See accompanying notes to the unaudited condensed consolidated financial statements.
See accompanying notes to the unaudited condensed consolidated financial statements.
See accompanying notes to the unaudited condensed consolidated financial statements.
NOTES
TO UNAUDITED
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE
NINE
MONTHS ENDED
SEPTEMBER
30, 2018
(UNAUDITED
)
Note 1 Overview and Description of the Company
ABCO Energy, Inc. (ABCO) 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. The Company is in the Photo Voltaic (PV) solar systems industry, air conditioner services industry, the energy efficient lighting industry and is an electrical product and services supplier.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10 Q and Article 10 of Regulation SX. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The December 31, 2017 consolidated balance sheet included in this Quarterly Report was derived from audited financial statements but does not include all disclosures required by GAAP. In the opinion of management, all adjustments considered necessary for fair presentation have been included. Operating results for the three and nine month periods ended September 30, 2018 is not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2018. For further information, refer to the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K.
Note 2 Summary of Significant Accounting Policies
Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
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.
Reclassifications
Certain balances have been reclassified in the accompanying condensed consolidated financial statements to conform to the current period presentation. These reclassifications had no effect on the prior period’s net loss or accumulated deficit.
Revenue Recognition
The Company generates revenue from sales of solar electric production products, air conditioning sales and service, LED lighting installation services and leasing fees. During the nine months ended September 30, 2018 and 2017 the Company had product sales as follows:
Sales Product and Services Description
|
|
2018
|
|
|
2017
|
|
Solar PV residential and commercial sales
|
|
$
|
2,012,332
|
|
|
|
92
|
%
|
|
$
|
1,047,950
|
|
|
|
90
|
%
|
Energy efficient lighting and other income
|
|
|
174,848
|
|
|
|
8
|
%
|
|
|
120,730
|
|
|
|
10
|
%
|
Interest income
|
|
|
739
|
|
|
|
0
|
%
|
|
|
|
|
|
|
0
|
%
|
Total revenue
|
|
$
|
2,187,919
|
|
|
|
100
|
%
|
|
$
|
1,168,680
|
|
|
|
100
|
%
|
The Company recognizes product revenue net of sales discounts and returns and allowances. ASC (606) accounting requires that the company recognize revenue and profits on the percentage of completion method for long term projects. These contracts generally extend for a period in excess of one reporting period. The amount of revenue and profits recognized in each period is determined by the ratio of costs incurred to the total of estimated costs. Costs included in construction in process consist of materials, direct labor and project related overhead. At September 30, 2018 ABCO had $1,950,646 in construction in progress and had earned $934,851 and $1,015,795 was not earned at the end of the period. Recognition standards require evidence of arrangement, delivery or services rendered, price fixed, collectability reasonably assured are now replaced with the following steps under ASC 606.
1. Identify the contract with a customer.
2. Identify the performance obligations in the contract.
3. Determine the transaction price
4. Allocate the transaction price to the performance obligations in the contract.
5. Recognize revenue when (or as) the entity satisfies a performance obligation
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 and rebates in the normal business manner and experience a limited 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. Interest is recorded on the books when earned on amortized leases.
Income (Loss) per Share
Basic income (loss) per share amounts are calculated based on the weighted average number of shares of common stock outstanding during each period. Diluted earnings per share is based on the weighted average numbers of shares of common stock outstanding for the periods, including dilutive effects of stock options, warrants granted and convertible preferred stock. Dilutive options and warrants that are issued during a period or that expire or are canceled during a period are reflected in the computations for the time they were outstanding during the periods being reported. ABCO has incurred losses in the current period but the impact of the common stock equivalents would be anti-dilutive and therefore are not included in the calculation. However, ABCO has issued 30,000,000 shares of Series B preferred stock with a conversion feature of 10 common shares for each share of Series B preferred stock. The Company has also issued 219,000 shares of Series C Preferred Shares (“Series C”) which are convertible at 65% of the average of the closing prices for the 15 trading days prior to the date of conversion. If the Series C was assumed to be converted as of September 30,2018, approximately 675,000,000 potentially dilutive shares would be issuable. The Series B would add a maximum of 300,000,000 additional shares of common stock if conversion were to take place. In addition, there are no common stock equivalents outstanding at the time of this report. Since convertible preferred stock and convertible debt have unknown conversion ratios to common stock, no calculation for this contingency is included in earnings or losses per share.
Effects of Recently Issued Accounting Pronouncements
The Company has reviewed all recently issued accounting pronouncements noting that they do not have a material effect on the financial statements at September 30, 2018.
Fair Value of Financial 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 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 – Level 3
GAAP requires bifurcation of certain embedded derivative instruments such as conversion features in convertible debt 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.
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. As a result, the Company incurred accumulated net losses from inception through the period ended September 30, 2018 of $(4,805,726), which raises substantial doubt about the Company’s ability to continue as a going concern.
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 or preferred 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 Inventory
Inventory of construction supplies not yet charged to specific projects was $45,195 and $38,127 as of September 30, 2018 and December 31, 2017, 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.
Note 5 Note Payable – Officers, Directors and Related Parties
Officer loans are demand notes totaling $176,136 and $187,826, respectively, as of September 30, 2018 and December 31, 2017. These notes provide for interest at 12% per annum and are unsecured. Notes payable to the Officers, Directors and Related Parties resulted in interest charges of $5,335 and $5,523 for the quarters ended September 30, 2018 and September 30, 2017, respectively. The other related party note from a non-officer or director totaled $55,084 at September 30, 2018.
Related party notes payable and accrued interest as of September 30, 2018 and December 31, 2017 consists of the following:
Description
|
|
Accrued interest due at
September
30, 2018
|
|
|
Note Balance
September
30, 2018
|
|
|
Note Balance
December 31, 2017
|
|
Note payable - Director bearing interest at 12% per annum, unsecured, demand note
|
|
$
|
32,489
|
|
|
$
|
60,000
|
|
|
$
|
60,000
|
|
Note payable - Officer bearing interest at 12% per annum, unsecured, demand note
|
|
|
18,215
|
|
|
|
61,052
|
|
|
|
61,052
|
|
Note payable – other bearing interest at 12% per annum, unsecured, demand note
|
|
|
17,696
|
|
|
|
55,084
|
|
|
|
66,774
|
|
Total
|
|
$
|
68,400
|
|
|
$
|
176,136
|
|
|
$
|
187,826
|
|
Note 6 Short Term Notes Payable
Description
|
|
September
30, 2018
|
|
|
December 31, 2017
|
|
Demand note Perfectly Green Corp (1)
|
|
$
|
50,000
|
|
|
$
|
-
|
|
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
|
|
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
|
|
Veritas settlement of the Web Bank and Quarterspot notes
|
|
|
3,734
|
|
|
|
-
|
|
Total
|
|
$
|
53,734
|
|
|
$
|
96,338
|
|
(1) On January 22, 2018 the Company borrowed $60,000 from Perfectly Green Corporation, a Texas corporation. The Company repaid $10,000 during the quarter ended September 30, 2018. 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. Accrued interest on this note totaled $553 at September 30, 2018.
(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 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 September 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 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 as of September 30, 2018.
The negotiated payment settlements on the loans described in (2) and (3) above resulted in a remaining obligation totaling $3,734 as of September 30, 2018 with respect to the WebBank loan, the Quarterspot loan and the Veritas settlement fees. The obligation requires ABCO to continue payments of $1,187 per week until the total paid reaches the sum of $3,734 with respect to the loans and fees. The Quarterspot loan was paid in full so these payments apply only to WebBank and Veritas. These notes will be considered paid in full at the end of the negotiated settlement period if all such payments are made on a timely basis.
Note 7 Long Term Debt
Holder
|
|
Date issued
|
|
|
Interest rate
|
|
|
Amount due 9-30-18
|
|
Ascentium Capital
|
|
|
10-1-18
|
|
|
|
13
|
%
|
|
$
|
15,000
|
|
Fredrick Donze
|
|
|
9-2-18
|
|
|
|
6
|
%
|
|
|
7,000
|
|
Charles O’Dowd (officer)
|
|
|
8-9-18
|
|
|
|
6
|
%
|
|
|
6,240
|
|
Total long term debt at 9-30-18
|
|
|
|
|
|
|
|
|
|
|
28,240
|
|
Less Current portion
|
|
|
|
|
|
|
|
|
|
|
8 433
|
|
Total long-term debt
|
|
|
|
|
|
|
|
|
|
$
|
19,807
|
|
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 was 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 $6,575 dated August 9, 2018 and bears interest at 6% per annum for the three year payment plan.
Note 8 Fai
r Value of Financial Instruments
The following is the major category of liabilities measured at fair value on a recurring basis as of September 30, 2018, and December 31, 2017 using quoted prices in active markets for identical liabilities (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3):
|
|
September
30, 2018
|
|
|
December 31, 2017
|
|
Derivative Liabilities from Convertible Notes (Level 3)
|
|
$
|
-
|
|
|
$
|
178,013
|
|
Note 9 Stockholder’s Equity
At September 30, 2018 and December 31, 2017, the Company had sold but have not yet issued 137,191,082 and 35,140,224 shares of common stock. The gross proceeds during the nine months ended September 30, 2018 totaled $496,622 and the expenses of offering totaled $259,330. The net proceeds of $237,292 were used for working capital, corporate expenses, legal fees and public company expenses. These shares are reflected in the balance sheet and included in total shares outstanding. Many shareholders have elected to wait for the issuance of restricted shares until the holding period under rule 144 has expired. The following table shows the issued and unissued shares at the end of the period.
Description of shares
|
|
September 30, 2018
Shares
|
|
|
Net Value of
unissued shares
|
|
|
Par value
of shares
|
|
|
December 31, 2017
Shares
|
|
|
Net value of
unissued shares
|
|
|
Par Value
of shares
|
|
Common shares sold and issued
|
|
|
353,963,157
|
|
|
|
|
|
|
$
|
353,963
|
|
|
|
126,998,171
|
|
|
|
|
|
|
$
|
126,998
|
|
Common shares sold and not yet issued
|
|
|
137,191,082
|
|
|
|
237,292
|
|
|
|
137,191
|
|
|
|
35,140,224
|
|
|
|
59,643
|
|
|
|
35,140
|
|
Total common shares
|
|
|
491,154,239
|
|
|
$
|
237,292
|
|
|
$
|
491,154
|
|
|
|
162,138,395
|
|
|
$
|
59,643
|
|
|
$
|
162,138
|
|
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
|
|
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.
On January 17, 2018 the debt holder Blackbridge Capital Growth Fund, LLC converted $14,375 of their convertible debentures into 12,500,000 shares of common stock. This transaction resulted in an increase to paid in capital for derivative gains in the amount of $25,196 in addition to the reduction in the debt in the amount of $14,375. As of September 30, 2018, Blackbridge had sold their promissory note to L2 Capital, LLC in a private transaction. L2 Capital converted $87,707 of the note into 95,893,406 shares of common stock prior to September 30, 2018. The balance of the convertible debenture was zero at September 30, 2018.
During the nine months ended September 30, 2018, Crown Bridge Partners, LLC converted $39,021 of the balance of their convertible debenture that was issued in 2017, into 48,959,039 shares of common stock. The balance of the Crown Bridge holding was zero at September 30, 2018.
On October 13, 2017, the Company issued a nine (9) month $58,000 convertible promissory note to Power Up Lending Group, Ltd., (“Power Up”), which bears interest at the rate of 8% per annum on the principal sum of the outstanding (“Power Up Note”). The Company received net proceeds of $55,000 after deductions for expenses. The Power Up Note is convertible at any time after the six (6) month anniversary of the Note into shares of common stock as a conversion price equal to 58% of the lowest
two (2) trade prices in the 15 trading days before the conversion date. The earliest conversion date was April 19, 2018. During the period ended September 30, 2018 Powerup Lending converted and sold $59,815 worth of debentures including $1,815 in interest for 51,130,560 shares of common stock. The balance of this note was zero at September 30, 2018.
The Board of Directors of the Company has approved a reverse stock split of its common stock, at a ratio of 1-for-20 (the “Reverse Stock Split”). Management expects the Reverse Stock Split will become effective with FINRA (the Financial Industry Regulatory Authority) and in the marketplace on or about December 15, 2018 (the “Effective Date”), whereupon the shares of common stock will begin trading on a split adjusted basis. On the Effective Date, the Company’s trading symbol will be changed to “ABCED” for a period of 20 business days, after which the “D” will be removed from the Company’s trading symbol, which will revert to the original symbol of “ABCE”. In connection with the Reverse Stock Split, the Company’s CUSIP number will change to 00287V204. On the Effective Date, the total number of shares of the Company’s Common Stock held by each stockholder will be converted automatically into the number of whole shares of Common Stock equal to (i) the number of issued and outstanding shares of Common Stock held by such stockholder immediately prior to the Reverse Stock Split, divided by (ii) 20. No fractional shares will be issued, and no cash or other consideration will be paid. Instead, the Company will issue one whole share of the post-Reverse Stock Split Common Stock to any stockholder who otherwise would have received a fractional share because of the Reverse Stock Split.
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. 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 $75,000 to the stock issue based on the market value of the underlying common shares on the date of approval of $0.0005. The 15,000,000 shares of Preferred Stock, each has 20 votes for each preferred share held by them at a record date. The holders of the Series B Preferred are also entitled to own additional 150,000,000 common shares upon conversion of the Series B Stock. As a result of owning these shares of Common and Preferred Series B Stock, the Control Shareholders will have voting control the Company.
By Written Consent in lieu of a Meeting of Shareholders executed September 26, 2017, the holders of a majority of the voting power common stock and preferred stock of the Company adopted a further Amendment to the Articles of Incorporation increasing 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.
On September 15, 2017 and on September 28, 2018, the Board of Directors authorized the issuance of an aggregate of 30,000,000 shares of Series B Convertible Preferred Stock (“Series B”) with 15,000,000 shares of Series B authorized on each such date. Each preferred share provides for 20 votes of each share of the Series B and provides that Series B holders are entitled to vote together with holders of common stock with respect to any matter upon which the holders of Common Stock have the right to vote on. The Series B is also convertible into 10 shares of Common Stock for each share of Series B. The Series B were issued to each director and to certain consultants (collectively “Control Shareholders” to the Company as follows:
Name
Positions
|
|
No. of Shares of Series B
|
|
Charles O’Dowd,
President, CEO and Director
|
|
|
12,000,000
|
|
Wayne Marx,
Secretary and Director
|
|
|
2,000,000
|
|
Absaroka Communications Corp,
Consultant
|
|
|
8,000,000
|
|
Cereus Consulting LLC,
Consultant
|
|
|
8,000,000
|
|
Total shares of series B preferred
|
|
|
30,000,000
|
|
The Series B were issued to allow for the Company’s Management to continue to guide the Company forward in view of some business challenges facing the Company. On the date of this Form 10-Q, there were 499,854,239 shares of Common Stock outstanding. The Control Shareholders and the Series B holders, by written consent dated November 7, 2018 [i] adopted the Amendment to Increase Capital to increase the authorized number of Common Stock from 2,000,000,000 to 5,000,000,000 shares and [ii] approved the Reverse Split with a ratio of one (1) share for each twenty (20) shares of Common Stock outstanding as of the Record Date.
On September 15, 2017, the Board of Directors of the Company authorized the issuance of 27,000,000 restricted shares of common stock, (“New Restricted Common Shares”) to the Control Shareholders and consultants. On September 28, 2018, the Company issued an additional 27,000,000 of New Restricted Common Shares to the Control Shareholders and consultants. The second issuance of New Restricted Common Shares were issued for services rendered to the Company and both issuances of New Restricted Common Shares, together with two issues of the Series B allows the Company Management to continue to guide the Company forward in view of some business challenges facing the Company. These Shares were issued upon an exemption from registration pursuant to Section 4(2) of the 1933 Act and Rule 506 of Regulation D under the 1933 Act. The following table gives effect to all New Restricted Common Shares as follows:
Name
Positions
|
|
Number of New
Restricted Common Shares
|
|
Charles O’Dowd,
President, CEO and Director
|
|
|
18,000,000
|
|
Wayne Marx,
Secretary and Director
|
|
|
2,000,000
|
|
Und, LLC,
Consultant
|
|
|
2,000,000
|
|
Absaroka Communications Corp,
Consultant
|
|
|
16,000,000
|
|
Cereus Consulting, LLC,
Consultant
|
|
|
16,000,000
|
|
Total issued to related parties
|
|
|
54,000,000
|
|
On November 8, 2017, the Company entered into a Consulting Agreement (“CA”) with Eurasian Capital, LLC [“Consultant”] which will provide institutional funding services and shareholder and third party sponsorship services for a nine month term ending May 7, 2018. Consultant was 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 was issued 7,194,063 restricted shares for November and December 2017, of which 3,968,254 have been delivered to Consultant. No shares for January through the termination date were ever issued. 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 7,391,976 shares to Consultant 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 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 which is convertible at a fixed price of $.01 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.
Note 10 Convertible Debt and Derivative Valuation
Statement of Financial Accounting Standard ASC 820-10-35-37 Fair Value of Financial Instruments and Statement of Financial Accounting Standard ASC 815, Accounting for Derivative Instruments and Hedging of 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 the nine months ended September 30, 2018.
During the year ended December 31, 2017, the Company funded operations with borrowing on 2 additional convertible promissory notes and had another debenture due from 2016. This table presents the positions on the notes at September 30, 2018 and December 31, 2017.
Holder
|
|
Date
of Loan
|
|
|
Loan
amount
|
|
|
OID and
discounts
and fees
|
|
|
Interest
rate
|
|
|
Conversions to
shares
|
|
|
Conversion
Dollars
|
|
|
Balance
September
30,
2018
|
|
|
Balance
December 31,
2017
|
|
L2 Capital – formerly Blackbridge Capital Growth Fund, LLC
|
|
11-2-16
|
|
|
$
|
100,000
|
|
|
$
|
0
|
|
|
|
7
|
%
|
|
|
110,843,406
|
|
|
$
|
110,097
|
|
|
$
|
-
|
|
|
$
|
92,525
|
|
Crown Bridge Partners, LLC
|
|
1-11-17
|
|
|
$
|
45,000
|
|
|
$
|
5,000
|
|
|
|
5
|
%
|
|
|
58,499,039
|
|
|
$
|
63,318
|
|
|
$
|
-
|
|
|
$
|
39,021
|
|
Power Up Lending Group, Ltd
|
|
11-11-17
|
|
|
$
|
58,000
|
|
|
$
|
3,000
|
|
|
|
8
|
%
|
|
|
51,130,560
|
|
|
|
59,815
|
|
|
$
|
-
|
|
|
$
|
58,000
|
|
Total
|
|
|
|
|
$
|
203,000
|
|
|
$
|
8,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
189,546
|
|
Debt discount on derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
2,310
|
|
Net total debentures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
187,236
|
|
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”) on November 2, 2016 whereby Blackbridge has agreed to purchase up to $5,000,000 of shares of the Company’s common stock. The Company had agreed to file a Registration Statement to register such shares for sale to Blackbridge. Blackbridge purchased a $100,000 convertible note for cash and designated that a portion of the note was to be used to cover the expenses to be incurred for the preparation and filing of the Registration statement and related matters (“Expenses Note”).
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 (the “Blackbridge 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 by agreement, effective March 1, 2017. The balance on the $150,000 Blackbridge note was $0 at September 30, 2018.
On May 15, 2017 Blackbridge converted $7,475 of the debt to 2,500,000 shares. On January 17, 2018 Blackbridge converted $14,375 of their convertible debentures into 12,500,000 shares of common stock. These two transaction resulted in an increase to paid in capital for derivative gains in the amount of $25,196 in addition to the reduction in the debt in the amount of $21,850. As of September 30, 2018, Blackbridge had sold their promissory note to L2 Capital, LLC in a private transaction. L2 Capital converted the principal of $78,150 and $10,098 of interest and penalties into 95,893,406 shares of common stock. The balance of the convertible note was $0 at September 30, 2018.
On January 11, 2017, the Company issued a twelve (12) month $45,000 convertible promissory note to Crown Bridge Partners, LLC, (“Crown”), which bears interest at the rate of 5% per annum on the principal sum of the outstanding balance (“Crown Note”). The Company received net proceeds of $40,000 after deductions for expenses from the Crown Note which is convertible at any time after the six (6) month anniversary of the note into shares of common stock as a conversion price equal to 52% of the lowest one (1) trade price in the 20 trading days before the conversion date. During 2017, Crown converted $11,050 of their convertible debentures for 9,540,000 shares of common stock. During the period ended September 30, 2018, Crown Bridge converted $33,950 in principal and $18,317 of interest and penalties into 48,959,039 shares of common stock. The balance of the note was $0 as of September 30, 2018.
On October 13, 2017, the Company issued a nine (9) month $58,000 convertible promissory note to Power Up Lending Group, Ltd., (“Power Up”), which bears interest at the rate of 8% per annum on the principal sum of the outstanding note. The Company received net proceeds of $55,000 after deductions for expenses from the Power Up Note. The Power Up Note is convertible at any time after the nine (9) month anniversary into shares of common stock at a conversion price equal to 58% of the lowest two (2) trade prices in the 15 trading days before the conversion date. The earliest conversion date was April 19, 2018. During the period ended September 30, 2018 Powerup Lending converted and sold $59,815 worth of debentures including $1,815 in interest for 51,130,560 shares of common stock. The balance of the Power Up Note was $0 at September 30, 2018
The Company determined that the conversion feature embedded within the above notes are 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 at September 30, 2018 and December 31, 2017:
Description
|
|
September
30,
2018
|
|
|
December 31,
2017
|
|
Purchase price of the convertible debentures
|
|
$
|
-
|
|
|
$
|
203,000
|
|
Valuation premium on notes during 2018 and 2017
|
|
|
-
|
|
|
|
(24,987
|
)
|
Balance of derivative liability net of discount on the notes
|
|
$
|
-
|
|
|
$
|
178,013
|
|
The Company recorded finance fees and interest on notes and derivatives for the nine months ended September 30, 2018 and 2017 of $125,384 and $126,050 respectively.
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 September 30, 2018 and December 31, 2017 and throughout the year.
Note 11 Income Taxes
Due to the current uncertainty of realizing the tax benefits of the Company’s net operating losses, a valuation allowance equal to the tax benefits for the deferred taxes has 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 tax returns in the United States of America 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. As such, 2015, 2016 and 2017 are still open years.
The company has net operating loss carryforwards as of September 30, 2018 totaling approximately $3,477,000. The table below shows the tax effect of these losses and the deferred tax liability remaining after deductions for derivative expenses and stock-based compensation from 2017 and 2018. A deferred 21% tax benefit of approximately $730,195 has been offset by a valuation allowance of the same amount as its realization is not assured.
Note 12 Subsequent Events
During the period October 1, 2018 through November 19, 2018, the Company sold 8,700,000 shares of restricted common stock using exemption under Regulation S for gross proceeds of $43,365 and net proceeds of $22,638.
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.