(EDGAR Online via COMTEX) -- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Operations The following discussion of the financial condition and results of our operations should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K for the year ended December 31, 2009 (this "Report"). This Report contains certain forward-looking statements and our future operating results could differ materially from those discussed herein. Certain statements contained in this Report, including, without limitation, statements containing the words "believes", "anticipates," "expects" and the like, constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). However, as we issue "penny stock," as such term is defined in Rule 3a51-1 promulgated under the Exchange Act, we are ineligible to rely on these safe harbour provisions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. We disclaims any obligation to update any such factors or to announce publicly the results of any revisions of the forward-looking statements contained or incorporated by reference herein to reflect future events or developments. On November 13, 2007, we changed our name from "XL Generation International Inc." to "Ecolocap Solutions Inc." Our shares of common stock are traded on the Bulletin Board operated by the Financial Industry Regulatory Authority under the symbol ECOS. Over the past three months the Company CEO went to Vietnam to reactivate discussions and negotiations for its portfolio of existing projects. After a few trips, discussions and negotiations that occurred over the past six months, 8 ERPA (Emission Reduction Purchase Agreement) contracts were reactivated in Vietnam. During the past year, Micro Bubble Technologies (MBT) has prepared to launch its new CNT Battery and has continued to market its M-Fuel technology internationally through distribution agreements that are signed or in the final stages of completion. These agreements have taken place in industries ranging from maritime to telecommunications. We have sent our CNT Batteries to independent laboratory testing, CNT Batteries have proven, for the same price as a traditional lead-acid battery, will deliver up to 8 times the reserve capacity of a lead-acid battery and 2.5 times that of a lithium-ion battery, while taking only ten minutes to recharge, as compared to five to 12 hours for standard batteries. MBT has also developed a new process that blends non-miscible liquids (oil and water) on a submicron level in order to create a new non-emulsified fuel product that it calls EM-Fuel. Laboratory and actual in use measurements have demonstrated a 25% reduction in cost for fuel and maintenance, while reducing particulate CO2 and NOx emissions by 60%. The M-Fuel can also be used without any modification of the engine or furnace burning the oil. In September 2009, MBT has signed an agreement with Next-Alternative Inc, which agreed to pay $2 million in return for the exclusive right to market and distribute MBT's Carbon Nano Tube Battery for wheeled applications in North America. In November 2009, MBT held a Product Event Showcase in Seoul, South Korea. Participants spent time in meetings with EcoloCap representatives going over the numerous business opportunities available to them. Target markets and applications were discussed at length as were the various scenarios of large scale product implementation. In December2009, Ecolocap Solutions Canada signed a partnership agreement with Gazprom Marketing and Trading, for the development of CDM Projects in Asia. January 25, 2010. In January 2010, MBT delivered its first Lithium X batteries to Halo Renewable Energy of Seattle, WA. Halo will conduct preliminary testing in collaboration with a major potential customer. In February 2010, MBT announced that it has signed an agreement with Exponent Inc. Engineering and Scientific Consulting of Phoenix, AZ to test EcoloCap's newly announced Lithium X battery. Business Plan MBT is in the process of locating a site to build its first battery factory in Korea. MBT is also in discussion with various international companies for joint ventures in battery production. MBT will be delivering 60 test batteries to an international communications company and a European bus company. MBT plans to start testing M-Fuel in California by the third quarter of 2010 for approval of the California Air Resources Board. The Kyoto Protocol established various exchange mechanisms in order to achieve its targeted reduction in carbon emission. In addition to the targets set by Kyoto, countries and companies not bound by the Kyoto Protocol are voluntarily creating national schemes and offsetting their emissions associated to their normal activities as part of their corporate responsibility. Recognizing the opportunity these new mechanisms represent, we are developing an integrated development approach that focuses upon both existing and needed infrastructure facilities to produce substantial new value in the form of tradable CERs while at the same time maximizing alternative energy generation co-products. Our partners with owners of facilities emitting the harmful greenhouse gas as well as with all other environmental projects' owners in developing countries, to capitalize on the opportunities afforded by the emerging market in carbon credit trading turning potential liabilities into lucrative resources while maximizing available possibilities for clean and renewable energy production. Our initial geographical focus will be Vietnam and China followed by expansions into Africa and Latin America. These areas have been identified by leading authorities as representing substantial opportunities for remediation of greenhouse gasses and therefore represent the greatest opportunities for the production of CERs. They also represent geographies in which we can develop efficient operating scale thereby enhancing potential profitability. Results of Operations For the Twelve Month Period ended December 31, 2009 Overview We posted net losses of $975,857 for the year ended December 31, 2009 as compared to net gains of $4,939,044 last year. The loss resulted mainly from selling, general and administrative expenses. Last year loss was caused by the signature of an exclusive Service Agreement with United Best Technology Limited of Hong Kong. United will devote all its intellectual property, knowledge, technology and contacts related to the CER and Clean Development Mechanism projects exclusively for the development of EcoloCap business in an exclusive and define territory. United for the exclusivity of its services was granted Three Million Five Hundred Thousand (3,500,000) restricted shares of our common stock. The cost of the Agreement was accounted for under compensation expense. During the past year, the economic crisis has slowed down the CER projects development market. From the beginning of the year and until the end of the second quarter, most of the investors have secured their initial investments and stalled new investments in the carbon credit business. In the third quarter, following the economic pickup, the carbon credit business has started to move and investors have been looking for investment projects. Ecolocap Solutions Canada CEO went back to Vietnam and China to reactivate discussions and negotiations for its portfolio of existing projects. After a few trips, discussions and negotiations that occurred over the past six months, 8 ERPA (Emission Reduction Purchase Agreement) contracts were reactivated in Vietnam. In order to help CER project owners and to accelerate the project development, Ecolcoap Solutions has started discussions with potential investors, brokers and CER buyers. On December 30, 2009 EcoloCap Solutions has entered into a Partnership Agreement with Gazprom Marketing and Trading, tofinance and prepare the registration process of EcoloCap's growing portfolio of existing and potential Certified Emission Reductions (CERs) under the Clean Development Mechanism (CDM). As of March 31, 2010, the due diligence of the projects under the abovementioned agreement is now under way; that should be concluded in the next two months. Development Stage Expenditures Development stage expenditures for the year ended December 31, 2009, were $265,000 in salaries, $32,700 in travel, $71,400 in rent, $258,000 in compensation expense and $91,400 in professional fees. Sales For the year ended December 31, 2009 we had no gross revenues. Total Cost and Expenses For the year ended December 31, 2009, we incurred total costs and expenses of $975,857. This compared to $4,939,044 for last year. The decrease in total cost and expenses resulted from the signature in 2008 of an exclusive Service Agreement with United Best Technology Limited of Hong Kong. United will devote all its intellectual property, knowledge, technology and contacts related to the CER and Clean Development Mechanism projects exclusively for the development of EcoloCap business in an exclusive and define territory. United for the exclusivity of its services was granted Three Million Five Hundred Thousand (3,500,000) restricted shares of our common stock. The cost of the Agreement was accounted for under compensation expense. We decided to leave the manufacturing and distribution of environmentally sound artificial playing field surfaces and have currently developed an integrated development approach that focuses upon both existing and needed infrastructure facilities to produce substantial new value in the form of tradable CERs. Selling, General and Administration For the year ended December 31, 2009, we incurred selling, general and administration expenses of $470,476. This compared $939,873 for last year. The decrease resulted from the former CEO salary being paid in Company stock (compensation expense) and reduction of the development expenses $10,000. Interest We calculate interest in accordance with the respective note payable. For the year ended December 31, 2009, we charged $42,705. This compared to $162,146 for last year. The decrease is caused by the conversion of $701,000 of debt into common shares and the loans of $447,096 from stockholders at 5% interest. Liquidity and Capital Resources At December 31, 2009, we had $1,944 in cash, as opposed to $23,787 in cash at December 31, 2008. Total cash used in operations requirements for the twelve month period ended December 31, 2009 was $542,803. As a result of its new business plan, management estimates that cash requirements through the end of the fiscal year ended December 31, 2010 will be between $2.0 million to $5.5 million. As of the date of this Report, we do not have available resources sufficient to cover the expected cash requirements through the end of the third quarter of 2010 or the balance of the year. As a result, there is substantial doubt that we can continue as an ongoing business without obtaining additional financing. Management's plans for maintaining our operations and continued existence include selling additional equity securities and borrowing additional funds to pay operational expenses. There is no assurance we will be able to generate sufficient cash from operations, sell additional shares of Common Stock or borrow additional funds. Our inability to obtain additional cash could have a material adverse effect on our financial position, results of operations and our ability to continue our existence. If our losses continue and we are unable to secure additional financing, we may ultimately be required to seek protection from creditors under applicable bankruptcy laws. At December 31, 2009, we had total assets of $13,705,275 compared to total assets of $81,098. The increase is mainly due to the acquisition of Intangible assets and Goodwill ($13,228,721) and Deposit on machinery ($609,823). At December 31, 2009, we had total current liabilities of $2,295,558 compared to total current liabilities of 918,524 at December 31, 2008. The liabilities are mainly due to (i) accrued operational costs ($391,177), (ii) customer deposit ($454,940) and (iii) loan notes from shareholders ($1,402,055). We are party to a lease for our Montreal office (the "Montreal Lease"), at a minimum annual rent of approximately $64,000 per year. The Montreal Lease expires in February 15, 2014. The Company has vacated the premises and according to the lease, a six month rent might have to be paid if the landlord intends a lawsuit against the Company. The six month rent amount has been provisioned in the Financial Statements. Our financial condition raises substantial doubt about our ability to continue as a going concern. Management's plan for our continued existence includes selling additional stock through private placements and borrowing additional funds to pay overhead expenses while maintaining marketing efforts to raise our sales volume. Our future success is dependent upon our ability to achieve profitable operations, generate cash from operating activities and obtain additional financing. There is no assurance that we will be able to generate sufficient cash from operations, sell additional shares of common stock or borrow additional funds. Our inability to obtain additional cash could have a material adverse effect on our financial position, results of operations and our ability to continue as a going concern. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this Memorandum. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions. We have only had operating losses which raise substantial doubts about our viability to continue our business and our auditors have issued an opinion expressing the uncertainty of our company to continue as a going concern. If we are not able to continue operations, investors could lose their entire investment in our company. Limited Operating History We have a history of operating losses, and may continue to incur operating losses. We experienced losses during the fiscal year ending December 31, 2009. With respect to the audited year ended December 31, 2009, we incurred losses of $975,857 (compared with losses of $4,939,044 for the same period last year). We had negative working capital for the year ending December 31, 2009 of $1,668,483 (compared with $837,426 for the same period last year), and a stockholders' deficiency of $5,835,523 audited as of December 31, 2009 (compared with a stockholders' deficiency of $837,426 audited as of December 31, 2008). All of these developments raise substantial doubt about our ability to continue as a going concern. As a result of these losses and the losses incurred as of December 31, 2009, our auditors may issue an opinion in their audit report for the year ended December 31, 2009 expressing uncertainty about the ability of our Company to continue as a going concern. This means that there is substantial doubt whether we can continue as an ongoing business without additional financing and/or generating profits from our operations. Contractual Obligations The Company is a party to a lease for its Montreal office, at a minimum annual rent of approximately $64,000 per year. The Montreal Lease expires in February 15, 2014. The Company has vacated the premises and according to the lease, a six month rent might have to be paid if the landlord intends a lawsuit against the Company. The six month rent amount has been provisioned in the Financial Statements. The Company is a party to a lease for its Barrington office, at a minimum annual rent of approximately $23,000 per year. The Barrington Lease expires in May, 2013. Off Balance Sheet Arrangements We have no off balance sheet arrangements other than as described above. We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder's equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us. May 12, 2010