maturing the first year anniversary of the date of issuance. The Company may prepay the principal and accrued interest at any time without penalty. Pursuant to the agreement, the note is convertible into shares of common or preferred stock at a conversion price to be mutually finalized within 48 hours of the conversion request.

 

On February 15, 2018, the Company sold a Promissory Note to an unaffiliated lender for the aggregate principal amount of $11,000, bearing interest at a rate of 8% per annum and maturing the first year anniversary of the date of issuance. The Company may prepay the principal and accrued interest at any time without penalty. Pursuant to the agreement, the note is convertible into shares of common or preferred stock at a conversion price to be mutually finalized within 48 hours of the conversion request.

 

On February 27, 2018, the Company entered a Securities Purchase Agreement with a lender whereas the Company agreed to issue seven convertible notes for an aggregate of $495,000 with the first note being in the amount of $165,000 and the rest of the eight notes being in the amount of $55,000. The notes bear interest at 12% per annum commencing on February 27, 2018, and contain a 10% original issue discount, such that the purchase price of the first note is $150,000 and the rest of the six notes (or “Back-End Notes”) is $50,000. The proceeds for the Back-End Notes will be funded one at a time in 30-day increments commencing September 27, 2018 through February 27, 2019. However, the Company must maintain a bid of $0.001 per common stock share over 5 consecutive trading days before the closing of each Back-End Notes.

 

On February 27, 2018, the first note was funded. The note bears interest at 12% per annum and matures on February 27, 2019. The note contains an original issue discount of $15,000 so the purchase price of the note is $150,000. Pursuant to the agreement, the note is convertible into shares of common stock at any time at a conversion price equal to 50% of the lowest trading price of the common stock for the twenty days, including the day upon which a notice of conversion is received by the Company, prior to conversion. During the first six months, the Company may redeem the first note at 140% of the par value plus accrued interest. The Company also incurred financing costs of $8,000, which has been recorded as a discount.

 

Conversion of convertible notes payable

 

During June through August 2017, the Company issued 278,959 shares of common stock pursuant to the conversion of $75,604 of convertible notes payable.

 

In September and October 2017, the Company issued 2,469,740 shares of common stock in aggregate pursuant to the conversion of $59,344 of convertible notes payable.

 

In November 2017, the Company issued 4,442,131 shares of common stock in aggregate pursuant to the conversion of $40,940 of convertible notes payable.

 

On September 22, 2017, the Company received a notice of conversion to issue 1,539,449 shares of common stock pursuant to the conversion of $19,551 of convertible note payables, the shares have been approved to be issued by the Board of Directors of the Company but have not been issued as of October 23, 2017.

 

On September 27, 2017, the Company received a notice of conversion to issue 624,102 shares of common stock pursuant to the conversion of $7,926 of convertible note payables, the shares have been approved to be issued by the Board of Directors of the Company but have not been issued as of October 23, 2017.

 

On September 28, 2017, the Company received a notice of conversion to issue 306,189 shares of common stock pursuant to the conversion of $3,889 of convertible note payables, the shares have been approved to be issued by the Board of Directors of the Company but have not been issued as of October 23, 2017.

 

In December 2017 and January 2018, the Company issued 21,838,612 shares of common stock in aggregate pursuant to the conversion of approximately $46,865 of convertible notes payable and accrued interest of $14,307.

 

In February 2018 the Company issued 9,976,596 shares of common stock in aggregate pursuant to the conversion of approximately $42,360 of convertible notes payable.

 

  12  
 

 

Conversion of Series A Convertible Preferred Stock

 

In November 2017, the Company issued 420,000 shares of common stock pursuant to the conversion of 21,000 shares of Series A Convertible Preferred Stock.

 

In February 2018, the Company issued 2,500,000 shares of common stock pursuant to the conversion of 125,000 shares of Series A Convertible Preferred Stock.

 

The Company issued the foregoing securities pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended, available to the Company under Section 4(a)(2) promulgated thereunder due to the fact that such issuances did not involve a public offering of securities, the shares were issued to a small group of persons and no solicitation or advertisement was made in connection therewith.

 

Conversion of Series C Convertible Preferred Stock

 

On December 14, 2017, the Company issued 8,133,050 shares of Series C Convertible Preferred stock to the President of the Company to settle payable to the President of $8,133. On December 15, 2017, the Company issued 97,596,600 shares of common stock to the President of the Company pursuant to the conversion of 8,133,050 shares of Series C preferred stock.

 

Conversion of Series D Convertible Preferred Stock

 

On December 13, 2017, a lender of the Company assigned a $5,000 note payable to a third-party lender. On December 14, 2017, the Company entered into a Debt Conversion Agreement with the third-party lender, whereby $2,500 of the loan principal became convertible into Series D convertible preferred stock of the Company at a conversion price equal to $0.001 per share.

 

On December 14, 2017, the Company entered into a Debt Conversion Agreement with a third-party lender, whereby $2,000 of the loan principal became convertible into 2,000,000 shares of Series D convertible preferred stock of the Company.

 

On December 15, 2017, the Company entered into an Amendment to Debt Conversion Agreement with a third-party lender, whereby $3,912 of the loan principal became convertible into 3,911,550 shares of Series D convertible preferred stock of the Company.

 

On December 15, 2017, the Company entered into an Amendment to Debt Conversion Agreement with a third-party lender, whereby $3,000 of the loan principal became convertible into 3,000,000 shares of Series D convertible preferred stock of the Company.

 

In December 2017, January 2018 and February 2018, the Company issued 30,800,000 shares of common stock pursuant to the conversion of 3,080,000 shares of Series D Convertible Preferred Stock.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

  13  
 

 

Item 5. Other Information

 

Subsequent Events

 

  Conversions of convertible notes payable

 

In March 2018 and April 2018, the Company issued 6,980,733 shares of common stock in aggregate pursuant to the conversion of approximately $29,150 of convertible notes payable. 

 

  Issuances of notes payable

 

On March 1, 2018, the Company sold a Promissory Note to an unaffiliated lender for the aggregate principal amount of $4,000, bearing interest at a rate of 8% per annum and maturing the first year anniversary of the date of issuance. The Company may prepay the principal and accrued interest at any time without penalty. Pursuant to the agreement, the note is convertible into shares of common or preferred stock at a conversion price to be mutually finalized within 48 hours of the conversion request.

 

On April 3, 2018, the Company sold a Promissory Note to an unaffiliated lender for the aggregate principal amount of $10,000, bearing interest at a rate of 8% per annum and maturing the first year anniversary of the date of issuance. The Company may prepay the principal and accrued interest at any time without penalty. Pursuant to the agreement, the note is convertible into shares of common or preferred stock at a conversion price to be mutually finalized within 48 hours of the conversion request.

 

  Other issuances

 

In March 2018 and April 2018, the Company issued 25,332,900 shares of common stock in aggregate pursuant to the conversion of approximately 2,533,290 of Series D Convertible Preferred Stock.

 

  14  
 

 

Item 6. Exhibits

 

Index to Exhibits

 

10.1   2018-02-27 Adar Bays LLC Securities Purchase Agreement
     
10.2   2018-02-27 Adar Bays LLC Convertible Redeemable Note (144)
     
10.3   2018-02-27 Adar Bays LLC Convertible Redeemable Back End Note (1 of 6)
     
10.4   2018-02-27 Adar Bays LLC Convertible Redeemable Back End Note (2 of 6)
     
10.5   2018-02-27 Adar Bays LLC Convertible Redeemable Back End Note (3 of 6)
     
10.6   2018-02-27 Adar Bays LLC Convertible Redeemable Back End Note (4 of 6)
     
10.7   2018-02-27 Adar Bays LLC Convertible Redeemable Back End Note (5 of 6)
     
10.8   2018-02-27 Adar Bays LLC Convertible Redeemable Back End Note (6 of 6)
     
10.9   2018-02-27 Adar Bays LLC Collateralized Secured Promissory Note (1 of 6)
     
10.10   2018-02-27 Adar Bays LLC Collateralized Secured Promissory Note (2 of 6)
     
10.11   2018-02-27 Adar Bays LLC Collateralized Secured Promissory Note (3 of 6)
     
10.12   2018-02-27 Adar Bays LLC Collateralized Secured Promissory Note (4 of 6)
     
10.13   2018-02-27 Adar Bays LLC Collateralized Secured Promissory Note (5 of 6)
     
10.14   2018-02-27 Adar Bays LLC Collateralized Secured Promissory Note (6 of 6)
     
31.1*   Rule 13(a)-14(a)/15(d)-14(a) Certification
     
32.1*   Section 1350 Certification
     
101.SCH**   XBRL Taxonomy Extension Schema Document
     
101.CAL**   XBRL Taxonomy Extension Calculation Linkbase Document
     
101.LAB**   XBRL Taxonomy Extension Labels Linkbase Document
     
101.DEF**   XBRL Taxonomy Extension Definition Linkbase Document
     
101.PRE**   XBRL Taxonomy Extension Presentation Linkbase Document

 

* Filed herewith
** Furnished herewith. Users of this data are advised that, pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Exchange Act of 1934 and otherwise are not subject to liability.

 

  15  
 

 

SIGNATURES

 

Pursuant to the requirements 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: April 17, 2018 By: /s/ JOEL FALITZ
  Name: Joel Falitz
  Title: President, Chief Executive Officer, Secretary and Treasurer
    (Principal Executive Officer)
    (Principal Financial and Accounting Officer)

 

  16  
 

 

 

SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of February 27, 2018, by and between Ecosciences, Inc. , a Nevada corporation, with headquarters located at 420 Jericho Turnpike, Suite 110, Jericho, NY 11753, (the “Company”), and ADAR BAYS, LLC , a Florida limited liability company, with its address at 3411 Indian Creek Drive, Suite 403, Miami Beach, FL 33140 (the “Buyer”).

 

WHEREAS :

 

A. The Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”);

 

B. Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement seven 12% convertible notes of the Company, in the forms attached hereto as Exhibit A through G in the aggregate principal amount of $495,000.00 (with the first note being in the amount of $165,000 and the rest of the six notes being in the amounts of $55,000 each, a “Back End Note”)) (together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof, the “Note”), convertible into shares of common stock, of the Company (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note. Each of the seven notes shall contain a 10% OID such that the purchase price of the notes shall be $150,000.00 for the first note and $50,000.00 for each Back End note respectively. The first of the seven notes (the “First Note”) shall be paid for by the Buyer as set forth herein. Each of the six remaining $55,000 Back End notes shall initially be paid for by the issuance of an offsetting $50,000.00 secured note issued to the Company by the Buyer (a “Buyer Note”), provided that prior to conversion of a particular Back End note, the Buyer must have paid off that particular Buyer Note in cash such that the particular Back End Note may not be converted until it has been paid for in cash by Buyer.

 

C. The Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of Note as is set forth immediately below its name on the signature pages hereto; and

 

NOW THEREFORE , the Company and the Buyer severally (and not jointly) hereby agree as follows:

 

1. Purchase and Sale of Note.

 

a. Purchase of Note . On each Closing Date (as defined below), the Company shall issue and sell to the Buyer and the Buyer agrees to purchase from the Company such principal amount of Note as is set forth immediately below the Buyer’s name on the signature pages hereto.

 

 

Company Initials 

 

 

 

 

b. Form of Payment . On the Closing Date (as defined below), (i) the Buyer shall pay the purchase price for the Note to be issued and sold to it at the Closing (as defined below) (the “Purchase Price”) by wire transfer of immediately available funds to the Company, in accordance with the Company’s written wiring instructions, against delivery of the Note in the principal amount equal to the Purchase Price as is set forth immediately below the Buyer’s name on the signature pages hereto, and (ii) the Company shall deliver such duly executed Note on behalf of the Company, to the Buyer, against delivery of such Purchase Price.

 

c. Closing Date . The date and time of the first issuance and sale of the Note pursuant to this Agreement (the “Closing Date”):

 

Note Type   Issue Date   Cash Funding Date
$165,000 front End (Note 1)   February 27, 2018   February 27, 2018
$55,000 back end 1(Note 2)   February 27, 2018   September 27, 2018
$55,000 back end 2 (Note 3)   February 27, 2018   October 27, 2018
$55,000 back end 3 (Note 4)   February 27, 2018   November 27, 2018
$55,000 back end 4 (Note 5)   February 27, 2018   December 27, 2019
$55,000 back end 5 (Note 6)   February 27, 2018   January 27, 2019
$55,000 back end 6 (Note 7)   February 27, 2018   February 27, 2019

 

The Closing of each Note, shall be contingent on the following condition: (i) the Company must maintain a bid of $0.001 per share over 5 consecutive trading days.

 

2. Buyer’s Representations and Warranties. The Buyer represents and warrants to the Company that:

 

a. Investment Purpose . As of the date hereof, the Buyer is purchasing the Note and the shares of Common Stock issuable upon conversion of or otherwise pursuant to the Note, such shares of Common Stock being collectively referred to herein as the “Conversion Shares” and, collectively with the Note, the “Securities”) for its own account and not with a present view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act; provided , however , that by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act.

 

b. Accredited Investor Status . The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D (an “Accredited Investor”). Any of Buyer’s transferees, assignees, or purchasers must be “accredited investors” in order to qualify as prospective transferees, permitted assignees in the case of Buyer’s or Holder’s transfer, assignment or sale of the Note.

 

  2  

 

 

c. Reliance on Exemptions . The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities.

 

d. Information . The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by the Buyer or its advisors. The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, afforded the opportunity to ask questions of the Company. Notwithstanding the foregoing, the Company has not disclosed to the Buyer any material nonpublic information and will not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer. Neither such inquiries nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall modify, amend or affect Buyer’s right to rely on the Company’s representations and warranties contained in Section 3 below. The Buyer understands that its investment in the Securities involves a significant degree of risk. The Buyer is not aware of any facts that may constitute a breach of any of the Company’s representations and warranties made herein.

 

e. Governmental Review . The Buyer understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities.

 

f. Transfer or Re-sale . The Buyer understands that (i) the sale or re-sale of the Securities has not been and is not being registered under the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the Securities are sold pursuant to an effective registration statement under the 1933 Act, (b) in the case of subparagraphs (c), (d) and (e) below, the Buyer shall have delivered to the Company, at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in comparable transactions to the effect that the Securities to be sold or transferred may be sold, or transferred pursuant to an exemption from such registration, including the removal of any restrictive legend which opinion shall be accepted by the Company, (c) the Securities are sold or transferred to an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”) of the Buyer who agrees to sell or otherwise transfer the Securities only in accordance with this Section 2(f) and who is an Accredited Investor, (d) the Securities are sold pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S under the 1933 Act (or a successor rule) (“Regulation S”); (ii) any sale of such Securities made in reliance on Rule 144 may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case). Notwithstanding the foregoing or anything else contained herein to the contrary, the Securities may be pledged as collateral in connection with a bona fide margin account or other lending arrangement.

 

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g. Legends . The Buyer understands that the Note and, until such time as the Conversion Shares have been registered under the 1933 Act will be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Conversion Shares may bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of the certificates for such Securities):

 

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

 

The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, and (b) such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, and that legend removal is appropriate, which opinion shall be accepted by the Company so that the sale or transfer is effected. The Buyer agrees to sell all Securities, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, within 2 business days, it will be considered an Event of Default under the Note.

 

  4  

 

 

h. Authorization; Enforcement . This Agreement has been duly and validly authorized. This Agreement has been duly executed and delivered on behalf of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms.

 

i. Residency . The Buyer is a resident of the jurisdiction set forth immediately below the Buyer’s name on the signature pages hereto.

 

j. No Short Sales . Buyer/Holder, its successors and assigns, agree that so long as the Note remains outstanding, the Buyer/Holder shall not enter into or effect “short sales” of the Common Stock or hedging transaction which establishes a short position with respect to the Common Stock of the Company. The Company acknowledges and agrees that upon delivery of a Conversion Notice by the Buyer/Holder, the Buyer/Holder immediately owns the shares of Common Stock described in the Conversion Notice and any sale of those shares issuable under such Conversion Notice would not be considered short sales.

 

3. Representations and Warranties of the Company . The Company represents and warrants to the Buyer that:

 

a. Organization and Qualification . The Company and each of its subsidiaries, if any, is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted.

 

b. Authorization; Enforcement . (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement, the Note and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Note by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Note and the issuance and reservation for issuance of the Conversion Shares issuable upon conversion or exercise thereof) have been duly authorized by the Company’s Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its shareholders is required, (iii) this Agreement has been duly executed and delivered by the Company by its authorized representative, and such authorized representative is the true and official representative with authority to sign this Agreement and the other documents executed in connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery by the Company of the Note, each of such instruments will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms.

 

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c. Issuance of Shares . The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the Note in accordance with its respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof.

 

d. Acknowledgment of Dilution . The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance of the Conversion Shares upon conversion of the Note. The Company further acknowledges that its obligation to issue Conversion Shares upon conversion of the Note in accordance with this Agreement, the Note is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.

 

e. No Conflicts . The execution, delivery and performance of this Agreement, the Note by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance of the Conversion Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation or By-laws, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities are subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect). All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. The Company is not in violation of the listing requirements of the OTC Markets Exchange (the “OTC MARKETS”) and does not reasonably anticipate that the Common Stock will be delisted by the OTC MARKETS in the foreseeable future, nor are the Company’s securities “chilled” by FINRA. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.

 

f. Absence of Litigation . Except as disclosed in the Company’s Periodic Report filings with the SEC, there is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its subsidiaries, threatened against or affecting the Company or any of its subsidiaries, or their officers or directors in their capacity as such, that could have a material adverse effect. Schedule 3(f) contains a complete list and summary description of any pending or, to the knowledge of the Company, threatened proceeding against or affecting the Company or any of its subsidiaries, without regard to whether it would have a material adverse effect. The Company and its subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.

 

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g. Acknowledgment Regarding Buyer’ Purchase of Securities . The Company acknowledges and agrees that the Buyer is acting solely in the capacity of arm’s length purchasers with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any statement made by the Buyer or any of its respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is merely incidental to the Buyer’ purchase of the Securities. The Company further represents to the Buyer that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the Company and its representatives.

 

h. No Integrated Offering . Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the 1933 Act of the issuance of the Securities to the Buyer.

 

i. Title to Property . The Company and its subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are described in Schedule 3(i) or such as would not have a material adverse effect. Any real property and facilities held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as would not have a material adverse effect.

 

j. Bad Actor . No officer or director of the Company would be disqualified under Rule 506(d) of the Securities Act as amended on the basis of being a “bad actor” as that term is established in the September 19, 2013 Small Entity Compliance Guide published by the Securities and Exchange Commission.

 

k. Breach of Representations and Warranties by the Company . If the Company breaches any of the representations or warranties set forth in this Section 3, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an Event of Default under the Note.

 

4. COVENANTS .

 

a. Expenses . At the Closing, the Company shall reimburse Buyer for expenses incurred by them in connection with the negotiation, preparation, execution, delivery and performance of this Agreement and the other agreements to be executed in connection herewith (“Documents”), including, without limitation, reasonable attorneys’ and consultants’ fees and expenses, transfer agent fees, fees for stock quotation services, fees relating to any amendments or modifications of the Documents or any consents or waivers of provisions in the Documents, fees for the preparation of opinions of counsel, escrow fees, and costs of restructuring the transactions contemplated by the Documents. When possible, the Company must pay these fees directly, otherwise the Company must make immediate payment for reimbursement to the Buyer for all fees and expenses immediately upon written notice by the Buyer or the submission of an invoice by the Buyer.

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b. Listing . The Company shall promptly secure the listing of the Conversion Shares upon each national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and, so long as the Buyer owns any of the Note Securities, shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all Conversion Shares from time to time issuable upon conversion of the Note. The Company will obtain and, so long as the Buyer owns any of the Securities, maintain the listing and trading of its Common Stock on the OTC MARKETS or any equivalent replacement market, the Nasdaq stock market (“Nasdaq”) or the New York Stock Exchange (“NYSE”), and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Financial Industry Regulatory Authority (“FINRA”) and such exchanges, as applicable. The Company shall promptly provide to the Buyer copies of any notices it receives from the OTC MARKETS and any other markets on which the Common Stock is then listed regarding the continued eligibility of the Common Stock for listing on such markets.

 

c. Corporate Existence . So long as the Buyer beneficially owns the Note, the Company shall maintain its corporate existence and shall not sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or sale of all or substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s obligations hereunder and under the agreements and instruments entered into in connection herewith and (ii) is a publicly traded corporation whose Common Stock is listed for trading on the OTC MARKETS, Nasdaq, or NYSE.

 

d. No Integration . The Company shall not make any offers or sales of any security (other than the Securities) under circumstances that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the offering of the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision applicable to the Company or its securities.

 

e. Filings. The Company shall include all of the Notes in its next scheduled SEC filing whether that shall be a 10Q or a 10K.

 

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f. Right of First Refusal . The Company shall grant the Buyer the right of first refusal for the issuance of any customary convertible debt transactions or other registered public offering for a period of 60 days following the Closing of the Notes.

 

g. Funding Lock Up . For a period of forty five (45) days following the funding of the $165,000 Note, , the Company shall not consummate any other customary convertible financing following the closing of the transactions contemplated herein.

 

h. Breach of Covenants . If the Company breaches any of the covenants set forth in this Section 4, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an event of default under the Note.

 

5. Governing Law; Miscellaneous .

 

a. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state and county of New York. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens . The Company and Buyer waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

 

b. Counterparts; Signatures by Facsimile . This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.

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c. Headings . The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.

 

d. Severability . In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.

 

e. Entire Agreement; Amendments . This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the majority in interest of the Buyer.

 

f. Notices . All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, (iv) via electronic mail or (v) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received) or delivery via electronic mail, or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

 

  If to the Company, to:  
  Ecosciences, Inc.  
  420 Jericho Turnpike, Suite 110  
  Jericho, NY 11753  
  Attn: Joel Falitz, CEO  
     
  If to the Buyer:  
  ADAR BAYS, LLC  
  3411 Indian Creek Drive, Suite 403  
  Miami Beach, FL 33140  
  Attn: Samuel Eisenberg, Manager  

 

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Each party shall provide notice to the other party of any change in address.

 

g. Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, the Buyer may assign its rights hereunder to any “qualified person”, any “permitted assigns”, or “prospective transferee” that acquires or purchases Note Securities in a private transaction from the Buyer or to any of its “affiliates,” as that term is defined under the 1934 Act, without the consent of the Company with Buyer’s Opinion of Counsel. A qualified person is an “accredited investor” transferee, assignee, or purchaser of the Note who succeeds to the Holder’s right, title and interest to all or a portion of the Note accompanied with an Opinion of Counsel as provided for in Section 2(f).

 

h. Third Party Beneficiaries . This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

 

i. Survival . The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer. The Company agrees to indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a result of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.

 

j. Further Assurances . Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

k. No Strict Construction . The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

 

l. Remedies . The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing economic loss and without any bond or other security being required.

 

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IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above written.

 

Ecosciences, Inc.  
     
By:    
Name: Joel Falitz  
Title: President  
     
ADAR BAYS, LLC.  
     
By:    
Name: Samuel Eisenberg  
Title: Manager  

 

AGGREGATE SUBSCRIPTION AMOUNT:   $495,000

 

Aggregate Principal Amount of Notes:

 

Aggregate Purchase Price:

 

Note 1: $165,000.00, less $15,000.00 in OID, less $8,000.00 in legal fees

 

Back End Note 1: $55,000.00, less $5,000.00 in OID, less $2,500.00 in legal fees

 

Back End Note 2: $55,000.00, less $5,000.00 in OID, less $2,500.00 in legal fees

 

Back End Note 3: $55,000.00, less $5,000.00 in OID, less $2,500.00 in legal fees

 

Back End Note 4: $55,000.00, less $5,000.00 in OID, less $2,500.00 in legal fees

 

Back End Note 5: $55,000.00, less $5,000.00 in OID, less $2,500.00 in legal fees

 

Back End Note 6: $55,000.00, less $5,000.00 in OID, less $2,500.00 in legal fees

 

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EXHIBIT A

144 NOTE - $165,000

 

EXHIBIT B

BACK END NOTE 1- $55,000

 

EXHIBIT C

BACK END NOTE 2- $55,000

 

EXHIBIT D

BACK END NOTE 3- $55,000

 

EXHIBIT E

BACK END NOTE 4- $55,000

 

EXHIBIT F

BACK END NOTE 5- $55,000

 

EXHIBIT G

BACK END NOTE 6- $55,000

 

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THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT”)

 

  US $165,000.00

 

ECOSCIENCES, INC.

12% CONVERTIBLE REDEEMABLE NOTE

DUE FEBRUARY 27, 2019

 

FOR VALUE RECEIVED, Ecosciences, Inc. (the “Company”) promises to pay to the order of ADAR BAYS, LLC and its authorized successors and Permitted Assigns, defined below, (“ Holder ”), the aggregate principal face amount One Hundred Sixty Five Thousand Dollars exactly (U.S. $165,000.00) on February 27, 2019 (“ Maturity Date ”) and to pay interest on the principal amount outstanding hereunder at the rate of 12% per annum commencing on February 27, 2018. The interest will be paid to the Holder in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note. This Note contains a 10% OID such that the purchase price is $150,000.00. The principal of, and interest on, this Note are payable at 3411 Indian Creek Drive, Suite 403, Miami Beach, FL 33140, initially, and if changed, last appearing on the records of the Company as designated in writing by the Holder hereof from time to time. The Company will pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing on the records of the Company. The forwarding of such check or wire transfer shall constitute a payment of outstanding principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented by such check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein. Permitted Assigns means any Holder assignment, transfer or sale of all or a portion of this Note accompanied by an Opinion of Counsel as provided for in Section 2(f) of the Securities Purchase Agreement.

 

 

Initials

 

 
 

 

This Note is subject to the following additional provisions:

 

1. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that Holder shall pay any tax or other governmental charges payable in connection therewith. To the extent that Holder subsequently transfers, assigns, sells or exchanges any of the multiple lesser denomination notes, Holder acknowledges that it will provide the Company with Opinions of Counsel as provided for in Section 2(f) of the Securities Purchase Agreement.

 

2. The Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.

 

3. This Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“ Act ”), applicable state securities laws and Sections 2(f) and 5(f) of the Securities Purchase Agreement. Any attempted transfer to a non-qualifying party shall be treated by the Company as void. Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly registered on the Company’s records as the owner hereof for all other purposes, whether or not this Note be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in Section 4(a), and any prequalified prospective transferee of this Note, also is required to give the Company written confirmation that this Note is being converted (“ Notice of Conversion ”) in the form annexed hereto as Exhibit A . The date of receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date. All notices of conversion will be accompanied by an Opinion of Counsel.

 

4. (a) The Holder of this Note is entitled, at its option, at any time, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company’s common stock (the “ Common Stock ”) at a price (“ Conversion Price ”) for each share of Common Stock equal to 50% of the lowest trading price of the Common Stock as reported on the National Quotations Bureau OTC Markets exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future (“ Exchange ”), for the twenty prior trading days including the day upon which a Notice of Conversion is received by the Company (provided such Notice of Conversion is delivered together with an Opinion of Counsel, by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered within 3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Accrued, but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. To the extent the Conversion Price of the Company’s Common Stock closes below the par value per share, the Company will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Company agrees to honor all conversions submitted pending this increase. In the event the Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased to 40% instead of 50% while that “Chill” is in effect. In no event shall the Holder be allowed to effect a conversion if such conversion, along with all other shares of Company Common Stock beneficially owned by the Holder and its affiliates would exceed 4.99% of the outstanding shares of the Common Stock of the Company (which may be increased up to 9.9% upon 60 days’ prior written notice by the Investor).

 

 

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(b) Interest on any unpaid principal balance of this Note shall be paid at the rate of 12% per annum. Interest shall be paid by the Company in Common Stock (“Interest Shares”). Holder may, at any time, send in a Notice of Conversion to the Company for Interest Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.

 

(c) During the first 6 months this Note is in effect, the Company may redeem this Note by paying to the Holder an amount equal to 140% of the face amount plus any accrued interest. This Note may not be prepaid after the 6 month anniversary. The redemption must be closed and paid for within 3 business days of the Company sending the redemption demand or the redemption will be invalid and the Company may not redeem this Note.

 

(d) Upon (i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related transactions, (ii) a reclassification, capital reorganization (excluding an increase in authorized capital) or other change or exchange of outstanding shares of the Common Stock, other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with or into another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a “Sale Event”), then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the unpaid principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion Price.

 

(e) In case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection with which this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change, consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash, the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good faith.

 

5. No provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.

 

 

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6. The Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.

 

7. The Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred by the Holder in collecting any amount due under this Note.

 

8. If one or more of the following described “Events of Default” shall occur:

 

(a) The Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company; or

 

(b) Any of the representations or warranties made by the Company herein or in any certificate or financial or other written statements heretofore or hereafter furnished by or on behalf of the Company in