NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2017 and 2016
Note 1 – Overview and Description of the Company
ABCO Energy, Inc. was organized on July 29, 2004 and operated until July 1, 2011 as Energy Conservation Technologies, Inc. (ENYC). On July 1, 2011 ENYC entered into a share exchange agreement (SEA) with ABCO Energy and acquired all the assets of ABCO. ENYC changed its name to ABCO Energy, Inc. on October 31, 2011. As a result of the SEA, the outstanding shares of ENYC as of June 30, 2011 were restated in a one for twenty three (1 for 23) reverse division prior to the exchange to approximately 9% of the post-exchange outstanding common shares.
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. All share numbers through-out these financial statements and notes thereto have been adjusted to reflect this reverse split.
The Company is in the Photo Voltaic (PV) solar systems industry, the LED and energy efficient commercial lighting business and is an electrical 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, lighting and electrical service operations centers. This combination of services, solar and electric, provides the Company with a solid base in the standard electrical services business and a solid base in the growth markets of solar systems industry.
OVERVIEW
As of December 31, 2017, we operated in Tucson, 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 Photovoltaic electric systems that allow the customer 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 US manufactured solar products from such companies as Mia Soleil, Canadian Solar, Boviet, Westinghouse Solar and various 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 organizations.
ABCO also sells and installs energy efficient lighting products, 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. Our license is ROC 258378 electrical and we are fully licensed to offer commercial and residential electrical services and solar. As in all states, we will comply with all licensing requirements of those jurisdictions.
The ABCO subsidiary, Alternative Energy Finance Corporation, (AEFC) a Wyoming Company provides funding for leases of photovoltaic systems. AEFC financed its owned leases from its own cash and now arranges financing with funds provided by other lessors. AEFC has not done any company owned new leases since 2011 but intends to do so as cash becomes available.
Note 2 – Summary of significant accounting policies
Critical Accounting Policies and Use of Estimates
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 accordance with generally accepted accounting principles (GAAP) generally accepted in the United States of America.
GAAP requires the Company to make estimates and judgments 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 warranties. The Company bases its estimates on historical and anticipated results and trends and on various other assumptions that the Company believes are reasonable under the circumstances, including assumptions as to future events.
The policies discussed below are considered 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 fiscal year, the company had product sales as follows:
Sales Product and Services Description
|
|
2017
|
|
|
2016
|
|
Solar PV residential and commercial sales
|
|
$
|
1,315,907
|
|
|
|
91
|
%
|
|
$
|
674,1301
|
|
|
|
84
|
%
|
Energy efficient lighting & other income
|
|
|
130,164
|
|
|
|
8
|
%
|
|
|
131,078
|
|
|
|
16
|
%
|
Interest Income
|
|
|
985
|
|
|
|
1
|
%
|
|
|
1,340
|
|
|
|
0
|
%
|
Total revenue
|
|
$
|
1,447,056
|
|
|
|
100
|
%
|
|
$
|
806,548
|
|
|
|
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 ratio of total costs to total estimated costs by project, for recognition of revenue and expenses. Accounts receivable includes fully completed and partially completed projects and partially billed statements for completed work and product delivery. The Company records a reserve for bad debts in the amount of 2% of earned accounts receivable. When the Company determines that an account is uncollectible, the account is written off against the reserve and the balance 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 inventory on an annual basis, the Company discounts all obsolete items to fair market value and has established a valuation reserve of 10% of the inventory at total cost to account for obsolescence.
Income Taxes
The company has net operating loss carryforwards as of December 31, 2017 totaling approximately $3,411,320. Accrued derivative liabilities of $1,047,443 and stock based compensation are assumed to be non-tax events. A deferred 21% tax benefit of approximately $716,377 has been offset by a valuation allowance of the same amount as its realization is not assured.
Due to the current uncertainty of realizing the benefits of the tax NOL carry-forward, a valuation allowance equal to the tax benefits for the deferred taxes has not been established. The full realization of the tax benefit associated with the carry-forward depends predominately upon the Company’s ability to generate taxable income during future periods, which is not assured.
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 2014, 2015 and 2016 are still open years and 2017 will replace 2014 when the tax return is filed.
The NOL carryforward expires according to the following schedule:
Year Ending
December 31:
|
|
Actual
Total Loss
|
|
|
Less
Derivative expense
|
|
|
Less
Stock Based Compensation
|
|
|
Net Tax loss
subject to carry over
|
|
2037
|
|
$
|
599,936
|
|
|
$
|
41,289
|
|
|
$
|
81,400
|
|
|
$
|
477,247,
|
|
2036
|
|
|
1,923,384
|
|
|
|
1,006,154
|
|
|
|
|
|
|
|
917,230
|
|
2035
|
|
|
214,823
|
|
|
|
|
|
|
|
|
|
|
|
214,823
|
|
2034
|
|
|
635,517
|
|
|
|
|
|
|
|
|
|
|
|
635,517
|
|
2033
|
|
|
622,474
|
|
|
|
|
|
|
|
|
|
|
|
622,474
|
|
2032
|
|
|
230,224
|
|
|
|
|
|
|
|
|
|
|
|
230,224
|
|
2031
|
|
|
182,908
|
|
|
|
|
|
|
|
|
|
|
|
182,908
|
|
2030
|
|
|
130,897
|
|
|
|
|
|
|
|
-
|
|
|
|
130,897
|
|
Totals
|
|
$
|
4,540,163
|
|
|
$
|
1,047,443
|
|
|
$
|
81,400
|
|
|
$
|
3,411,320
|
|
Fair Values 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, 2017. 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. The Company incurred a net loss of $599,936, the net cash flow used in operations was $(167,739) and its accumulated net losses from inception through the period ended December 31, 2017 is $4,540,163, 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 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 December 31, 2017 and 2016, consists of the following:
Description
|
|
2017
|
|
|
2016
|
|
Accounts receivable on completed contracts
|
|
$
|
46,985
|
|
|
$
|
43,292
|
|
Costs and estimated earnings on contracts in progress
|
|
|
|
|
|
|
60,349
|
|
Total
|
|
$
|
46,985
|
|
|
$
|
103,641
|
|
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 December 31, 2017 and 2016. 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 $83,813 at December 31, 2017 and $5,229 at December 31, 2016. During December 2017 the Company sold two large commercial projects that were substantially incomplete at December 31, 2017 and thus created the larger billings in excess of costs.
Note 6 – Inventory
Inventory of construction supplies not yet charged to specific projects was $38,127 and $46,701 as of December 31, 2017 and 2016, respectively. 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. The Company has established a valuation reserve of 10% of the value of inventory after write downs for obsolescence.
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 December 31, 2017 and $1,800 on December 31, 2016.
On May 1, 2014, the Company rented office and warehouse space at 2100 N. Wilmot #211, Tucson, Arizona 85712. This facility consists of 2,400 square feet. The Company now has a one year lease with monthly rent of $2,841 which was renewed on November 1, 2017 to a term of one year. ABCO has a forward commitment of $28,410.
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 $11,281 and $11,984 at December 31, 2017 and December 31, 2016 respectively.
Note 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
|
|
December 31, 2017
|
|
|
December 31, 2016
|
|
Equipment
|
|
$
|
86,136
|
|
|
$
|
90,946
|
|
Accumulated depreciation
|
|
|
(64,195
|
)
|
|
|
(61,220
|
)
|
Net Fixed Assets
|
|
$
|
21,941
|
|
|
$
|
29,726
|
|
Depreciation expenses for the years ended December 31, 2017 and 2016 was $7,785 and $12,785 respectively.
Note 10 – Notes Payable Officers and Related Party Transactions
Officer loans consist of demand notes totaling $187,826 and $177,347, respectively, as of December 31, 2017 and December 31, 2016. These notes provide for interest at 12% per annum and are unsecured. Notes payable to the Directors resulted in interest charges of $21,767 and $16,303 for the periods ended December 31, 2017 and December 31, 2016, respectively. Other related party notes totaled $66,774 and $63,846 at December 31, 2017 and 2016 respectively for loans from a person who is neither an officer or director.
Related party notes payable as of December 31, 2017 and December 31, 2016 consists of the following:
Description
|
|
December 31, 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.
|
|
|
66,774
|
|
|
|
63,846
|
|
Total
|
|
$
|
187,826
|
|
|
$
|
177,347
|
|
The first note in the amount of $60,000 provides for interest at 12% per annum and is unsecured. This note resulted in an interest charge of $27,102 accrued and unpaid at December 31, 2017.
The second note has a current balance of $61,052 as of December 31, 2017. The note is an unsecured demand note and bears interest at 12% per annum. This note resulted in an interest charge of $12,735 accrued and unpaid at December 31, 2017.
The third note is from a related party and has a current balance of $66,774 and $63,846 as of December 31, 2017 and 2016 respectively. The note is an unsecured demand note and bears interest at 12% per annum. This note resulted in an accumulated interest charge of $12,871 accrued and unpaid at December 31, 2017.
Note 11 – Short Term Notes Payable
Description
|
|
December 31, 2017
|
|
|
December 31, 2016
|
|
Note payable - Credit line, payable to Ascentium Capital, bearing interest at 9% per annum, secured by Boom Truck - due in full by 9-20-17. (1)
|
|
$
|
-
|
|
|
$
|
4,400
|
|
Merchant Note payable to Web Bank, borrowed 2-1-16, bearing interest at 23% per annum, unsecured. (2) Settled by negotiated payment in 2018
|
|
|
69,854
|
|
|
|
82,323
|
|
Merchant Note payable to Quarterspot Lending, borrowed 6-27-16, bearing interest at 31% per annum, unsecured. (3) Settled by negotiated payment in 2018
|
|
|
26,484
|
|
|
|
40,474
|
|
Merchant note payable to Premier Capital Funding, borrowed 7-12-16, bearing interest at 29% per annum, unsecured.
|
|
|
0
|
|
|
|
27,546
|
|
Total
|
|
$
|
96,338
|
|
|
$
|
154,743
|
|
(1) Note payable to Ascentium Capital, secured by truck, bearing interest at 9% per annum, was paid September 20, 2017.
(2) On February 1, 2016, the Company financed operations with a loan in the amount of $150,000 from WebBank. The note is an open credit line with interest rate of 23% maturing in March of 2017. A portion of the loan was used to pay off a credit loan from Orchard Street Funding in the amount of $44,061. On August 22, 2016, the Company ceased making payments on this loan and at December 31, 2017 the Company owed a settled negotiated amount of $69,854 in principal, accrued interest and settlement fees. This loan was personally guaranteed by an Officer of the Company. The Company has negotiated a payment and payoff arrangements for this debt.
(3) On June 28, 2016, the Company financed operations with a loan in the amount of $43,500 from Quarterspot, a lending institution. The note is an open line with interest rate of approximately 31% maturing in September of 2017. On August 22, 2016, the Company ceased making payments on this loan. As of December 31, 2017, the Company owed $26,484 in principal, accrued interest and settlement fees. This loan is not personally guaranteed by an Officer of the Company. Arrangements have been made for the final payment schedule on this loan. The negotiated settlement on the Quarterspot note was $8,650 plus fees. This note and the fees have been paid in full in 2018.
Note 12 – Long term debt
ABCO Energy, Inc had no Long term debt as of December 31, 2017 was $0 and $0 as of December 31, 2016.
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 Company hired a valuation consultant to value the Convertible Debentures for the derivative portion of the instruments. The Binomial model was used to value the derivative liability for the fiscal year ending December 31, 2017 and December 31, 2017.
During the year ended December 31, 2017, the Company funded operations with borrowing on 2 new convertible promissory notes and had another debenture due from 2016. This table presents the positions on the notes at December 31, 2017 and 2016.
Holder
|
|
Date
of Loan
|
|
|
Loan
amount
|
|
|
OID and
discounts
and fees
|
|
|
Interest
rate
|
|
|
Conversions to
shares
|
|
|
Conversion
Dollars
|
|
|
Balance
December 31,
2017
|
|
|
Balance
December 31,
2016
|
|
Blackbridge Capital Growth Fund, LLC
|
|
|
11-2-16
|
|
|
$
|
100,000
|
|
|
$
|
0
|
|
|
|
0
|
%
|
|
|
2,500,000
|
|
|
$
|
7,475
|
|
|
$
|
92,525
|
|
|
$
|
100,000
|
|
Crown Bridge Partners, LLC
|
|
|
1-11-17
|
|
|
$
|
45,000
|
|
|
$
|
5,000
|
|
|
|
5
|
%
|
|
|
3,790,000
|
|
|
$
|
5,979
|
|
|
$
|
39,021
|
|
|
$
|
0
|
|
Power Up Lending Group, Ltd
|
|
|
11-11-17
|
|
|
$
|
58,000
|
|
|
$
|
3,000
|
|
|
|
8
|
%
|
|
|
None
|
|
|
|
None
|
|
|
$
|
58,000
|
|
|
$
|
0
|
|
Total
|
|
|
|
|
|
$
|
203,000
|
|
|
$
|
8,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
189,546
|
|
|
$
|
100,000
|
|
Debt discount on derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,310
|
|
|
|
59,589
|
|
Net total debentures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
187,236
|
|
|
$
|
40,411
|
|
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 of this report.
The initial valuation of the derivative liability on the converted common shares totaled $175,703 as calculated by consultants for the Company when all notes were issued, but before any conversions. This valuation represents $27,297 less than funds received of $203,000 and this value was recorded as a derivative liability on the balance sheet. 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.
From September 28, 2016 through December 7, 2016, the Company issued an aggregate of 19,873,739 shares of its common stock upon conversions of six different convertible notes at conversion prices ranging from $0.0015 to $0.0047 per share. After considering the funds received for the shares and amortization of original derivative liability and the changes in the liability due to market conditions, the Company recorded equity of $424,878 during 2016 for such conversion transactions.
Note 14 – Convertible Debt and Derivative Liabilities on Other Notes
The Company has 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 of this report.
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.
The Company determined that the conversion feature embedded within the Expenses Note 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 by December 31, 2017:
Description
|
|
Amount
|
|
Purchase price of the two convertible debentures
|
|
$
|
203,000
|
|
Valuation premium on notes during 2017
|
|
|
24,987
|
|
Balance of derivative liability net of discount on the two notes (See Consolidated Balance sheet liabilities)
|
|
$
|
178,013
|
|
|
|
|
|
|
Derivative calculations and presentations on the Statement of Operations
|
|
|
|
|
Loss on note issuance
|
|
$
|
109,889
|
|
Change in Derivative(Gain) Loss
|
|
|
(214,265
|
)
|
Derivative Finance fees
|
|
|
197,762
|
|
Interest on derivatives
|
|
|
(134,665
|
)
|
Derivative valuation and expense charged to operations in 2017 (See Consolidated Statement of Operations)
|
|
$
|
(41,279
|
)
|
The Company recorded finance fees and interest on derivatives for the twelve months ended December 31, 2017 of $134,665.
The Company measured and utilized quoted prices in active markets for identical liabilities (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (level 3) in applying valuation technology to derivative values for December 31, 2017 and 2016 and throughout the year.
Note 15 – Stockholder’s Equity
Common Stock
During the year ended December 31, 2017, the Company sold 94,782,461 shares of common stock and received or credited net proceeds of $269,514 net of direct offering expenses from private placement offerings. In addition, debenture holders converted debt into 6,290,000 shares were issued upon conversion of two of the notes referred to in Note 13 above. The legal and administrative expense of offerings totaled $55,711. The net proceeds in the amount of $213,803 were used for working capital, corporate expenses, legal fees, prepaid expenses and public company expenses.
The Company issued 7,194,063 common restricted shares and recorded equity in the amount of $20,000 from vendors for services and issued 27,000,000 restricted common shares to management for services with a fair market value of $81,400.
During the year ended
December 31, 2016
the Company issued 2,486,382 shares of common stock and received or credited net proceeds of $326,064, net of direct offering expenses from private placement offerings. In addition, debenture holders converted debt into 19,873,739 shares were issued upon conversion of the six notes referred to in Note 13 above. The legal and administrative expense of offerings totaled $103,400. The net proceeds in the amount of $647,539 were used for working capital, corporate expenses, legal fees, prepaid expenses and public company expenses.
The Company recorded equity in the amount of $424,878 gain on sale of the six convertible debt notes and $464,739 on the two Blackbridge notes for derivatives valuations incurred in 2016.
Preferred Stock
On September 15, 2017, the Board of Directors authorized the issuance of an aggregate of 15,000,000 shares of Class B Convertible Preferred Stock [“Series B”] to both Directors of the Company and to two unaffiliated Consultants. The Company assigned a value of $15,000 for the shares. Of the Series B, 6,000,000 shares were issued to Charles O’Dowd and 1,000,000 to Wayne Marx, the Directors. Each Consultant received 4,000,000 shares. See the Company’s Schedule 14C filed with the Commission on September 28, 2017. These shares have no market pricing and management assigned the value of $15,000 to the stock issued based on the par value of $0.001. The 15,000,000 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 an additional 150,000,000 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 shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period
The computation of basic and diluted loss per share at December 31, 2017 excludes the common stock equivalents from convertible debt of the following potentially dilutive securities because their inclusion would be anti-dilutive, and the share issue number is not calculable until conversion takes place. The total value of the derivative not converted at December 31, 2017 was $187,236.
Note 16 – Other Matters
During the fiscal year ended December 31, 2017 the Company sold 94,782,461 shares in Regulation S offerings to non-US investors. The total proceeds from the offering was $686,731. Commission and expense reimbursements totaled $417,217. The Company recorded net proceeds totaling $269,514.
During the fiscal year ended December 31, 2016 the Company sold 2,486,382 shares in Regulation S offerings to non-US investors. The total proceeds from the offering was $767,234. Commission and expense reimbursements totaled $441,170. The Company recorded net proceeds totaling $326,064.
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, 2017 and 2016, amounted to $0 and $3,146, respectively. Total amounts paid under this agreement and charged to interest expense for the years ended December 31, 2017 and 2016, amounted to $0 and $4,129, respectively. The accrued balance due on this obligation to shareholders totals $49,290 at December 31, 2017 and 2016.
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.
During November and December 2017, the Company issued an aggregate of 7,194,063 restricted common shares to financial consulting entities for services relating to fund raising activities. The total issuance was valued at $20,000 for fair market value as negotiated and that amount is charged to additional paid in capital.
During November 2016, the Company issued an aggregate of 1,449,649 shares to financial consulting entities for services relating to fund raising activities. The total issuance was valued at $103,400 for fair market value as negotiated and that amount is charged to additional paid in capital.
Effective December 31, 2016, the Company entered into a Consulting Agreement (“CA”) with Joshua Tyrell (“Tyrell”) which provides for Tyrell to assist in various business development activities on behalf of the Company, including but not limited to realizing new business opportunities. In consideration for rendering such services, Tyrell was issued 1,500,000 free trading shares of Company common stock. The CA has a six month term expiring on March 31, 2017. On November 7, 2016 and on November 30, 2016, the CA was amended to provide for the payment of an additional 6,300,000 and an additional 5,000,000 free-trading shares, respectively to Tyrell for services rendered due to the huge trading volume of the derivative conversions and to extend the term of the CA to twelve (12) months ending November 7, 2017. The CH expired on such date and was not renewed. The consultant received a total of 1,430,000 shares of free trading and restricted common stock valued at $91,600.
On November 1, 2016 the Company has 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 as of December 31, 2016. (“Expenses Note”).
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.
The Company issued 27,000,000 restricted common shares to management for services with a fair market value of $81,400. during the Year Ended December 31, 2017. Of these awards, Charles O’Dowd received 9,000,000 shares and Wayne Marx received 1,000,000 shares. The balance of 17,000,000 shares were awarded to consultants to the Company.
Note 17 – Subsequent Events
The Company has 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. and loaned ABCO 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 $7,475 dollars for 2,500,000 common shares during 2017 and an additional $14,575 for 12,500,000 shares on January 17, 2018 bringing the total note balance to $77,950 with as of the date of this report.
During the period of January 1, 2018 and the date of this report, the Company sold and will issue 31,816,667 restricted shares of common stock from private placement offerings. The gross proceeds were in the amount of $155,310, expenses of the offering totaled $90,023 and net proceeds to the Company amounted to $65,287. The proceeds were used for working capital, corporate expenses, legal fees, prepaid expenses and public company expenses.
An aggregate of 1,620,000 stock awards are outstanding under the Equity Incentive Plan as of December 31, 2017.