XBRL Rendering Preview
Document and Entity Information
 3 Months Ended
Mar. 31, 2017
shares
Document And Entity Information  
Entity Registrant Name ECO TEK 360 INC
Entity Central Index Key 0001338929
Document Type 10-Q
Document Period End Date Mar. 31, 2017
Amendment Flag false
Current Fiscal Year End Date --12-31
Is Entity a Well-known Seasoned Issuer? No
Is Entity a Voluntary Filer? No
Is Entity's Reporting Status Current? Yes
Entity Filer Category Smaller Reporting Company
Entity Common Stock, Shares Outstanding 19,238,877
Document Fiscal Period Focus Q1
Document Fiscal Year Focus 2017
Consolidated Balance Sheets - USD ($)
Mar. 31, 2017
Dec. 31, 2016
Current assets:    
Cash and cash equivalents $ 1,230 $ 36,208
Prepaid interest 31,847 $ 21,622
Loan and interest receivable 20,041
Total current assets 53,118 $ 57,830
Property and equipment 1,778 1,873
Total assets 54,896 59,703
Current liabilities:    
Accounts payable 450,371 338,520
Accrued compensation $ 476,250 413,250
Secured note and accrued interest payable 122,333
Unsecured notes and accrued interest payable $ 163,608 27,206
Convertible notes and accrued interest, $ 56,500 55,500
Advances from related party 39,048
Related party loans and accrued interest $ 453,851 289,741
Current liabilities from discontinued operations 84,281 84,281
Total current liabilities $ 1,684,861 $ 1,369,879
Commitments and contingencies
Stockholders' deficit    
Preferred stock $0.001 par value, 1,000,000 shares authorized, 200,000 shares issued and outstanding $ 200 $ 200
Common stock $0.001 par value, 400,000,000 shares authorized, 19,238,877 and 19,209,161 shares issued 20,110 20,080
Additional paid-in capital 28,906,903 28,410,437
Stock subscription receivable (10,000) (10,000)
Accumulated deficit (30,547,178) (29,730,893)
Total stockholders' deficit (1,629,965) (1,310,176)
Total liabilities and stockholders' deficit $ 54,896 $ 59,703
Consolidated Balance Sheets (Parenthetical) - $ / shares
Mar. 31, 2017
Dec. 31, 2016
Statement of Financial Position [Abstract]    
Preferred Stock, par or stated value $ 0.001 $ 0.001
Preferred Stock, shares authorized 1,000,000 1,000,000
Preferred Stock, shares issued 200,000 200,000
Preferred Stock, shares outstanding 200,000 200,000
Common Stock, par or stated value $ 0.001 $ 0.001
Common Stock, shares authorized 400,000,000 400,000,000
Common Stock, shares issued 19,238,877 19,209,161
Common Stock, shares outstanding 19,238,877 19,209,161
Common Stock, shares issuable 871,166 871,166
Statements of Operations - USD ($)
 3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Income Statement [Abstract]    
REVENUE
OPERATING EXPENSES    
General and administrative $ 303,193 $ 80,211
Consulting fees share expense 8,915 314,172
Stock based compensation 487,581 50,000
Total Operating Expenses 799,689 444,383
LOSS FROM OPERATIONS (799,689) (444,383)
OTHER EXPENSE    
Interest expense and financing costs 12,158 $ 3,500
Interest expense - related parties 4,438
Total other expense 16,596 $ 3,500
Loss from continuing operations $ (816,285) $ (447,883)
Discontinued operations
Net loss before income taxes $ (816,285) $ (447,883)
Provision for income taxes  
NET LOSS $ (816,285) $ (447,883)
Net loss per share from continuing operations $ (0.04) $ (0.03)
Net loss per share from discontinued operations
Net loss per share $ (0.04) $ (0.03)
Weighted average common shares outstanding 19,224,349 17,635,056
Statements of Cash Flows - USD ($)
 3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
CASH FLOWS FROM OPERATING ACTIVITIES    
Net loss $ (816,285) $ (447,883)
Loss from continuing operations (816,285) $ (447,883)
Adjustments to reconcile net income (loss) to net cash from operating activities:    
Depreciation 95
Amortization of debt discount 8,108
Stock based compensation expense 487,581 $ 50,000
Stock issued for services 8,915 314,172
Changes in operating assets and liabilities:    
Accounts payable and accrued expenses 174,851 $ 64,500
Accrued interest 8,529
Prepaid interest and deposits (18,333)
Loans and interest receivable (20,041)
Net cash used in operating activities $ (166,580) $ (19,211)
CASH FLOWS FROM INVESTING ACTIVITIES    
Additions to property and equipment
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES    
Related party loans $ 160,650
Proceeds from unsecured notes 10,000
Repayment of related party advance (39,048) $ (11,058)
Net cash provided by (used in) financing activities $ 131,602 $ (11,058)
DISCONTINUED ACTIVITIES:    
Net cash used in operating activities
Net cash used in investing activities
Net cash used in financing activities
Net cash flows used in discontinued activities
Net decrease in cash and cash equivalents $ (34,978) $ (30,269)
Cash and cash equivalents - beginning of period 36,208 32,989
Cash and cash equivalents - end of period $ 1,230 $ 2,720
Supplemental Cash Flow Disclosures    
Cash paid for interest
Cash paid for income taxes
Description of Business
 3 Months Ended
Mar. 31, 2017
Description Of Business  
Description of Business

NOTE 1 – DESCRIPTION OF BUSINESS


Eco Tek 360, Inc. ("the Company") was incorporated in Nevada on March 25, 2005. As of March 31, 2017 and December 31, 2016 and 2015, the Company had 400,000,000 shares of authorized common stock.

Eco Tek 360, Inc., during the fourth quarter, 2013, the Company changed its business plan to engage in future manufacturing and global distribution of ladies apparel. Trident Merchant Group, Inc. is a wholly owned subsidiary which provided "value added" strategic advisory services. Trident has since ceased operations in order to concentrate on the opportunities related to rejuvenating fibers and repurposing them into finished products.

During the second quarter, 2014 the Company formed Leading Edge Fashions, LLC of which it controls 51%. Effective December 31, 2014 the Company's Board of Directors determined it was in the best interest of the Company to discontinue the operations of Leading Edge Fashions, LLC.

The Company created a new limited liability company, Pure361, LLC ("Pure361") in May 2015 for the purpose of operating the portion of the Company's business that is involved with the collection, rejuvenation and manufacturing of garments and other accessories for the uniform marketplace that serves the hospitality, food service, medical, manufacturing, education, military, transportation and other commercial uniform industries. The Company owns 51% of Pure361. Pure361 entered into a license agreement with Pure System International Ltd. ("Pure"), the minority owner of Pure 361, related to potential future operations in which Pure361 was granted the exclusive license to use certain licensed intellectual property related to the manufacturing of uniforms from recyclable waste.

The Company created a new wholly owned subsidiary, Progressive Fashions Inc. ("PFI") in February 2016 for the purpose of designing, producing and marketing the EMME® Activewear Collection. PFI has had no operations to date.

Basis of Presentation: Unaudited Interim Financial Information

The accompanying interim condensed consolidated financial statements are unaudited. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all of the normal recurring adjustments necessary to present fairly the financial position and results of operations as of and for the periods presented. The interim results are not necessarily indicative of the results to be expected for the full year or any future period.

 

Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). The Company believes that the disclosures are adequate to make the interim information presented not misleading. These consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and the notes thereto included in the Company's Report on Form 10-K filed on March 31, 2017 for the years ended December 31, 2016 and 2015.

 

Going Concern

The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles, which contemplates continuation of the Company as a going concern. The Company has an accumulated deficit of $30,547,178 and $29,730,893 as of March 31, 2017 and December 31, 2016, respectively, which include losses of $816,285 and $447,883 for the three months ended March 31, 2017 and 2016, respectively.  Consequently, the aforementioned items raise substantial doubt about the Company's ability to continue as a going concern within one year after the date that the financial statements are issued.

 

The Company's ability to continue as a going concern is dependent upon its ability to repay or settle its current indebtedness, acquire an operating business and raise capital through equity and debt financing or other means on desirable terms. If the Company is unable to obtain additional funds when they are required or if the funds cannot be obtained on favorable terms, management may be required to restructure the Company or cease operations. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

 
Summary of Significant Accounting Policies
 3 Months Ended
Mar. 31, 2017
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

NOTE 2 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Principles of Consolidation

 

The accompanying consolidated financial statements include all of the accounts of the Company and its wholly owned subsidiary, Trident Merchant Group, Inc., Leading Edge Fashion, LLC which is 51% owned, and Pure361, LLC which is 51% owned.  All significant intercompany accounts and transactions have been eliminated. 

 

Reclassifications

 

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported consolidated net (loss).

 

Cash and Cash Equivalents

 

Cash and cash equivalents include cash on hand and investments in money market funds. The Company considers all highly-liquid instruments with an original maturity of 90 days or less at the time of purchase to be cash equivalents.

    

Equipment

 

Property and equipment are stated at cost. Costs of replacements and major improvements are capitalized, and maintenance and repairs are charged to operations as incurred. Depreciation expense is provided primarily by the straight-line method over the estimated useful lives of the assets which is seven years.

 

Prepaid interest and deposits

 

Prepaid interest and deposits consist of debt discounts, and amounts paid for deposits on property, plant and equipment. Prepaid interest is amortized over the life of the related liability.

 

Revenue Recognition

 

Revenue for the women's fashion division will be recognized at the point-of-sale for retail store sales, net of estimated customer returns. Revenue is recognized at the completion of a job or service for the consulting division. Revenue is presented on a net basis and does not include any tax assessed by a governmental or municipal authority. Payment for merchandise at stores and through the Company's direct-to-consumer channel will be tendered by cash, check, credit card, debit card or gift card. Therefore, the Company's need to collect outstanding accounts receivable for its retail and direct-to-consumer channel is negligible and mainly results from returned checks or unauthorized credit card transactions. The Company maintains an allowance for doubtful accounts for its consulting service accounts receivable, which management reviews on a regular basis and believes is sufficient to cover potential credit losses and billing adjustments. Deposits for consulting services are recognized as a sale upon completion of service.

 

The Company accounts for a gift card transaction by recording a liability at the time the gift card is issued to the customer in exchange for consideration from the customer. A liability is established and remains on the Company's books until the card is redeemed by the customer, at which time the Company records the redemption of the card for merchandise as a sale or when it is determined the likelihood of redemption is remote, based on historical redemption patterns. Revenues attributable to gift card liabilities relieved after the likelihood of redemption becomes remote are included in sales and are not material.

 

 

Sales Return Reserve

 

The Company records a reserve for estimated product returns where the sale has occurred during the period reported, but the return is likely to occur subsequent to the period reported and may otherwise be considered in-transit. The reserve for estimated in-transit product returns is based on the Company's most recent historical return trends. If the actual return rate or experience is materially higher than the Company's estimate, additional sales returns would be recorded in the future.

 

Income Taxes

 

Income taxes are accounted for under the asset and liability method as stipulated by ASC 740 "Income Taxes." Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities or a change in tax rate is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced to estimated amounts to be realized by the use of a valuation allowance. A valuation allowance is applied when in management's view it is more likely than not that such deferred tax asset will be unable to be utilized.

 

The Company adopted certain provisions under ASC Topic 740, which provide interpretative guidance for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Effective with the Company's adoption of these provisions, interest related to the unrecognized tax benefits is recognized in the financial statements as a component of income taxes.

 

In the unlikely event that an uncertain tax position exists in which the Company could incur income taxes, the Company would evaluate whether there is a probability that the uncertain tax position taken would be sustained upon examination by the taxing authorities. Reserves for uncertain tax positions would be recorded if the Company determined it is probable that a position would not be sustained upon examination or if payment would have to be made to a taxing authority and the amount is reasonably estimated. As of December 31, 2016 and 2015, the Company does not believe it has any uncertain tax positions that would result in the Company having a liability to the taxing authorities. The Company's tax returns are subject to examination by the federal and state tax authorities for the years ended 2005 through 2016.

 

Impairment or Disposal of Long-Lived Assets

 

ASC Topic 360 (formerly FASB issued Statement No. 144), "Accounting for the Impairment or Disposal of Long-Lived Assets" ("FAS 144"), clarifies the accounting for the impairment of long-lived assets and for long-lived assets to be disposed of, including the disposal of business segments and major lines of business.  Long-lived assets are reviewed when facts and circumstances indicate that the carrying value of the asset may not be recoverable.  When necessary, impaired assets are written down to their estimated fair value based on the best information available. No impairment was necessary as of March 31, 2017 or December 31, 2016.

 

Stock-based Compensation

 

We account for stock-based awards at fair value on the date of grant, and recognize compensation over the service-period that they are expected to vest. We estimate the fair value of stock options and stock purchase warrants using the Black-Scholes option pricing model. The estimated value of the portion of a stock-based award that is ultimately expected to vest, taking into consideration estimated forfeitures, is recognized as expense over the requisite service periods. The model includes subjective input assumptions that can materially affect the fair value estimates. The expected volatility is estimated based on the most recent historical period of time, of other comparative securities, equal to the weighted average life of the options. The estimate of stock awards that will ultimately vest requires judgment, and to the extent that actual forfeitures differ from estimated forfeitures, such differences are accounted for as a cumulative adjustment to compensation expenses and recorded in the period that estimates are revised.

  

 

Use of Accounting Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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.  Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the valuation of common stock and options issued as stock based compensation.

 

Fair Value

 

FASB ASC 820, Fair Value Measurements and Disclosures ("ASC 820") establishes a framework for all fair value measurements and expands disclosures related to fair value measurement and developments. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

 

ASC 820 requires that assets and liabilities measured at fair value are classified and disclosed in one of the following three categories:

 

Level 1—Quoted market prices for identical assets or liabilities in active markets or observable inputs;

Level 2—Significant other observable inputs that can be corroborated by observable market data; and

Level 3—Significant unobservable inputs that cannot be corroborated by observable market data.

 

The carrying amounts of cash, accrued compensation, accounts payable and other liabilities, accrued interest payable, and short-term portion of notes payable approximate fair value because of the short-term nature of these items.

 

Concentration of Credit Risk

 

The carrying value of short-term financial instruments, including cash, restricted cash, trade accounts receivable, accounts payable, accrued expenses and short-term debt, approximates the fair value of these instruments. These financial instruments generally expose the Company to limited credit risk and have no stated maturities or have short-term maturities and carry interest rates that approximate market.  The Company maintains cash balances at financial institutions that are insured by the FDIC.  At March 31, 2017, and December 31, 2016, the Company had no amounts in excess of the FDIC limit.
Capital Stock
 3 Months Ended
Mar. 31, 2017
Equity [Abstract]  
Capital Stock

NOTE 3 – CAPITAL STOCK

 

Preferred Stock

 

The Company has designated a "Class B Convertible Preferred Stock" (the "Class B Preferred").  The number of authorized shares totals 1,000,000 and the par value is $.001 per share.  The Class B Preferred shareholders vote together with the common stock as a single class.  The holders of Class B Preferred are entitled to receive all notices relating to voting as are required to be given to the holders of the Common Stock.  The holders of shares of Class B Preferred shall be entitled to 10,000 votes per share.  The Class B Preferred Stock will have the rights to liquidation as all classes of the Common Stock of the Company.  The Class B Preferred stockholders are entitled to receive non-cumulative dividends at the rate of 8% per annum, and are accrued daily.  The Class B Preferred Stock shall be redeemed by the Corporation for 100% of the original purchase price plus the amount of cash dividends accrued on the earlier of 6 months from the date of issuance, or the date that the Corporation received its funding from any outside source in conjunction with a merger, reverse merger or any change of control.  In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, the holders of the Class B Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any assets of the Corporation to the holders of the Common Stock, the amount of $.035 per share plus any and all accrued but unpaid dividends.

During the fourth quarter, 2011, 200,000 shares of the Series B Preferred Stock were issued to a related party for reimbursement of $7,500 of legal and accounting fees paid on behalf of the Company.

 

Common Stock

 

As of March 31, 2017 and December 31, 2016, the Company had 19,238,877 and 19,209,161 shares of its $0.001 par value common stock issued and outstanding, respectively.   In addition, as of March 31, 2017, and December 31, 2016, the Company had 871,666 and 871,666 shares of common stock issuable, respectively.

   

In February 2016, the Company issued 50,000 shares of its common stock at a value of $1.00 per share for $50,000 to a board director for payment of services.

 

In March 2016, the Company issued 250,000 shares of its common stock at a value of $1.00 per share for $250,000 in payment for consulting services.  In addition, the Company granted a warrant to the consultant to purchase 250,000 shares of common stock at $0.50 per share for a period of two years.  The fair value of these warrants at the time they were granted was approximately $170,000 and was calculated using the Black-Scholes-Merton model.  The expense related to this stock option for the year ended December 31, 2016 was $77,946.

 

The following assumptions were used for the warrants granted in March 2016 are as follows:

 

Expected term at issuance   2 years      
Expected average volatility     70.71% to 141.42 %    
Expected dividend yield     -      
Risk-free interest rate   .70%– 1.64%      

 

The following table summarizes information relating to outstanding and exercisable stock warrants as of March 31, 2017:

 

Warrants Outstanding      Warrants Exercisable  
                           
Number of Shares      Weighted Average Remaining
Contractual life (in years)		      Weighted Average
Exercise Price		      Number of Shares      Weighted Average
Exercise Price		  
  275,000     .803     $ 0.59       275,000     $ 0.59  
 

 

In March 2016, the Company issued 50,000 shares of its common stock at a value of $1.00 per share for $50,000 as payment for consulting services.

 

In the three month period ended March 31, 2016, the Company issued 200,000 shares of its common stock at a value of $1.00 per share, in conjunction with the extension of the maturity date of the $100,000 secured note.  $150,000 was amortized as of September 2016, and $50,000 is being amortized for the period ended August 31, 2017. The unamortized portion as of March 31, 2017 and December 31, 2016 was $13,514 and $21,622, respectively.

 

In March 2016, the Company issued 884,001 shares of its common stock at approximately $0.25 per share amounting to $250,000 to two individuals for monies received in 2015 from subscription agreements that were entered into with the Company in 2015.  115,100 shares remain issuable related to these subscription agreements as of March 31, 2017.

 

During the three months ended March 31, 2017, the Company issued 29,716 common stock valued at $.30 per share for $8,885 of consulting services.

 

Stock Options

 

In the three months ended March 31, 2017, the Company issued 2,550,000 stock options to consultants, employees, and management. All of the options vested immediately. The fair value of these options was calculated using the Black-Scholes-Merton model.  The expense related to this stock option for the three months ended March 31, 2017 was $487,581.

 

The following assumptions were used for the options granted in the period ended March 31, 2017 are as follows:

 

    At March 31, 2017
Fair values     $0.17 - $0.44      
Exercise price     $0.001-$1.50      
Expected term at issuance   2 - 10 years      
Expected average volatility     75.93% to 85.41%    
Expected dividend yield     -      
Risk-free interest rate   1.23%– 2.45%      

 

 

 
Notes Payable
 3 Months Ended
Mar. 31, 2017
Notes Payable  
Notes Payable

NOTE 4 – NOTES PAYABLE

 

Unsecured Notes Payable

 

During the year ended December 31, 2016, the Company received two separate payments of $12,500, totaling $25,000, as secured notes. The notes are non-interest bearing, and have no terms of repayment.

 

On December 12, 2016, the Company issued an unsecured promissory note to an investor. The note bears interest at 5% and matures on June 30, 2017. As of December 31, 2016, payments from the investor are $2,200. On January 11, 2017 the investor loaned an additional $5,000 related to the promissory note. The balance of this note plus accrued interest totals $7,288 as of March 31, 2017.

  

On March 14, 2017, the Company issued an unsecured promissory note to an investor in the amount of $5,000. The note bears interest at 4% and matures on March 14, 2018. The balance of this note plus interest totals $5,009 as of March 31, 2017.

 

Convertible Notes Payable

 

In August 2015, The Company issued an unsecured promissory note to an investor in the amount of $50,000, convertible to common stock at $1.00 per share.  The note bears an interest rate of 8% per annum and matured on August 8, 2016.  The note is currently unpaid and in default.  The note was also issued with a warrant for this investor to purchase 25,000 shares of common stock at $1.50 for a period of 2 years.  The fair value of these warrants was approximately $3,909 as of December 31, 2016 and was calculated using the Black-Scholes-Merton model. The note does not contain a beneficial conversion feature. The balance of this note plus accrued interest totals were $56,500 and $55,500 at March 31, 2017 and December 31, 2016, respectively.
Discontinued Operations
 3 Months Ended
Mar. 31, 2017
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations

NOTE 5 – DISCONTINUED OPERATIONS

 

During 2014, the Company's Leading Edge Fashions, LLC retail businesses, of which it owned 51%, was classified as discontinued operations.  Based on the Company's strategy to allocate resources to its businesses relative to their growth potential and those with the greater right to win in the marketplace, the Company determined that this business did not align with the Company's long-term growth plans.

 

As of December 31, 2016 and December 31, 2015, $870,045 of current liabilities from discontinued operations includes $0 and $785,764 loan payable, respectively, and $84,281 accounts payable.  The loan payable was converted to common stock in July 2016, which resulted in a gain on the extinguishment of debt related to discontinued operations in the amount of $635,764. The accounts payable related to discontinued operations was $84,281 as of March 31, 2017
Related Party Transactions
 3 Months Ended
Mar. 31, 2017
Related Party Transactions [Abstract]  
Related Party Transactions

NOTE 6 – RELATED PARTY TRANSACTIONS

 

During the three months ended March 31, 2017, the Company repaid advances from related parties in the amount of $39,048. The President was owed $0 and $39,048 March 31, 2017 and December 31, 2016, respectively.

 

During 2016, the Company received loans from the CEO and a member of the board of directors totaling $284,900. In the three months ended March 31, 2017, the Company received additional loans from these individuals in the amount of $160,650. The loans bear interest at 5% per annum and mature on June 30, 2017 and September 30, 2017. The balance of these loans plus accrued interest was $453,851 and $289,741 at March 31, 2017 and December 31, 2016, respectively.

 

In March 2017, the Company loaned a related party $20,000. The loan bears interest at the rate of 5% per annum and has a term of six months.
Commitments and Contingencies
 3 Months Ended
Mar. 31, 2017
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

NOTE 7 – COMMITMENTS AND CONTINGENCIES

 

On March 15, 2015 the Company entered into a trademark license agreement with True Beauty, LLC which controls the trademark EMME.  EMME is a market pioneer and trusted voice of the "Full-Figured" market. Under this licensing agreement the Company has the right to design, produce and market the EMME® Activewear Collection.  On April 13, 2016, the agreement was amended regarding the term and minimum royalties.  The royalty expense was $38,500 for the three months ended March 31, 2017.

 

The additional minimum royalties are as follows

 

Year    
2017     112,500
2018     250,000
2019     250,000
Total   $ 612,500

 

 

The license agreement is renewable for five consecutive one year terms commencing on January 1, 2020 if certain sales targets of the previous year are attained.

 

As of the date of this filing, the Company is a party to three pending litigation matters.

One matter is entitled Randazzo LLC v. Avani Holdings LLC & Global Fashion Technologies, Inc.  This litigation was initiated by the plaintiff in order to evict Avani Holdings LLC from its rented premises in California and to recover unpaid rent.  ECTX does not operate out of the premises in question and has never signed any leases or other documents with the plaintiff.  A judgment of eviction was entered, but ECTX does not operate out of the premises in question and therefore did not appear in the matter to oppose the judgment of eviction.  The plaintiff is also seeking unpaid rent in the amount of $26,595.

The second matter is entitled Patricia Witthuhn v. Global Fashion Technologies, Inc.  This litigation was initiated by the plaintiff in order to collect wages allegedly due pursuant to her employment with Avani Holdings LLC.  The Company never hired Ms. Witthuhn and never acquired Avani Holdings, LLC.  Consequently, there is no legitimate cause of action against the Company.  However, due to cash flow constraints, the Company is unable to hire outside counsel for this litigation.  The amount being sought by the plaintiff is approximately $15,000.

The third matter is entitled William Corso v. Global Fashion Technologies, Inc.  This litigation was initiated by the plaintiff in order to collect wages allegedly due pursuant to his employment with Avani Holdings LLC.  The Company never hired Mr. Corso and never acquired Avani Holdings, LLC.  Consequently, there is no legitimate cause of action against the Company.  However, due to cash flow constraints, the Company is unable to hire outside counsel for this litigation.  The amount being sought by the plaintiff is approximately $40,000.

 
Net Loss Per Share
 3 Months Ended
Mar. 31, 2017
Earnings Per Share [Abstract]  
Net Loss Per Share

NOTE 8 – NET LOSS PER SHARE

 

Potentially dilutive securities are excluded from the calculation of net loss per share when their effect would be anti-dilutive. For all periods presented in the consolidated financial statements, all potentially dilutive securities have been excluded from the diluted share calculations as they were anti-dilutive as a result of the net losses incurred for the respective periods. Accordingly, basic shares equal diluted shares for all periods presented.

 

Potentially dilutive securities were comprised of the following:  

 

    March 31,     December 31,
    2017     2016
Warrants     275,000       275,000
Options     2,550,000       -
Convertible notes payable, including accrued interest     50,000       50,000
Contingently issuable shares     -       -
      2,875,000       325,000

 
Subsequent Events
 3 Months Ended
Mar. 31, 2017
Subsequent Events [Abstract]  
Subsequent Events

NOTE 9 – SUBSEQUENT EVENTS

 

Management has evaluated events occurring after the date of these financial statements through the date that these financial statements were issued, and noted no subsequent events to disclose.
Summary of Significant Accounting Policies (Policies)
 3 Months Ended
Mar. 31, 2017
Accounting Policies [Abstract]  
Principles of Consolidation

Principles of Consolidation

 

The accompanying consolidated financial statements include all of the accounts of the Company and its wholly owned subsidiary, Trident Merchant Group, Inc., Leading Edge Fashion, LLC which is 51% owned, and Pure361, LLC which is 51% owned.  All significant intercompany accounts and transactions have been eliminated.
Reclassification

Reclassifications

 

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported consolidated net (loss).
Cash and Cash Equivalents

Cash and Cash Equivalents

 

Cash and cash equivalents include cash on hand and investments in money market funds. The Company considers all highly-liquid instruments with an original maturity of 90 days or less at the time of purchase to be cash equivalents.
Equipment

Equipment

 

Property and equipment are stated at cost. Costs of replacements and major improvements are capitalized, and maintenance and repairs are charged to operations as incurred. Depreciation expense is provided primarily by the straight-line method over the estimated useful lives of the assets which is seven years.
Prepaid Interest

Prepaid interest and deposits

 

Prepaid interest and deposits consist of debt discounts, and amounts paid for deposits on property, plant and equipment. Prepaid interest is amortized over the life of the related liability.
Revenue Recognition

Revenue Recognition

 

Revenue for the women's fashion division will be recognized at the point-of-sale for retail store sales, net of estimated customer returns. Revenue is recognized at the completion of a job or service for the consulting division. Revenue is presented on a net basis and does not include any tax assessed by a governmental or municipal authority. Payment for merchandise at stores and through the Company's direct-to-consumer channel will be tendered by cash, check, credit card, debit card or gift card. Therefore, the Company's need to collect outstanding accounts receivable for its retail and direct-to-consumer channel is negligible and mainly results from returned checks or unauthorized credit card transactions. The Company maintains an allowance for doubtful accounts for its consulting service accounts receivable, which management reviews on a regular basis and believes is sufficient to cover potential credit losses and billing adjustments. Deposits for consulting services are recognized as a sale upon completion of service.

 

The Company accounts for a gift card transaction by recording a liability at the time the gift card is issued to the customer in exchange for consideration from the customer. A liability is established and remains on the Company's books until the card is redeemed by the customer, at which time the Company records the redemption of the card for merchandise as a sale or when it is determined the likelihood of redemption is remote, based on historical redemption patterns. Revenues attributable to gift card liabilities relieved after the likelihood of redemption becomes remote are included in sales and are not material.
Sales Return Reserve

Sales Return Reserve

 

The Company records a reserve for estimated product returns where the sale has occurred during the period reported, but the return is likely to occur subsequent to the period reported and may otherwise be considered in-transit. The reserve for estimated in-transit product returns is based on the Company's most recent historical return trends. If the actual return rate or experience is materially higher than the Company's estimate, additional sales returns would be recorded in the future.
Income taxes

Income Taxes

 

Income taxes are accounted for under the asset and liability method as stipulated by ASC 740 "Income Taxes." Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities or a change in tax rate is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced to estimated amounts to be realized by the use of a valuation allowance. A valuation allowance is applied when in management's view it is more likely than not that such deferred tax asset will be unable to be utilized.

 

The Company adopted certain provisions under ASC Topic 740, which provide interpretative guidance for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Effective with the Company's adoption of these provisions, interest related to the unrecognized tax benefits is recognized in the financial statements as a component of income taxes.

 

In the unlikely event that an uncertain tax position exists in which the Company could incur income taxes, the Company would evaluate whether there is a probability that the uncertain tax position taken would be sustained upon examination by the taxing authorities. Reserves for uncertain tax positions would be recorded if the Company determined it is probable that a position would not be sustained upon examination or if payment would have to be made to a taxing authority and the amount is reasonably estimated. As of December 31, 2016 and 2015, the Company does not believe it has any uncertain tax positions that would result in the Company having a liability to the taxing authorities. The Company's tax returns are subject to examination by the federal and state tax authorities for the years ended 2005 through 2016.
Impairment or Disposal of Long-Lived Assets

Impairment or Disposal of Long-Lived Assets

 

ASC Topic 360 (formerly FASB issued Statement No. 144), "Accounting for the Impairment or Disposal of Long-Lived Assets" ("FAS 144"), clarifies the accounting for the impairment of long-lived assets and for long-lived assets to be disposed of, including the disposal of business segments and major lines of business.  Long-lived assets are reviewed when facts and circumstances indicate that the carrying value of the asset may not be recoverable.  When necessary, impaired assets are written down to their estimated fair value based on the best information available. No impairment was necessary as of March 31, 2017 or December 31, 2016.
Stock Based Compensation

Stock-based Compensation

 

We account for stock-based awards at fair value on the date of grant, and recognize compensation over the service-period that they are expected to vest. We estimate the fair value of stock options and stock purchase warrants using the Black-Scholes option pricing model. The estimated value of the portion of a stock-based award that is ultimately expected to vest, taking into consideration estimated forfeitures, is recognized as expense over the requisite service periods. The model includes subjective input assumptions that can materially affect the fair value estimates. The expected volatility is estimated based on the most recent historical period of time, of other comparative securities, equal to the weighted average life of the options. The estimate of stock awards that will ultimately vest requires judgment, and to the extent that actual forfeitures differ from estimated forfeitures, such differences are accounted for as a cumulative adjustment to compensation expenses and recorded in the period that estimates are revised.

  
Use of Accounting Estimates

Use of Accounting Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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.  Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the valuation of common stock and options issued as stock based compensation.
Fair Value

Fair Value

 

FASB ASC 820, Fair Value Measurements and Disclosures ("ASC 820") establishes a framework for all fair value measurements and expands disclosures related to fair value measurement and developments. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

 

ASC 820 requires that assets and liabilities measured at fair value are classified and disclosed in one of the following three categories:

 

Level 1—Quoted market prices for identical assets or liabilities in active markets or observable inputs;

Level 2—Significant other observable inputs that can be corroborated by observable market data; and

Level 3—Significant unobservable inputs that cannot be corroborated by observable market data.

 

The carrying amounts of cash, accrued compensation, accounts payable and other liabilities, accrued interest payable, and short-term portion of notes payable approximate fair value because of the short-term nature of these items.

 
Concentration of credit risk

Concentration of Credit Risk

 

The carrying value of short-term financial instruments, including cash, restricted cash, trade accounts receivable, accounts payable, accrued expenses and short-term debt, approximates the fair value of these instruments. These financial instruments generally expose the Company to limited credit risk and have no stated maturities or have short-term maturities and carry interest rates that approximate market.  The Company maintains cash balances at financial institutions that are insured by the FDIC.  At March 31, 2017, and December 31, 2016, the Company had no amounts in excess of the FDIC limit.
Capital Stock (Tables)
 3 Months Ended
Mar. 31, 2017
Capital Stock Tables  
Assumptions for warrants
Expected term at issuance   2 years      
Expected average volatility     70.71% to 141.42 %    
Expected dividend yield     -      
Risk-free interest rate   .70%– 1.64%      
Stock Warrants
Warrants Outstanding      Warrants Exercisable  
                           
Number of Shares      Weighted Average Remaining
Contractual life (in years)		      Weighted Average
Exercise Price		      Number of Shares      Weighted Average
Exercise Price		  
  275,000     .803     $ 0.59       275,000     $ 0.59  
 
Assuptions for stock options

 

    At March 31, 2017
Fair values     $0.17 - $0.44      
Exercise price     $0.001-$1.50      
Expected term at issuance   2 - 10 years      
Expected average volatility     75.93% to 85.41%    
Expected dividend yield     -      
Risk-free interest rate   1.23%– 2.45%      
Commitments and Contingencies (Tables)
 3 Months Ended
Mar. 31, 2017
Commitments and Contingencies Disclosure [Abstract]  
Minimum Royalties
Year    
2017     112,500
2018     250,000
2019     250,000
Total   $ 612,500
Net Loss Per Share (Tables)
 3 Months Ended
Mar. 31, 2017
Net Loss Per Share Tables  
Potentially dilutive securities
    March 31,     December 31,
    2017     2016
Warrants     275,000       275,000
Options     2,550,000       -
Convertible notes payable, including accrued interest     50,000       50,000
Contingently issuable shares     -       -
      2,875,000       325,000
Description of Business (Details Narrative) - shares
Mar. 31, 2017
Dec. 31, 2016
Dec. 31, 2013
Description Of Business Details Narrative      
Common Stock, shares authorized 400,000,000 400,000,000  
Non-controlling interest     51.00%
Going Concern (Details Narrative) - USD ($)
 3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Dec. 31, 2016
Going Concern Details Narrative      
Accumulated deficit $ (30,547,178)   $ (29,730,893)
Net loss $ (816,285) $ (447,883)  
Capital Stock (Details Narrative 1) - USD ($)
 2 Months Ended 3 Months Ended 8 Months Ended 12 Months Ended
Feb. 28, 2016
Mar. 31, 2017
Mar. 31, 2016
Aug. 31, 2017
Dec. 31, 2011
Dec. 31, 2016
Preferred Stock, par or stated value   $ 0.001       $ 0.001
Preferred Stock, shares authorized   1,000,000       1,000,000
Preferred Stock, shares issued   200,000       200,000
Preferred Stock, shares outstanding   200,000       200,000
Class B Preferred Stock Voting Rights   10,000 votes per share        
Class B Dividend Rate   8.00%        
Class B Redemption Price per share   $ 0.35        
Common Stock, par or stated value   $ 0.001       $ 0.001
Common Stock, shares issued   19,238,877       19,209,161
Common Stock, shares outstanding   19,238,877       19,209,161
Common Stock, shares issuable   871,166       871,166
Stock and option expense for services   $ 8,915 $ 314,172      
Consulting [Member]            
Class B Preferred stock issue for services, shares         200,000  
Class B Preferred stock issue for services, amount         $ 7,500  
Shares issued for Services   29,716 250,000      
Shares issued for Services, amount   $ 8,885 $ 250,000      
Share price   $ .30 $ 1.00      
Warrant for common shares     250,000      
Warrant, per share     $ 0.50      
Fair value of warrants     $ 170,000      
Stock and option expense for services     $ 77,946      
Directors Fee [Member]            
Shares issued for Services 50,000          
Shares issued for Services, amount $ 50,000          
Share price $ 1.00          
Consulting [Member]            
Shares issued for Services     50,000      
Shares issued for Services, amount     $ 50,000      
Share price     $ 1.00      
Common Stock [Member]            
Stock subscriptions, shares outstanding   115,100        
Stock subscriptions, shares     $ 884,001      
Stock subscriptions received     $ 250,000      
Par Value     $ .25      
Share price     $ 1.00      
Shares issued for debt     200,000      
Shares issued for debt, amount     $ 100,000      
Amortization of note     $ 150,000 $ 50,000    
Notes Payable   $ 13,514       $ 21,622
Capital Stock Additional (Details Narrative) - $ / shares
 3 Months Ended
Mar. 31, 2017
Dec. 31, 2017
Number of shares, Otustanding and exercisable 2,550,000  
Warrants Outstanding [Member]    
Number of shares, Otustanding and exercisable 275,000  
Weighted Average Remaining contractual life 8 months 3 days  
Weighted Average Exercise price $ 0.59  
Warrants Exercisable [Member]    
Number of shares, Otustanding and exercisable   275,000
Minimum [Member]    
Exepected Life (years) 2 years  
Exercise price $ 0.17  
Expected volatility 70.71%  
Annual Dividend Yield  
Risk-free Interest 0.70%  
Maximum [Member]    
Exercise price $ 0.44  
Expected volatility 141.42%  
Risk-free Interest 1.64%  
Capital Stock- Stock Options (Details Narrative )
 3 Months Ended
Mar. 31, 2017
USD ($)
$ / shares
Stock option expense | $ $ 487,581
Expected term at issuance 2 years
Expected dividend yield
Minimum [Member]  
Fair values $ 0.17
Expected average volatility 75.93%
Risk-free interest rate 1.23%
Maximum [Member]  
Fair values $ 0.44
Expected average volatility 85.41%
Risk-free interest rate 2.45%
Notes Payable (Details) - USD ($)
 3 Months Ended 12 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Dec. 31, 2016
Proceeds from unsecured notes $ 10,000  
Unsecured Notes Payable [Member]      
Proceeds from unsecured notes     $ 12,500
Gross proceeds from unsecured notes     $ 25,000
Investor [Member]      
Date Issued     Dec. 12, 2016
Maturity Date     Jun. 30, 2017
Proceeds from unsecured notes 5,000    
Interest Rate     5.00%
Monthly Payment     $ 2,200
Notes Payable $ 7,288    
Additional Investor [Member]      
Date Issued Mar. 14, 2017    
Maturity Date Mar. 31, 2018    
Note Payable Issued $ 5,000    
Interest Rate 4.00%    
Notes Payable $ 5,009    
Convertible notes payable[Member]      
Date Issued Aug. 01, 2015    
Maturity Date Aug. 08, 2016    
Note Payable Issued $ 50,000    
Convertible rate, per share $ 1.00    
Interest Rate 8.00%    
Notes Payable $ 56,500   $ 55,500
Warrant for common shares 25,000    
Warrant, per share $ 1.50    
Fair value of warrants $ 3,909    
Income Taxes - Tax Benefit (Details)
 3 Months Ended
Mar. 31, 2016
USD ($)
Income Taxes - Tax Benefit Details  
Provision for income taxes
Discontinued Opeartions - Leading Edge Fashions, LLC (Details Narrative)
Dec. 31, 2016
Business Combinations [Abstract]  
Ownership 51.00%
Discontinued Operations (Details Narrative) - USD ($)
 12 Months Ended
Dec. 31, 2016
Mar. 31, 2017
Dec. 31, 2015
Current liabilities from discontinued operations $ 84,281 $ 84,281  
Gain on the extinguishment of debt 635,764    
Current Liabilities [Member]      
Current liabilities from discontinued operations 870,045   $ 870,045
Loan Payable [Member]      
Current liabilities from discontinued operations 0   785,764
Accounts Payable [Member]      
Current liabilities from discontinued operations $ 84,281   $ 84,281
Related Party Transactions (Details Narrative) - USD ($)
 3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Dec. 31, 2016
Related Party Transactions [Abstract]      
Advances from related party   $ 39,048
Related party loans and accrued interest $ 453,851   $ 289,741
Repayment of related party advance (39,048) $ (11,058)  
Advances from related party 284,900    
Related party loans $ 160,650  
Interest rate 5.00%    
Loan to related party $ 20,000    
Commitments and Contingencies - Minimum Royalties (Details) - USD ($)
 3 Months Ended
Mar. 31, 2017
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Commitments and Contingencies Disclosure [Abstract]        
Royalty Expense $ 38,500      
Royalty Commitment $ 612,500 $ 250,000 $ 250,000 $ 112,500
Commitments and Contingencies (Details Narrative) - USD ($)
 1 Months Ended 12 Months Ended
Jan. 18, 2016
Dec. 31, 2016
Pending Litigation #1 [Member]    
Date 1/18/2016  
Allegations
unpaid rent
 collect wages
Alleged Damages $ 26,595 $ 15,000
Pending Litigation #2 [Member]    
Date 1/18/2016  
Allegations
debt of Avani Holdings, LLC.
 collect wages
Alleged Damages $ 150,000 $ 40,000
Net Loss Per Share (Details) - shares
 3 Months Ended 12 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Potentially dilutive securities 2,875,000 325,000
Warrants [Member]    
Potentially dilutive securities 275,000 275,000
Options [Member]    
Potentially dilutive securities 2,550,000
Convertible notes payable[Member]    
Potentially dilutive securities 50,000 50,000
Contingently issuable shares[Member]    
Potentially dilutive securities