Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market
Information
The
high and low per share closing sales prices of the Company’s stock on the OTC Markets (ticker symbol: SNPW) for each quarter
for the years ended December 31, 2019 and 2018 were as follows:
|
Quarter
Ended
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
|
|
|
|
March 31, 2018
|
|
|
0.138
|
|
|
|
0.12
|
|
|
June 30, 2018
|
|
|
0.0635
|
|
|
|
0.0575
|
|
|
September 31, 2018
|
|
|
0.0325
|
|
|
|
0.0275
|
|
|
December 31, 2018
|
|
|
0.0145
|
|
|
|
0.0106
|
|
|
March 31, 2019
|
|
|
0.0038
|
|
|
|
0.0155
|
|
|
June 30, 2019
|
|
|
0.0012
|
|
|
|
0.0059
|
|
|
September 31, 2019
|
|
|
0.0004
|
|
|
|
0.0017
|
|
|
December 31, 2019
|
|
|
0.0007
|
|
|
|
0.0068
|
|
Holders
of our Common Stock
As
of May 19, 2020, there were approximately 569 stockholders of record of our common stock. This number does not include shares
held by brokerage clearing houses, depositories or others in unregistered form. The stock transfer agent for our securities is
VStock Transfer.
Dividend
Policy
We
have never paid dividends on our Common Stock and intend to continue this policy for the foreseeable future. We plan to retain
earnings for use in growing our business base. Any future determination to pay dividends will be at the discretion of our Board
of Directors and will be dependent on our results of operations, financial condition, contractual and legal restrictions and any
other factors deemed by the management and the Board to be a priority requirement of the business.
Our
Series C Preferred Stock holders were to be paid an annual dividend in the amount of $0.125 per year, for a total of $0.25, over
an eighteen (18) month term, from the date of issuance (the “Commencement Date. Dividend payments shall be payable as follows:
(i) dividend in the amount of $0.0625 per share of Series C Preferred Stock at the end of each of the third quarter and fourth
quarter of the first twelve (12) months of the twenty-four (24) month period after the Commencement Date; and (ii) dividend in
the amount of $0.03125 per share of Series C Preferred Stock at the end of each of the four quarters of the second twelve (12)
months of the twenty-four (24) month period after the Commencement Date. The source of payment of the dividends will be derived
from up to thirty-five percent (35%) of net revenues (“Net Revenues”) from the Street Furniture Division of the Corporation
following the seventh (7th) month after the Commencement Date. To the extent the amount derived from the Net Revenues of the Street
Furniture Division is insufficient to pay dividends of Series C Preferred Stock, if a sufficient amount is available, the next
quarterly payment date the funds will first pay dividends of Series C Preferred Stock past due. As of today’s date, no dividend
payments have been made. 275,000 shares of Series C Preferred Stock were originally issued as Series B Preferred Stock of Sun
Pacific Holding Corp. and all dividend payments have ceased, leaving only accrued payments due.
Securities
Authorized for Issuance Under Equity Compensation Plans
The
Company has not adopted an equity compensation plan.
Unregistered
Sales of Equity Securities
On
or about January 9, 2019, we issued 1,500,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.00292 per share of common stock.
On
or about January 15, 2019, we issued 2,000,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.003285 per share of common stock.
On
or about January 25, 2019, we issued 2,000,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.0016 per share of common stock.
On
or about January 29, 2019, we issued 3,500,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.0018 per share of common stock.
On
or about February 6, 2019, we issued 3,750,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.0018 per share of common stock.
On
or about February 8, 2019, we issued 3,776,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.0016 per share of common stock.
On
or about February 12, 2019, we issued 3,900,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.0018 per share of common stock.
On
or about February 22, 2019, we issued 3,776,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.0016 per share of common stock.
On
or about February 26, 2019, we issued 4,300,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.0018 per share of common stock.
On
or about March 7, 2019, we issued 4,000,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.00168 per share of common stock.
On
or about March 11, 2019 we issued 4,700,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.00189 per share of common stock.
On
or about March 19, 2019, we issued 5,100,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.00168 per share of common stock.
On
or about March 27, 2019, we issued 5,438,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.0014 per share of common stock.
On
or about March 26, 2019, we issued 5,400,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.004720741 per share of common stock.
On
or about April 9, 2019, we issued 5,900,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.00144 per share of common stock.
On
or about April 16, 2019, we issued 6,000,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.00144 per share of common stock.
On
or about April 26, 2019, we issued 5,978,800 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.001280023 per share of common stock.
On
or about May 1, 2019, we issued 5,978,800 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.00132 per share of common stock.
On
or about May 1, 2019, we issued 6,700,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.001485075 per share of common stock.
On
or about May 6, 2019, we issued 6,871,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.001 per share of common stock.
On
or about May 8, 2019, we issued 7,700,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.001035065 per share of common stock.
On
or about May 9, 2019, we issued 7,846,500 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.000920028 per share of common stock.
On
or about May 21, 2019, we issued 8,622,300 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.001239924 per share of common stock.
On
or about May 21, 2019, we issued 8,400,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.0009 per share of common stock.
On
or about May 30, 2019, we issued 9,300,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.0009 per share of common stock.
On
or about May 31, 2019, we issued 9,471,700 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.000800068 per share of common stock.
On
or about June 5, 2019, we issued 10,000,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.000855 per share of common stock.
On
or about June 5, 2019, we issued 10,408,400 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.000759963 per share of common stock.
On
or about June 12, 2019, we issued 5,618,833 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.0007199 per share of common stock.
On
or about June 13, 2019, we issued 11,200,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.00072 per share of common stock.
On
or about June 14, 2019, we issued 11,985,594 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.000640018 per share of common stock.
On
or about June 20, 2019, we issued 12,600,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.000495 per share of common stock.
On
or about June 25, 2019, we issued 13,200,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.000495 per share of common stock.
On
or about July 1, 2019, we issued 13,800,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.000495 per share of common stock.
On
or about July 9, 2019, we issued 14,500,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.000495034 per share of common stock.
On
or about July 11, 2019, we issued 15,200,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.000495 per share of common stock.
On
or about July 17, 2019, we issued 16,000,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.00045 per share of common stock.
On
or about July 22, 2019, we issued 16,800,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.00045 per share of common stock.
On
or about July 30, 2019, we issued 17,600,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.00045 per share of common stock.
On
or about August 7, 2019, we issued 18,400,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.00045 per share of common stock.
On
or about August 13, 2019, we issued 19,300,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.00045 per share of common stock.
On
or about August 28, 2019, we issued 20,000,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.00018 per share of common stock.
On
or about September 6, 2019, we issued 21,300,000 shares of common stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.000135 per share of common stock.
On
or about September 11, 2019, we issued 22,300,000 shares of common stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.000135 per share of common stock.
On
or about September 19, 2019, we issued 15,190,000 shares of common stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.000135 per share of common stock.
On
or about October 2, 2019, we issued 24,200,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.00009 per share of common stock.
On
or about October 7, 2019, we issued 25,300,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.00018 per share of common stock.
On
or about October 8, 2019, we issued 26,500,000 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.00018 per share of common stock.
On
or about October 15, 2019, we issued 27,321,556 shares of common stock to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.00018 per share of common stock.
On
or about November 19, 2019, we issued 29,805,700 shares of common stock to one entity pursuant to a cashless exercise of a warrant,
with an exercise price of $0.00009 per share of common stock.
On
or about December 12, 2019, we issued 31,293,000 shares of common stock to one entity pursuant to a cashless exercise of a warrant,
with an exercise price of $0.00009 per share of common stock.
On
or about December 19, 2019, we issued 32,854,600 shares of common stock to one entity pursuant to a cashless exercise of a warrant,
with an exercise price of $0.00009 per share of common stock.
On
or about December 26, 2019, we issued 34,494,000 shares of common stock to one entity pursuant to a cashless exercise of a warrant,
with an exercise price of $0.00009 per share of common stock. The issuances of the above shares of common stock were exempt from
the registration requirements of Section 5 of the Securities Act of 1933 (the “Act”) pursuant to Section 4(a)(2) thereto
as isolated transactions not involving a public offering. Following the issuances and as of the date of this filing, the Registrant
has a total of 966,501,700 shares
of common stock issued and outstanding.
All
the offers and sales of securities listed above were made to accredited investors. The
issuance of the above securities is exempt from the registration requirements under Rule 4(2) of the Securities Act of 1933, as
amended, and/or Rule 506 as promulgated under Regulation D.
Repurchases
of Equity Securities
We
repurchased no shares of our Common Stock during the year ended December 31, 2019.
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The
discussion and analysis of our financial condition and results of operations are based on our financial statements, which we have
prepared in accordance with accounting principles generally accepted in the United States of America. This discussion should be
read in conjunction with the other sections of this Form 10-K, including “Risk Factors,” and the Financial Statements.
The various sections of this discussion contain a number of forward-looking statements, all of which are based on our current
expectations and could be affected by the uncertainties and risk factors described throughout this Annual Report on Form 10-K.
See “Forward-Looking Statements.” Our actual results may differ materially. The preparation of these financial statements
requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during
the reporting periods. On an ongoing basis, we evaluate estimates and judgments, including those described in greater detail below.
We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
As
used in this “Management’s Discussion and Analysis of Financial Condition and Results of Operation,” except
where the context otherwise requires, the term “we,” “us,” “our,” or “the Company,”
refers to the business of Sun Power Holdings Corp.
Organizational
Overview
Utilizing
managements history in general contracting, coupled with our subject matter expertise and intellectual property (“IP”)
knowledge of solar panels and other leading-edge technologies, Sun Pacific Holding (“the Company”) is focused on building
a “Next Generation” green energy company. The Company offers competitively priced “Next Generation” solar
panel and lighting products by working closely with design, engineering, integration and installation firms in order to deliver
turnkey solar and other energy efficient solutions. We provide solar
bus stops, solar trashcans and “street kiosks” that utilize our unique advertising offerings that provide State and
local municipalities with costs efficient solutions. We provide general, electrical, and plumbing contracting services to a range
of both public and commercials customers in support of our goals of expanding our green energy market reach. In conjunction with
these general contracting services and as part of our effort to expand our green energy marketplace, we have recently started
the process to develop and build out a Waste to Energy plant in the State of Rhode Island and have started, through a partnership,
with ownership terms to be defined upon securing financing, the opportunity to develop and build a solar farm in Durango Mexico.
Our
green energy solutions can be customized to meet most enterprise and/or government mandated regulations and advanced system requirements.
Our portfolio of products and services allow our clients to select a solution that enables them to establish a viable standard
product offering that focuses on the goals of the client’s entire organization.
Currently,
the Company has six (6) subsidiary holdings. Sun Pacific Power Corp which was the initial company that specialized in solar, electrical
and general construction, Bella Electric, LLC that in conjunction with the Company operates our electrical contracting work. Bella
Electric, LLC is a Pennsylvania limited liability company. The Company also formed Sun Pacific Security Corp., a New Jersey corporation.
Currently the Company has not begun operations in the security sector but is reviewing plans to provide residential and commercial
security solutions, including installation and monitoring. The Company also formed National Mechanical Group Corp, a New Jersey
corporation focused on plumbing operations in the New Jersey and Pennsylvania areas. Currently the Company is exploring migrating
National Mechanical Group Corp from plumbing operations to partnering on a Solar Farm project in Durango Mexico in which it will
partner with Soluciones De Energia Diversificada Internacional, S.A.P.I. (“SEDI”), a subsidiary of Blissful Holdings,
LLC. The partnership has identified, received preliminary terms, and is proceeding with due diligence including a site visit in
December with a project funding source/partner in support of its partnership with SEDI to build and develop the Durango Mexico
Solar Farm Project. The proposed project funding would be for up to $80 million in capital to build a 40 plus megawatt solar farm
in which NMG and SEDI would own a thirty percent equity interest in the completed project. The Company also formed Street Smart
Outdoor Corp, a Wyoming corporation that acts as a holding company for the Company’s state specific operations in unique
advertising through solar bus stops, solar trashcans and “street kiosks.” MedRecycler, LLC, is a wholly owned subsidiary
duly formed in the state of Nevada. MedRecycler, LLC was created in 2018 to act as a holding company for potential waste to energy
projects. MedRecycler, LLC, currently owns 51% of MedRecycler RI, Inc. a Rhode Island Corporation. MedRecycler RI, Inc. was created
for the Medical Waste to Energy facility that the Company is attempting to finance and operate in West Warrick, Rhode Island.
MedRecycler RI, Inc. is currently exploring permanent financing options to fund its operations that meet the underwriting requirements
of various bond/debt investors and issuing authorities, which if put into place would require changes to MedRecycler RI, Inc.’s
and or the Company’s organizational structure. The Company is exploring creative solutions that would meet the requirements
of the various financing parties and still provide equivalent profit sharing arrangements between the parties that allow Sun Pacific
to also undertake other projects as it focuses on the best organizational structure to allow it to fund and grow its green energy
objectives.
As
of today, our principal source of revenues is derived from Street Smart Outdoor Corp. operations in the outdoor advertising business
with contracts in place in Rhode Island and Tallahassee, Florida, along with some other minor contracting work that we are currently
reviewing to determine if we shall continue pursuing in the future. We are currently in discussions with a nationally known outdoor
advertising firm to manage and expand our operations, either through a joint venture, partnership, and or a management arrangement
as a result of the company’s insufficient working capital and as an option to allow for the expansion of our technologies
and or contracts by working with other parties that can bring management expertise and or other resources that may allow us to
further optimize our growth strategies.
Sun
Pacific Power Corp. continues to make bids for construction projects throughout the Northeast region. However, as of today, we
have limited operations in Sun Pacific Power Corp. and are reviewing continuing general contracting in the region as we shift
our focus to other green energy opportunities.
Bella
Electric, LLC and Sun Pacific Security Corp. have generally ceased operations, but we maintain the subsidiaries in case we find
opportunities to relaunch our operations.
MedRecycler,
LLC, a wholly owned subsidiary of Sun Pacific Holding Company currently holds fifty one percent (51%) of MedRecycler-RI, Inc.,
a corporation formed in the state of Rhode Island for the development of waste to energy projects in the state of Rhode Island.
Currently, MedRecycler-RI, Inc. has entered into an Indenture of Trust in the amount of $8,725,000.00 as bridge financing for
a project in West Warwick, Rhode Island (the “Rhode Island Project”). The original plan was for a facility in Johnston,
Rhode Island, but through our negotiations, determined that the West Warwick location was more suitable. The Indenture of Trust
has been secured by all equity holdings in MedRecycler-RI, Inc., all personal holdings of equity in the Company held by Nick Campanella,
our CEO and member of the Board of Directors. Mr. Campanella has further pledged personal property located in Manapalan in excess
of $1,000,000. Payment for the Indenture of Trust is further guaranteed by the Company and Street Smart Outdoor Corp. Currently,
MedRecycler-RI, Inc. has entered into a lease agreement in West Warwick, Rhode Island, has taken preliminary steps to order the
equipment, and is beginning to engage specialists and staff for building out the Rhode Island Project. In order to secure actual
operations of the Rhode Island Project, we estimate that MedRecycler-RI, Inc. must still secure a minimum of $17,200,000 in long
term financing. MedRecycler-RI, Inc. is currently negotiating with the state of Rhode Island and potential bond financiers to
secure the long-term financing for the Rhode Island Project. Although we anticipate, assuming the long-term financing is secured,
the Rhode Island Project may be fully operational as early as the first quarter of 2020, but, at this time, that schedule could
slip as a result of delays in closing on long-term financing. All initial operational earnings will be earmarked for interest,
principal repayment, and the fulfillment of other covenants of the long-term financing until all reserves have been met. As we
have not secured long term financing, we can make no statement regarding the long term success of the Rhode Island Project, though,
even in a best case scenario, the Rhode Island Project may not be cash flow positive until fully operational and proceeds fulfill
covenants under the terms of the yet to be finalized debt financing. Through MedRecycler, LLC, the Company owns fifty-one percent
(51%) of MedRecycler-RI, Inc., which was pledged by the Company to Mr. Campanella pursuant to a forbearance agreement related
to debts owed to Mr. Campanella. The remaining forty nine percent (49%) of MedRecycler-RI, Inc. is held by Nicholas Campanella,
personally, Marmac Corporate Advisors, LLC, and Eilers Law Group, P.A., holding thirty nine percent (39%), eight percent (8%),
two percent (2%), respectfully. Mr. Campanella received his ownership as consideration for his personal pledges securing the Indenture
of Trust, Marmac Corporate Advisors, LLC and Eilers Law Group, P.A. received their respective ownership as consideration for efforts
and services performed. One hundred percent (100%) of the ownership of MedRecycler-RI, Inc. has been pledged to bridge financing,
including any pledge rights held by Mr. Campanella in MedRecycler, LLC. On October 21, 2019, MedRecycler-RI, Inc. amended the
Indenture of Trust to include an addition $2,700,000 in bridge financing to secure delivery of equipment for installation. MedRecycler
RI, Inc. is currently exploring permanent financing options to fund its operations that meet the underwriting requirements of
various bond/debt investors and issuing authorities, which if put into place would require changes to MedRecycler RI, Inc.’s
and or the Company’s organizational ownership structure. The Company is exploring creative solutions that would meet the
requirements of the various financing parties and still provide equivalent profit sharing arrangements between the parties that
would also allow Sun Pacific to undertake other projects as it focuses on the best organizational structure to allow it to fund
and grow its green energy objectives.
Currently
the Company is also exploring migrating its subsidiary, National Mechanical Group Corp from plumbing operations to partnering
on a Solar Farm project in Mexico in which it will partner with other subject matter experts and seek project financing. If successful,
National Mechanical Group Corp would own equity in the partnership that would own a portion of the project and also receive compensation
for its work in project management and other professional services.
On
September 19, 2019, the United States Patent and Trademark Office published patent US 2019 288 139 A1 for the Frame-Less Encapsulated
Photo-Voltaic (PV) Solar Power Panel Supporting Solar Cell Modules Encapsulated Within Optically-Transparent Epoxy-Resin Material
Coating a Phenolic Resin Support Sheet issued to National Mechanical Group Corp. Originally designed for application in the solar
bus shelters operated by Street Smart Outdoor Corp, as a glassless solar panel, the Company has developed a patent protected product
and process for creating solar panels that can be integrated directly into the design of products as a molded, weather resistant
plastic. The Company will begin work developing a business plan for expanding on either manufacturing or licensing of the technology
in 2020.
Currently,
the Company has been and is insolvent if you factor in the Company’s debt obligations. Over its history and to augment the
Company’s strategy, it has sought out partnerships and other arrangements with professionals and companies at the operating
subsidiary level to counter its insolvent state, coupled with the Company’s use of debt and equity financings. The Company
continues to look for opportunities that will allow it to partner with others in the form of debt and or equity and other contributions
at the subsidiary level, and where possible attempt to keep control of at least fifty one percent (51%) of those subsidiaries.
While it will also look for the means to correct its insolvent state at the holding company level, given its current negative
economic condition, many parties continue to prefer to work with the Company at an operational subsidiary level. The Company is
currently exploring other equity and or debt opportunities to correct its overall insolvent state. Although we continue operations
through our subsidiary holdings, revenues generated do not fully produce cash flows sufficient to meet our basic capital requirements.
In order to meet our reporting requirements alone, we will have to seek additional capital through debt or equity financing and/or
request deferred payment or other in-kind payments for services. Street Smart Outdoor is undercapitalized making expansion of
our advertising products highly unlikely or difficult to expand without the use of potential partnerships and or commission only
sales representatives. Neither the Company nor Street Smart Outdoor have secured additional financing to support operations. We
are attempting to partner or otherwise develop a capital strategy to allow us to grow the outdoor advertising business that includes
financing outdoor structures with other parties, in which we arrange financing arrangements, and we continue to look for other
professional organizations that we can partner with in expanding our contracts. Our Rhode Island Project currently represents
a liability of over $8,700,000, if you include the subsequent $2,700,000 in additional short term provide in October 2019 and
has yet to commence. It will require additional financing, we estimate, of not less than $8,500,000 to complete the build out
of phase one for the facility and $17,200,000 if you include consolidating the current $8,700,000 short term indenture. The permanent
financing will also require Nicholas Campanella to continue to pledge his assets that are currently pledged under the short-term
debenture for the long term financing. We have plans upon the successful launch of our phase one to double the capacity of the
facility, which will require additional financing. MedRecycler-RI, Inc. has yet to secure any additional financing. Failure to
be successful with the Rhode Island financing could lead to bankruptcy or reorganization of the Company.
It
has been made clear by the Rhode Island authorities approving long term bond facilities for the MedRecycler-RI, Inc. project,
that the Company cannot have an ownership interest given its poor creditworthiness and insolvency. The approving authority has
expressed a desire to sever all economic interest in the Rhode Island Project from the Company, However, we have proposed, and
have received initial approval, whereby in exchange for releasing all guarantees and other security interests of the Company and
its subsidiaries, and forgoing direct ownership in MedRecycler-RI, Inc., the Company shall receive an economic interest equal
to 51% of all profits derived from the MedRecycler-RI, Inc. This will free collateral and cashflow for the development of new
projects of the Company and its subsidiaries, while also removing the debt of MedRecycler-RI, Inc. from the balance sheet of the
Company. At the same time, once MedRecycler-RI, Inc. becomes profitable, and has met all requirements of long term financing related
to reserve allocations and profit thresholds, the Company should receive a recurring income from the MedRecycler-RI, Inc. without
the limitations on its assets and additional overhead costs related to maintaining the subsidiary and financial reporting. Any
final agreement will be subject to final approval of the Rhode Island authority, who has provided tentative approval of the economic
interest structure. The Company will engage independent counsel to negotiate the terms to avoid any potential risks of conflict
of interest. Company management has recently been made aware of a derivative lawsuit filed against the Company and others requesting
that the transactions underlying the creation and operation of the Rhode Island Project be unwound. However, in the event that
such suit was successful, the resulting ownership of MedRecycler-RI, Inc. would prohibit permanent financing to meet final approval
from the state of Rhode Island, most likely resulting in the holder of the bridge financing to foreclose upon the Rhode Island
Project in its entirety as well as a total change of control of the Company. The Company believes that the claim has no merit
and that the transaction has been structured in a manner that is most advantageous to the Company and its shareholders by preserving
as much value as possible from the Rhode Island Project, while also balancing the requirements of those parties approving permanent
financing.
Strategic
Vision
Our
objective is to grow our business profitably as a premier green energy-based provider of both product and services to the public
and private sectors. We are working to deploy our strategy in building upon our general and other contracting expertise in conjunction
with our intellectual property and subject matter expertise in green energy that may allow us to grow a group of profitable business
lines in solar, waste to energy, efficient lighting, and other unique energy related areas.
Recent
advances in a multitude of different yet converging technologies have significantly improved the ability to integrate energy efficient
products and solutions into infrastructure related projects. These technological advances decrease the requirements needed to
jointly operate a multitude of differing assets, devices, and tools that create new ways to integrate evolving new technologies.
This technological change and convergence in energy efficient devices, integrated communications among devices, and societal needs
to more effectively and environmentally friendly we believe presents a significant opportunity for us in providing and supporting
simple to complex integrated solutions.
Our
challenges continue to be reaching critical mass in our solar shelter business, expanding into other green energy related projects,
completion of the Rhode Island Project and securing operational capital. Except for the bridge financing for the Rhode Island
Project, we do not have any material existing financing arrangements in place. While the Company has never been adequately funded
from inception, the Company has attempted to use debt, equity, and other opportunistic in-kind compensation to further the Company’s
strategic vision.
Going
Concern
The
Company has an accumulated deficit of $8,342,437 and a working capital deficit of $10,491,807 as of December 31, 2019. The Company’s
continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations,
which it has not been able to accomplish to date, and/or obtain additional financing from its stockholders and/or other third
parties.
In
order to further implement its business plan and satisfy its working capital requirements, the Company will need to raise additional
capital. There is no guarantee that the Company will be able to raise additional equity or debt financing at acceptable terms,
if at all.
There
is no assurance that the Company will ever be profitable. These consolidated financial statements do not include any adjustments
to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of
liabilities that may result should the Company be unable to continue as a going concern.
Critical
Accounting Policies and Estimates
Our
significant accounting policies are more fully described in the notes to our consolidated financial statements. Those material
accounting estimates that we believe are the most critical to an investor’s understanding of our financial results and condition
are discussed immediately below and are particularly important to the portrayal of our financial position and results of operations
and require the application of significant judgment by our management to determine the appropriate assumptions to be used in the
determination of certain estimates.
Use
of estimates in the preparation of financial statements
Preparation
of financial statements in conformity with accounting principles generally accepted in the United States requires management to
make estimates and assumptions that affect reported amounts in the financial statements and accompanying notes. Actual results
could differ from those estimates. Significant estimates include the allowance for doubtful accounts and impairment assessments
related to long-lived assets.
Consolidation
The
consolidated financial statements include the accounts of the Company and its wholly owned, and less-than-wholly owned subsidiaries
of which the Company holds a controlling interest. All significant intercompany balances and transactions have been eliminated.
Amounts attributable to minority interests in the Company’s less-than-wholly owned subsidiary are presented as non-controlling
interest on the accompanying condensed consolidated balance sheets and statements of operations.
Cash
and cash equivalents
For
purposes of the consolidated statements of cash flows, cash includes demand deposits and short-term liquid investments with original
maturities of three months or less when purchased. The Federal Deposit Insurance Corporation (FDIC) provided insurance coverage
of up to $250,000, per depositor, per institution. At December 31, 2019, none of the Company’s cash balances were in excess
of federally insured limits with the exception of $1,161,388 of cash balances held in escrow at UMB Bank, NA under a project fund
that the Company’s subsidiary, MedRecycler-RI, Inc. is drawing balances against for the development of its Medical Waste
to Energy project in Rhode Island. Any and all withdrawals are strictly controlled by the lending institution and use of proceeds
must be approved prior to release of funds.
Accounts
Receivable
In
the normal course of business, we decide to extend credit to certain customers without requiring collateral or other security
interests. Management reviews its accounts receivable at each reporting period to provide for an allowance against accounts receivable
for an amount that could become uncollectible. This review process may involve the identification of payment problems with specific
customers. Periodically we estimate this allowance based on the aging of the accounts receivable, historical collection experience,
and other relevant factors, such as changes in the economy and the imposition of regulatory requirements that can have an impact
on the industry. These factors continuously change and can have an impact on collections and our estimation process. The Company’s
allowance for doubtful accounts totaled $22,835 and $145,055 as of December 31, 2019 and 2018, respectively.
Leases
In
February 2016, the FASB issued ASU No. 2016-02 (Topic 842). Topic 842 amends several aspects of lease accounting, including requiring
lessees to recognize leases with a term greater than one year as a right-of-use asset and corresponding liability, measured at
the present value of the lease payments. In July 2018, the FASB issued supplemental adoption guidance and clarification to Topic
842 within ASU 2018-10 “Codification Improvements to Topic 842, Leases” and ASU 2018-11 “Leases (Topic 842):
Targeted Improvements.” The new guidance aims to increase transparency and comparability among organizations by requiring
lessees to recognize lease assets and lease liabilities on the balance sheet and requiring disclosure of key information about
leasing arrangements. A modified retrospective application is required with an option to not restate comparative periods in the
period of adoption.
The
Company, effective January 1, 2019 has adopted the provisions of the new standard. The Company has operating leases for warehouses
and offices. Management evaluates each lease independently to determine the purpose, necessity to its future operations in addition
to other appropriate facts and circumstances.
We
adopted Topic 842 using a modified retrospective approach for all existing leases at January 1, 2019. The adoption of Topic 842
impacted our balance sheet by the recognition of the operating lease right-of-use assets and the liability for operating leases.
Accordingly, upon adoption, leases that were classified as operating leases under the previous guidance were classified as operating
leases under Topic 842. The lease liability is based on the present value of the remaining lease payments, discounted using a
market based incremental borrowing rate as the effective date of January 1, 2019 using current estimates as to lease term including
estimated renewals for each operating lease. As of January 1, 2019, the Company recorded an adjustment of approximately $1,339,000
to operating lease right-of-use assets (“ROU”) and the related lease liability (Note 7).
Deposits
During
the year ended December 31, 2019, the Company made deposits of approximately $5,000,000 pursuant to a purchase of equipment costing
approximately $7,200,000. We are currently estimating a commence of operations in late summer to early fall of 2020 at MedRecycler-RI,
Inc.’s West Warwick, Rhode Island facility.
Contingencies
Certain
conditions may exist as of the date financial statements are issued, which may result in a loss, but which will only be resolved
when one or more future events occur or do not occur. We assess such contingent liabilities, and such assessment inherently involves
an exercise of judgment. In assessing loss contingencies related to pending legal proceedings that are pending against us or unasserted
claims that may result in such proceedings, we evaluate the perceived merits of any legal proceedings or unasserted claims as
well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency
indicates that it is probable that a liability has been incurred and the amount of the liability can be estimated, then the estimated
liability would be accrued in our consolidated financial statements. If the assessment indicates that a potentially material loss
contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent
liability, together with an estimate of the range of possible loss if determinable would be disclosed.
Fair
value of financial instruments
The
carrying amounts of the Company’s accounts payable, accrued expenses, and accrued expenses due to related parties approximate
fair value due to their short-term nature. The Company’s long-term debt approximates fair value based on prevailing market
rates.
Property
and equipment
Property
and equipment are stated at cost. Additions and improvements that significantly add to the productive capacity or extend the life
of an asset are capitalized. Maintenance and repairs are expensed as incurred. Depreciation is computed using the straight-line
method over three to five years for vehicles and five to ten years for equipment. Leasehold improvements are amortized over the
lesser of the estimated remaining useful life of the asset or the remaining lease term. Interest costs incurred that are directly
related to the construction of long term assets are capitalized during the construction period. As of December 31, 2019 and 2018,
$651,828 and $0, respectively, is included in proprerty plant and equipment.
Capitalized
Interest
During
the year ended December 31, 2019, the Company incurred total interest costs of $1,025,926, of which, $651,828 was capitalized
and included in property and equipment as of December 31, 2019.
Impairment
of long-lived assets
The
Company periodically reviews for the impairment of long-lived assets whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be realizable. An impairment loss would be recognized when estimated future cash flows
expected to result from the use of the asset and its eventual disposition is less than its carrying amount. At December 31, 2019
and 2018, the Company has not identified any such impairment losses.
Income
taxes
Under
ASC Topic 740, “Income Taxes”, the Company is required to account for its income taxes through the establishment of
a deferred tax asset or liability for the recognition of future deductible or taxable amounts and operating loss and tax credit
carry forwards. Deferred tax expense or benefit is recognized as a result of timing differences between the recognition of assets
and liabilities for book and tax purposes during the year.
Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Deferred tax assets are recognized for deductible temporary differences
and operating losses, and tax credit carry forwards. A valuation allowance is established to reduce that deferred tax asset if
it is “more likely than not” that the related tax benefits will not be realized.
Revenue
recognition
100%
of the Company’s revenue for the years ended December 31, 2019 and 2018 is recognized based on the Company’s satisfaction
of distinct performance obligations identified in each agreement, generally at a point in time as defined by Topic 606, as amended.
In
May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts
with Customers. This standard replaced most existing revenue recognition guidance and is codified in FASB ASC Topic 606. Effective
January 1, 2018, the Company adopted ASU No. 2014-09 using the modified retrospective method. Under the new guidance, the Company
recognizes revenue from contracts based on the Company’s satisfaction of distinct performance obligations identified in
each agreement. The adoption of the guidance under ASU No. 2014-09 did not result in a material impact on the Company’s
consolidated revenues, results of operations, or financial position. As part of the implementation of ASC 606 the Company must
present disaggregation of revenues from contracts with customers into categories that depict how the nature, timing, and uncertainty
of revenue and cash flows are affected by economic factors. Quantitative disclosures on the disaggregation of revenue are as follows:
|
|
|
2019
|
|
|
2018
|
|
|
Outdoor Advertising Shelter
Revenues
|
|
$
|
150,636
|
|
|
$
|
276,591
|
|
|
Contracting
Service Revenues
|
|
|
150,097
|
|
|
|
308,059
|
|
|
|
|
$
|
300,733
|
|
|
$
|
584,650
|
|
Earnings
Per Share
Under
ASC 260, “Earnings Per Share” (“EPS”), the Company provides for the calculation of basic and diluted earnings
per share. Basic EPS includes no dilution and is computed by dividing income or loss available to common shareholders by the weighted
average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution of securities that could
share in the earnings or losses of the entity. For the Year ended December 31, 2019 and 2018, basic and diluted loss per share
are the same as the calculation of diluted per share amounts would result in an anti-dilutive calculation. For the years ended
December 31, 2019 and 2018, all potential shares have been excluded from the calculation of diluted loss per share because their
impact was anti-dilutive.
Results
of Operations for the Year Ended December 31, 2019 as Compared to the Year Ended December 31, 2018
Revenues
During
the year ended December 31, 2019, revenues decreased by $283,917, from $584,650 for the year ended December 31, 2018 to $300,733
in 2019, as a result of lesser advertising revenues and reduce General Contracting services as the Company migrates away from
General Contracting services and towards the development of Green Energy Projects including the sale of Solar powered shelters
and other energy related projects that derive income from advertising sources. Advertising revenue declined as a result of a transition
to commissioned advertising sales personnel during the quarter. The Company has entered into revenue sharing agreements with the
City of Tallahassee, the State of Rhode Island Transportation Authority, and the State of New Jersey, along with others to provide
and manage up to approximately 1,700 Solar powered shelters and other related products for a period of up to Ten (10) years that
may include providing WiFi Signal Boosters and Advertising in conjunction with the shelters and other related other outdoor related
products. Depending upon the timing of installation and advertising revenue generated per shelter and or other advertising-based
product, the Company’s Revenue may increase materially from this green energy offering. The Company has recently raised
capital to build and deploy up to 20 bus shelters in Rhode Island as part of an income sharing arrangement with an investment
group. The Company has recently had 20 bus shelters delivered and is in the process of deploying the bus shelters into the marketplace.
The Company is currently in discussion with the State of Rhode Island on the specific details related to those bus shelters. The
State of Rhode Island is also exploring options of purchasing those bus shelters from the Company. The Company is also presently
in the process of adding up to 60 bus benches in the City of Tallahassee and has engaged two new commissioned sales individuals
to assist the company in increasing its advertising revenues in the City of Tallahassee market place, along with adding improved
sales advertising capabilities in an effort to improve advertising utilization. The Company’s current Waste to Energy and
Durango Solar Farm Project may or may not impact future revenues depending upon the capital structure and other conditions that
will be required of the Company by its financing partners and or other regulatory authorities upon closing of its permanent financing
for those projects. These items along with other revenue generating opportunities that is under review by the Company may cause
dramatic shifts in the Company’s comparative revenue profile of the products and services that the Company provides in the
future.
Cost
of Revenues
During
the year ended December 31, 2019, cost of revenues decreased by $96,596, from $311,492 for the year ended December 31, 2018 to
$214,896 in 2019, as a result of a higher mix of higher margin advertising generated revenues. Costs of revenues may shift dramatically
depending upon how the Company’s comparative revenue profile of the products and services shift in the future.
Operating
Expenses
During
the year ended December 31, 2019, operating expenses decreased by $268,527, from $1,569,796 for the year ended December 31, 2018
to $1,301,269 in 2019 due materially to decreases in wages, fees, and other general and administrative expenses that were associated
with project development costs for the Company’s Medical Waste to Energy initiative and other development projects associated
with green energy development initiatives that the Company is currently exploring. The Company’s Operating Expenses may
vary quarter to quarter as a result in upfront development costs for permits, engineering reviews, and other costs associated
with the Company’s new development projects related to its Medical Waste to Energy project as well as other projects that
it is currently reviewing.
Other
Expenses
During
the year ended December 31, 2019, Other Expenses increased by $115,370 from $478,843 for the year ended December 31, 2018 to $594,213
in 2019 as a result of greater amounts of interest expense as a result of the issuance of convertible debt and other capital related
events. Given the Company’s financing requirements in developing its new business models, the Company’s other (income)
expenses may increase over time as the Company explores the use of additional debt financing.
Net
Loss
As
a result of the above, Net Loss increased $34,164 from $1,775,481 for the year ended December 31, 2018 to $1,809,645 in 2019.
Liquidity
and Capital Resources
Net
Working Capital
We
have, since inception, financed operations and capital expenditures through the sale of stock and convertible notes and debt.
Our immediate sources of liquidity include cash and cash equivalents, accounts receivable, and unbilled receivables.
At
December 31, 2019, we had a net working capital deficit of approximately $10,491,807 compared to $2,866,603 at December 31, 2018.
We relied on temporary financing for the MedRecycler project and proceeds from advertising project financing in 2019. We relied
on proceeds from the sale of common stock, convertible promissory notes and advances from related parties throughout fiscal 2018.
We
must successfully execute our business plan to increase profitability in order to achieve positive cash flows to sustain adequate
liquidity without requiring additional funds from external sources to meet minimum operating requirements. We may need to raise
additional capital to fund our operations and there can be no assurance that additional capital will be available on acceptable
terms or at all.
Generally,
the Company has insufficient capital to maintain operations. Cashflows from operations of the Company and all its subsidiary holdings
will not sustain the Company’s operations, let alone its filing requirements, unless there is substantial influx of cash
flow through either debt and/or equity financing.
Cash
Flows from Operating Activities
Cash
provided by operating activities provides an indication of our ability to generate sufficient cash flow from our recurring business
activities. Fixed costs such as labor, direct materials, and office rent represent a significant portion of the Company’s
continuing operating costs.
For
the year ended December 31, 2019, net cash used in operations was approximately $550,010 driven primarily by current year operating
loss, offset primarily by non-cash expenses for the amortization of debt discounts, loss on settlement of convertible debt, as
well as increases in accrued officer compensation and accrued expenses.
For
the year ended December 31, 2018, net cash used in operations was approximately $758,069 driven by current year operating loss,
offset primarily by non-cash expenses for the loss on settlement of accrued officer compensation, accrued expenses, an increase
in accounts payable, and loss on the conversion of debt.
Cash
Flows from Investing Activities
For
the year ended December 31, 2019, the Company invested approximately $5.7 million in its MedRecycler project, consisting of $538,242
of equipment purchases and deposits n equipment of $5,682,329, offset by $42,000 in proceeds from the sale of vehicles.
For
the year ended December 31, 2018, no cash was provided by investing activities.
Cash
Flows from Financing Activities
Cash
provided by (used in) financing activities provides an indication of our debt financing and proceeds from capital raise transactions.
For
the year ended December 31, 2019, cash provided by financing activities was approximately $8,445,588, primarily from the temporary
financing for the MedRecycler project of $8,453,624, and the issuance of convertible debt of $200,000, offset by the repayment
of convertible debt of $150,000 and vehicles loans of $60,667.
For
the year ended December 31, 2018, cash provided by financing activities was approximately $707,181 from the sale of common stock,
sale of convertible notes, project financing obligations, and advances from officers, offset by repayments of vehicle loans.
In
the short term, we must raise additional capital through debt or equity financing to support our business operations and grow
our business. Over the long term, we must successfully execute our growth plans to increase profitable revenue and income streams
to generate positive cash flows to sustain adequate liquidity without impairing growth initiatives or requiring the infusion of
additional funds from external sources to meet minimum operating requirements. We may need to raise additional capital to fund
our operations and there can be no assurance that additional capital will be available on acceptable terms or at all.
Off-Balance
Sheet Arrangements
We
have no off-balance sheet financing arrangements.
Contractual
Obligations
Not
required of smaller reporting companies.