10-Q: Eco Science Solutions Q3: Losses Mount, Going Concern Risk

Sentiment:

Quarterly Report 9 December 2025 3:53 PM

📋All filings for Eco Science Solutions, INC

Eco Science Solutions Inc. reported a net loss of $245,859 for the three months ended October 31, 2025, with no revenue generated, raising substantial doubt about its ability to continue as a going concern.

Delay expectedImplementation of several corporate governance reforms mandated by a 2020 legal settlement (e.g., D&O insurance, appointment of independent directors, creation of governance/audit committees, investor relations officer, in-house counsel, whistleblower policy, clawback policy, enhanced conflicts policies, documentation of policies, annual internal control assessment, director education, board oversight of expenditures) has been delayed due to lack of funding and revenue generation.The company has been unable to settle invoices from Take2L for $1,001,310 for services rendered.Many notes payable are in default, indicating delays in repayment.

Capital raiseThe company anticipates continuing to rely on related party and third-party loans and equity sales of common shares and/or shares for services rendered to fund business operations.Management states that the continuation of the company as a going concern is dependent upon the ability to raise equity or debt financing.Future funding could result in potentially dilutive issuances of equity securities or the incurrence of debt.The company has historically relied on loans from related parties and convertible notes.

Worse than expectedThe company reported no revenue for the current and prior comparative periods.Net losses persist, with a significant accumulated deficit of $79.50 million.The cash balance is critically low at $1,914.The company has a substantial working capital deficit of $17.34 million.Numerous notes payable are in default.Management explicitly states substantial doubt about the company's ability to continue as a going concern.Disclosure controls and procedures were deemed ineffective.

Summary

The company reported a net loss of $245,859 for the three months ended October 31, 2025, compared to a loss of $275,311 for the same period in 2024.
For the nine months ended October 31, 2025, the net loss was $782,123, an improvement from the $819,019 loss in the prior year's comparative period.
No revenue was generated in any of the reported periods (three and nine months ended October 31, 2025, and 2024).
As of October 31, 2025, the company had a working capital deficit of $17,344,395 and an accumulated deficit of $79,508,395.
Cash on hand was critically low at $1,914 as of October 31, 2025.
The company's wholly-owned subsidiary, Ga-Du Corporation, was dissolved on April 3, 2025.
Many notes payable, including a $1,407,781 convertible note, are in default.
Disclosure controls and procedures were deemed ineffective as of October 31, 2025.

Sentiment

Score: 1

Explanation: The company has no revenue, significant losses, a critically low cash balance, a massive accumulated deficit, and an explicit 'going concern' warning. Multiple debts are in default, and critical governance reforms are delayed due to lack of funds. The overall financial health is extremely poor, indicating severe distress and high risk.

Positives

Net loss decreased for both the three-month ($245,859 vs $275,311) and nine-month ($782,123 vs $819,019) periods compared to the prior year, primarily due to decreased accounting, audit, and legal fees.
The company continues to process upgrades to its Herbo software suite.
OTC Markets began quotation of the company's shares on December 6, 2024, and FINRA completed processing Form 211 on February 7, 2025, allowing brokers to resume market making.

Negatives

No revenue was generated for the three and nine months ended October 31, 2025, and 2024.
A significant working capital deficit of $17,344,395 and an accumulated deficit of $79,508,395 persist as of October 31, 2025.
The cash balance is critically low at $1,914 as of October 31, 2025.
Substantial doubt exists regarding the company's ability to continue as a going concern.
The company relies heavily on loans and advances from its CEO and CFO, Mr. Michael Rountree, and other related parties.
Numerous notes payable, including a $1,407,781 convertible note, are in default.
Disclosure controls and procedures were not effective as of October 31, 2025.
Significant accrued and unpaid salaries/fees are owed to current and former related parties, totaling $7,156,642 as of October 31, 2025.
Unpaid invoices to Take2L for $1,001,310 for technology development remain outstanding.
Several corporate governance reforms mandated by a 2020 legal settlement have not been implemented due to lack of funding.

Risks

The company has not generated significant revenues to date and its continuation as a going concern is dependent upon continued financial support from shareholders, ability to raise equity or debt financing, and attainment of profitable operations.
A working capital deficit of $17.35 million and an accumulated deficit of $79.51 million raise substantial doubt about the company's ability to continue as a going concern.
External factors such as inflation, the war in Ukraine, and climate change may have serious adverse impacts on domestic and foreign economies, potentially reducing consumer spending and impacting the company's operations.
There are no assurances that additional capital will be available on acceptable terms or that an equity line will be available when needed, potentially leading to dilutive issuances of equity securities or incurrence of debt.
The current economic downturn may make it difficult to find new capital sources for the company.
Disclosure controls and procedures were not effective as of October 31, 2025, indicating potential weaknesses in financial reporting and compliance.
Failure to implement mandated corporate governance reforms due to lack of funding could lead to further legal or regulatory issues.

Future Outlook

The company anticipates continuing to rely on related party and third-party loans and equity sales to fund business operations due to ongoing operational shortfalls. Management is actively seeking users for its Herbo ERP and HerboPay financial software and pursuing opportunities with state legislatures in states where cannabis is legal. The company intends to promote its platforms to other regulated industries such as gaming, firearm and ammunition, and oil and gas. However, there are no assurances that additional capital will be available on acceptable terms, and future funding could result in potentially dilutive issuances of equity securities or the incurrence of debt. The current economic downturn may also make it difficult to find new capital sources.

Management Comments

"We currently have no revenue and are actively seeking users of our software; Mr. Rountree is pursuing opportunities with state legislature in states where cannabis is legal."
"Additionally, Mr. Rountree is actively searching out businesses that would benefit from using the Herbo ERP and HerboPay financial software."
"Currently a significant portion of our total operating expenses are from management and consultant fees."
"Mr. Rountree continues to fund the Company with his personal funds and once the Company begins generating revenue or secures financing, 15% will be put aside [for governance reforms]."
"To date, Mr. Rountree is funding the Company and there arent enough funds to implement all of the requirements of the Stipulation."
"The agreement calls for the above to be completed within four years; however, the implementation of each remains at the discretion, and subject to the judgement, of Mr. Mudd."
"In the event that the Company does not begin to generate income, or secure financing, the Company will fail."

Industry Context

The company operates in the niche market of providing ERP and financial services platforms (Herbo and Herbo Pay) for regulated, cash-intensive industries, primarily cannabis and CBD, with intentions to expand into gaming, firearm/ammunition, and oil/gas. This strategy targets sectors with unique compliance needs. However, the complete lack of revenue indicates significant challenges in commercializing its offerings or penetrating these markets, contrasting sharply with the growth seen by successful technology providers in regulated industries.

Comparison to Industry Standards

The company's financial performance, characterized by zero revenue, persistent net losses, a substantial accumulated deficit of $79.51 million, and a critically low cash balance of $1,914, falls significantly below industry standards for publicly traded software or financial technology companies.
Unlike established players in the ERP or FinTech space, which typically demonstrate strong revenue growth, positive cash flow, and robust balance sheets, this company exhibits severe financial distress.
The reliance on related-party loans and the explicit 'going concern' warning are indicators of financial instability that are atypical for healthy companies in any industry, let alone those targeting high-growth or specialized sectors.

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
Secretary	S. Randall Oveson	Michael Rountree	2025-04-02	Resignation of previous person, appointment of new person by Board of Directors.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Subsidiary Dissolution	Ga-Du Corporation, a wholly-owned subsidiary, was dissolved.	2025-04-03	Eliminates a subsidiary, potentially streamlining operations but also removing its platforms (Financial Services, Inventory Control, Advisory Software) from the company's direct offerings, though the filing states ESSI acquired enterprise technologies in-house.
Governance Reform Delays	Several governance reforms mandated by a 2020 legal settlement have not been implemented due to lack of funding, including D&O insurance, appointment of two new independent directors (only one appointed), creation of a board-level Governance Committee, adoption of written corporate governance guidelines and code of ethics, creation of an Audit Committee (one appointed, consisting solely of Mr. Mudd), enhanced board independence, creation of an Investor Relations Officer, engagement of general counsel as necessary, appointment of a Chief Accounting Officer, creation of a written Whistleblower Policy, adoption of a Clawback Policy, adoption of enhanced conflicts policies and practices, establishment of documentation of Policies and Financial Reporting Checklist, annual assessment of internal controls, provision of continuing director education and employee compliance training, and establishment of board oversight of company expenditures.	N/A	Indicates ongoing weaknesses in corporate oversight, internal controls, and investor relations, potentially exposing the company to further legal, regulatory, and operational risks. The lack of funding for these reforms highlights severe financial constraints.
Disclosure Controls and Procedures	Management concluded that disclosure controls and procedures were not effective as of October 31, 2025.	2025-10-31	Raises concerns about the reliability and timeliness of information disclosed to the public and regulatory bodies, increasing compliance risk and potentially impacting investor confidence.

Legal Proceedings

The company settled the 'In re Eco Science Solutions, Inc. Shareholder Derivative Litigation' (Lead Civil No. 1:17-cv-00530-LEW-WRP (D. Haw.)) in December 2020. The settlement included: resignation of Jeffery Taylor as Chairman and Don Taylor as CFO/Board member; appointment of Carl Mudd as Ombudsman and Chairman; cancellation of 3,500,000 common shares from specific shareholders; issuance of 1,400,000 restricted common stock to Robbins LLP for attorney fees; a $350,000 promissory note to Robbins LLP for legal fees; and forgiveness of $1,500,000 debt held by Phenix Ventures LLC.
A commitment to dedicate not less than 15% of revenue and/or any financing raised towards achieving governance reforms has not been implemented due to lack of revenue or substantial financing.

Related Party Transactions

Total related party payables and notes payable amounted to $7,156,642 as of October 31, 2025, an increase from $6,666,476 on January 31, 2025.
Mr. Michael Rountree (CEO, CFO, COO, President, Treasurer) is owed $1,627,500 in accrued and unpaid salary and $335,334 in expenses as of October 31, 2025. Rountree Consulting, controlled by Mr. Rountree, has provided $260,065 in promissory notes during the nine months ended October 31, 2025, and holds accumulated notes totaling $4,212,847.
Mr. Don Lee Taylor (former CFO/Board member) is owed $426,450 in accrued and unpaid salary and $13,000 in notes payable as of October 31, 2025.
Mr. Jeffery Taylor (former CEO/President/Secretary/Director) is owed $44,721 in accrued and unpaid salary as of October 31, 2025.
Ms. Jennifer Taylor (sister of former officers/directors) is owed $166,000 in accrued and unpaid consulting fees as of October 31, 2025.
Ms. Meredith Rountree (sister of CEO) is owed $161,250 in accrued and unpaid consulting fees as of October 31, 2025.
L. John Lewis (former CEO of Ga-Du) is owed $240,000 in accrued and unpaid salary (reflected as a liability held on divestiture) and holds a $170,000 note payable.
S. Randall Oveson (former COO of Ga-Du, former Secretary) is owed $240,000 in accrued and unpaid salary (reflected as a liability held on divestiture).
Andy Tucker (consultant) is owed $240,000 in accrued and unpaid salary (reflected as a liability held on divestiture).
Mr. Carl Mudd (Chairman, Ombudsman) is owed $580,000 in advisory fees as of October 31, 2025.

Stakeholder Impact

Shareholders face significant dilution risk from potential future equity raises, continued trading on the OTC Markets Pink Sheets, and the substantial accumulated deficit and going concern risk. The ineffectiveness of disclosure controls also poses a risk to transparency and investor confidence.
Employees and management, particularly Mr. Rountree, are impacted by accrued and unpaid salaries and fees, indicating financial strain and reliance on personal funds to sustain operations.
Creditors, including related parties, face high risk due to numerous notes payable being in default and the company's overall financial distress, raising concerns about the recoverability of their investments.
Suppliers, such as Take2L, are impacted by unpaid invoices, which could strain relationships and affect the continuity of essential services.
Customers (potential future users of Herbo software) face the risk of the company's failure, which could disrupt their operations if they adopt the platform.

Next Steps

Actively seek users for Herbo ERP and HerboPay financial software.
Pursue opportunities with state legislatures in states where cannabis is legal.
Promote ERP and financial services platform to other regulated industries (gaming, firearm/ammunition, oil/gas).
Obtain additional capital through debt or equity financing to cover operational overhead and implement governance reforms.
Implement remaining corporate governance reforms as funding becomes available.

Key Dates

Date	Description
2009-12-08	Company incorporated in Nevada under the name Pristine Solutions, Inc.
2014-01-08	Company changed its name from Pristine Solutions, Inc. to Eco Science Solutions, Inc.
2015-12-21	Company entered into employment agreements with Mr. Jeffery Taylor and Mr. Don Lee Taylor.
2016-02-17	Company issued promissory notes to Mr. Jeffery Taylor and Mr. Don Lee Taylor.
2017-06-21	Company acquired 100% of the shares of capital stock of Ga-Du Corporation.
2017-06-21	Company entered into an employment agreement with Michael Rountree to serve as COO.
2017-06-21	Ga-Du entered into an employment agreement with L. John Lewis as CEO.
2017-06-21	Ga-Du entered into an employment agreement with S. Randall Oveson as COO.
2017-06-21	Ga-Du entered into a consulting agreement with Andy Tucker.
2017-07-21	Company entered into a sublease for office space.
2017-10-01	Company entered into a convertible note for $1,407,781.
2017-10-20	Shareholder derivative complaint filed by Mr. Ian Bell.
2018-01-11	Shareholder derivative complaint filed by Mr. Marc D Annunzio.
2018-02-09	First and Second Hawaii Complaints consolidated into the Consolidated Hawaii Action.
2018-03-28	Third party purchased an additional $250,000 in notes from Rountree Consulting.
2018-07-31	Company issued promissory notes to Mr. Lewis to convert a payable amount to a note payable of $170,000.
2018-09-01	Take2L invoiced $350,000 to the Company for ongoing software development.
2018-09-12	Company received $14,422 from a third party (Note 5).
2018-12-10	Plaintiffs in the Consolidated Hawaii Action filed their amended complaint.
2020-09-21	United States District Court for the District of Hawaii preliminarily approved a proposed settlement in the shareholder derivative litigation.
2020-11-17	A hearing was held, and settlement terms were approved by the Honorable Leslie Kobayashi.
2020-12-03	Order issued by the Honorable Leslie Kobayashi approving the settlement.
2020-12-08	Company entered into a Promissory Note in the amount of $350,000 with Robbins LLP.
2020-12-08	Michael Rountree was appointed interim CFO and Treasurer.
2020-12-08	Jeffery Taylor resigned as Chairman of the Board, and Don Taylor resigned as CFO and a Board Member.
2020-12-23	Company entered into a Board Advisory Agreement with Mr. Carl Mudd to serve as Chairman and Ombudsman.
2021-01-28	Company entered into an Asset Purchase Agreement with Haiku Holdings, LLC.
2021-01-28	Company entered into a Debt Settlement and Share Purchase Agreement with Rountree Consulting, Inc.
2021-01-28	Board of Directors accepted the resignation of Jeffery Taylor as Chief Executive Officer, effective January 31, 2021.
2021-01-28	Company entered into an Indemnification Agreement with Michael Rountree, A. Carl Mudd, and S. Randall Oveson.
2021-01-31	Company and Note holder entered into a consolidation of prior notes (Consolidated Note).
2021-01-31	Executive Employment Agreement with Michael Rountree became effective.
2022-10-06	Company's securities were revoked along with its trading symbol.
2023-01-17	Company accepted the resignation of Mr. Don Taylor as Director of Festivals and Mr. Jeffery Taylor as Director, President and Secretary.
2023-02-28	Formal termination of employment contracts for Mr. Don and Mr. Jeffery Taylor.
2023-04-05	Company and eXPO Financial Services LLC entered into a Software Acquisition Agreement.
2024-01-31	eXPO software acquisition paid in full.
2024-12-06	OTC Markets began quotation of the company's shares on the OTC Markets Pink Sheets under the trading symbol ESSI.
2025-02-07	FINRA completed processing the company's Form 211, allowing brokers to resume publication of competing quotes and provide continuous market making.
2025-04-02	Mr. Oveson resigned as Secretary and Mr. Rountree was appointed Secretary of the Company.
2025-04-03	A Certificate of Dissolution/Withdrawal was filed with the state of Nevada, and Ga-Du Corporation was dissolved.
2025-10-31	End of the current quarterly reporting period.
2025-12-09	Date the financial statements were issued.

Recommendation

strong sell

The company exhibits severe financial distress with no revenue, persistent and substantial net losses, a critically low cash balance, and a massive accumulated deficit. The explicit 'going concern' warning, numerous defaulted debts, and the inability to implement mandated governance reforms due to lack of funding indicate an unsustainable business model. While the net loss decreased, it does not mitigate the fundamental issues. The stock is highly speculative and carries an imminent risk of complete loss of investment, making it a strong sell for any seasoned investor or institution.

Keywords

Eco Science Solutions, ESSI, Herbo, Herbo Pay, ERP platform, financial services platform, cannabis industry software, CBD industry software, regulated industries, software development, SEC filing, 10-Q, quarterly report, going concern, net loss, accumulated deficit, related party transactions, corporate governance, OTC Markets

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