UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
  FORM
10-Q
 x
                QUARTERLY REPORT UNDER SECTION
      13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
                  FOR THE
      QUARTERLY PERIOD ENDED DECEMBER 31,
2009
 o
                TRANSITION REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 For
the transition period from  _________________________  to
_____________________________
 
 Commission
File Number: 333-145659
 
 ECOBLU PRODUCTS,
INC.
 (Exact
name of registrant as specified in its charter)
  Colorado
                20-8677788(State
      or other jurisdiction of incorporation or organization)
                (I.R.S.
      Employer Identification No.)
 
 909 West Vista Way,
      Vista, CA 92083(Address
      of principal executive offices)
 
 (909) 519-5470(Registrant’s
      telephone number including area code)______________________________________________________________(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 Exchange Act during the past
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.                x Yes o 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). x Yes o No
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company; as
defined within Rule 12b-2 of the Exchange Act.
 
 
 Large
      accelerated filer o
                Accelerated
      filer oNon-accelerated
      filer       (Do not check if a smaller
      reporting company) o
                Smaller
      reporting company x
 
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
 o Yes x No
 
 
 The
number of shares outstanding of each of the issuer's classes of common equity as
of December 31, 2009:
 69,232,194 shares
of common stock


1
 Ecoblu Products, Inc.
 (A development stage company)
 
 Contents







PART
      I
            FINANCIAL
      INFORMATION
            
            Page NumberItem
    1
            Condensed
      Consolidated Financial Statements
              December 31,
      2009
            
            3Condensed
      Consolidated Balance Sheet
            
            3Condensed
      Consolidated Statements of Operations
            
            4Condensed
      Consolidated Statement of Cash Flows
            
            5Notes to Condensed
      Consolidated Financial Statements
            
            6Item
    2
            Management's
      Discussion and Analysis of Financial Condition and
      Results of Operations
            
            11Item
      3
            Quantitative and
      Qualitative Disclosures About Market Risk
            
            13Item
    4T
            Controls and
      Procedures
            
            13Part
    II
            OTHER
      INFORMATION
            
            14Item
    1
            Legal
      Proceedings
            
            14Item
      2
            Unregistered Sales
      of Equity Securities and Use of Proceeds
            
            14Item
      3
            Defaults Upon Senior
      Securities
            
            14Item
      4
            Submission of
      Matters to a Vote of Security Holders
            
            14Item
    5
            Other
      Information
            
            14Item
    6
            Exhibits and
      Reports
            
            15SIGNATURES
            
            
            16







2
 Ecoblu
Products, Inc.
 (A
development stage company)
  Condensed
Consolidated Balance Sheet


December
      31,2009(Unaudited)ASSETSCURRENT
      ASSETSCash
            
            $
            609Prepaid
      expenses
            
            
            48,888Total
      current assets
            
            
            49,497IDLE
      PROPERTY AND EQUIPMENT
            
            
            497,717OTHER
      ASSETSEquipment
      deposits – related party
            
            
            339,119Tenant
      improvements in progress
            
            
            36,442Security
      deposits
            
            
            25,642Prepaid
      trademark costs
            
            
            4,871Total
      other assets
            
            
            406,074TOTAL
      ASSETS
            
            $
            953,288LIABILITIES
      AND STOCKHOLDERS' (DEFICIT)CURRENT
      LIABILITIESAccounts
      payable
            
            $
            147,537Rent
      payable
            
            
            119,900Other
      payables and accrued expenses
            
            
            15,305Total
      current liabilities
            
            
            282,742LONG
      TERM LIABILITIESConvertible
      note payable, including accrued interest and net of
    discount
            
            
            21,036Deferred
      rent
            
            
            19,445Total
      long term liabilities
            
            
            40,481TOTAL
      LIABILITIES
            
            
            323,223STOCKHOLDERS'  (DEFICIT)Common
      stock, $0.001 par value, 100,000,000 shares authorizedand
      69,232,194 shares issued and outstanding
            
            
            69,232Additional
      paid-in capital
            
            
            918,262Common
      stock subscription receivable
            
            
            (20,000
            )Accumulated
      deficit
            
            
            (337,429
            )Total
      stockholders' (deficit)
            
            
            630,065TOTAL
      LIABILITIES AND STOCKHOLDERS'  (DEFICIT)
            
            $
            953,288The
      accompanying notes are an integral part of these unaudited condensed
      consolidated financial statements




3
 Ecoblu
Products, Inc.
 (A
development stage company)
  Condensed
Consolidated Statements of Operations
 (Unaudited)





Three
      Months Ended
              December
      31,
            
            
            Period
      of Inception (May 20, 2009)
              to
      December 31,2009
            
            
            2009(Unaudited)
            
            
            (Unaudited)REVENUE
            
            
            $
            -
            
            
            $
            -OPERATING
      EXPENSESResearch
      and development
            
            
            5,975
            
            
            
            5,975Marketing
            
            
            
            17,873
            
            
            
            17,873Compensation
            
            
            
            32,462
            
            
            
            32,462Rent
            
            
            
            62,417
            
            
            
            134,345Professional
      fees
            
            
            
            52,130
            
            
            
            52,130Consulting
            
            
            
            62,700
            
            
            
            62,700Interest
            
            
            
            1,035
            
            
            
            1,035Other
      general and administrative expenses
            
            
            30,909
            
            
            
            30,909Total
      operating expenses
            
            
            
            265,501
            
            
            
            337,429LOSS
      FROM OPERATIONS
            
            
            (265,501
            )
            
            
            (337,429
            )Provision
      for income taxes
            
            
            -
            
            
            
            -NET
      LOSS
            
            $
            (265,501
            )
            
            $
            (337,429
            )NET
      LOSS PER COMMON SHARE -BASIC
      AND DILUTED
            
            $
            (0.00
            )WEIGHTED
      AVERAGE NUMBER OFCOMMON
      SHARES OUTSTANDING
            
            
            68,502,724The
      accompanying notes are an integral part of these unaudited condensed
      consolidated financial statements





4
 Ecoblu
Products, Inc.
 (A
development stage Company)
  Condensed
Consolidated Statement of Cash Flows
 From
Inception (May 20, 2009) Through December 31, 2009
(Unaudited)







CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
            
            $
            (337,429
            )Adjustment
      to reconcile net loss to net cashused
      in operating activities:Stock
      based compensation
            
            
            32,000Donated
      legal fees
            
            
            3,200Changes
      in operating assets and liabilities:(Increase)
      in prepaid expenses
            
            
            (48,888
            )(Increase)
      in security deposits
            
            
            (25,642
            )Increase
      in accounts payable
            
            
            97,138Increase
      in rent payable
            
            
            119,900Increase
      in other payables and accrued expenses
            
            
            33,500Interest
      on amortization of debt discount
            
            
            878Increase
      in accrued interest added to principal
            
            
            157Net
      cash used in operating activities
            
            
            (125,186
            )CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchase
      of equipment
            
            
            (368,687
            )Payments
      for equipment deposits – related party
            
            
            (339,119
            )Payments
      for tenant improvements in progress
            
            
            (31,899
            )Net
      cash used in investing activities
            
            
            (739,705
            )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from sale of common stock
            
            
            738,500Proceeds  from
      debt
            
            
            127,000Net
      cash provided by financing activities
            
            
            865,500NET
      INCREASE IN CASH AND CASH EQUIVALENTS
            
            
            609CASH
      AND CASH EQUIVALENTS - beginning of period
            
            
            -CASH
      AND CASH EQUIVALENTS - end of period
            
            $
            609SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:Interest
      paid
            
            $
            -Income
      taxes paid
            
            $
            -The
      accompanying notes are an integral part of these unaudited condensed
      consolidated financial statements





5
 Ecoblu
Products, Inc.
 (A
development stage company)
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FROM
MARCH 21, 2007 (INCEPTION), TO SEPTEMBER 30,
2009







Note
1 – Organization and Basis Presentation





Organization


Ecoblu
Products, Inc. (“The Company”) was incorporated in the state of Colorado under
the name N8 Concepts, Inc. on March 27, 2007. On October 19, 2009, the Company
merged with Ecoblu Products, Inc., a Nevada Corporation
(“ECOBLU”).  For financial reporting purposes, the acquisition was
treated as a reverse acquisition whereby ECOBLU’s operations continue to be
reported as if it had actually been the acquirer. Assets and liabilities
continue to be reported at the Acquiree’s historical cost because before the
reverse acquisition, the Company had nominal assets, liabilities and
operations.





ECOBLU
was organized May 20, 2009 in Nevada as a wholesale distributor of protective
coating products.  The Company is in the development stage, as defined
in Accounting Codification Standard (“ACS”) topic 915-10, formerly Statement of
Financial Accounting Standards No. 7, Accounting and Reporting by Development
Stage Enterprises.  From inception through December 31, 2009, the
Company has recorded no revenues.





The
Company plans to adopt a fiscal year end of March 31, 2011.





Going
Concern


The
Company's financial statements are prepared using the accrual method of
accounting in accordance with accounting principles generally accepted in the
United States of America and have been prepared on a going concern basis, which
contemplates the realization of assets and the settlement of liabilities in the
normal course of business. The Company is a development stage company presently
generating no operating revenues and its viability is dependent upon its ability
to obtain future financing and the success of its future
operations.  These factors raise substantial doubt about the Company’s
ability to continue as a going concern.





These
financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets or liabilities that might
be necessary should the Company be unable to continue as a going
concern.





The
Company plans to fund its operations through the raising of capital from the
sale of its equity instruments or issuance of debt. Management believes that
these sources of funds will allow the Company to continue as a going concern
through 2010. However, no assurances can be made that current or anticipated
future sources of funds will enable the Company to finance future periods’
operations.





Basis of
Presentation


The
accompanying unaudited condensed consolidated financial statements contain all
adjustments (consisting only of normal recurring adjustments) which, in the
opinion of management, are necessary to present fairly the financial position of
the Company as of December 31, 2009, and the results of its operations and cash
flows for the three months ended December 31, 2009 and from its inceptions (May
20, 2009) through December 31, 2009. Certain information and footnote
disclosures normally included in financial statements have been condensed or
omitted pursuant to rules and regulations of the U.S. Securities and Exchange
Commission (the “Commission”). The Company believes that the disclosures in the
unaudited condensed consolidated financial statements are adequate to make the
information presented not misleading.







Note
2 - Summary of Significant Accounting Policies





Principles of
Consolidation


The
accompanying consolidated financial statements include the accounts of the
Ecoblu Products, Inc. and its wholly owned subsidiary.  Intercompany
transactions and balances have been eliminated in consolidation.




Property and
Equipment


Property
and equipment are stated at cost.  Major renewals and improvements are
charged to the asset accounts while replacements, maintenance and repairs that
do not improve or extend the lives of the respective assets are
expensed.  At the time property and equipment are retired or otherwise
disposed of, the asset and related accumulated depreciation accounts are
relieved of the applicable amounts.  Gains or losses from retirements
or sales are credited or charged to income.  Depreciation expense is
not recorded on idle property and equipment until such time as it is placed into
service.





Long-Lived
Assets


The
Company accounts for its long-lived assets in accordance with ASC Topic
360-10-05, “Accounting for the Impairment or Disposal of Long-Lived
Assets.”  ASC Topic 360-10-05 requires that long-lived assets be
reviewed for impairment whenever events or changes in circumstances indicate
that the historical cost carrying value of an asset may no longer be
appropriate.  The Company assesses recoverability of the carrying
value of an asset by estimating the future net cash flows expected to result
from the asset, including eventual disposition.  If the future net
cash flows are less than the carrying value of the asset, an impairment loss is
recorded equal to the difference between the asset’s carrying value and fair
value or disposable value.  At December 31, 2009, the Company
determined that none of its long-term assets were impaired.





Issuances Involving Non-cash
Consideration


All
issuances of the Company’s stock for non-cash consideration have been assigned a
dollar amount equaling the market value of the shares issued on the date the
shares were issued for such services. The non-cash consideration received
pertains to consulting services.





Stock Based
Compensation


The
Company accounts for stock-based compensation under ACS Topic 505-50, formerly
SFAS No. 123R, "Share-Based Payment” and SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure - An amendment to SFAS No.
123.”  These standards define a fair value based method of accounting
for stock-based compensation. In accordance with SFAS Nos. 123R and 148, the
cost of stock-based compensation is measured at the grant date based on the
value of the award and is recognized over the vesting period. The value of the
stock-based award is determined using the Black-Scholes option-pricing model,
whereby compensation cost is the excess of the fair value of the award as
determined by the pricing model at the grant date or other measurement date over
the amount that must be paid to acquire the stock. The resulting amount is
charged to expense on the straight-line basis over the period in which the
Company expects to receive the benefit, which is generally the vesting period.
The Company has not issued any stock based compensation.





6





Loss Per
Share


The
Company reports earnings (loss) per share in accordance with ASC Topic 260-10,
"Earnings per Share." Basic earnings (loss) per share is computed by dividing
income (loss) available to common shareholders by the weighted average number of
common shares available. Diluted earnings (loss) per share is computed similar
to basic earnings (loss) per share except that the denominator is increased to
include the number of additional common shares that would have been outstanding
if the potential common shares had been issued and if the additional common
shares were dilutive. Diluted earnings (loss) per share has not been presented
since the effect of the assumed conversion of warrants and debt to purchase
common shares would have an anti-dilutive effect.  As of December 31,
2009, the Company had 600,000 potential common shares relating to its
convertible debt obligation.





Cash and Cash
Equivalents


For
purpose of the statements of cash flows, the Company considers cash and cash
equivalents to include all stable, highly liquid investments with maturities of
three months or less.





Use of
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 affects 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.





Convertible
Debentures


If the
conversion feature of conventional convertible debt provides for a rate of
conversion that is below market value, this feature is characterized as a
beneficial conversion feature (“BCF”).  A BCF is recorded by the
Company as a debt discount pursuant to ASC Topic 470-20 “Debt with Conversion
and Other Options.” In those circumstances, the convertible debt is recorded net
of the discount related to the BCF and the Company amortizes the discount to
interest expense over the life of the debt using the effective interest
method.





Income
Taxes


The
Company accounts for its income taxes under the provisions of ASC Topic 740
”Income Taxes” (formerly Statement of Financial Accounting Standards 109). The
method of accounting for income taxes under ASC 740 is an asset and liability
method. The asset and liability method requires the recognition of deferred tax
liabilities and assets for the expected future tax consequences of temporary
differences between tax bases and financial reporting bases of other assets
and   liabilities.





Recent Accounting
Pronouncements


In
January 2010, the Financial Accounting Standards Board (“FASB”) issued
Accounting Standards Update (“ASU”) No. 2010-06, Improving Disclosures about
Fair Value Measurements. ASU No. 2010-06 amends FASB Accounting Standards
Codification (“ASC”) 820 and clarifies and provides additional disclosure
requirements related to recurring and non-recurring fair value measurements and
employers’ disclosures about postretirement benefit plan assets. This ASU is
effective for interim and annual reporting periods beginning after December 15,
2009. The adoption of ASU 2010-06 is not expected to have a material impact on
the Company’s condensed consolidated financial statements.





In
October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue
Arrangements, (amendments to ASC Topic 605, Revenue Recognition) (“ASU 2009-13”)
(formerly Emerging Issues Task Force Issue 08-1) and ASU 2009-14, Certain
Arrangements That Include Software Elements , (amendments to FASB ASC Topic 985,
Software ) (“ASU 2009-14”) (formerly Emerging Issues Task Force Issue 09-3). ASU
2009-13 requires entities to allocate revenue in an arrangement using estimated
selling prices of the delivered goods and services based on a selling price
hierarchy. The amendments eliminate the residual method of revenue allocation
and require revenue to be allocated using the relative selling price method. ASU
2009-14 removes tangible products from the scope of software revenue guidance
and provides guidance on determining whether software deliverables in an
arrangement that includes a tangible product are covered by the scope of the
software revenue guidance. ASU 2009-13 and ASU 2009-14 should be applied on a
prospective basis for revenue arrangements entered into or materially modified
in fiscal years beginning on or after June 15, 2010, with early adoption
permitted. The Company anticipates adopting ASU 2009-13 and ASU 2009-14 in
fiscal 2011 and is currently assessing the impact of the adoption of these
standards on the Company’s condensed consolidated financial
statements.








Note
3 – Prepaid Expenses





Prepaid
expenses at December 31, 2009 consist of $48,888 paid towards a chemical
purchase order.








Note
4 – Idle Property and Equipment


The
Company is in the process of constructing its facilities. As of December 31
2009, the Company purchased coating machines totaling $477,294 from a related
party (see Note 6) and furnishings and office equipment amounting to $20,423.
These assets have not placed in service and remain idle until the facilities
commence operating.








7





Note
5 – Convertible Note Payable





The
Company received $127,000 evidenced by a promissory note that is assessed
interest at rate of 5% per annum commencing on December 22, 2009. The note
matures on December 22, 2012, when the outstanding principal and accrued
interest become fully due and payable. Prior to maturity, the holder has the
right to convert the balance owed into 600,000 shares of the Company’s common
stock.





Pursuant
to ASC Topic 470-20, “Debt with Conversion and Other Options,” the
convertible note was recorded net of a discount that includes a beneficial
conversion feature (“BCF”) amounting to $107,000.  The discount is
amortized and charged to operations over the life of the debt using the
effective interest method.  The initial value of the BCF of $107,000
was calculated as the difference between the market value of the 600,000
potential conversion shares at December 22, 2009 (600,000 shares multiplied by
stock price of $0.39 per share, or $234,000), less the effective cost of the
conversion at such date (the note balance, or $127,000).





For
      the three-months ended December 31, 2009, interest totaling $157 was
      charged to operations. During the three months
      ended December 31 2009, discount amortization charged to operations
      totaled $879.





The
      balance of the convertible note as of December 31, 2009 is as
      follows:








Principal
      balance
            
            $
            127,000Accrued
      interest
            
            
            157Less
      discount
            
            
            (106,121
            )$
            21,036






Note 6 – Related Party
Transactions




As of
December 31 2009, the Company purchased coating machines totaling $477,294 from
two related entities that are controlled by the Company’s President, who is also
a majority shareholder.  The Company also made $339,119 in equipment
deposits to these same related parties for the manufacture of four new coating
machines.





The
Company’s related party transactions are not considered to have occurred at arms
length.








Note
7 – Fair Value of Assets and Liabilities




Determination of Fair
Value





The
Company’s financial instruments consist principally of cash, accounts and rent
payable, and convertible note with carrying values that approximate fair
value.  The Company determines the fair value of notes payable based
on the effective yields of similar obligations.




The
Company believes all of the financial instruments’ recorded values approximate
fair market value because of their nature and respective durations.




The
Company complies with the provisions of ASC 820, “Fair Value Measurements and
Disclosures” (“ASC 820”), previously referred to as SFAS No.
157.  ASC 820 defines fair value, establishes a framework for
measuring fair value and expands disclosures about fair value measurements
required under other accounting pronouncements. ASC 820-10-35, “Fair Value Measurements and
Disclosures - Subsequent Measurement” (“ASC 820-10-35”), clarifies that
fair value is an exit price, representing the amount that would be received from
the sale of an asset or paid to transfer a liability in an orderly transaction
between market participants. ASC 820-10-35 also requires that a fair value
measurement reflect the assumptions market participants would use in pricing an
asset or liability based on the best information available. Assumptions include
the risks inherent in a particular valuation technique (such as a pricing model)
and/or the risks inherent in the inputs to the model.  The Company
also follows ASC 825 “Interim
Disclosures about Fair Value of Financial Instruments”, previously
referred to as FAS 107-1 to expand required disclosures.


ASC
820-10-35 establishes a fair value hierarchy that prioritizes the inputs to
valuation techniques used to measure fair value. The hierarchy gives the highest
priority to unadjusted quoted prices in active markets for identical assets or
liabilities (level 1 measurements) and the lowest priority to unobservable
inputs (level 3 measurements). The three levels of the fair value hierarchy
under ASC 820-10-35 are described below:





Level 1.
    Unadjusted quoted prices in active markets that are
accessible at the measurement date for identical, unrestricted assets or
liabilities.





Level 2.
    Inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly or indirectly,
including quoted prices for similar assets or liabilities in active markets;
quoted prices for identical or similar assets or liabilities in markets that are
not active; inputs other than quoted prices that are observable for the asset or
liability (e.g., interest rates); and inputs that are derived principally from
or corroborated by observable market data by correlation or other
means.





Level 3.
    Inputs that are both significant to the fair value
measurement and unobservable.





8





Application of Valuation
Hierarchy




A
financial instrument's categorization within the valuation hierarchy is based
upon the lowest level of input that is significant to the fair value
measurement. The following is a description of the valuation methodology used to
measure fair value, as well as the general classification of such instruments
pursuant to the valuation hierarchy.




Cash.           The
Company assessed that the fair value of this asset to approximate its carrying
value due to its short-term nature.




Accounts
Payable.      The Company assessed that the fair
value of this liability approximates its carrying value due to its short-term
nature.




Rent
Payable.      The Company assessed that the fair
value of this liability approximates its carrying value due to its short-term
nature.




The
methodology described above may produce a current fair value calculation that
may not be indicative of net realizable value or reflective of future fair
values. If readily determined market values became available or if actual
performance were to vary appreciably from assumptions used, assumptions may need
to be adjusted, which could result in material differences from the recorded
carrying amounts. The Company believes its method of determining fair value is
appropriate and consistent with other market participants. However, the use of
different methodologies or different assumptions to value certain financial
instruments could result in a different estimate of fair value.




The
following table presents the fair value of financial instruments that are
measured and recognized on a non-recurring basis classified under the
appropriate level of the valuation hierarchy described above, as
of  December 31, 2009:





Liabilities measured at fair vaule at
      December 31, 2009:
            
            Level 1
            
            
            Level 2
            
            
            Level 3
            
            
            TotalNonrecurring:Convertible
      note payable
            
            $
            -
            
            
            $
            127,000
            
            
            $
            -
            
            
            $
            127,000








Note
8 – Stockholders’ Equity




Since the
Company’s inception, it has issued 3,154,250 shares of common stock of which
3,054,250 shares were issued for cash totaling $738,500 and a subscription
receivable of $20,000. In addition, the Company issued 100,000 shares of common
stock for consulting services.




The
Company’s legal counsel agreed to waive reimbursement of $3,200 of legal fees
rendered in connection of various issues for the Company.  This amount
has been recorded as a capital contribution during the period ended December 31,
2009.






Note
9 – Provision for Income Taxes




As of
December 31, 2009, for income tax purposes, the Company has unused operating
loss carryforwards of approximately $300,000, which may provide future federal
tax benefits of approximately $102,000 which expire in various years through
2029.




An
allowance of $102,000 has been provided to reduce the tax benefits accrued by
the Company for these operating losses to zero as it cannot be determined when,
or if, the tax benefits derived from these losses will materialize.





Utilization
of the net operating loss carryforward is subject to significant limitations
imposed by the change in control under Internal Revenue Code Section 382,
limiting its annual utilization to the value of the Company at the date of
change in control multiplied by the federal discount rate.





The
provision for income tax expense for the three months ended December 31, 2009 is
as follows:








CurrentFederal
            $                        -









9





Note
10 – Commitments and Contingencies





Real Estate Lease – Texas
Distribution Center


In May
2009, the Company entered into an agreement to lease a distribution center for
three years.  The details on the lease are as follows:





1.
            Base
      rentals - $5,000 for May 2009, $0 for June 2009, and $15,000 per month
      thereafter. 2.
            Termination
      date – April 30, 2012.


3.
            Renewal
      Option – one option for an additional three year period with rent at
      $16,500 per month.


4.
            Security
      Deposit - $15,000.





Rent
expense related to this lease was $114,845 for the period of inception (May 20,
2009) to December 31, 2009.  The Company had a deferred rent liability
of $19,445 on this lease at December 31, 2009, due to the reduced and free rent
periods included therein. The Company has not paid any rent on this
obligation.




Real Estate Lease – Vista,
California


In June
2009, the Company entered into an agreement to lease warehouse and office
facilities for three years.  The details on the lease are as
follows:





1.
            Base
      rentals - $5,500 per month beginning October 1,
  2009.


2.
            Base
      rentals increase to $6,000 monthly beginning October 1, 2010 and $6,500
      monthly beginning October 1, 2011.


3.
            Company
      is responsible to pay its proportionate share of property taxes, insurance
      and common area maintenance – estimated at $875 per
  month


4.
            Termination
      date – September 30, 2012.


5.
            Renewal
      Option – one option for an additional three year
  period.


6.
            Security
      Deposit - $5,500.


7.
            Rent
      for month six (March 2010) shall be discounted to by
  50%


8.
            Rent
      for month twelve (March 2011) shall be discounted by
  50%





Rent
expense related to this lease was $19,500 for the period of inception (May 20,
2009) to December 31, 2009. The Company has not paid any rent on this
obligation.




Rent
payable for the Company’s two real estate leases as of December 31, 2009 is as
follows:







Texas Distribution
      Center
            
            
            100,400Vista,
      California
            
            
            19,500Total rent
      payable
            
            $
            119,900


Total
minimum future lease payments under the Company’s two real estate leases as of
December 31, 2009 are as follows:




December 31,2010
            
            $
            247,5002011
            
            
            253,5002012
            
            
            118,500Total minimum lease
      payments
            
            $
            619,500





Purchase, Distribution &
Services Agreement


On August
24, 2009, the Company entered into a Purchase, Distribution & Services
Agreement, (the “Agreement”), with the owner of technical data and intellectual
property for a protective coating in order to obtain an exclusive supply of the
product, use of the technical data, intellectual property and other information
relating to the product and use of the trademarks, together with certain
distribution, marketing and sales rights.  Pursuant to the Agreement,
the Company has guaranteed it will purchase a minimum of fifty (50) 275 gallon
totes of product in the first twelve month period.  The Company is
required to increase the minimum quantities by 25% in the second year, to 62.5
totes.  The initial term of the agreement is two years and will renew
for additional one year terms without further action unless otherwise
terminated.








Note
11 – Subsequent Events




The
Company has evaluated subsequent events through February 22, 2010, the date
these financial statements were issued.




On
January 20, 2010, the Company issued 150,000 shares of its common stock in
exchange for cancelling $40,000 due an attorney for legal services.




On
February 1, 2010, the Company issued 23,334 shares to its controller for
services rendered. On the same date, the Company issued 95,000 shares to two
consultants for services rendered and 12,560 shares to an outside accountant in
exchange for cancelling $7,537 due him.




The
Company received $360,000 evidenced by a promissory note dated February 11,
2010, that is assessed interest at rate of 5% per annum commencing on February
11, 2010. The note matures on February 11, 2013.  The Company may
settle the note in whole or in part utilizing cashless warrants to the note
holder for 110% of the amount pledged towards warrants. The cashless warrants
will have a 5-year life with an exercise price of fifty cents ($0.50) a
share.


10


Item
2 - Management's Discussion and Analysis of Financial Condition and Results of
Operations




Forward-Looking
Statements




Certain
statements concerning the Company's plans and intentions included herein may
constitute forward-looking statements for purposes of the Securities Litigation
Reform Act of 1995 for which the Company claims a safe harbor under that Act.
There are a number of factors that may affect the future results of the Company,
including, but not limited to, (a) the ability of the Company to obtain
additional funding for operations, (b) the continued availability of management
to develop the business plan and (c) successful development and market
acceptance of the Company’s products.




This
Quarterly Report may contain both historical facts and forward-looking
statements.  Any forward-looking statements involve risks and
uncertainties, including, but not limited to, those mentioned
above.  Moreover, future revenue and margin trends cannot be reliably
predicted.




As the
result of a Merger and the change in the business and operations on October 19,
2009, a discussion of the past financial results of Ecoblu (Colorado) is not
pertinent and the financial results of Ecoblu (Nevada), the accounting acquirer,
are considered the financial results of the Company on a going-forward basis.
Ecoblu (Nevada)’s inception was May 20, 2009.




Plan of
Operation




The
Company originally intended to focus on developing a line of athletic and casual
apparel and accessories. We were not able to secure any licensing relationships
with any apparel or equipment companies. We have since identified an opportunity
to enter the treated lumber products market.




On
October 19, 2009 we completed a merger transaction to acquire EcoBlu Products,
Inc. (Nevada) which was formed on May 20, 2009 as a Nevada corporation. All
operations of Ecoblu Products, Inc.(Nevada) have become the operations of Ecoblu
Products, Inc.(Colorado) as of that date with Ecoblu Products, Inc.(Nevada)
being the disappearing corporation pursuant to the Merger
Agreement.




EcoBlu
Products, Inc. is now a manufacturer of proprietary wood products coated with an
eco-friendly chemistry that protects against mold, rot, decay, termites and
value added fire. EcoBlu products utilizing BLUWOODTM technology is the ultimate
in wood protection, preservation, and fire safety to building components
constructed of wood; from I-joists, beams and paneling, to floors and
ceilings.




The
Company is committed to the development, marketing and sales of
environmentally-responsible building materials. We have agreements authorizing
us to sell wood products treated with various proprietary chemicals to inhibit
fire, water damage, degradation from certain pest infestation and other effects.
We operate from leased facilities in Collin County, Texas and San Diego,
California. The Company intends but has not begun to sell our value added
chemically treated wood products in various regions of the United States, Canada
and Mexico.





EcoBlu
Products, Inc has developed an affiliate coating program. This program is
designed to allow lumber companies to coat commodity lumber their facilities
contingent upon their stocking inventory and supporting our EcoBlu EWP
products




On
January 6, 2010, we announced that that we had signed the Calvert Company, Inc.
of Vancouver, WA as our first authorized affiliate. Calvert will manufacture
private label glued laminated beams for EcoBlu Products, and will offer to the
market its complete line of glued laminated beams including curved and arched,
straight, fabricated trusses and custom products; all protected with EcoBlu's
BLUWOODTM and FRCTM (Fire Retardant Coating) technology.




Calvert
will operate a licensed factory application center for EcoBlu's BLUWOODTM and
FRCTM coatings and distribute their product line as well as other covered
structure wood components coated with licensed technology.




We have
purchased several proprietary machines for the chemical treatment of wood
products and have four additional systems being built.These
machines were purchased from a company controlled by our President. These
purchases comprise all of the remaining proprietary equipment held by the
related party company.




As of the
date of this report we are preparing to ship and install one of the systems to
the Calvert Company so they can begin production operations as a participant in
our affiliate program.




We have
one Coating machine in our Texas facility which we have not been able to bring
into use due to issues with the Texas Facility which we are attempting to
reconcile with the leaseholder. The remaining systems are at the related party
company controlled by our President which is also where the additional four
systems are being built.







11





Financial
Summary




Results of Operations for
the Three-Months Ended December 31, 2009




The
Company reports a net loss of $265,501 for the three-months ended December 31,
2009 primarily comprised of consulting, professional fees and compensation
expenses totaling $147,292. Rent expense was $62,417.  Operations for
the prior period were related solely to discontinued business
operations.




Liquidity and Capital
Resources





On
December 31, 2009, we had $609 cash on hand and had discontinued our operations
marketing our apparel lines.





Our
operations used $125,186 of cash in the period of inception (May 20, 2009)
through December 31, 2009.  Cash of $739,705 was used in investing
activities during the same period, which consisted of $368,687 in payments to
purchase coating machines, payments of $339,119 to a related party for equipment
deposits on the manufacture of four new coating machines, and payments of
$31,899 for tenant improvements in progress on our facilities.  During
the same period, we received proceeds from convertible debt financing of
$127,000 and $738,500 from the issuance of common stock.





We are
unable to predict the duration, extent or trends related to the current credit
and capital markets. We do expect to continue to experience difficulty financing
our short term cash requirements as a result of these struggling markets and the
U.S. Economy in general. Also, we may not be able to get terms favorable to the
Company or the existing shareholders if we are able to secure additional
financing.





A
critical component of our operating plan impacting our continued existence is
the ability to obtain additional capital through additional equity and/or debt
financing. We do not anticipate enough positive internal operating cash flow
until such time as we can generate substantial revenues from business
activities, which may take the next few years to realize.





Our near
term cash requirements are anticipated to be offset through the receipt of funds
from private placement offerings and loans obtained through private sources.
Since inception, we have predominantly financed cash flow requirements through
the issuance of common stock for cash.





Over the
next twelve months we believe that existing capital and funds from intended
operations will not be sufficient to sustain operations and planned development
of those intended operations. Consequently, we will be required to seek
additional capital in the future to fund growth through additional equity or
debt financing or credit facilities. No assurance can be made that such
financing would be available, and if available it may take either the form of
debt or equity. In either case, the financing could have a negative impact on
our financial condition and our Stockholders.





We may
continue to incur operating losses over the next twelve months. Our operating
history makes predictions of future operating results difficult to ascertain.
Our prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in their early stages of
development. Such risks include, but are not limited to, an evolving and
unpredictable business model and the management of growth. To address these
risks we must, among other things, obtain a customer base, implement and
successfully execute our business and marketing strategy, continue to develop
and upgrade technology and products, respond to competitive developments, and
attract, retain and motivate qualified personnel. There can be no assurance that
we will be successful in addressing such risks, and the failure to do so can
have a material adverse effect on our business prospects, financial condition
and results of operations.





Critical Accounting
Policies





Principles of
Consolidation


The
accompanying consolidated financial statements include the accounts of the
Ecoblu Products, Inc. and its wholly owned subsidiary. Intercompany transactions
and balances have been eliminated in consolidation.





Property and
Equipment


Property
and equipment are stated at cost.  Major renewals and improvements are
charged to the asset accounts while replacements, maintenance and repairs that
do not improve or extend the lives of the respective assets are
expensed.  At the time property and equipment are retired or otherwise
disposed of, the asset and related accumulated depreciation accounts are
relieved of the applicable amounts.  Gains or losses from retirements
or sales are credited or charged to income.  Depreciation expense is
not recorded on idle property and equipment until such time as it is placed into
service.





Long-Lived
Assets


The
Company accounts for its long-lived assets in accordance with ASC Topic
360-10-05, “Accounting for the Impairment or Disposal of Long-Lived
Assets.”  ASC Topic 360-10-05 requires that long-lived assets be
reviewed for impairment whenever events or changes in circumstances indicate
that the historical cost carrying value of an asset may no longer be
appropriate.  The Company assesses recoverability of the carrying
value of an asset by estimating the future net cash flows expected to result
from the asset, including eventual disposition.  If the future net
cash flows are less than the carrying value of the asset, an impairment loss is
recorded equal to the difference between the asset’s carrying value and fair
value or disposable value.  At December 31, 2009, the Company
determined that none of its long-term assets were impaired.





Use of
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 affects 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.





Convertible
Debentures


If the
conversion feature of conventional convertible debt provides for a rate of
conversion that is below market value, this feature is characterized as a
beneficial conversion feature (“BCF”).  A BCF is recorded by the
Company as a debt discount pursuant to ASC Topic 470-20 “Debt with Conversion
and Other Options.” In those circumstances, the convertible debt is recorded net
of the discount related to the BCF and the Company amortizes the discount to
interest expense over the life of the debt using the effective interest
method.








Off-Balance
Sheet Arrangements


None
Applicable


12


Item
3 - Quantitative and Qualitative Disclosures About Market Risk




Not
Applicable




Item
4T - Controls and Procedures





Evaluation
of Disclosure Controls and Procedures





As of the
end of the period covered by this report, we carried out an evaluation, under
the supervision and with the participation of our principal executive officer
(who is also our principal financial officer), of the effectiveness of the
design and operation of our disclosure controls and procedures, or “disclosure
controls,” pursuant to Exchange Act Rule 13a-15(e). Disclosure controls are
controls and procedures designed to reasonably ensure that information required
to be disclosed in our reports filed under the Exchange Act, such as this
quarterly report, is recorded, processed, summarized and reported within the
time periods specified in the U.S. Securities and Exchange Commission’s rules
and forms. Disclosure controls include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in our
reports filed under the Exchange Act is accumulated and communicated to our
management, including our principal executive officer and principal financial
officer, or persons performing similar functions, as appropriate, to allow
timely decisions regarding required disclosure.





Based on
that evaluation, our principal executive officer has concluded that, as of the
end of the period covered by this report, our disclosure controls and procedures
are not effective in ensuring that information required to be disclosed in our
Exchange Act reports is recorded, processed, and summarized and reported within
the time periods specified in the Securities and Exchange Commission’s rules and
forms to allow timely decisions regarding required disclosure.





Because
of the limited personnel and lack of segregation of duties, management
determined that a material weakness existed in the processes, procedures and
controls related to the preparation of our quarterly financial
statements.  This material weakness could result in the reporting of
financial information and disclosures in future consolidated annual and interim
financial statements that are not in accordance with generally accepted
accounting principles.





Changes
in Internal Controls





The
weaknesses noted above, including those related to limited personnel, were
addressed during the quarter ended December 31, 2009.  The Company has
taken the following steps to remedy these weaknesses:




1.
            Hired
      an experienced Controller in December
2009.


2.
            Controller
      implemented procedures in January 2010 to improve segregation of duties in
      the cash receipts, disbursements, reconciliation and reporting
      process.


3.
            Controller
      also implemented procedures in January 2010 to improve the transaction
      processing, reconciliation and reporting
  process.


4.
            Management
      has been interviewing and negotiating with Chief Financial Officer (CFO)
      candidates with the intention of filling the CFO position by early March
      2010.





Other
than described above, there has been no change in our internal control over
financial reporting in connection with the evaluation required by Rule 13a-15(e)
under the Exchange Act that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.





13





Part
II     OTHER INFORMATION




Item
1     Legal Proceedings




No legal
proceedings were initiated by or served upon the Company in the three month
period ending December 31, 2009.




From time
to time the Company may be named in claims arising in the ordinary course of
business. Currently, no legal proceedings or claims, other than those disclosed
above, are pending against or involve the Company that, in the opinion of
management, could reasonably be expected to have a material adverse effect on
its business and financial condition.






Item
2     Unregistered Sales of Equity Securities and Use
of Proceeds





In
October the issued a total of 1,250,000 common shares for cash totaling $175,000
and a subscription receivable of $20,000. The sales were made to 2 individuals.
Proceeds were used for general operating expenses.





In
November 2009 the Company issued a total of 1,713,000 common shares for cash
totaling $548,500.  The sales were made to 12 individuals and 2
entities. Proceeds were received by a company related to our President where the
proceeds were used as a payment on the purchase of several proprietary machines
for the chemical treatment of wood products and deposit for the purchase of 4
additional machines which will comprise the remainder of the proprietary
equipment held by the related party company.





In
December 2009, the Company received $5,000 in cash for 31,250 shares of common
stock from one individual.





All sales
were issued as exempted transactions under Section 4(2) and/or Regulation S of
the Securities Act of 1933. They are subject to Rule 144 of the Securities Act
of 1933. The recipient(s) of our securities took them for investment purposes
without a view to distribution.  Furthermore, they had access to
information concerning our Company and our business prospects; there was no
general solicitation or advertising for the purchase of our securities; and the
securities are restricted pursuant to Rule 144.





Convertible
Notes


The
Company received $127,000 evidenced by a promissory note dated December 22,
2009, that is assessed interest at rate of 5% per annum commencing on December
22, 2009. The note matures on December 22, 2012, when the outstanding principal
and accrued interest become fully due and payable. Prior to maturity, the holder
has the right to convert the balance owed into 600,000 shares of the Company’s
common stock.





The
Company received $360,000 evidenced by a promissory note dated February 11,
2010, that is assessed interest at rate of 5% per annum commencing on February
11, 2010. The note matures on February 11, 2013.  The Company may
settle the note in whole or in part utilizing cashless warrants to the note
holder for 110% of the amount pledged towards warrants. The cashless warrants
will have a 5-year life with a Strike Price of fifty cents (.50) a
share.








Item
3      Defaults Upon Senior Securities




None,
for the period ending December 31, 2009




Item
4     Submission of Matters to a Vote of Security
Holders




None, for
the period ending December 31, 2009




Item
5    Other Information




None, for
the period ending December 31, 2009


14




Item
6    Exhibits and Reports




Exhibits




Ecoblu Products, Inc. includes by
reference the following exhibits:




3.1      Articles
of Incorporation, filed as exhibit 3.1.1 with the registrant’s Registration
Statement


on Form SB-2, as amended; filed with
the Securities and Exchange Commission on


August 23, 2007.




3.2      Bylaws,
filed as exhibit 3.2 with the registrant’s Registration Statement on Form
SB-2,


as amended; filed with the Securities
and Exchange Commission on August 23, 2007.




3.3
            Amended  Articles
      of Incorporation ; filed as exhibit 3.1 with the registrant’s Current
      Report on Form 8-K; filed with the Securities and Exchange Commission on
      October 22, 2009




10.1    Agreement
      and Plan of Merger – between Ecoblu Products, Inc. (Colorado) and Ecoblu
      Products Inc. (Nevada), dated October 7, 2009. Additional Parties to the
      agreement are James H. Watson, Jr., Ken Relyea, Steve Conboy and Mark
      Vuozzo, as Individuals, filed as exhibit 10.1 with the registrant’s
      Current Report on Form 8-K; filed with the Securities and Exchange
      Commission on October 22, 2009.




10.2    AF21
      Product, Purchase, Sales,  Distribution & Service Agreement,
      (the “Agreement”),  between Ecoblu Products, Inc. and Megola,
      Inc., dated November 11, 2009 filed as exhibit 10.2 with the registrant’s
      Quarterly Report on Form 10-Q; filed with the Securities and Exchange
      Commission on November 23, 2009.




10.3    Purchase,
      Distribution & Service Agreement, (the “Agreement”), between Ecoblu
      Products, Inc. BluwoodUSA, Inc., dated August 24, 2009, filed as exhibit
      10.3 with the registrant’s Current Report on Form 8-K; filed with the
      Securities and Exchange Commission on October 22,
  2009.




10.4    Application
      System Purchase Agreement – between Ecoblu Products, Inc. and SC Bluwood
      Inc., dated September 28, 2009, filed as exhibit 10.4 with the
      registrant’s Current Report on Form 8-K; filed with the Securities and
      Exchange Commission on October 22,
2009.







Ecoblu Products, Inc. includes herewith
the following exhibits:




10.5
            Convertible
      Promissory Note, dated December 22,
2009




10.6
            Convertible
      Promissory Note, dated February 11,
2010




31.1           Certification
of Principal Executive and Principal Financial Officer (Rule
13a-14(a)/15(d)-14(a))


32.1           Certification
of Principal Executive and Principal Financial Officer (18 U.S.C.
1350)








15





SIGNATURES





In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.





Ecoblu Products,
      Inc.February
      22, 2010
              By:
              /s/
      Steve ConboySteve
      ConboyPresident
                Principal Executive Officer
                Principal Financial Officer