As Filed with the Securities and Exchange
Commission onFile No: 000-55235
United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE QUARTERLY PERIOD ENDING SEPTEMBER 30, 2017
☐
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from _____to_____
Commission file number: 000-55235
ABCO ENERGY, INC.
(Name of registrant as specified in its Charter)
Nevada |
|
(State of Incorporation) | (IRS Employer Identification No.) |
2100 North Wilmot #211, Tucson, AZ | 85712 |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: | 520-777-0511 |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
COMMON STOCK | ABCE | OTCQB |
Indicate by check mark whether the registrant (1) 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. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definition of “law accelerated filed,” “accelerated filed,” “Smaller reporting company,” and “emerging growth company” in Rule 12b of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ | |
Non-accelerated filer ☐ | Smaller Reporting Company ☒ | |
Emerging growth company |
If an emerging growth company, indicate by check mark (if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act subsequent to the distribution of securities under a plan confirmed by the court. Yes ☐ No ☐ N/A
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of November 20, 2017,August 19, 2019, we had 141,134,90063,392,630 shares of common stock issued and outstanding.
PART I – FINANCIAL INFORMATION | |
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23 | |
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PART II. OTHER INFORMATION | |
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PART 1 – FINANCIAL INFORMATION
ABCO ENERGY, INC.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREESIX MONTHS ENDED
JUNE 30, 2017
4 | |
5 | |
6 | |
7 | |
8 |
ABCO ENERGY, INC.
ASSETS | September 30, 2017 Unaudited | December 31, 2016 Audited | ||||||
Current Assets | ||||||||
Cash | $ | 2,141 | $ | 12,534 | ||||
Accounts receivable on completed projects | 81,248 | 43,292 | ||||||
Costs and estimated earnings on contracts in progress | 58,270 | 60,349 | ||||||
Inventory | 43,137 | 46,701 | ||||||
Prepaid fees and expenses | - | 151,846 | ||||||
Total Current Assets | $ | 184,796 | $ | 314,722 | ||||
Fixed Assets | ||||||||
Vehicles, office furniture & equipment – net of accumulated depreciation | 23,609 | 29,726 | ||||||
Other Assets | ||||||||
Investment in long term leases | 11,451 | 11,984 | ||||||
Security deposits | 1,800 | 1,800 | ||||||
Total Other Assets | 13,251 | 13,784 | ||||||
Total Assets | $ | 221,656 | $ | 358,232 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued expenses | $ | 500,721 | $ | 477,439 | ||||
Billings in excess of costs and earnings on incomplete projects | 32,033 | - | ||||||
Current portion of long term debt | - | 4,400 | ||||||
Convertible debenture notes | 98,935 | 40,411 | ||||||
Derivative liability on convertible debentures | 175,515 | 397,722 | ||||||
Notes payable – merchant loans | 104,963 | 150,342 | ||||||
Notes payable – related parties | 182,363 | 177,347 | ||||||
Total Current Liabilities | 1,094,530 | 1,247,661 | ||||||
Long term debt, net of current portion | - | - | ||||||
Total Liabilities | 1,094,530 | 1,247,661 | ||||||
Commitments and contingencies | - | - | ||||||
Stockholders' Deficit: | ||||||||
Preferred stock, 100,000,000 shares authorized, $0.001 par value, and 15,000,000 shares issued and outstanding at September 30, 2017 and 0 at December 31, 2016 | 15,000 | - | ||||||
Common stock, 2,000,000,000 shares authorized, $0.001 par value, 129,233,067 and 26,871,876 issued and outstanding at September 30, 2017 and December 31, 2016, respectively. | 115,251 | 3,006 | ||||||
Common shares sold not issued | 105,912 | 23,866 | ||||||
Additional paid-in capital | 3,151,951 | 3,023,926 | ||||||
Accumulated deficit | (4,260,988 | ) | (3,940,227 | ) | ||||
Total Stockholders' Deficit | (872,874 | ) | (889,429 | ) | ||||
Total Liabilities and Stockholders' Deficit | $ | 221,656 | $ | 358,232 |
ASSETS |
| June 30, 2019 Unaudited |
|
| December 31, 2018 Audited |
| ||
Current Assets |
|
|
|
|
|
|
|
|
Cash |
| $ | 55,625 |
|
| $ | 67,707 |
|
Accounts receivable on completed projects |
|
| 140,811 |
|
|
| 105,187 |
|
Costs and estimated earnings on contracts in progress |
|
| 52,829 |
|
|
| 184,212 |
|
Inventory |
|
| 61,997 |
|
|
| 53,950 |
|
Prepaid expenses and discounts on debt |
|
| 32,445 |
|
|
|
|
|
Total Current Assets |
| $ | 343,707 |
|
| $ | 411,056 |
|
Fixed Assets |
|
|
|
|
|
|
|
|
Vehicles, office furniture & equipment – net of accumulated depreciation |
|
| 32,172 |
|
|
| 36,538 |
|
Other Assets |
|
|
|
|
|
|
|
|
Investment in long term leases |
|
| 4,234 |
|
|
| 10,512 |
|
Security deposits |
|
| 2,700 |
|
|
| 2,700 |
|
Total Other Assets |
|
| 6,934 |
|
|
| 13,212 |
|
Total Assets |
| $ | 382,813 |
|
| $ | 460,806 |
|
|
|
|
|
|
|
|
|
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|
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|
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|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
| $ | 376,558 |
|
| $ | 549,611 |
|
Excess billing on contracts in progress |
|
| 303,317 |
|
|
| 85,777 |
|
Convertible note payable, net |
|
| 196,817 |
|
|
| 189,680 |
|
Derivative liability on convertible debentures |
|
| - |
|
|
| 74,848 |
|
Notes payable – merchant loans |
|
| 48,711 |
|
|
| 53,362 |
|
Note payable – non-affiliate |
|
| 40,301 |
|
|
| 49,563 |
|
Notes payable – related parties |
|
| 188,054 |
|
|
| 169,549 |
|
Current portion of long term debt |
|
| 7,582 |
|
|
| 7,628 |
|
Total Current Liabilities |
|
| 1,161,340 |
|
|
| 1,180,018 |
|
|
|
|
|
|
|
|
|
|
Long term debt, net of current portion |
|
| 15,066 |
|
|
| 18,670 |
|
Total Liabilities |
|
| 1,176,406 |
|
|
| 1,198,688 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
| 0 |
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit: |
|
|
|
|
|
|
|
|
Preferred stock, 100,000,000 shares authorized, $0.001 par value, and 30,000,000 shares issued and outstanding at June 30, 2019 and 30,000,000 at December 31, 2018. |
|
| 30,000 |
|
|
| 30,000 |
|
Common stock 5,000,000,000 shares authorized, $0.001 value, and 63,392,630 Issued and outstanding at June 30, 2019 and 32,756,289 outstanding at December 31, 2018, respectively. |
|
| 63,393 |
|
|
| 31,886 |
|
Common shares sold not issued -0- at June 30, 2019 and 870,000 at December 31, 2018 |
|
| 0 |
|
|
| 870 |
|
Additional paid-in capital |
|
| 4,889,205 |
|
|
| 4,379,793 |
|
Accumulated deficit |
|
| (5,776,191 | ) |
|
| (5,180,431 |
|
Total Stockholders’ Deficit |
|
| (793,593 | ) |
|
| (737,882 | ) |
Total Liabilities and Stockholders’ Deficit |
| $ | 382,813 |
|
| $ | 460,806 |
|
See accompanying notes to the unaudited consolidated financial statements.
ABCO ENERGY, INC.
FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018
(UNAUDITED)
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | |||||||||||||
Revenues | $ | 265,856 | $ | 146,547 | $ | 1,168,680 | $ | 512,075 | ||||||||
Cost of Sales | 379,326 | 119,062 | 861,446 | 619,551 | ||||||||||||
Gross Profit | (113,470 | ) | 27,485 | 307,234 | (107,476 | ) | ||||||||||
Operating Expenses: | ||||||||||||||||
Administrative payroll expense for the period | 105,549 | 72,224 | 289,899 | 227,920 | ||||||||||||
Selling, General & Administrative expense | 179,909 | 116,526 | 312,554 | 334,286 | ||||||||||||
Total selling and administrative expense | 285,458 | 188,750 | 602,453 | 562,206 | ||||||||||||
Income (Loss) from operations | (398,928 | ) | (161,375 | ) | (295,219 | ) | (669,682 | ) | ||||||||
Other expenses | ||||||||||||||||
Interest on notes payable | (105,575 | ) | (38,393 | ) | (146,878 | ) | (93,252 | ) | ||||||||
Loss on note issuance | (109,889 | ) | (109,889 | ) | ||||||||||||
Gain on extinguished debt | 132,737 | 132,737 | ||||||||||||||
Derivative valuation gain (loss) | 102,582 | (65741 | ) | 224,538 | (118,314 | ) | ||||||||||
Derivative finance fees | 278,910 | (126,050 | ) | (227,726 | ) | |||||||||||
Total Other (Expenses) Income | 19,855 | 174,776 | (25,542 | ) | (439,292 | ) | ||||||||||
Net income (Loss) before provision for income taxes | (379,073 | ) | 13,401 | (320,761 | ) | (1,108,974 | ) | |||||||||
Provision for income taxes | - | - | - | - | ||||||||||||
Net Income (loss) | $ | (379,073 | ) | $ | 13,401 | $ | (320,761 | ) | $ | (1,108,974 | ) | |||||
Net Income (loss) per share (Basic and fully diluted) | $ | (0.01 | ) | $ | 0.01 | $ | (0.01 | ) | $ | (0.01 | ) | |||||
Weighted average number of common shares used in the calculation including shares to be issued (Basic and diluted) | 87,611,195 | 37,072,741 | 78,052,471, | 35,843,482 |
|
| For the Three Months Ended |
|
| For the Six Months Ended |
| ||||||||||
|
| JUNE 30, 2019 |
|
| JUNE 30, 2018 |
|
| JUNE 30, 2019 |
|
| JUNE 30, 2018 |
| ||||
|
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|
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Revenues |
| $ | 459,616 |
|
| $ | 558,726 |
|
| $ | 1,113,626 |
|
| $ | 1,081,021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Sales |
|
| 268,662 |
|
|
| 417,882 |
|
|
| 678,886 |
|
|
| 746,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Gross Profit |
|
| 190,954 |
|
|
| 140,844 |
|
|
| 434,740 |
|
|
| 334,761 |
|
|
|
|
|
|
|
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|
|
|
|
|
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|
|
|
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Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Payroll |
|
| 133,272 |
|
|
| 73,023 |
|
|
| 213,589 |
|
|
| 143,710 |
|
Payroll taxes |
|
| 14,652 |
|
|
| 35,671 |
|
|
| 34,188 |
|
|
| 37,076 |
|
Consulting |
|
| 12,413 |
|
|
| 31,231 |
|
|
| 24,537 |
|
|
| 33,699 |
|
Professional fees |
|
| 44,315 |
|
|
| 46,765 |
|
|
| 75,432 |
|
|
| 52,945 |
|
Rent |
|
| 9,194 |
|
|
| 9,833 |
|
|
| 17,775 |
|
|
| 18,945 |
|
Insurance |
|
| 19,111 |
|
|
| 8,839 |
|
|
| 36,888 |
|
|
| 16,824 |
|
Other selling and administrative expenses |
|
| 7,848 |
|
|
| 49,581 |
|
|
| 99,457 |
|
|
| 111,680 |
|
Total operating expense |
|
| 240,805 |
|
|
| 254,943 |
|
|
| 501,866 |
|
|
| 414,879 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (Loss) from operations |
|
| (49,851 | ) |
|
| (114,099 | ) |
|
| (67,126 | ) |
|
| (80,118 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on notes payable |
|
| (27,074 | ) |
|
| (28,272 | ) |
|
| (105,988 | ) |
|
| (36,746 | ) |
Loss on note issuance derivatives |
|
|
|
|
|
| (36,230 | ) |
|
|
|
|
|
| (36,230 | ) |
Change in Derivative Gain (Loss) |
|
| - |
|
|
| 74,905 |
|
|
| (177,934 | ) |
|
| 63,793 |
|
Finance Fees – derivatives |
|
|
|
|
|
| (118,577 | ) |
|
|
|
|
|
| (125,384 | ) |
Derivative amortization - interest expense |
|
|
|
|
|
| (38,953 | ) |
|
|
|
|
|
| (38,953 | ) |
Gain (Loss) on extinguishment of debt |
|
|
|
|
|
|
|
|
|
| (244,712 | ) |
|
| 39,355 |
|
Total other expenses |
|
| (27,074 | ) |
|
| (147,127 | ) |
|
| (528,634 | ) |
|
| (134,165 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (Loss) before provision for income taxes |
|
| (76,925 | ) |
|
| (261,226 | ) |
|
| (595,760 | ) |
|
| (214,283 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income tax |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Net income (loss) |
| $ | (76,925 | ) |
| $ | (261,226 | ) |
| $ | (595,760 | ) |
| $ | (214,283 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) Per Share (Basic and Fully Diluted) |
| $ | (.00 | ) |
| $ | (.01 | ) |
| $ | (.01 | ) |
| $ | (.01 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares used in the calculation |
|
| 47,817,667 |
|
|
| 27,852,317 |
|
|
| 48,074,460 |
|
|
| 25,961,483 |
|
See accompanying notes to the unaudited consolidated financial statements
ABCO ENERGY, INC.
CONSOLIDATED STATEMENTSSTATEMENT OF SHAREHOLDERS EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2019
AND FOR THE YEAR ENDED DECEMBER 31, 2018
(UNAUDITED)
Shares | Par amount | Preferred stock | APIC | Acc. Deficit | Total stockholders' deficit | |||||||||||||||||||
Balance as of December 31, 2017 | 6,349,909 | 6,350 | 15,000 | 3,379,536 | (4,540,163 | ) | (1,139,277 | ) | ||||||||||||||||
Shares issued under Regulation S – net of expenses | 7,080,100 | 7,080 | 441,919 | 448,999 | ||||||||||||||||||||
Net loss for period ended June 30, 2018 | (214,283 | ) | (214,283 | ) | ||||||||||||||||||||
Balance as of June 30, 2018 | 13,430,009 | 13,430 | 15,000 | 3,821,455 | (4,754,446 | ) | (904,561 | ) |
Shares | Par amount | Preferred stock | APIC | Acc. Deficit | Total stockholders' deficit | |||||||||||||||||||
Balance as of December 31, 2018 | 32,756,289 | 32,756 | 30,000 | 4,379,793 | (5,180,431 | ) | (737,882 | ) | ||||||||||||||||
Shares issued under Regulation S – Net of expenses | 4,740,000 | 4,740 | 43,493 | 48,233 | ||||||||||||||||||||
Shares issued for CNP-Preferred series C | 20,451,633 | 20,452 | 28,228 | 48,680 | ||||||||||||||||||||
Derivative liability converted | 405,591 | 405,591 | ||||||||||||||||||||||
Shares issued | 4,444,708 | 4,445 | 28,000 | 32,445 | ||||||||||||||||||||
Shares issued | 1,000,000 | 1,000 | 4,100 | 5,100 | ||||||||||||||||||||
Net loss for period ended June 30, 2019 | (595,760 | ) | (595,760 | ) | ||||||||||||||||||||
Balance as of June 30, 2019 | 63,392,630 | 63,393 | 30,000 | 4,889,205 | (5,776,191 | ) | (793,593 | ) |
See accompanying notes to the consolidated financial statements.
ABCO ENERGY, INC.
FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018
(UNAUDITED)
September 30, | September 30, | |||||||
2017 | 2016 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net Income (loss) | $ | (320,761 | ) | $ | (1,108,974 | ) | ||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
Depreciation | 6,117 | 9,886 | ||||||
Shares issued for services | 101,400 | |||||||
Changes in operating assets and liabilities: | ||||||||
Change in derivative liability on convertible debt net of discount | 58,524 | 40,411 | ||||||
Accrual of interest expense on derivative valuations | (222,207 | ) | 375,875 | |||||
Increase in convertible debenture notes | 68,714 | |||||||
Increase (Decrease) in Accounts receivable on completed projects | (37,956 | ) | (991 | ) | ||||
Decrease in accounts receivable on incomplete projects | 2,079 | 115,230 | ||||||
Proceeds from billings in excess of costs on projects | 32,033 | 225,987 | ||||||
Decrease in prepaid expenses | 151,846 | |||||||
Change in inventory | 3,564 | 4,928 | ||||||
Increase (decrease) in accounts payable and accrued expenses | 23,282 | 17,922 | ||||||
Net cash used in operating activities | (202,079 | ) | (251,012 | ) | ||||
Cash Flows from Investing Activities: | ||||||||
Proceeds from investments in long term leases | 533 | 485 | ||||||
Product and lease deposits | - | 1,845 | ||||||
Net cash provided by (used for) investing activities | 533 | 2,330 | ||||||
Cash Flows from Financing Activities: | ||||||||
Proceeds from issue of preferred stock | 15,000 | |||||||
Proceeds from sale of common stock – net of expenses | 220,916 | 106,017 | ||||||
Loans from directors and other related parties | 5,016 | 70,138 | ||||||
Loans from financial institutions - net of principal payments | (45,379 | ) | 48,976 | |||||
Retirement of long term debt | (4,400 | ) | - | |||||
Net cash provided by financing activities | 191,153 | 225,131 | ||||||
Net increase (decrease) in cash | (10,393 | ) | (23,551 | ) | ||||
Cash, beginning of period | 12,534 | 40,035 | ||||||
Cash, end of period | $ | 2,141 | $ | 16,484 |
June 30, | June 30, | |||||||
2019 | 2018 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net income (loss) | $ | (595,760 | ) | $ | (214,283 | ) | ||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
Depreciation | 5,290 | 8,120 | ||||||
Inventory change | (8,046 | ) | (577 | ) | ||||
Change in amortizable debt discount | 28,706 | 38,953 | ||||||
Gain on derivative conversion | 36,230 | |||||||
Change in derivative liability | 177,934 | |||||||
Gain or loss on extinguishment of debt | 244,712 | (39,355 | ) | |||||
Change in convertible debentures | (61,590 | ) | ||||||
Changes in Accounts receivable | 95,759 | (461,328 | ) | |||||
Billings in excess of costs on incomplete projects | 217,540 | 448,246 | ||||||
Accounts payable and accrued expenses | (264,958 | ) | (67,032 | ) | ||||
Net cash used in operating activities | (98,823 | ) | (312,616 | ) | ||||
Cash flows from investing activities | ||||||||
Equipment purchased | (924 | ) | (2,436 | ) | ||||
Proceeds from investments in long term leases | 6,278 | 245 | ||||||
Net cash provided by (used for) investing activities | 5,354 | (2,191 | ) | |||||
Cash Flows from Financing Activities: | ||||||||
Proceeds from sale of common stock – net of expenses | 53,335 | 282,110 | ||||||
Proceeds of related party notes payable | 18,505 | (11,439 | ) | |||||
Proceeds from financial institution loans | 110,000 | |||||||
Payments on long term debt | (142,601 | ) | (63,350 | ) | ||||
Payments on merchant notes | (4,652 | ) | ||||||
Payments on preferred stock Series C | (141,000 | ) | ||||||
Proceeds from convertible note payable | 193,300 | |||||||
Proceeds from loans non-affiliate | 104,500 | |||||||
Net cash provided by financing activities | 81,387 | 317,321 | ||||||
Net increase (decrease) in cash | (12,082 | ) | 2,514 | |||||
Cash, beginning of period | 67,707 | 5,046 | ||||||
Cash, end of period | $ | 55,625 | $ | 7,560 |
Supplemental disclosures of cash flow information:
Cash paid for interest - operations | $ | 146,879 | $ | 93,252 | ||||
Shares issued for services | 101,400 | 15,000 | ||||||
Note conversion to common shares during 2017 | 6,290 |
Cash paid for interest | $ | 105,988 | $ | 15,281 | ||||
Income taxes paid or accrued | $ | - | $ | - |
See accompanying notes to the unaudited consolidated financial statements
ABCO ENERGY, INC.
FOR THE THREE MONTHSSIX MONTHS ENDED SEPTEMBERJUNE 30 2017
(UNAUDITED
)Note 1 – Overview and Description of the Company
ABCO Energy, Inc
On January 13, 2017, the Board of Directors of the Company approved a reverse stock split of its common stock, at a ratio of 1-for-10 (the “Reverse Stock Split”). The Reverse Stock Split became effective with FINRA (the Financial Industry Regulatory Authority) and in the marketplace on January 13, 2017 (the “Effective Date”), whereupon the shares of common stock began trading on a split adjusted basis. As a result of the Reverse Stock Split the number of authorized shares of common stock was reduced to 50,000,000 from 500,000,000 shares. The Company held a Special Meeting of Stockholders in May 2017 which authorized an amendment to the Articles of Incorporation to increase the authorized common share capital to 2,000,000,000 common shares and 100,000,000 preferred shares. Thereafter, on September 27, 2017, by written consent the holders of a majority of the outstanding shares voted to authorize an additional amendment to increase the authorized common shares to 2,000,000,000 shares.
On December 23, 2018 the Board of Directors of the Company approved a reverse stock split of its common stock, at a ratio of 1-for-20 (the “Reverse Stock Split”). The Reverse Stock Split became effective with FINRA (the Financial Industry Regulatory Authority) and in the marketplace on December 23, 2018 (the “Effective Date”), whereupon the shares of common stock began trading on a split adjusted basis. On November 8, 2018, by written consent the holders of a majority of the outstanding shares voted to authorize an additional amendment to increase the authorized common shares to 5,000,000,000 shares.
OVERALL STRATEGIC DIRECTION
All share numbers through-out these financial statements and notes thereto have been adjusted to reflect this reverse split.
The Company is in the PhotovoltaicPhoto Voltaic (PV) solar systems industry, and is an energy efficientelectrical product and services supplier. The Company plans to build out a network of operations in major cities in the USA to establish a national base of PV suppliers, lightingsuppliers and electrical service operations centers. This combination of services, supplier.
OVERVIEW
As of the date of this report, ABCO Energy Inc. operated in Tucson and Phoenix, Arizona. The Company plan is to expand to more locations in North America in the next year as funding becomes available. We believe that the solar and energy efficiency business functions better if the employees are local individuals working and selling in their own community. Our customers have indicated a preference for dealing with local firms and we will continue our focus on company-owned integrated product and services offices. Once a local firm is established, growth tends to come from experience, quality and name recognition. We remain committed to high quality operations.
DESCRIPTION OF PRODUCTS
ABCO sells and installs Solar isPhotovoltaic electric systems that allow the wholly owned operating subsidiarycustomer to produce their own power on their residence or business property. These products, installed by our crews, are purchased from both USA and offshore manufacturers. We have available and utilize many suppliers of the companyUS manufactured solar products from such companies as Mia Soleil, Canadian Solar, Boviet, Westinghouse Solar and does the salesvarious Korean, German and Chinese suppliers. In addition, we purchase from several local and regional distributors whose products are readily available and selected for markets and price. ABCO offers solar leasing and long term financing programs from Service Finance Corporation, Green Sky, AEFC and others that are offered to ABCO customers and other marketing and installation of all of its contracting business. organizations.
ABCO Solar also sells and installs commercial lighting and energy conservation equipment like generators and energy efficient lighting products, regular and solar powered air conditioning forequipment, solar powered street lights and lighting accessories. ABCO contracts directly with manufacturers to purchase its lighting products which are sold to residential and commercial customers.
ABCO has Arizona statewide approval as a registered electrical services and solar products installer and as an air conditioning and refrigeration installer. Our license is ROC 258378 electrical and ROC 323162 HVAC and we are fully licensed to offer commercial and residential customers.
The ABCO subsidiary, Alternative Energy Finance Corporation (AEFC)
Note 2 – Summary of Significantsignificant accounting policies
Critical Accounting Policies
These financial statements consist of the consolidated financial positions and results of operations of both the parent, ABCO Energy, Inc. and the subsidiary companies. In the opinion of Management, all adjustments necessary for a fair statement of results for the fiscal years presented have been included. These financial statements have been prepared in conformityaccordance with generally accepted accounting principles (GAAP) generally accepted in the United States (“GAAP”)of America.
GAAP requires managementthe Company to make estimates and assumptionsjudgments that affect the reported amounts of assets. On an on-going basis, the Company evaluates its estimates and judgments, including those related to revenue recognition, inventories, adequacy of allowances for doubtful accounts, valuation of long-lived assets, income taxes, equity-based compensation, litigation and liabilitieswarranties. The Company bases its estimates on historical and disclosure of contingent assetsanticipated results and liabilities attrends and on various other assumptions that the date ofCompany believes are reasonable under the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Significant estimates include but are not limited to the estimated useful lives of equipment for purposes of depreciation, percentage of completion and the valuation of common and preferred shares issued for services, equipment and the liquidation of liabilities.
The policies discussed below are calculatedconsidered by management to be critical to an understanding of the Company’s financial statements. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results may differ from those estimates.
Cash and Cash Equivalents
There are only cash accounts included in our cash equivalents in these statements. For purposes of the statement of cash flows, the Company considers all short-term securities with a maturity of three months or less to be cash equivalents. There are no short term cash equivalents reported in these financial statements.
Property and Equipment
Property and equipment are to be stated at cost less accumulated depreciation. Depreciation is recorded on the straight-line basis according to IRS guidelines over the estimated useful lives of the assets, which range from three to ten years. Maintenance and repairs are charged to operations as incurred.
Revenue Recognition
The Company generates revenue from sales of solar products, LED lighting, installation services and leasing fees. During the last two fiscal years, the company had product sales as follows:
Sales Product and Services Description | June 30, 2019 | June 30, 2018 | ||||||||||||||
Solar PV residential and commercial sales | $ | 1,086,010 | 98 | % | $ | 910,284 | 84 | % | ||||||||
Energy efficient lighting & other income | 27,168 | 2 | % | 169,701 | 15 | % | ||||||||||
Interest Income | 448 | - | % | 496 | 1 | % | ||||||||||
Total revenue | $ | 1,113,626 | 100 | % | $ | 1,081,021 | 100 | % |
The Company recognizes product revenue, net of sales discounts, returns and allowances. These statements establish that revenue can be recognized when persuasive evidence of an arrangement exists, delivery has occurred, and all significant contractual obligations have been satisfied, the fee is fixed or determinable, and collection is considered probable.
Our revenue recognition is recorded on the percentage of completion method for sales and installation revenue and on the accrual basis for fees and interest income. We recognize and record income when the customer has a legal obligation to pay. All our revenue streams are acknowledged by written contracts for any of the revenue we record. There are no differences between major classes of customers or customized orders. We record discounts, product returns, rebates and other related accounting issues in the normal business manner and experience very small number of adjustments to our written contractual sales. There are no post-delivery obligations because warranties are maintained by our suppliers. Our lease fees are earned by providing services to contractors for financing of solar systems. Normally we will acquire the promissory note (lease) on a leased system that will provide cash flow for up to 20 years. Interest is recorded on the books when earned on amortized leases.
Accounts Receivable and work-in-progress
The Company recognizes revenue upon delivery of product to customers and does not make bill-and-hold sales. Contracts spanning reporting periods are recorded on the percentage of completion method, based on the weighted average numberratio of sharestotal costs to total estimated costs by project, for recognition of common stock outstanding during each period. Diluted earnings per share is based on the weighted average numbers of shares of common stock outstandingrevenue and expenses. Accounts receivable includes fully completed and partially completed projects and partially billed statements for the periods, including dilutive effects of stock options, warrants grantedcompleted work and convertible preferred stock. Dilutive options and warrants that are issued duringproduct delivery. The Company records a period or that expire or are canceled during a period are reflectedreserve for bad debts in the computations foramount of 2% of earned accounts receivable. When the time they were outstanding duringCompany determines that an account is uncollectible, the periods being reported. Since ABCO Energy has incurred losses for all periods exceptaccount is written off against the current period,reserve and the impactbalance to expense. If the reserve is deemed to be inadequate after annual reviews, the reserve will be increased to an adequate level.
Inventory
The Company records inventory of construction supplies at cost using the first in first out method. After review of the common stock equivalents would be anti-dilutiveinventory on an annual basis, the Company discounts all obsolete items to fair market value and therefore are not included inhas established a valuation reserve of 10% of the calculation.
Income Taxes
The Company has reviewed all recently issued accounting pronouncements noting that they donet operating loss carryforwards as of December 31, 2018 totaling approximately $4,191,760. Accrued derivative liabilities and stock-based compensation are assumed to be non-tax events. A deferred 21% tax benefit of approximately $880,270 has been offset by a valuation allowance of the same amount as its realization is not affectassured.
Due to the financial statements.
The Company files in the US only and is not subject to taxation in any foreign country. There are three open years for which the Internal Revenue Service can examine our tax returns so 2015, 2016 and 2017 are still open years and 2018 will replace 2015 when the tax return is filed.
Fair ValueValues of Financial Instruments
ASC 825 requires the Corporation to disclose estimated fair value for its financial instruments. Fair value estimates, methods, and assumptions are set forth as follows for the Corporation’s financial instruments. The carrying amounts of cash, receivables, other current assets, payables, accrued expenses and notes payable are reported at cost but approximate fair value because of the short maturity of those instruments. The Company evaluates derivatives based on level 3 indicators.
ASC 825 requires the Corporation to disclose estimated fair value for its financial instruments. Fair value estimates, methods, and assumptions are set forth as follows for the Corporation’s financial instruments. The carrying amounts of cash, receivables, other current assets, payables, accrued expenses and notes payable are reported at cost but approximate fair value because of the short maturity of those instruments.
The Company measures assets and liabilities at fair value based on expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale date of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level.
The following are the hierarchical levels of inputs to measure fair value:
Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2: Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3: Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.
The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts payable and accrued expenses, approximate their fair values because of the current nature of these instruments. Debt approximates fair value based on interest rates available for similar financial arrangements. Derivative liabilities which have been bifurcated from host convertible debt agreements are presented at fair value.
Derivative Financial Instruments
Fair value accounting requires bifurcation of embedded derivative instruments such as convertible features in convertible debts or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the binomial option-pricing model. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.
Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives. In addition, the fair value of freestanding derivative instruments, such as warrants, are also valued using the binomial option-pricing model.
Stock-Based Compensation
The Company accounts for employee and non-employee stock awards under ASC 718, whereby equity instruments issued to employees for services are recorded based on the fair value of the instrument issued and those issued to non-employees are recorded based on the fair value of the consideration received or the fair value of the equity instrument, whichever is more reliably measurable.
Effects of Recently Issued Accounting Pronouncements
The Company has reviewed all recently issued accounting pronouncements noting that they do not affect the financial statements.
Per Share Computations
Basic net earnings per share are computed using the weighted-average number of common shares outstanding. Diluted earnings per share is computed by dividing net income by the weighted-average number of common shares and the dilutive potential common shares outstanding during the period. All shares were considered anti-dilutive at December 31, 2018. Potentially dilutive share issues are: 1) all unissued common shares sold, the convertible debentures are dilutive, 2) all convertible debentures have a possibility of a large number of shares being issued and would result in a larger number of shares issued if the price remains low, 3) the preferred stock of the company held by insiders is convertible into common shares and the preferred stock is voted on a 20 to 1 basis. All of the above are potential dilutive items.
Reclassification
Certain reclassifications have been made to conform to prior periods’ data to the current presentation. These reclassifications had no effect on reported income.
Note 3 – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. Since its inception, the Company has been engaged substantially in financing activities and developing its business plan and marketing. AsThe Company incurred a result,net loss of $(595,760), the Company incurrednet cash flow used in operations was $98,823 and its accumulated net losses from inception through the period ended SeptemberJune 30, 2017 of $(4,260,988),2019 is $5,776,191, which raises substantial doubt about the Company’s ability to continue as a going concern. In addition, the Company’s development activities since inception have been financially sustained through capital contributions from shareholders.
The ability of the Company to continue as a going concern is dependent upon its ability to raise additional capital from the sale of common stock or through debt financing and, ultimately, the achievement of significant operating revenues. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.
Note 4 – Warranties of the Company
ABCO Energy provides a five and ten year workmanship warranties for installed systems that cover labor and installation matters only. All installed products are warranted by the manufacturer. In the last four years of operations, all claims on workmanship have been handled expeditiously and inexpensively by the company. Management does not consider the warranties as a significant or material risk and therefore there is no reserve.
Note 5 – Accounts Receivable and Work in Process
Accounts receivable as of June 30, 2019 and 2018, consists of the following:
Description | June 30, 2019 | December 31, 2018 | ||||||
Accounts receivable on completed contracts | $ | 140,811 | $ | 105,187 | ||||
Costs and estimated earnings on contracts in progress | 52,829 | 184,212 | ||||||
Total | $ | 193,640 | $ | 289,399 |
Work in process consists of costs recorded and revenue earned on projects recognized on the percentage of completion method for work performed on contracts in progress at June 30, 2019 and 2018. The company records contracts for future payments based on contractual agreements entered into at the inception of construction contracts. Amounts are payable from customers based on milestones established in each contract. Amounts are billed in advance and unearned profits are netted against the billed amounts such that accounts receivable reflect current amounts due from customers on completed projects and amounts earned on projects in process are reflected in the balance sheet as costs and estimated earnings in excess of billings on contracts in progress.
Billings in excess of costs and earnings were $303,317 at June 30, 2019 and $85,777 at December 31, 2018.
Note 6 – Inventory
Inventory of construction supplies not yet charged to specific projects was $43,137$61,996 at June 30, 2019 and $46,701$53,950 as of September 30, 2017 and December 31, 2016, respectively.2018. The Company values items of inventory at the lower of cost or market and uses the first in first out method to charge costs to jobs.
Note 7 – Security deposits and Long Term Commitments
The Company has paid security deposits on the rented spaces it occupies for offices and warehouse which total $2,700 on June 30, 2019 and December 31, 2018.
On May 1, 2014, the Company rented office and warehouse space at 2100 N. Wilmot #211, Tucson, Arizona 85712. This facility consists of 3,600 square feet. The Company now has a one year lease with monthly rent of $2,770 which was renewed on November 1, 2018 to a term of one year. ABCO has a forward commitment of $11,081.
Note 8 – Alternative Energy Finance Corporation (AEFC)
AEFC is a wholly owned subsidiary of ABCO Energy. AEFC provides funding for leases of photovoltaic systems and finances its own leases from its own cash. Long term leases recorded on the consolidated financial statements were $4,234 at June 30, 2019 and $10,512 at December 31, 2018. During the quarter ended March 31, 2019 one of the leases paid in full as the owner’s property was sold.
Note 5 9 – Property and equipment
The Company has acquired all its office and field work equipment with cash payments and financial institution loans. The total fixed assets consist of vehicles, office furniture, tools and various equipment items and the totals are as follows:
Asset | June 30, 2019 | December 31, 2018 | ||||||
Equipment | $ | 120,267 | $ | 119,343 | ||||
Accumulated depreciation | (88,095 | ) | (82,805 | ) | ||||
Net Fixed Assets | $ | 32,172 | $ | 36,538 |
Depreciation expenses for the periods ended June 30, 2019 and June 30, 2018 was $5,290 and $8,120 respectively.
Note 10 – Notes Payable – Officers Directors and Related Parties
Related party notes payable as of SeptemberJune 30, 2017and2019 and December 31, 20162018 consists of the following:
Description | September 30, 2017 | December 31, 2016 | ||||||
Notes payable – Director bearing interest at 12% per annum, unsecured, demand notes. | $ | 60,000 | $ | 60,000 | ||||
Note payable - Officer bearing interest at 12% per annum, unsecured, demand note | 61,052 | 53,501 | ||||||
Note payable – other bearing interest at 12% per annum, unsecured, demand note. | 61,311 | 63,846 | ||||||
Total | $ | 182,363 | $ | 177,347 |
Description | June 30, 2019 | December 31, 2018 | ||||||
Notes payable – Director bearing interest at 12% per annum, unsecured, demand notes. | $ | 60,000 | $ | 60,000 | ||||
Note payable - Officer bearing interest at 12% per annum, unsecured, demand note | 61,052 | 61,052 | ||||||
Note payable – other bearing interest at 12% per annum, unsecured, demand note. | 67,002 | 48,497 | ||||||
Total | $ | 188,054 | $ | 169,549 |
The first note in the amount of $60,000 provides for interest at 12% per annum and is unsecured. This note hasresulted in an interest charge of $32,450 accrued and unpaid interest charge of $25,287 and $19,876 at SeptemberJune 30, 2017 and December 31, 2016, respectively.
The second note was increased by another loan in February 2017 in the amounthas a current balance of $4,200.$61,052 as of June 30, 2019. The note is an unsecured demand note and bears interest at 12% per annum. This note hasresulted in an interest charge of $23,694 accrued and unpaid interest charge of $10,888 and $5,812 at SeptemberJune 30, 2017 and December 31, 2016, respectively.
The third note is from a related party and has a current balance of $61,311$67,002 as of SeptemberJune 30, 2017 which changes with credit card transactions during each period.2019. The note is an unsecured demand note and bears interest at 12% per annum. This note hasresulted in an accumulated interest charge of $22,663 accrued and unpaid interest charge of $10,852 and $5,254 at SeptemberJune 30, 2017 and December 31, 2016 respectively.
Note 611 – Short Term Notes Payable
Description | September 30, 2017 | December 31, 2016 | ||||||
Merchant Note payable to Web Bank, borrowed 2-1-16, bearing interest at 23% per annum, unsecured. (1) | $ | 71,782 | $ | 82,323 | ||||
Merchant Note payable to Quarterspot Lending, borrowed 6-27-16, bearing interest at 31% per annum, unsecured. (2) | 26,484 | 40,474 | ||||||
Merchant note payable to Pearl Capital Funding, borrowed 7-12-16, bearing interest at 29% per annum, unsecured. (3) | 6,697 | 27,545 | ||||||
Total | $ | 104,963 | $ | 150,342 |
Description | June 30, 2019 | December 31, 2018 | ||||||
Private money loan from Perfectly Green Corporation, borrowed 1-22-18, bearing interest at 3% per annum, unsecured (3) demand note-Original balance $60,000, current balance | $ | 40,301 | $ | 49,563 | ||||
Knight Capital Funding, LLC, borrowed 1-30-19, bearing interest at 23% per annum, unsecured | 48,711 | - | ||||||
Total | $ | 89,012 | $ | 49,563 |
(1) On February 1, 2016,January 22, 2018 the Company financed operationsborrowed $60,000 from Perfectly Green Corporation, a Texas corporation. The Company repaid $19,699 prior to June 30, 2019. The note bears interest at 3% per annum and is payable upon demand after 60 days’ notice which can be requested at any time after May 31, 2018.
(2) On January 30, 2019 the Company borrowed $153,092 including principal and interest from Knight Capital Funding, LLC, [“KCF”] bearing interest at 23% per annum, unsecured. The balance and accrued interest at June 30, 2019 was $48,711. This loan was paid in full on August 10,2019 and replaced with a new loan of $144,900 from KCF. See Note 14 below.
During May 2018, the Company authorized a Series C Preferred Stock and has sold three issuances for cash to Power Up Lending Group Ltd as shown in the table below. The Series C Preferred Stock has no voting rights and is subordinate to the Series B Preferred Stock. The Series C Preferred Stock is convertible into common stock after 6 months at the option of the Holder. The conversion into common stock shares is determined by the use of the lowest price of the trading common stock in a 20 day period prior to the elected date to convert. The price is determined by the discount rate of 35% of the lowest price to determine the number of shares. The Series C Preferred is classified as a liability on the Balance Sheet because it is mandatorily redeemable after its 15 month term if not fully converted by that date. The classification of this investment as a liability on the balance sheet will also require a calculation of a derivative liability on future statements.
Name of Holder |
| Date of issuance |
|
| Date of maturity |
|
| Amount of issuance |
| |||
Power Up Lending Group, LTD |
|
| 5-7-18 |
|
|
| 11-7-18 |
|
| $ | 78,000 |
|
Power Up Lending Group, LTD |
|
| 7-6-18 |
|
|
| 1-6-19 |
|
| $ | 68,000 |
|
Power Up Lending Group, LTD |
|
| 8-24-18 |
|
|
| 2-24-19 |
|
| $ | 73,000 |
|
Total amount sold |
|
|
|
|
|
|
|
|
| $ | 219,000 |
|
Conversions during 2018 |
|
|
|
|
|
|
|
|
|
| 29,320 |
|
Balance on Preferred Stock Series C liability at December 31, 2018 |
|
|
|
|
|
|
|
|
| $ | 189,680 |
|
Effective as of September 2, 2018 Redstart Holdings Corp. (“RHC”) acquired from Power Up Lending Group Ltd., all of the $219,000 Series C Preferred Stock of ABCO Energy, Inc. owned by Power-Up for a one year promissory note from RHC for the principal amount of $328,500 plus interest at 8% per annum pursuant to a Stock Purchase Agreement dated October 31, 2018 (“SPA”). The Company agreed to the transactions contemplated by the SPA.
During the quarter ended March 31, 2019, the Company redeemed from Redstart 68,000 shares and 73,000 shares, respectively, of the Series C Preferred and retired these shares. Redstart converted all of the 78,000 Series C Preferred into common shares in 2018 and 2019. The balance of this note at June 30, 2019 was $-0- and it was $48,680 at December 31, 2018 all of which was converted into common shares during January 2019.
Note 12 – Long term debt
Holder |
| Date issued |
|
| Interest rate |
|
| Amount due June 30, 2019 |
|
| Amount due December 31, 2018 |
| ||||
Ascentium Capital |
|
| 10-1-18 |
|
|
| 13 | % |
| $ | 12,778 |
|
| $ | 14,285 |
|
Fredrick Donze |
|
| 9-2-18 |
|
|
| 6 | % |
|
| 5,180 |
|
|
| 6,283 |
|
Charles O’Dowd (officer) |
|
| 8-9-18 |
|
|
| 6 | % |
|
| 4,690 |
|
|
| 5,731 |
|
Total long term debt |
|
|
|
|
|
|
|
|
|
| 22,648 |
|
|
| 26,298 |
|
Less Current portion |
|
|
|
|
|
|
|
|
|
| 7,582 |
|
|
| 7,628 |
|
Total long-term debt |
|
|
|
|
|
|
|
|
| $ | 15,066 |
|
| $ | 18,670 |
|
ABCO acquired the assets of Dr. Fred Air Conditioning services on September 2, 2018 for the total price of $22,000. The allocation of the purchase price was to truck and equipment at $15,000 and the balance was allocated to inventory. The truck and equipment were financed by Ascentium Capital. Mr. Fred Donze, the owner, received a three year promissory note for the balance of $7,000 at 6% interest and with monthly payments of $213.
The Company purchased an automobile from its President with a promissory note in the amount of $150,000 from WebBank.$6,575 dated August 9, 2018 and bears interest at 6% per annum for the three year payment plan.
Note 13 – Convertible Debt and Derivative Valuation
In accordance with the Statement of Financial Accounting Standard ASC 820-10-35-37 Fair Value in Financial Instruments, Statement of Financial Accounting Standard ASC 815 Accounting for Derivative Instruments and Hedging Activities require that instruments with embedded derivative features be valued at their market values. The note is an open credit line with interest rate of 23% maturing in March of 2017. ACompany hired a valuation consultant to value the Convertible Debentures for the derivative portion of the loaninstruments. The Binomial model was used to pay offvalue the derivative liability for the fiscal year ending December 31, 2019 and December 31, 2018.
During the year ended December 31, 2018, the Company funded operations with borrowing on new convertible promissory notes and had other debentures due from 2017. This table presents the positions on the notes at June 30, 2019 and December 31, 2018.
Holder | Date of Loan | Loan amount | OID and discounts and fees | Interest rate | Maturity Dates | Balance June 30, 2019 | ||||||||||||||||||
Power Up Lending Group Ltd | 2-16-19 | $ | 68,000 | $ | 13,000 | 8 | % | 8-16-19 | 68,000 | |||||||||||||||
Power Up Lending Group Ltd | 3-18-19 | 68,000 | 13,300 | 8 | % | 9-18-19 | 68,000 | |||||||||||||||||
Power Up Lending Group Ltd - | 5-13-19 | 83,000 | 13,300 | 8 | % | 8-13-20 | 83,000 | |||||||||||||||||
219,000 | ||||||||||||||||||||||||
Less non-amortized discounts | 22,182 | |||||||||||||||||||||||
Totals and balances for 6-30-19 | $ | 219,000 | $ | 39,300 | $ | 196,818 |
The initial valuation of the derivative liability on the converted common shares totaled $-0- at June 30, 2019 and $74,848, net of discount, at December 31, 2018 as calculated by consultants for the Company when all notes were issued, but before any conversions. This value includes the fair value of the shares issued according to the contracts of the holders and valued according to our common share price at the time of acquisition.
Note 14 – Convertible Debt and Derivative Liabilities on Other Notes
The Company, effective as of September 1, 2018, entered into an Equity Purchase Agreement with Oasis Capital, LLC, a credit loanPuerto Rico limited liability company (“Investor”) pursuant to which Investor agreed to purchase up to $5,000,000 of the Company’s common stock at a price equal to 85% of the market price at the time of purchase (“Put Shares”). The Company agreed to file a new registration statement to register for resale the Put Shares. The Registration Statement must be effective with the SEC before Investor is obligated to purchase any Put Shares. In addition, the Company [i] issued to Investor a one year $150,000 note (“Commitment Note”) which is convertible at 57 ½ % of the lowest trading price for the 15 day trading period ending on the last trading date prior to the Conversion Date per share as a commitment fee for its purchase of Put Shares and [ii] delivered to Investor a Registration Rights Agreement pursuant to which the Company agreed to register all Put Shares acquired under the Equity Purchase Agreement. No transaction occurred on this matter through March 31, 2019 and no derivative was calculated on the note because it was not yet mature. The Company issued 4,444,708 common shares to Oasis and the price of the shares was classified as a prepaid expense. In addition, Oasis acquired 1,000,000 shares of common stock and paid ABCO $5,100 in May of 2019 under the Registration Statement referred to in the next sentence. This note is not recorded as a liability on the balance sheet until Oasis provides services by purchasing shares under the Registration Statement. See Note 17 below on page 18 with respect to the filing on April 26, 2019 and the effectiveness on May 7, 2019, of a Form S-1 Registration Statement filed for the Put Shares.
The Company had entered into Securities Purchase Agreement with Blackbridge Capital, LLC, a Delaware limited liability company [“SPA”], operating out of New York, New York (“Blackbridge”) whereby Blackbridge has agreed to purchase up to $5,000,000 worth of shares of the Company’s common stock. The Company has agreed to file a Registration Statement to register such shares for sale to Blackbridge. In addition, the Company has issued [i] a convertible promissory note to Blackbridge pursuant to the Securities Purchase Agreement equal to $150,000 as a commitment fee, that is currently charged to prepaid expenses until services are provided (the “Blackbridge Note”), [ii] and a $100,000 Convertible Note to cover the expenses to be incurred for the preparation and filing of the Registration Statement and related matters (“Expenses Note”). Blackbridge converted an additional $14,575 for 12,500,000 shares on January 17, 2018 bringing the total note balance to $78,150 as of the date the note was acquired by Oasis Capital, LLC.
On March 13, 2017, the Company and Blackbridge, entered into an Agreement, effective as of March 1, 2017, terminating the SPA. The Registration Statement on Form S-1 filed by the Company pursuant to the SPA could not be processed because of technical issues raised by the SEC and was withdrawn on February 28, 2017. In addition, the Blackbridge Note issued by the Company as a commitment fee was declared null and void and was cancelled on March 1, 2017.
Effective as of January 31, 2019, Company acquired through redemption from Orchard StreetRedstart Holdings Corp, [“RHC”] 68,000 shares of the Series C Preferred Stock [“Redeemed Preferred Shares”] owned by RHC. The redemption price for the Redeemed Preferred Shares was $101,810.55 which was financed through a cash advance transaction of future receivables.
Effective as of February 22, 2019, Company acquired through redemption from RHC 73,000 shares of the Series C Preferred Stock [“Redeemed Preferred Shares”] owned by RHC. The redemption price for the Redeemed Preferred Shares was $106,145 which was financed through available cash and the promissory note referred to in the next paragraph.
Effective August 8, 2019 the Company entered into a Future Receivable Sale Agreement with Knight Capital Funding in the amount of $44,061. On August 22, 2016, the Company ceased making payments on this loan and at September 30, 2017 the Company owed approximately $71,782$105,000 in principal and accrued interest. This loan is personally guaranteed by an Officerorder to fund a redemption of the Company. On March 20, 2017, the Company and WebBank agreedRedstart Series C Preferred Stock. The agreement calls for 176 daily payments of $823.30 to a monthly payment schedule with payment of $2,508 per month until June 20, 2017, paid biweekly.
The Company issued to Power Up Lending Group, Inc. [“Power Up”], a lending institution.$68,000 Convertible Promissory Note dated February 16, 2019 [“Note”] which contains an original issue discount of $10,000.00 (OID) and expenses of $3,000.00 [“Note”]. The noteNote is convertible into Company common stock beginning six months after the date of the Note with an open line with interesteffective discount rate of approximately 31% maturing20 % upon conversion. Without the OID, the effective discount rate would be 35% as set forth in Septemberthe Note. The net proceeds from the Note, combined with Company working capital in the amount of 2017. On August$51,145, was used to redeem the February 22, 2016,2019 acquisition above in the amount of $106,145.
The Company ceased making payments on this loan. Asissued to Power Up Lending Group, Inc. a $68,000 Convertible Promissory Note dated March 13, 2019 which contains an original issue discount of September 30, 2017,$10,000.00 (OID) and expenses of $3,000.00 [“Note”]. The Note is convertible into Company common stock beginning six months after the Company owed $26,484 in principal and accrued interest. This loan is not personally guaranteed by an Officerdate of the Company. On NovemberNote with a stated discount rate of 19% as set forth in the Note. Without the OID, the effective discount would have been 35%. The net proceeds from this Note were used for working capital.
The Company issued to Power Up Lending Group, Inc. a $83,000 Convertible Promissory Note dated May 13, 2019 which contains an original issue discount of $10,000.00 (OID) and expenses of $3,000.00 [“Note”]. The Note is convertible into Company common stock beginning six months after the date of the Note with a stated discount rate of 19% as set forth in the Note. Without the OID, the effective discount would have been 35%. The net proceeds from this Note were used for working capital.
The Company determined that the conversion feature embedded within the Power Up Series C Preferred shares that reached maturity in 2018 in the amount of $78,000 is a financial derivative. The Generally Accepted Accounting Principles (GAAP) required that the Company’s embedded conversion option be accounted for at fair value. The following schedule shows the change in fair value of the derivative liabilities on June 30, 2016, the Company2019 and Quarterspot agreed to a monthly payment schedule with payment of $1,500 per month until JanuaryDecember 31, 2017. On March 27, 2017, the Company agreed to begin payments of $3,010 per month for twelve months until paid in full.
Description | June 30, 2019 | December 31, 2018 | ||||||
Purchase price of the convertible debenture -net of discount | $ | 74,848 | $ | 78,000 | ||||
Valuation reduction during the period | (74,848 | ) | 3,152 | |||||
Balance of derivative liability net of discount on the notes (See Consolidated Balance sheet liabilities) | $ | - | $ | 74,848 | ||||
Derivative calculations and presentations on the Statement of Operations | ||||||||
Loss on note issuance | $ | - | $ | (36,230 | ) | |||
Change in Derivative (Gain) Loss | (177,934 | ) | 61,251 | |||||
Derivative Finance fees | - | (33,018 | ) | |||||
Gain (loss) on extinguishment of debt | (244,712 | ) | (410,157 | ) | ||||
Derivative valuation and expense charged to operations in 2019 (See Consolidated Statement of Operations) | $ | (422,646 | ) | $ | (418,154 | ) |
The Company has been negotiating more favorable paymentmeasured and payoff arrangements for these debts. ABCO stopped payments on the WebBank note on July 19, 2017 after signing an agreement with Veritas Legal Plan Inc. to renegotiate and service this debt and the Quarterspot debt listed above. Payments on the Quarterspot Note were stopped on July 28, 2017. Under the VeritasLegal Plan, the Company would pay for the legal services incurred to negotiate a reduced pay-off amount or a reduced balance on these notes payable over a period of two to three years. The Company had paid Veritas $12,116.18, of which a portion were for fees for services rendered, to apply towards the settlement of and legal fees for negotiating settlements favorable to ABCO and to defend ABCO positions in court if necessary. The current payment arrangements are for ABCO to pay Veritas $1,052.87 per month towards these arrangements. If the Company is not successful in this process the note holders may take legal action to collect their respective debts against the Company and/or its officers.
Description | September 30, 2017 | December 31, 2016 | ||||||
Note payable to Ascentium Capital, secured by truck, bearing interest at 9% per annum, matured on September 20, 2017. As of September 20, 2017, this note was paid in full. This loan had payments of $469 per month. | $ | - | $ | 4,400 | ||||
Less current portion of truck loan | - | (4,400 | ) | |||||
Total long term debt net of current portion | $ | - | $ | - |
September 30, 2017 | December 31, 2016 | |||||||
Derivative Liabilities from Convertible Notes (Level 3) | $ | 175,515 | $ | 397,722 |
Note 915 – Stockholder’s Equity
Common Stock
During the six months ended June 30, 2019 the Company sold 4,740,000 shares of restricted common shares in Regulation S offerings to non-US investors. The total proceeds from the offering was $160,305. Commission and expense reimbursements totaled $79,927. The Company recorded net proceeds totaling $80,317.
Legal and other professional fees charged to additional paid in capital totaled $29,000 for the six months ended June 30, 2019.
During the fiscal year ended December 31, 2016,2018 the Company sold 6,162,119 restricted common shares in Regulation S offerings to non-US investors. The total proceeds from the offering was $581,859. Commission and expense reimbursements totaled $292,042. The Company recorded net proceeds totaling $ 289,817.
Legal and other professional fees charged to additional paid in capital totaled $39,176 for the six months ended December 31, 2018.
In addition, debenture holders converted debt into 16,767,650 shares which were issued upon conversion of $256,742 of the notes referred to in Note 13 above.
During the year ended December 31, 2018 the Company issued an aggregate of 19,872,739369,599 common restricted shares of its common stock upon conversions of nine different convertible notes at conversion prices ranging from $0.0015 to $0.0047 per share. All share figures contained in this filing have been adjusted to reflect Post Reverse Stock Split numbers. As a result of such issuances, all six [6] of the notes have paid in full as of that date. The Companyand recorded $424,878 for the equity infusion provided by these notes.
Preferred Stock
On September 15, 2017 and on September 15, 2018, the Board of Directors authorized on each such date the issuance of 15,000,000 preferred shares for an aggregate of 15,000,00030,000,000 shares of Class B Convertible Preferred Stock ["[“Series B"B”] to both Directors of the Company and to two unaffiliated Consultants.Consultants or a total of 30,000,000 shares of Series B. The Company assigned a value of $15,000 for the shares for 2017 and 2018. Of the Series B, 6,000,00012,000,000 shares were issued to Charles O'DowdO’Dowd and 1,000,0002,000,000 to Wayne Marx, the Directors. Each Consultant received 4,000,0008,000,000 shares. See the Company'sCompany’s Schedule 14C filed with the Commission on September 28, 2017.2018. These shares have no market pricing and management assigned thean aggregate value of $15,000$30,000 to the stock issueissued based on the par value of the preferred stock.0,001.$0.001. The 15,000,00030,000,000 shares of preferred Stock, each with has 20 votes for each Preferred share held by them of record. The holders of the Preferred are also entitled to ownan additional 150,000,000300,000,000 common shares upon conversion of the Preferred Stock. As a result of owning of these shares of Common and Preferred Stock, the Control Shareholders will have voting control the Company.
Earnings (loss) per share calculation
Basic net loss per share is computed by dividing net loss by the weighted average number of a Meetingshares of Shareholders executed September 26, 2017,common stock outstanding during the holdersperiod. Diluted net loss per share is computed by dividing net loss by the weighted average number of a majorityshares of the voting power common stock and preferredpotentially outstanding shares of common stock during each period
The computation of basic and diluted loss per share at December 31, 2018 excludes the common stock equivalents from convertible debt of the Company adopted a further Amendment tofollowing potentially dilutive securities because their inclusion would be anti-dilutive, and the Articles of Incorporation increasingshare issue number is not calculable until conversion takes place.
Note 16 – Other Matters
During the authorized common stock from 1 Billion shares to 2 Billion shares The Certificate of amendment was filed with the Nevada Secretary of State on September 28, 2017.
Legal and other professional fees charged to additional paid in capital totaled $29,000 for the six months ended June 30, 2019.
During the fiscal year ended December 31, 2018 the Company sold 6,162,119 restricted common shares in Regulation S offerings to non-US investors. The total proceeds from the offering was $581,859. Commission and expense reimbursements totaled $292,042. The Company recorded net proceeds totaling $ 289,817.
Legal and other professional fees charged to additional paid in capital totaled $39,176 for the six months ended December 31, 2018.
Stock subscriptions executed under an earlier offering included a provision whereby ABCO agrees to pay a dividend (defined as interest) of from 6% to 12% of the total amount invested for a period of one year from receipt of the invested funds. This dividend (defined as interest) is allocated between the broker and the investor with amounts paid to the broker treated as a cost of the offering and netted against additional paid in capital and amounts paid to the investor treated as interest expense. Total amounts paid or accrued under this agreement and charged to additional paid-in capital for the years ended December 31, 2018 and 2017, amounted to $0 and $0, respectively. Total amounts paid under this agreement and charged to interest expense for the years ended December 31, 2018 and 2017, amounted to $0 and $0, respectively. The accrued balance of accrued interestdue on this obligation to shareholders totals $49,290 at SeptemberJune 30, 20172019 and December 31, 2016 amounted to $49,290 and no payments have been made during the current period.
ABCO has evaluated these agreements under ASC 480-10: Certain Financial Instruments with Characteristics of Both Liabilities and Equity and determined that the capital contributions made under these subscription agreement more closely resemble equity than liabilities as they can only be settled through the issuance of shares and although they have a stated cost associated with them which accrues in the same manner as interest, the cost is only incurred in the first twelve months after placement as is more closely associated with a cost of raising funds than interest expense.
On November 8, 2017, the Company entered into a Consulting Agreement (“CA”) with Eurasian Capital, LLC [“Consultant”] which willwas to provide institutional funding services and shareholder and third partythird-party sponsorship services for a sixnine month term ending May 7, 2018. Consultant shallwas to be paid a monthly retainer of $10,000 payable in ABCO restricted common stock based upon the 5 day average of the closing bid price commencing on the first day of each month during the effectiveness of the Consulting Agreement. The CA was terminated by the Company on March 29, 2018 for non-performance by Consultant. Consultant will alsowas issued 198,413 restricted shares for services in November 2017 which were delivered to Consultant in December 2017. The shares for services rendered in December of 2017 [208,308] and for January 2018 [161,271] were issued in January 2018 but were not delivered until early April 2018 when a dispute with respect to the CA termination was resolved with the execution of releases. A dispute has arisen with respect to the number of shares due Consultant as a result of the CA termination. The parties resolved this matter by the delivery of an aggregate of 369,599 shares to Consultant in 2018 and the execution of releases.
The Company, effective as of September 1, 2018, entered into an Equity Purchase Agreement with Oasis Capital, LLC, a Puerto Rico limited liability company (“Investor”) pursuant to which Investor agreed to purchase up to $5,000,000 of the Company’s common stock at a price equal to 85% of the market price at the time of purchase (“Put Shares”). The Company agreed to file a new registration statement to register for resale the Put Shares. The Registration Statement must be paideffective with the SEC before Investor is obligated to purchase any Put Shares. In addition, the Company [i] issued to Investor a successone year $150,000 note (“Commitment Note”) which is convertible at 57 ½ % of the lowest trading price for the 15 day trading period ending on the last trading date prior to the Conversion Date per share as a commitment fee for its purchase of 7%Put Shares and [ii] delivered to Investor a Registration Rights Agreement pursuant to which the Company agreed to register all Put Shares acquired under the Equity Purchase Agreement. No transaction occurred on this matter through March 31, 2019 and no derivative was calculated on the note because it was not yet mature. The Company issued 4,444,707 common shares to Oasis and the price of the shares was classified as a prepaid expense.. This note is not recorded as a liability on the balance sheet until Oasis provides services by purchasing shares under the Registration Statement. See Note 17 below on page 18 with respect to the filing on April 26, 2019 and the effectiveness on May 7, 2019, of a Form S-1 Registration Statement filed for raising capital which will be paid in cash from the proceedsPut Shares.
The Company issued 1,350,000 restricted common shares to management for services with a fair market value of each applicable capital raise.
Note 17 – Subsequent Events
Effective August 8, 2019 the Company entered into a Future Receivable Sale Agreement with Knight Capital Funding in the amount of $105,000 in order to fund a redemption of the Redstart Series C Preferred Stock. The agreement calls for 176 daily payments of $823.30 to retire this note in the amount of $144,900 representing principal and discount of collection of future receivables. The Company’s decision to redeem the Preferred shares was primarily to prevent the conversion of this note from diluting the common shares in 2019.
Equity Awards
The following table sets forth information on outstanding option and stock awards held by the named executive officers of the Company at December 31, 2018, including the number of shares underlying both exercisable and un-exercisable portions of each stock option as well as the exercise price and the expiration date of each outstanding option. See Note 16 to Notes to Consolidated Financial Statements.
Outstanding Equity Awards After Fiscal Year-End (1) |
| |||||||||||||||||
Name |
| Number of securities underlying unexercised options exercisable (1) |
|
| Number of securities underlying unexercised options un-exercisable (2) |
|
| Option Exercise Price ($) |
|
| Option Grant Date |
|
| Option Expiration Date |
| |||
Charles O’Dowd |
|
| 500,000 |
|
|
| 0 |
|
| $ | .001 |
|
| 01/01/2017 |
|
| 01/01/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wayne Marx |
|
| 500,000 |
|
|
| 0 |
|
| $ | .001 |
|
| 01/012017 |
|
| 01/01/2021 |
|
(1) No Equity Awards were issued during the year ended December 31, 2018.
(2) All options vest 20% per year beginning on the first anniversary of their grant date.
An aggregate of 1,620,000 stock awards are outstanding under the Equity Incentive Plan as of December 31, 2018.
RESULTS OF OPERATIONS – OVERVIEW
THREE MONTHS ENDED SEPTEMBERJUNE 30, 20172019 COMPARED TO THREE MONTHS ENDED SEPTEMBERJUNE 30, 2016.
Our discussion of operating results for the threeThree months ended SeptemberJune 30, 20172019 and SeptemberJune 30, 20162018 are presented below with major category details of revenue and expense including the components of operating expenses.
Sales consist of photovoltaic products, electrical services and LED lighting products and installation during both periods for the three months ended SeptemberJune 30, 20172018 and for the three months ended SeptemberJune 30, 2016.
Sales for the three months ended SeptemberJune 30, 20172018 were $265,856$459,616 as compared to $146,547$558,726 for the same three months in 2016.2018. This is an increasea decrease of $119,309$99,110 or 82% above18% of the 20162018 sales. The Solar sales revenue in 20172019 and 20162018 reflected seasonal and changing market conditions in the financing of solar installationsinstallations. ABCO has increased their efforts to sell into the commercial markets and competition from the public utilities in the Arizona markets. When the utilities in Arizona cancelled or substantially reduced the rebate programs, the financing or leasing companies were able to reduceincreased focus on the financial requirements by accepting the rebates as partial payments were no longer able to make loans or lease that required no money down or longer terms for their finance products. This severally reduced the opportunities for sales and reduced gross margins substantially. Without availableof nonprofit organization’s financing the sales of solar products became even more difficult. The prices of solar products were reduced in 2017 and 2016 to offset the reduction or elimination of
Cost of sales was 143%58% of revenues in 20172019 and 119%75% of revenues in 2016.2018. Gross margins were 43%42% of revenue in 20172018 and 19%75 % of revenue for the three months of 2016.2018. During 20172019 and 20162018 we have been offering new products and have found our entry market prices for steel parking structures have added gross margins higher than usual because we use outside contractors for the entire projects. Our gross profit reflects this decision. We feel that we have made progress in entering the parking shade markets and that our gross margins will stabilize as growth lowers these margins in the future.
Total selling, general and administrative expenses were 107%52% of revenues for the three months ended June 30, in 20172019 and 129%46% of revenues for the same period in 2016.2018. Net loss for the three-month period ended SeptemberJune 30, 20172018 was $(135,161)$(48,143) as compared to the net income of $13,401loss $(261,226) for the same three- monththree-month period ended SeptemberJune 30, 2016.2018. Our operating expenses for this period were lower as a percentage of revenue and lower by 22% from$14,138 than the comparative period in 2016.2018. The interest expense during the period ended SeptemberJune 30, 20172019 was higherlower by $11,406$1,198 than in the period ended SeptemberJune 30, 20162018 due mostly to the working capital provision of merchant loans and convertible debt. Interest on derivative liabilities of convertible debentures decreased by $154769 during the current period as compared
ABCO could not finish its backlog of work and expand into the markets of LED lights and commercial solar markets without maintaining staff, facilities and sales expenses. When sales revenues fall, and expenses are not reduced in equal amounts or percentages, the result is an increase of the percentage of operating expenses to sales revenue. ABCO chose to maintain a level of expenses that would not cripple the Company’s future.
SIX MONTHS ENDED SEPTEMBERJUNE 30, 20172019 COMPARED TO NINESIX MONTHS ENDED SEPTEMBER 30, 2016.
Our discussion of operating results for the ninesix months ended SeptemberJune 30, 20172019 and SeptemberJune 30, 20162018 are presented below with major category details of revenue and expense including the components of operating expenses.
Sales consist of photovoltaic products, electrical services and LED lighting products and installation during both periods for the ninesix months ended SeptemberJune 30, 20172019 and for the ninesix months ended SeptemberJune 30, 2016.
Sales for the ninesix months ended SeptemberJune 30, 20172019 were $1,168,650$1,113,626 as compared to $512,075$1,018,021 for the same ninethree months in 2016.2018. This is an increase of $656,60532,605 or 128 % above3% of the 20162018 sales. The Solar sales revenue in 20172019 and 20162018 reflected seasonal and changing market conditions in the financing of solar installations and competition from the public utilities in the Arizona markets. When the utilitiesABCO has begun its focus on commercial sales in Arizona cancelled or substantially reduced the rebate programs, the financing or leasing companies were2018 and has been able to reduce the financial requirements by accepting the rebates as partial payments were no longer able to make loans or leasegrow every period since that required no money down or longer terms for their finance products. This severally reduced the opportunities for sales and reduced gross margins substantially. Without available financing, the sales of solar products became even more difficult. The prices of solar products were reduced in 2017 and 2016 to offset the reduction or elimination of rebates and the market has recovered from this time. The advent of the federal legislation on possible tariffs for imported panels has influenced the sales and profits for the third quarter because of drastic price corrections and availability of products.decision. ABCO has worked diligently to overcome thesethe utility changes by focusing on commercial applications and the increased interest of business and government in the LED lighting contracts.
Cost of sales was 74%$678,886 or 61% of revenues in 20172019 and 121%$746,260 or 70% of revenues in 2016.2018. Gross margins were 26%39% of revenue in 20172019 and negative30% of revenue for the ninesix months of 2016.2018. During 20172019 and 20162018 we have been offering new products and have found our entry market prices for steel parking structures have added gross margins higher than usual because we use outside contractors for the entire projects. Our gross profit reflects this decision. We feel that we have made progress in entering the parking shade markets and that our gross margins will stabilize as growth lowers these margins in the future.
Total selling, general and administrative expenses were 52%$501,866 or 50% of revenues in 20172019 and 110%$414,879 or 38% of revenues for the same period in 2016.2018. Net loss(loss) income from operations for the nine-monththree-month period ended SeptemberJune 30, 20172019 was $(320,761)$(67,126) as compared to the net loss of $(1,108,974)$(80,118) for the same nine-monthsix month period ended SeptemberJune 30, 2016.2018. Our operating expenses for the 2017this period were higher as a percentage of revenue and higher by $40,247$86,987 than the comparative period in 2016.2018. The interest expense from operations during the period ended SeptemberJune 30, 20172019 was lowerhigher by $2,150$69,242 than in the period ended SeptemberJune 30, 20162018 due mostly to the increase in working capital provision ofthrough new merchant loans and derivatives on convertible debt. Interest on derivativeDerivative liabilities of convertible debentures decreasedincreased by $85,386$97,419 during the current period as compared to the prior year. This combination of factors increaseddecreased the operating incomeloss for the period ending SeptemberJune 30, 2017 by $788,2132019 to $(566,978) as compared to September$(214,165) for the six months ended June 30, 2016,2018, due to increased sales andalmost entirely by the change in derivative valuationincome and finance fees. Since our year to date revenues are higher than the previous year, this resulted in lower operating expenses as a percentage of total revenue.
As noted in previous paragraphs discussing market conditions, ABCO could not finish its backlog of work and expand into the markets of LED lights and commercial solar markets without maintaining staff, facilities and sales expenses. When sales revenues fall, and expenses are not reduced in equal amounts or percentages, the result is an increase of the percentage of operating expenses to sales revenue. Operating expenses for the two periods was approximately the sameincreased to accommodate our expansion of sales programs, but not in the same ratio as the reductionincrease in sales. ABCO chose to maintain a level of expenses that would not cripple the Company’s future.
STATEMENTS OF CASH FLOWS FOR THE NINETHREE MONTHS ENDED SEPTEMBERJUNE 30, 20172019 AND 2016
During the ninesix months ended SeptemberJune 30, 20172019 our net cash used byin operating activities was $(303,479)$(98,323) and comparatively the net cash used by operating activities in the ninesix months ended SeptemberJune 30, 20162018 was $(251,012)$(312,616). Net cash used by operating activities in the period ended SeptemberJune 30, 20172019 consisted primarily of net losslosses from operations of $(320,761)$(595,760) for 20172019 as compared to $(1,108,974)a loss of $(214,238) for 2016.2018. Depreciation adjustments were of non-cash expenses were $6,117$5,290 and $9,886$8,120 for each period respectively. Derivative portion of convertible debt accounted for charges to income for future changes in value of the underlying stock in the amount of $(163,683) net$(177,934) for the period ended SeptemberJune 30, 2017 and $416,286 net for the same period in 2016.2019. None of this expense will be realized if this debt is retired before maturity. The Company experienced an increasea decrease in accounts payable of $23,282$(264,956) and $17,922an increase of $67,032 for each period respectively. This is primarily due to the Company'sCompany’s ability apply cash receipts from investors and operations to pay past and current creditors during each period. Accounts receivable decreasedincrease by $35,877,$95,759, net of adjustments for contracts in process, during the period ended SeptemberJune 30, 2017.
Net cash used for investing activities for the periods ended SeptemberJune 30, 20172019 and 20162018 was $533$5,354 and $2,330$2,191 respectively due to receipt of principal on leases paid or terminated and equipment acquisitions.
Net cash provided by financing activities for the periods ended SeptemberJune 30, 20172019 and 20162018 was $292,553$81,387 and $225,231$317,321 respectively. Net cash provided by financing activities for 20172019 and 20162018 resulted primarily from the sale of common stock, loans from a financial institution and loans from a Director. The total principal paid onDirector, Officer and affiliates. Cash provided by financing activities during the three current periodperiods ended June 30, 2019 were primarily from the sale of common stock and loans is $49,779.
LIQUIDITY AND CAPITAL RESOURCES
Our primary liquidity and capital requirements have been for carrying cost of accounts receivable after completion of contracts. The industry habitually requires the solar contractor to wait for the utility approval in order to be paid for the contracts. This process can easily exceed 90 days and sometimes requires the Company as the contractor to pay all or most of the cost of the project without assistance from suppliers. Our working capital at SeptemberJune 30, 20172019 was $(909,794)$(817,634) and it was $(932,939)$(768,962) at December 31, 2016.30, 2018. This decrease of $23,145$48,672 was primarily due to saleslosses from operations during the period ended SeptemberJune 30, 20172019 and adjustments for possible future losses on derivative conversions. Bank financing has not been available to the Company, but we have been able to increase our credit lines with our suppliers because of good credit. There are no material covenants on our credit lines, normally due in 30 days, since they are standard in the industry and the balances vary daily.on a daily basis. Most are personally guaranteed by the Officer of the Company.
The total borrowed from Directors, Affiliates and officers and related parties to $182,363.totaled $188,054 plus accrued interest of $78,808 as of June 30, 2019. There are no existing agreements or arrangement with any Director to provide additional funds to the Company.
During the ninesix months period ended SeptemberJune 30, 20172019 or the last fiscal year ended December 31, 20162018 there were no transactions, or proposed transactions, which have materially affected or will materially affect the Company in which any director, executive officer or beneficial holder of more than 5% of the outstanding common, or any of their respective relatives, spouses, associates or affiliates, has had or will have any direct or material indirect interest. We have no policy regarding entering into transactions with affiliated parties.
PLAN OF OPERATIONS
Based on our current financial position, we cannot anticipate whether we will have sufficient working capital to sustain operations for the next year if we do not raise additional capital. We will not, however, be able to reach our goals and projections for multistate expansion without a cash infusion. We have been able to raise sufficient capital through the sale of our common shares and we have incurred substantial increases in debt from our trade creditors in the normal course of business. Management will not expand the business until adequate working capital is provided. Our ability to maintain sufficient liquidity is dependent on our ability to attain profitable operations or to raise additional capital. We have no anticipated timeline for obtaining neither additional financing nor the expansion of our business. We will continue to keep our expenses as low as possible and keep our operations in line with available working capital as long as possible. There is no guarantee that the Company will be able to obtain adequate capital from any sources, or at all.
Not Applicable to Smaller Reporting Companies.
(a) Evaluation of Disclosure Controls and Procedures.
As of the end of the reporting period, SeptemberJune 30, 2017,, 2019, we carried out an evaluation, under the supervision and with the participation of our management, including the Company’s Chairman and Chief Executive Officer/Principal Accounting Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”), which disclosure controls and procedures are designed to insure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within required time periods specified by the SEC’s rules and forms. Based upon that evaluation, the Chairman/CEO and the Chief Financial Officer concluded that our disclosure controls and procedures are not currently effective in timely alerting them to material information relating to the Company required to be included in the Company’s period SEC filings. The Company is attempting to expand such controls and procedures, however, due to a limited number of resources the complete segregation of duties is not currently in place.
(b) Changes in Internal Control.
Subsequent to the date of such evaluation as described in subparagraph (a) above, there were no changes in our internal controls or other factors that could significantly affect these controls, including any corrective action with regard to significant deficiencies and material weaknesses.
(c) Limitations.
Our management, including our Principal Executive Officer and Principal Financial Officer, does not expect that our disclosure controls or internal controls over financial reporting will prevent all errors or all instances of fraud. However, we believe that our disclosure controls and procedures are designed to provide reasonable assurance of achieving this objective. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and any design may not succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitation of a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
PART II-OTHER INFORMATION
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, consolidated financial condition, or operating results.
Not Applicable.
During the nine-month periodsix months ended SeptemberJune 30, 20172019 the Company sold an aggregate of 68,212,2954,740,000 shares of restricted common stockshares in Regulation S offerings to non-US investors. The total proceeds from the offering was $160,305. Commission and received or credited grossexpense reimbursements totaled $79,927. The Company recorded net proceeds of $546,278. Expenses oftotaling $80,317.
Legal and other professional expenses for this offering and other matters totaled $227,792. The net proceeds of $220,766 were used for working capital, corporate expenses, legal fees and public company expenses.
None
Not Applicable
Not Applicable
Exhibit No. | Description of Exhibit |
3(i) | Articles of Incorporation, as amended (1) | |
3(ii) | By-Laws (1) | |
10(a) | Share Exchange Agreement dated July 15, 2011 (1) | |
10(b) | ||
10(c) | ||
10(d) | ||
10(e) | ||
10(f) | ||
10(g) | ||
10(h) | ||
21 | Subsidiaries of Registrant (1) | |
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101 INS | XBRL, Instance Document | |
101 SCH | XBRL Taxonomy Extension Schema Document | |
1010 CAL | XBRL Taxonomy Calculation Linkbase Document | |
101 DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101 LAB | XBRL Taxonomy Labels Linkbase Document | |
101 PRE | XBRL Taxonomy |
(1) | Previously filed with the Company’s Form 10, SEC File No. 000-55235, filed on July 1, 2014, and incorporated herein by this reference as an exhibit to this Form 10-Q. |
(2) | Attached. |
(3) | Previously filed with the Company’s Form 10-K, File No. 000-55235, filed with the Commission on April 11, 2016 and incorporated herein by this |
(4) | Previously filed with |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report or amendment thereto to be signed on its behalf by the undersigned thereunto duly authorized.
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
August 19, 2019
ABCO ENERGY, INC | ||
/s/ Charles O’Dowd | ||
Charles O’Dowd | ||
Title: President & | ||
Chief Executive Officer (CEO) | ||
/s/ Charles O’Dowd | ||
Charles O’Dowd | ||
Chief Financial Officer (CFO) | ||
Principal Accounting Officer (PAO) |