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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

FORM 10-K

 

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  

 

For the fiscal year ended December 31, 2017

 

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  

 

Incoming, Inc.

(Exact name of Registrant as specified in its charter)

 

Nevada

000-53616

421768468

(State or Other Jurisdiction

of Incorporation or Organization)

(Commission File Number)

(IRS Employer

Identification No.)

 

244 Fifth Avenue, Suite V235

New York, NY 10001

(Address of principal executive offices) (Zip Code)

 

(800) 385-5705

(Registrant’s telephone number, including area code)

________________

 

N/A

(Former name or former address, if changed since last report)

 

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Securities Registered pursuant to Section 12(g) of the Act: Class A Common Stock, par value $0.001 per share




Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ¨ NO þ  

 

 

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ¨ NO þ  

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     YES þ      NO ¨

 

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   YES þ   NO ¨

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definition of “large accelerated filer,” “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   ¨

Accelerated filer   ¨

 

 

Non-accelerated filer   ¨

Smaller Reporting Company   þ

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No þ  

 

 

As of March 31, 2018 there were 33,754,332 shares of common stock issued and outstanding (31,774,332 Class A Common Stock outstanding and 1,980,000 Class B Common Stock outstanding).

 

 

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.       Yes ¨    No ¨

 

 

DOCUMENTS INCORPORATED BY REFERENCE

 

Not Applicable




INDEX

 

 

 

Page

Cautionary Statement Regarding Forward Looking Statements

i

PART I

 

Item 1. Business

1

Item 1A. Risk Factors

6

Item 1B. Unresolved Staff Comments

7

Item 2. Properties

7

Item 3. Legal Proceedings

7

Item 4. Removed and Reserved

7

 

 

PART II

 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

8

Item 6. Selected Financial Data

9

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

9

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

15

Item 8. Financial Statements and Supplementary Data

15

Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

26

Item 9A. Controls and Procedures

26

Item 9B. Other Information

27

 

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance

28

Item 11. Executive Compensation

28

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

29

Item 13. Certain Relationships and Related Transactions, and Director Independence

30

Item 14. Principal Accountant Fees and Services

31

PART IV

 

Item 15. Exhibits, Financial Statement Schedules

32

 

 

SIGNATURES

 




CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

 

Some discussions in this Annual Report on Form 10-K (the “Annual Report”) contain forward-looking statements that involve assumptions, and describe our future plans, strategies, and expectations. Such statements are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These statements are expressed in good faith and based upon a reasonable basis when made, but there can be no assurance that these expectations will be achieved or accomplished.

 

Such forward-looking statements include statements regarding, among other things (a) the potential markets for our products, our potential profitability, and cash flows, (b) our growth strategies, (c) anticipated trends in our industry, (d) our future financing plans and (e) our anticipated needs for working capital. This information may involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from the future results, performance, or achievements expressed or implied by any forward-looking statements. These statements may be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operation” as well as in this Annual Report generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors and matters described in this Annual Report generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. In addition to the information expressly required to be included in this filing, we will provide such further material information, if any, as may be necessary to ensure that the required statements, in light of the circumstances under which they are made, are not misleading.

 

Although forward-looking statements in this report reflect the good faith judgment of our management, forward-looking statements are inherently subject to known and unknown risks, business, economic and other risks and uncertainties that may cause actual results to be materially different from those discussed in these forward-looking statements. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We assume no obligation to update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, other than as may be required by applicable law or regulation. Readers are urged to carefully review and consider the various disclosures made by us in our reports filed with the Securities and Exchange Commission (“SEC”) which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operation and cash flows. If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.

 

As used in this Annual Report, “we,” “us,” and “our” refer to Incoming, Inc., which is also sometimes referred to as the “Company,” unless the context otherwise requires.


i



PART I

 

Item 1. Business

 

Our Corporate History and Background

 

We were incorporated in Nevada on December 22, 2006. Through our wholly-owned subsidiary North American Bio-Energies LLC (“NABE”), we operate in the alternative energy industry in the development and acquisition of commercial grade biodiesel facilities and the distribution and marketing of petroleum and biofuel products. In addition to operating as NABE, our subsidiary also does business as Foothills Bio-Energies, LLC (“Foothills”).

 

Overview of the Business

 

We have historically been engaged in the business of wholesaling biodiesel to distributors in the Eastern region of the United States. In addition, we have sold glycerin (a biodiesel by-product) to refiners and manufacturers and have sold kerosene to wholesalers. During 2017, we were unable to profitably produce biodiesel. As a result, we recorded an impairment of those fixed assets associated exclusively with biodiesel production.

 

When producing biodiesel, our focus is on commercial grade biodiesel produced from virgin agri-based feedstock that meets the standards for biodiesel established by The American Society of Testing and Materials (“ASTM”) and adopted by the Environmental Protection Agency (“EPA”). Management believes the resulting product is superior to biodiesel produced from recycled oils due to lower quantities of fatty acids, which allows for shorter processing times and less sulfur, and offers favorable conditions for machinery and engines.

 

During 2013, the Company applied for, and was granted, registration with the EPA as an importer of biodiesel. Earning status as an importer is an extension of NABE’s existing registration under the EPA’s RFS2 program. Registered importers are allowed to attach RINs to renewable fuels produced outside the United States so long as the fuel meets the latest ASTM standard for biodiesel and the transaction is properly documented throughout the entire process.

 

The Company occasionally works with neighboring universities to provide research opportunities in the biofuel industry for students. While no formal arrangements or understandings currently exist between the Company and any University or College, the Company frequently invites students to tour the NABE facilities and educates students on the benefits of the biofuel industry.

 

The Company refines glycerin for selling on the open market. Refining glycerin involves removing methanol and moisture from the crude glycerin. Once the wet methanol has been removed, glycerin is further refined through acidulation. Acidulation is achieved through the introduction of hydrochloric acid to glycerin, which concurrently refines the glycerin and yields fatty acid oils. Glycerin is refined to a purity level of 80-90% after the acidulation process. All components (wet methanol, fatty acid oil, and refined glycerin) of the process are marketable goods.

 

We believe in the benefits of maintaining a good relationship with the community in which our facilities are located and intend to continue with community initiatives and a focus on local feedstock, including the negotiation of feedstock contracts with farmers. In addition to partnering with nearby colleges and universities, we will continue to pursue grant opportunities from various state and federal supported programs.

 

Primary Products

 

When market conditions allow production, our primary product is biodiesel made from virgin agri-based feedstock that meets ASTM D6751 specifications. During 2017, we did not produce biodiesel. The National Biodiesel Board defines “biodiesel” as follows: “Biodiesel” is defined as mono-alkyl esters of long chain fatty acids derived from vegetable oils or animal fats which conform to ASTM D6751 specifications for use in diesel engines. Biodiesel refers to the pure fuel before blending with diesel fuel. Biodiesel blends are denoted as “BXX” with “XX” representing the percentage of biodiesel contained in the blend ( e.g. , B20 is 20% biodiesel, 80% petroleum diesel).

 

During colder months, the plant in Lenoir, NC utilizes its existing permits to re-sell kerosene to wholesalers.  This strategic decision to sell kerosene was made in recognition of seasonal declines in biodiesel sales as ambient temperature drop.


1



Secondary Products

 

Glycerin is a by-product of the chemical process in which biodiesel is produced and has a wide variety of uses in end products across multiple industries, including as an ingredient or processing aid in cosmetics, toiletries, personal care and drugs. Glycerin, also called glycerol, can also be found in food applications as a sugar substitute or in shortenings and margarine. It can also be found in soaps and foams or even nitroglycerin, which is used in dynamite.

 

Product Characteristics

 

Biodiesel is produced from animal fats, virgin agri-based oils or recycled waste fats and oils. The final product contains no petroleum, but can be blended at various levels for commercial use. Biodiesel is generally used as 100% pure or “neat”, 5%, 10% or 20% blend with petroleum (B5, B10 and B20 respectively). We sell both neat biodiesel and biodiesel blends.

 

Overview of the Biodiesel Industry - Biodiesel

 

Biodiesel is a clean-burning alternative to petroleum-based diesel (“Petrodiesel”). The EPA has classified biodiesel as an advanced biofuel. Biodiesel can be purchased directly from producers, from distributors, or at the pump. Biodiesel is manufactured from renewable feedstocks such as soybean, palm, canola and sunflower oils, as well as from animal fats, fish oils, algae and recycled cooking oils. New feedstocks from which biodiesel is manufactured continue to develop. Biodiesel is produced by reacting a feedstock with an alcohol (methanol) in the presence of a catalyst, which yields biodiesel and glycerin as a co-product. Biodiesel can be a direct replacement for diesel and can be blended with diesel fuel in any ratio. Biodiesel blends are primarily used as fuel for trucks and automobiles. It can also be used as home heating oil and as an alternative fuel in a variety of other applications, including, without limitation, marine transportation, electricity generation, farming equipment and mining operations.

 

According to the National Biodiesel Board, among other environmental benefits, biodiesel:

 

in its pure, or neat, form reduces the net gain in carbon dioxide (“CO2”) emissions by approximately 78% compared to petroleum fuels;  

reduces tailpipe emissions of particulate matter (soot or black carbon) by approximately 47%, which is recognized as a major contributor to global warming, as well as a critical air pollutant associated with reduced human health, particularly among children and asthmatics;  

reduces emissions of unburned hydrocarbons by almost 67%;  

produces approximately 48% less carbon monoxide than diesel fuels; and  

contains no sulfur and generates no sulfur emissions, a major source of acidification in rain and surface water.  

 

Biodiesel has better lubricating properties and a higher cetane rating (the diesel equivalent of octane) than low sulfur diesel fuels. The use of biodiesel in its neat form, B100, or in a blend with petroleum-based diesel, reduces fuel system wear and increases the life of the fuel injection equipment that relies on the fuel for its lubrication, including high pressure injection pumps, pump injectors and fuel injectors.

 

Biodiesel is twice as biodegradable as petroleum oil and is non-toxic. Tests sponsored by the United States Department of Agriculture confirm biodiesel is less toxic than table salt and biodegrades as quickly as sugar. Biodiesel may be used in existing tank, pump and pipeline infrastructure without modifications to the diesel engine. As a result, integration of biodiesel into the diesel fuel supply is cost effective as opposed to ethanol which requires substantial expenditure to retrofit existing tank, pump and pipeline infrastructure.

 

Biodiesel has passed Tier 1 and Tier 2 health effects testing required by the Clean Air Act of 1990. Harmful emissions (carbon monoxide, particulate matter and hydrocarbons) are reduced by more than 50% compared with Petrodiesel, and it has one of the highest energy content (BTU) of any alternative fuel.

 

Renewable Fuel Standards

 

On July 1, 2010, the EPA’s final regulations implementing revised renewable fuel standards (“RFS2”) set by Congress under the Energy Independence and Security Act of 2007 (“EISA”) went into effect. The original renewable fuel standards (“RFS”), were established by Congress under the Energy Policy Act of 2005 (“EPAct”), and mandated that transportation fuel sold in the United States contains a minimum volume of renewable fuel. EPAct rules were directed principally to blending ethanol into gasoline used as motor fuel and required approximately 7.5 billion gallons of renewable fuel to be blended into gasoline by 2012. Under the EISA,


2



Congress expanded the RFS program to, among other things, include diesel and increase the volume of renewable fuels required to be blended into transportation fuel from nine billion gallons in 2008 to 36 billion gallons by 2022.

 

Under the RFS2, obligated parties ( i.e. , petroleum refiners and importers of diesel) were required to demonstrate that they complied with their percentage obligations over the gallons of diesel they sold into the marketplace during a compliance period. The EPA developed a system of volume accounting and tracking of the credits associated with renewable fuels known as Renewable Identification Numbers (“RINs”). The system is based on the assignment of unique numbers to each batch of renewable fuel by the biodiesel producer or importer. The use of RINs allows the EPA to measure and track renewable fuel volumes at the point of their introduction into the national fuel supply rather than at the point when they are blended into conventional fuels, which provides more accurate measurements that can be easily verified. The RFS program requires RINs to be transferred with renewable fuel until the point at which the renewable fuel is purchased by an obligated party or is blended into petroleum products by a blender. RINs are accumulated to allow an obligated party to satisfy its renewable volume obligations (“RVOs”). An RVO represents the volume of renewable fuel that the obligated party is required to ensure was used in the U.S. in a given calendar year. Obligated parties have an RVO under each of the four RFS2 renewable fuel categories: cellulosic biofuel, biomass-based diesel, advanced biofuel and total renewable fuel. Obligated parties calculate their RVO at the end of a calendar year based on the volume of gasoline or diesel fuel they produced during the year. Obligated parties are required to meet their RVOs through the accumulation of RINs. By acquiring RINs and applying them to their RVOs, obligated parties are deemed to have satisfied their obligation to cause the renewable fuel represented by the RINs to be consumed as transportation fuel in highway or non-road vehicles or engines. The RFS2 program contemplated that RINs would be sold among obligated parties so that a deficient party could acquire RINs from another obligated party that generated excess RINs to satisfy its requirements.

 

The EPA’s regulations implemented the RFS standards by establishing the four categories of renewable fuel, and set separate volume requirements for each new category, including biodiesel. The new standards are known commonly as “RFS2.” As of July 26, 2010, the EPA confirmed we were in compliance with the RFS2 regulations, making us eligible for participation in the RIN market. In January of 2016, we submitted a revised engineering review in compliance with EPA regulations. Reviews must be performed by third parties and their report must be submitted every three years. We anticipate additional revenues from the direct sale of RINs in instances where customers do not want to bear the burden of administering RINs associated with biodiesel.

 

During the fourth quarter of 2011, the RIN market abruptly halted. In November of 2011, the EPA accused a Maryland man of transacting approximately $9 million in fraudulent RINs through his company, Clean Green Fuels LLC. EPA issued a separate violation notice to a Texas-based company, Absolute Fuel LLC, for transacting approximately $62 million in fraudulent RINs. In addition to the two major violators, EPA issued violation notices to at least two dozen companies that had purchased the fraudulent RINs. In light of the integrity issues that arose as a result of the fraudulent RINs, obligated parties severely restricted purchasing RINs until a program was instituted that would ensure validity of the RINs. The National Biodiesel Board has established a task force for developing a plan to validate RINs and provide assurance that obligated parties can confidently transact in the RIN market without having to be concerned that the EPA will negate any RINs that they had purchased in good faith.  EPA subsequently implemented a Quality Assurance Plan (QAP) to ensure validity and to increase liquidity of RINs. The QAP initiative was rolled out in an interim period (February 12, 2013 through December 31, 2014) that offered two assurance options.  As of January 1, 2015, a single option (“QAP Q”) became effective with its associated verified RINs referred to as Q-RINs.

 

Registration of Plant, Feedstock and Fuel

 

RFS2 imposes a complex set of compliance and reporting obligations to ensure that each obligated party satisfies its RVO for a particular compliance period, under the regulations. These regulations extend over the entire range of an obligated party’s operations. All producers of renewable fuel that produce more than 10,000 gallons of fuel annually must register with EPA’s fuels program prior to generating RINs. A biofuel producer will have to supply the EPA with extensive information concerning plant operations, processes and products, including the fuels produced, the feedstocks that may be used, co-products produced, the source of energy used to produce the biodiesel, compliance with clean air regulations and applicable air permits for permitted capacity and records that support the facility’s baseline volume. In addition, producers must provide the EPA with an independent process engineer’s report with respect to its plant upon initial registration and every three years thereafter or upon changing the feedstock from which it produces biodiesel. In certain cases, health-effects testing is required for a product to maintain its registration or before a new product can be registered. The EPA deems the information collected as essential to generating and assigning a certain category of RIN to a volume of fuel and to verifying the validity of RINs generated. In addition, a producer will have to demonstrate that the biodiesel produced is ASTM D6751 compliant. A producer also will have to register its renewable fuels as a motor vehicle fuel, which will subject it to additional reporting and other requirements. As part of the RFS2 rulemaking, the EPA continues to evaluate criteria regarding compliance with the renewable biomass verification provisions for foreign-grown feedstock, which could affect the market for feedstock.


3



Generation of Renewable Identification Numbers and Equivalence

 

Under RFS2, each RIN is generated by the producer or importer of the renewable fuel, as in the RFS1 program. In order to determine the number of RINs generated by and assigned to a batch of renewable fuel, the actual volume of the batch of renewable fuel must be multiplied by the appropriate equivalence value. The producer or importer must also determine the appropriate code to assign to the RIN to identify which of the four standards the RIN can be used to meet.

 

The equivalence value of a renewable fuel represents the number of gallons that can be claimed for compliance purposes for every physical gallon of renewable fuel. The EPA takes the position that the use of equivalence values based on energy content of a fuel is an appropriate measure of the extent to which a renewable fuel would replace or reduce the quantity of petroleum or other fossil fuel present in a fuel mixture. Under RFS1, ethanol was ascribed an equivalence value of 1.0. Under the EISA, additional credit was to be assigned to cellulosic and waste-derived renewable fuels, and the EPA was directed to establish appropriate credit for biodiesel and renewable fuel volumes in excess of the mandated volumes. Under RFS2, the EPA assigned an equivalence value to ethanol of 1.0, to butanol of 1.3, to biodiesel (mono alkyl ester) of 1.5, and for nonester renewable diesel of 1.7.

 

The producer or importer must also determine the appropriate code to assign to the RIN to identify which of the four standards the RIN can be used to meet and which equivalency value applies to determine the number of RINs generated. The fuel pathway of the product is determinative of the equivalence value and thus the quantity of RIN’s generated for each batch of finished product produced.

 

Biodiesel Production

 

According to the National Biodiesel Board, as of March 2018, there were 78 biodiesel production facilities in operation in the U.S. While it appears that overcapacity exists in the marketplace, a condition that will be exacerbated by new plants that may come online, we believe that the market potential for biodiesel remains higher than current and projected production levels.

 

In accordance with the EISA, RFS2 sets an annual requirement for the domestic use of biodiesel.  EPA published its final rulemaking in November of 2017 stating that the requirement will be for 2.1 billion gallons of biomass-based diesel for 2018. RFS2 provides specific volume requirements for advanced biofuels due in large part to research demonstrating that biodiesel produced from recycled oils, animal fats and agri-based oils can reduce greenhouse gas emissions by as much as 86% compared to petroleum diesel.

 

U.S. Tax Incentives

 

The American Jobs Creation Act of 2004 provided for a biodiesel fuel credit of $1.00 to a biodiesel fuel blender for each gallon of biodiesel produced by the taxpayer and sold to another entity. Biodiesel customers are charged a price that is $1.00 per gallon in excess of the market price of petroleum. Once the biodiesel is blended, the blender becomes eligible to file for reimbursement of $1.00 per gallon of blended biodiesel from the federal government. Our facility has passed all necessary inspections and complied with the applicable regulations to be eligible for any tax incentive programs.

 

The blender credit expired December 31, 2009 at the end of the tax year, severely cutting into biodiesel producer margins and forcing foreclosure of smaller plants across the nation. We were able to maintain a steady stream of revenue through the sale of glycerin and the occasional purchase of off-specification fuel from neighboring plants that we were able to refine further to meet ASTM-D6751 specifications, and then sell on the open market. In December of 2010, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 retroactively restored the biodiesel tax credit for all of 2010 and further extended it through December 31, 2011. Although Congress extended this credit on multiple occasions, it was not renewed prior to December 31, 2011.  This meant that our plant in Lenoir, NC operated during fiscal year 2012 without the production tax credit in place. In January of 2013, Congress voted to reinstate the biodiesel tax incentive retroactively to January 1, 2012 and going forward to December 31, 2013. In late December of 2014, Congress retroactively extended the blender tax credit that expired on December 31, 2013. The reinstatement made the credit effective for the period January 1, 2014 through December 31, 2014. For most of 2015, the tax credit remained in an expired state; however, an extension of the credit was passed by Congress in December of 2015. The 2015 Protecting Americans from Tax Hikes Act (PATH Act) retroactively reinstated the blender credit for all of 2015 and extended its deadline until December 31, 2016.  In November of 2017, the blender credit has not been reinstated retroactively for 2017, but was not extended prospectively for 2018 or any other future year. The blender credit’s status is uncertain going forward.


4



Our Customers

 

Our main customers are petroleum distributors in the Southeast region of the United States. However, we may seek out alternative markets to sell our biodiesel. Additional markets may emerge, including sales to power generation facilities or cogeneration power plants using biodiesel to provide electricity for powering industrial plants (excess electricity would be sold back to power grids allowing electric companies to meet RFS). Further, a potential market exists for biodiesel sales to customers as a cleaner burning heating oil replacement or additive.

 

We have no contractual relationship to sell our products. We determine the price and thereafter sell to our customers on a first come, first serve basis.

 

We sell a portion of our finished product to Echols Oil Company (“Echols”), which is owned by R. Samuel Bell, Jr., our Chairman and CEO. Echols is a petroleum distributor in the Southeast that utilizes biodiesel. Sales to Echols represented approximately 91% and 89% of our consolidated revenues for fiscal years 2017 and 2016, respectively.

 

Renewable Identification Numbers

 

We generate RINs to support the RVO of obligated parties, but we do not currently have any renewable volume obligations. To the extent we begin to export biodiesel in the future, we may be subject to the RVO requirement. We do not currently charge any of our distributors for RINs generated from our production of biodiesel, but may do so in the future.

 

Our Suppliers

 

Our facility can produce biodiesel using a variety of virgin feedstock, including agricultural oils, such as soy bean and sunflower, and animal by-products ( e.g. , pork and chicken fat). This feedstock flexibility allows the plant to take advantage of the lowest cost and best yielding virgin feedstocks in the market at any particular time. The agricultural oils are purchased from various farmers in the region and the pork and chicken fat are purchased from various processors in the region ( e.g. , Tyson Farms).

 

Our Employees


NABE’s employee count varies depending on the volume of production. We currently have one employee at the biodiesel plant in Lenoir, NC. There are no union issues and all positions are easily replaced. In accordance with our community initiative and efforts to increase consumer education on biodiesel, we occasionally employ interns from neighboring colleges, which offer degrees in renewable fuel production.

 

Our current plant manager, Randy K. Dellinger is one of the founding members of NABE. Mr. Dellinger has been responsible for the successful negotiation of various bargain purchases and feedstock agreements. Mr. Dellinger was raised in Lenoir, North Carolina where he remains an active member and advocate for local sustainability through several local organizations. Upon completing high school, Mr. Dellinger joined the United States Navy as an Ocean Systems Technician. After four years in the Navy, Mr. Dellinger went to work in the telecommunications field; first with Bell South as an engineer and then with MCI as a Project Manager. During this time he earned a Bachelor of Science degree from Dallas Baptist University. After MCI, Mr. Dellinger worked as a Senior Management Consultant for Cruces Consulting Services for six years. Upon returning to North Carolina, Mr. Dellinger founded NABE. Mr. Dellinger is on the Advisory Boards of Appalachian State University and A-B Technical College. He is also a former member of the board of the North Carolina Biodiesel Association.

 

Environmental Matters

 

We are subject to various federal, state and local environmental laws and regulations, including those relating to the discharge of materials into the air, water and ground, the generation, storage, handling, use, transportation and disposal of hazardous materials, access to and use of water supply, and the health and safety of our employees. Based upon information provided by the Company, the North Carolina Department of Environment and Natural Resources issued a finding that our facility does not require an air permit to produce up to 5 million gallons of biodiesel per year. Our facility also operates under a stormwater discharge permit from the North Carolina Department of Environment and Natural Resources and held by the facility landlord. Discharges to the local sewer are monitored by the City of Lenoir Wastewater Division. These laws and regulations can require expensive pollution control equipment or operational changes to limit actual or potential impacts to the environment. A violation of these laws and regulations or permit conditions can result in substantial fines, natural resource damage claims, criminal sanctions, permit revocations and/or facility


5



shutdowns. In an effort to ensure that we secure all necessary environmental permits in a timely fashion and remain in compliance with environmental permits, regulations and laws, we may occasionally employ the services of qualified outside environmental consulting firms. We do not anticipate a material adverse impact on our business or financial condition as a result of our efforts to comply with these requirements.

 

There will be a risk of liability for the investigation and cleanup of environmental contamination at our plant and at any off-site locations where we arrange for the disposal of hazardous substances if we are deemed to be a responsible party. While biodiesel is biodegradable, we utilize certain hazardous substances in our production process. While we handle those substances in compliance with all applicable federal, state and local laws, it is possible that prior uses of our site or past operations may have caused contamination of our sites. If these substances have been or are disposed of or released at sites that undergo investigation or remediation by regulatory agencies, we may be responsible under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”), or other environmental laws for all or part of the costs of investigation or remediation and for damage to natural resources. Liability under CERCLA or comparable state laws may be found without regard to fault or to the legality of the original conduct. We also may be subject to related claims by private parties alleging property damage and personal injury due to exposure to hazardous or other materials at or from these properties. Some of these matters may require us to expend significant amounts for investigation and/or cleanup or other costs.

 

In addition, new environmental laws, new interpretations of existing laws, increased governmental enforcement of existing laws or other developments could require us to make additional significant expenditures. Continued government and public emphasis on environmental issues can be expected to result in increased future investments for environmental controls as we operate our facility. Present and future environmental laws and regulations and related interpretations applicable to our operations, more vigorous enforcement policies and discovery of currently unknown conditions may require substantial capital and other expenditures.

 

Our air emissions are subject to the federal Clean Air Act, the federal Clean Air Act Amendments of 1990 and similar state and local laws and associated regulations. We are currently in compliance with EPA requirements as well as applicable state guidelines. Other federal and state air emission limitations, such as New Source Performance Standards, may also apply to facilities we own or operate. More stringent laws relating to climate change and greenhouse gases (“GHGs”) may be adopted in the future and could reduce the demand for biodiesel. Because other domestic biodiesel manufacturers will have similar restrictions, however, we believe that compliance with stringent air emission control or other environmental laws and regulations is not likely to materially affect our competitive position.

 

Additional environmental laws and regulations which are applicable to us and our operations include, among others, the following United States federal laws and regulations:

 

Federal Water Pollution Control Act (a/k/a the Clean Water Act) and comparable state laws, which govern discharges of pollutants into waters of the United States and each state, respectively;  

Resource Conservation and Recovery Act, which governs the management, storage and disposal of solid and hazardous waste;  

Oil Pollution Act of 1990, which imposes liabilities resulting from discharges of oil into navigable waters of the United States;  

Emergency Planning and Community Right-to-Know Act, which requires reporting of toxic chemical inventories;  

Safe Drinking Water Act, which governs underground injection and disposal activities; and U.S. Department of Interior regulations, which impose liability for pollution cleanup and damages.  

 

The hazards and risks associated with producing and transporting our products, such as fires, natural disasters, explosions, abnormal pressures, blowouts and pipeline ruptures also may result in personal injury claims or damage to property and third parties. As protection against operating hazards, we will maintain insurance coverage against some, but not all, potential losses. Though we will seek to maintain insurance that is deemed adequate and customary for our industry, losses could occur for uninsurable or uninsured risks or in amounts in excess of existing insurance coverage.

 

 

Item 1A. Risk Factors

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.


6



Item 1B. Unresolved Staff comments

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

Item 2. Properties

 

Our production facility is located at 815-D Virginia Street in Lenoir, North Carolina.  The property occupies approximately 18,000 square feet and is leased from Neptune, Inc., a North Carolina corporation (“Neptune”).  The Company executed the lease on April 1, 2007 and the lease expired on May 31, 2012.  The lease automatically renewed for two five-year terms as neither party opted out or expressed any conditions that were not mutually agreed to by the parties. Pursuant to the terms of the lease, we are obligated to pay only the real and personal property taxes on the facility as rental payments. Additionally, we have a right of first refusal to purchase the property from Neptune if Neptune chooses to sell the property at any time during term of the lease. Our property taxes for 2017 (which includes city and county taxes) were $1,913 and have been paid in full. The foregoing description constitutes all of the material terms of the lease agreement and is qualified in its entirety by reference to Exhibit 10.7, which is incorporated herein by reference.

 

The Company currently owns the process equipment utilized at its biodiesel production plant as well as the lab equipment used in testing.

 

Item 3. Legal Proceedings

 

In the Court of Common Pleas of the State of South Carolina’s Thirteenth Judicial Circuit (Greenville County), a Plaintiff has filed suit against the Company and its subsidiary, NABE. The filing took place in June of 2015. In its filing, the Plaintiff claims to be a subsidiary of a foreign biodiesel producer with which NABE transacted import activities during 2013 and 2014. The Plaintiff further claims that the Company did not have the right to retain the $510,030 that was received and recognized as Other Income during the second quarter of 2015. An agreement signed with a customer in 2014 allowed the Company to retain and recognize this income, which was dependent upon reinstatement of the federal biodiesel blender tax credit. Subsequent to our agreement with the customer, the blender tax credit was retroactively reinstated. The Company recognized the Other Income when the customer, after having successfully filed for the credit, remitted payment to the Company. The Company believes that the Plaintiff's actions are unfounded and that there is minimal likelihood of incurring any liability. The Company is vigorously defending the action.

 

Item 4. Removed and Reserved


7



PART II

 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

Our Class A Common Stock is currently traded on the Over-the-Counter Bulletin Board (OTCBB) under the symbol "ICNN."  Our Class B Common Stock is not registered under the Securities Exchange Act of 1934 and thus is not currently traded on any exchange or market.

 

Only a limited market exists for our securities. There is no assurance that a regular trading market will develop, or if developed, that it will be sustained. Therefore, a stockholder in all likelihood will be unable to resell his or her securities in the Company. Furthermore, it is unlikely that a lending institution will accept our securities as pledged collateral for loans unless a regular trading market develops.

 

As of March 5, 2018, the stock was trading at a market price of $0.02 per share; however, the Company’s Class A Common Stock is thinly traded with a limited market. The closing price of $0.02 was from the last reported sale date of March 1, 2018.


Fiscal Year 2017

 

High Bid

 

Low Bid (1)

Fourth Quarter (10-01-2017 to 12-31-2017)

 

$

0.1400

 

$

0.0200

Third Quarter (07-01-2017 to 09-30-2017)

 

$

0.2800

 

$

0.0200

Second Quarter (04-01-2017 to 06-30-2017)

 

$

0.0300

 

$

0.0200

First Quarter (01-01-2017 to 03-31-2017)

 

$

0.0300

 

$

0.0200

 


Fiscal Year 2016

 

High Bid

 

Low Bid (1)

Fourth Quarter (10-01-2016 to 12-31-2016)

 

$

0.0300

 

$

0.0200

Third Quarter (07-01-2016 to 09-30-2016)

 

$

0.0300

 

$

0.0300

Second Quarter (04-01-2016 to 06-30-2016)

 

$

0.0400

 

$

0.0300

First Quarter (01-01-2016 to 03-31-2016)

 

$

0.0400

 

$

0.0400

(1) The quotations set out herein reflect inter-dealer prices without retail mark-up, markdown or commission and may not necessarily reflect actual transactions.

 

Shareholders

 

At March 5, 2018, we had 99 total shareholders of record of our common stock (99 shareholders of Class A Common Stock and one shareholder of Class B Common Stock), including shares held by brokerage clearing houses, depositories or otherwise unregistered form.

 

Within the holders of record of the Company's Class A Common Stock are depositories such as Cede & Co., a nominee for The Depository Trust Company (or DTC), that holds shares of stock for brokerage firms which, in turn, hold shares of stock for one or more beneficial owners.  Accordingly, the Company believes there are many more beneficial owners of its Class A Common Stock whose shares are held in "street name", not in the name of the individual stockholder.

 

Dividend Policy

 

Holders of Class A Common Stock and Class B Common Stock are entitled to receive dividends on an equal basis out of funds legally available when and as declared by our board of directors. Pursuant to Section 78.196 of the Nevada Revised Statutes, our board of directors may declare dividends that are cumulative, noncumulative, or partially cumulative. Our board of directors has never declared any dividends and does not anticipate declaring any dividends in the foreseeable future. Should we decide in the future to pay dividends, our ability to do so and meet other obligations may depend upon the receipt of dividends or other payments from any subsidiaries and other holdings and investments. In the event of our liquidation, dissolution or winding up, holders of Class A Common Stock and Class B Common Stock are entitled to receive, ratably in proportion to the amount held by them, the net assets available to stockholders after payment of all creditors.


8



Securities authorized for issuance under equity compensation plans

 

We have no equity compensation plans and accordingly we have no shares authorized for issuance under an equity compensation plan.

 

Recent Sales of Unregistered Securities

 

During the fiscal year ended December 31, 2017, there were no sales of shares that would be considered exempt from the registration requirements under the Securities Act pursuant to Section 4(2) and/or Regulation D thereunder.

 

Item 6. Selected Financial Data

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation .

 

The following discussion and analysis of the results of operations and financial condition of the Company is an overview of the important factors that management focuses on in evaluating our businesses, financial condition and operating performance and gives effect to the acquisition of NABE by the Company, and should be read in conjunction with the financial statements included in this Annual Report on Form 10-K, and the related notes included elsewhere in this Annual Report. This discussion contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ materially from those we currently anticipate as a result of many factors described throughout this Annual Report.

 

Company Overview

 

NABE is a refiner and producer of commercial-grade biodiesel as specified by the American Society of Testing and Materials (ASTM D6751). Our refining and production facility is located in Lenoir, North Carolina with a nameplate annual capacity of five million gallons. Our facility produces biodiesel from virgin, agri-based feedstock using commercial specifications. The biodiesel we produce is sold throughout North Carolina, South Carolina and Virginia directly or through wholesale distributors. During prior years, we also refined and sold crude glycerin, recovered methanol and high acid oil, which are all contained within the byproduct of our biodiesel production.

 

Our production process starts with purchasing the most cost effective and suitable agri-based feedstock ( e.g. , soy, canola, sunflower, cotton seed and chicken/pork fat). A sample of every feedstock is tested by our in-house laboratory in order to develop the proper recipe of catalysts for the transesterification process. Glycerin, a byproduct, is then separated from the biodiesel and any excess methanol is recovered. Recovered methanol is reused in the production process and the glycerin is sold on the open market. While biodiesel is our main product, glycerin is a popular chemical used in pharmaceutical and hygiene applications and has historically serve as an additional source of revenue, about 2% of 2016 annual gross revenue.

 

Our facility is capable of producing biodiesel from a wide range of agri-based feedstocks: soy, canola, sunflower, cottonseed and chicken/pork fat. Biodiesel production costs are highly dependent on the cost of feedstock, and we believe the ability to utilize a variety of feedstocks efficiently and interchangeably is imperative to gaining a competitive advantage in the biodiesel production market.

 

Revenue

 

We derive the majority of our revenue from the sale of biodiesel; the balance is derived from the sale of glycerin, RINs, and kerosene. Revenue may be affected by the following factors:

 

- Price volatility of petroleum products;  

- Price volatility of RINs;  

- Government incentives;  

- Processing capacity; and  

- Market demand.  


9



We generate net revenue from imported biodiesel sales between the buyer and the seller.  Gross revenues are generated from the sale of own-produced biodiesel, glycerin and RIN’s.    

 

Price volatility of petroleum diesel. Biodiesel is primarily used in blends with petroleum diesel as a fuel for trucks, automobiles, heating oil and marine transportation. Biodiesel can be mixed at any level with petroleum diesel to create a biodiesel blend. Unlike ethanol, where engines need to be modified to handle blend ratios above 10%, biodiesel blends can be used in diesel engines without modifications. Petroleum diesel is a traded commodity and subject to daily pricing swings. The price that we can charge our customers for biodiesel needs to be competitive with the price of petroleum diesel fuel, regardless of our cost to produce.

 

Price volatility of RINs. Under certain circumstances, the EPA allows producers to separate RINs from the biodiesel to which it was initially assigned. The production facility in Lenoir, NC has successfully registered with EPA to generate RINs (type: D-Code = 4 and D-Code = 6) along with the biodiesel it produces. For those RINs that NABE is able to separate and sell, the selling price is subject to factors affecting the RIN market, which performs much like a commodity market with daily price swings.

 

Government incentives . Initiatives and incentives at the federal, state and local government levels benefit our blending and retail customers. The primary federal economic incentive was the biodiesel blenders excise tax credit, which was available to registered blenders of biodiesel and petroleum diesel. Our customers include registered biodiesel blenders; they purchase the biodiesel from us at a price of $1.00 in excess of the market price of petroleum diesel and then our customers were reimbursed the $1.00 from the federal government. In February of 2018, Congress retroactively restored the biodiesel tax credit for all of 2017, but did not extend it prospectively through December 31, 2018. Although Congress has extended this credit on multiple occasions, it last expired as of December 31, 2016 and there are no assurances that the tax incentive will be reinstated by Congress.  

 

Processing capacity . Our current annual maximum (assuming the facility is running 24 hours a day, 350 days per year) or “nameplate” capacity is 5.0 million gallons; however, our highest production output was 914,000 gallons in 2009.  

 

Market demand. The growth potential of our revenue depends on market demand for our products. We believe growth potential exists for sales given the increase of national “green” initiatives, the cooperation of U.S. auto manufacturers and the mandate by the EPA requiring a minimal consumption of biodiesel. In November of 2017, EPA issued its final rulemaking that established a 2.1 billion gallon biobass-based diesel usage mandate for 2018, which was an increase from the 2017 volume of 2.0 billion gallons.  

 

Revenue Recognition – Renewable Identification Numbers (“RINs”)

 

As a means for ensuring renewable fuels were being blended with petroleum products for consumption in the United States, the Environmental Protection Agency (“EPA”) created a mechanism for holding obligated parties (refiners and importers) accountable.  This mechanism requires that obligated parties annually demonstrate they have met the EPA's minimum renewable fuel blending limits, which are established annually and referenced as the renewable volume obligation (“RVO”).  Companies demonstrate compliance with the RVO by accumulating and submitting RIN-gallons (“RINs”) annually to the EPA.  RINs may be generated at renewable fuel production facilities and essentially function as commodities capable of being "separated" from the fuel and traded on an active market.  

 

For biodiesel that NABE produces, it generates RINs at the point that biodiesel passes through the facility’s meter in a sales event. RINs are not generated for any biodiesel held in inventory. RIN generation events occur regardless of the RINs transferring with the fuel or remaining with NABE.  Transferring RINs takes place through the EPA Moderated Transaction System (“EMTS”).  It is through the EMTS that the EPA is ultimately capable of tracking the RIN transfer activity.  As RINs are separated from their respective gallons, they may be re-sold multiple times before finally arriving in the possession of an obligated party.  For those customers who do not wish to participate in the EPA's renewable fuel program, NABE offers the option for separating the RINs and handling all of the required EMTS administration.

 

Once RINs have been separated from biodiesel, NABE has the option of either selling the commodities directly to obligated parties or selling them to brokers.  At times, NABE sells RINs to brokers due to having smaller quantities available.  Brokers often aggregate RINs from multiple parties and then sell them to obligated parties.  RIN market values fluctuate daily and are readily determinable from online sources.  

 

Customers requesting biodiesel without RINs are not offered a price discount as a result of declining to accept the RINs with the fuel. There are no agreements with any party in which NABE is obligated to share any compensation for the eventual sale of the RINs.


10



Revenue from the sale of RINs is deemed realizable the time that NABE has affected the transfer of RINs within EPA’s EMTS. Prior to transferring the RINs, NABE and the counterparty agree on the number of RINs, on the type of RIN (D-Code), and on the price per RIN. All of these elements, including the unit price of the RINs, have to be entered into EMTS by NABE as the transferor. The transferee is also required to enter the unit price into EMTS for the RINs when they are accepted.  Immediately after the RINs have been nominated within the EMTS for the trading party, an invoice is generated and sent. Trading parties are typically extended terms of net 3 days on RIN sales. NABE offers buyers a 10-day return policy.

 

Cost of Sales

 

Cost of sales represents costs that the Company’s facility in Lenoir, NC recognized for its own production and resell activities.

 

Cost of sales for biodiesel production is composed of the following items: raw materials, blending materials, labor and overhead. Raw materials refer to feedstock, which historically accounts for approximately 62% of the total cost of sales. Blending materials refer to methanol and catalyst, which combined will typically account for approximately 27% of the total cost of sales. Labor cost makes up a small portion of the cost of sales. Overhead includes utilities, maintenance costs, and inspections, and accounts for approximately 11% of the total cost of sales on a historic basis.

 

Cost of sales for biodiesel production is, directly or indirectly, determined by the following factors:

 

- The availability and pricing of feedstock; and  

- Operating efficiency of the production facility.  

 

The availability and pricing of feedstock. Our ability to produce or refine biodiesel from a variety of agri-based feedstocks allows us to shift production to the highest yielding feedstocks based on market prices. While this diversity limits exposure to volatile markets, feedstock remains the major cost of sales and its fluctuation will have a material impact on our total cost. Transportation costs also affect the overall feedstock cost, but are minimized due to the location of our facility in North Carolina. There is a readily available supply of local feedstocks including soy oil, and poultry/pork fat. We are currently working with vendors in Georgia, South Carolina and North Carolina to source used cooking oil as a cost competitive feedstock. Competition with the food and animal feed industries may keep feedstock prices high even while biodiesel prices fall.

 

Cost of sales for kerosene reselling activity is composed of the price paid for kerosene plus freight. No further conditioning is required for kerosene that is subsequently sold to regional wholesalers.

 

Operating Expenses

 

Operating expenses consist of selling expenses and general and administrative expenses. Generally, operating expenses are only a small portion of total costs and expenses.

 

Selling expenses are nominal as we have no advertising expenses and no dedicated sales staff.

 

General and administrative expenses consist of payroll for our plant manager and clerical staff in addition to professional fees, telephone, tax, and licenses and related fees. Professional fees include consultants and service providers necessary for compliance with SEC reporting requirements.

 

Results of Operations

 

The following is a discussion and analysis of our results of operations for 2017 and 2016, and the factors that could affect our future financial condition. This discussion and analysis should be read in conjunction with our audited financial statements and the notes thereto included elsewhere in this report. Our financial statements are prepared in accordance with United States generally accepted accounting principles. All references to dollar amounts in this section are in United States dollars unless expressly stated otherwise.

 

Revenue

 

The Company generated revenues of $71,035 during 2017. Revenue generated during the period was due to sales of biodiesel, kerosene, de-methylated glycerin, and recovered methanol. Third-party transactions during 2017 included biodiesel sales totaling $43,


11



diluted methanol sales of $2,904, de-methylated glycerin sales of $2,775, and recovered methanol sales of $658. During 2017, related party kerosene sales totaled $64,655.

 

The Company generated revenues of $251,995 during 2016.  Revenue generated during the period was due to sales of biodiesel, RINs, kerosene, and materials recovered during glycerin purification processing. During 2016, our third party biodiesel sales totaled $2,616 while our third party kerosene sales totaled $19,728. The fourth quarter of 2016 marked the first time in which we sold kerosene to wholesalers. Our biodiesel plant in Lenoir, NC has the permits necessary to re-sell kerosene. Kerosene sales helped to offset declining biodiesel demand during cold weather. We had biodiesel and RIN sales to related parties totaling $224,206 during the period under consideration. There were no RIN sales transacted to third parties during 2016. Recovered methanol sales were $2,237 while de-methlyated glycerin sales were $3,208 for the period January 1, 2016 through December 31, 2016.

 

Comparing the Company’s activity for 2017 to 2016, there was a decrease in revenue of $180,960 from $251,995 to $71,035. During 2017, revenue was primarily attributable to $64,655 in related party kerosene sales.  Kerosene sales amounted to $19,728 during 2016. Related party biodiesel and RIN sales totaled $224,206 during 2016 while there were no related party biodiesel or RIN sales during 2017. Also impacting comparative revenues were sales of glycerin, and recovered methanol. The Company had glycerin sales of $2,775 during 2017 while glycerin sales totaled $3,208 during the same period in 2016. The Company recognized $2,237 in recovered methanol sales during 2016 and had $658 in recovered methanol sales during the same period in 2017. Also during 2017, the Company had diluted methanol sales totaling $2,904 but did not have diluted methanol sales during 2016.

 

Cost of Revenue

The Company’s cost of revenue was $155,998 during 2017. For the same period, cost of revenue consisted of costs associated with kerosene purchases for resale, labor, overhead, and utilities. At the end of 2017, the Company wrote off $10,761 in inventory due to an expectation for continued losses from biodiesel operations. All inventory items written off were related to biodiesel production.

 

The Company’s cost of revenue was $294,478 during 2016. For the same period, cost of revenue consisted of costs associated with raw materials (feedstocks, methanol, and catalyst) purchases, kerosene purchases for resale, labor, overhead, and utilities.

 

Comparing activity for 2017 to activity for 2016, there was a decrease in cost of revenues of $138,480 from $294,478 to $155,998. The period-over-period decrease was due to operating with a leaner production crew at the biodiesel production facility in Lenoir, NC.  During 2016, the Company recognized an offset to the cost of goods sold totaling $48,994 as a result of filing for the blender tax credit associated with blended gallons. The Company did not recognize and blender tax credits during the current year.  Further impacting the year-over-year decrease were comparative direct material costs.  Direct material costs totaled $80,881 during 2016. These same costs totaled $65,780 for 2017, which also included the $10,761 inventory write off.

 

Depreciation

Depreciation expense totaled $64,083 during 2017.

 

Depreciation expense totaled $74,948 during 2016.

 

Gross Loss

The Company had a gross loss totaling $149,046 during 2017.  The primary reason for the gross loss during the period was the Company’s inability to produce and sell biodiesel under adverse market conditions, including lower petroleum benchmark prices.

 

The Company had a gross loss totaling $117,431 during 2016.  The primary reason for the gross loss during the period was the Company’s inability to produce and sell biodiesel under adverse market conditions, including lower petroleum benchmark prices.

 

Selling, General and Administrative Expenses (SG&A)

SG&A expenses totaled $74,692 during 2017. During the period under consideration, SG&A expenses primarily consisted of costs associated with payroll, office overhead and professional fees.

 

SG&A expenses totaled $108,277 during 2016. During the period under consideration, SG&A expenses primarily consisted of costs associated with payroll, office overhead and professional fees.


12



Comparing the activity for 2017 to 2016, there was a decrease in SG&A expenses of $33,585 as SG&A decreased from $108,277 to $74,692. The period-over-period decrease is in line with reduced biodiesel production activity and fewer personnel at the biodiesel production facility in Lenoir, NC.

 

Other Income & Tax Credit Income

Other Income totaled $1,666 during 2017. During 2017, this amount was partially attributable to $202 in funding received from the USDA Biofuel Program and to a rebate from our insurance carrier. Each quarter, the Company submits a Payment Request (Form RD-4288) and supporting documents to the USDA delineating those gallons produced/sold. Along with the documentation, the Company informs the USDA regarding the type and quantity of feedstocks utilized.  These payment requests are reviewed by an agent of the USDA and then submitted as part of the “pool” for funding. Biodiesel producers compete for whatever funding is available from the USDA’s pool. Since it is difficult to predict the amount of funding that may be received, the Company only recognizes Other Income associated with the USDA Biofuel Program when the funds are received. The additional $1,464 of Other Income recognized during the current year was related to a refund from our insurance carrier.  Our carrier performed an audit of 2016 and determined that we were eligible for a refund. The refund was recorded in Other Income, instead of an offset to insurance expense, since its basis was an audit of a prior year.

 

Other Income totaled $720 during 2016. During 2016, this amount was attributable to $196 in funding received from the USDA Biofuel Program and to a rebate from our insurance carrier. The additional $524 of Other Income recognized during 2016 was related to a refund from our insurance carrier resulting from an audit of 2015.

 

Interest Expense

Interest expense was $368 during 2017.

 

Interest expense was $671 during 2016.

 

Net Loss

The Company had a net loss of ($422,271) during 2017.

 

The Company had a net loss of ($225,659) during 2016.

 

 

Debt Obligations and Commitments

Contractual Obligations

 

Total

 

Less than one year

 

1 - 2 Years

 

2 - 5 Years

 

More than 5 Years

Term loan (1)

 

1,690

 

1,690

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

Total

 

$        1,690

 

1,690

 

-

 

-

 

-

_______________________

(1) NABE entered into a term note in April 2017 that matured in February 2018.  The note was payable in monthly principal and interest installments of $880.  Interest is payable at a rate of $35 per month.  The balance outstanding at December 31, 2017 was $1,690.

 

 

Liquidity and Capital Resources

 

Working Capital

 

 

As of December 31, 2017

 

As of December 31, 2016

Current Assets

$

7,929

$

54,567

Current Liabilities

 

699,206

 

601,758

 

 

 

 

 

Working Capital Deficiency

 

(691,277)

 

(547,191)

 

 

 

 

 

Accumulated Deficit

 

(6,935,447)

 

(6,513,176)


13



Cash Flows

 

 

Year ended

December 31,

2017

 

Year ended

December 31,

2016

Cash (used in) by operating activities

$

(79,809)

$

(46,755)

Cash provided by investing activities

 

14,271

 

-

Cash provided/(used in) by financing activities

 

57,558

 

(13,281)

Net change in cash

 

(7,980)

 

(60,036)

 

As of December 31, 2017, our current assets totaling $7,929 consisted of cash, accounts receivable, other current assets and prepaid expenses. Our accounts payable and accrued liabilities and current portion of amounts due to related parties and third parties were $699,206 as of December 31, 2017. As a result we had a working capital deficiency of $691,277 at December 31, 2017.

 

Current assets for the Company totaled $54,567 as of December 31, 2016. Current liabilities for the Company totaled $601,758 as of December 31, 2016. As a result the Company had a working capital deficiency of $547,191 at December 31, 2016.

 

Through December 31, 2017, the Company has funded its operations through the issuance of 33,774,332 shares (31,774,332 shares of Class A stock and 1,980,000 shares of Class B stock), loans from the former director, loans from related parties, and loans from third parties.

 

To date, our cash flow requirements have been primarily met by equity financings and from operating the Company's biodiesel production facility in Lenoir, NC. Management expects to keep operational costs to a minimum until cash is available through financing or operating activities. Management plans to continue to seek other sources of financing on favorable terms; however, there are no assurances that any such financing can be obtained on favorable terms, if at all. Our auditors have issued a going concern opinion on the Company’s financial statements for the year ended December 31, 2017.

 

Cash Used In Operating Activities

 

During 2017, the Company’s cash used in operating activities totaled $79,809. The Company’s cash used in operating activities was primarily attributable to collecting trade receivables, and to making transactions on trade payables. Third party trade receivables decreased $11,818. Inventory decreased a total of $25,810, an amount which includes $10,761 of inventory that was fully written off at year end due to continued losses from biodiesel production operations. Trade payables decreased $5,807 while related party payables decreased $13,245 during 2017. Related party trade payables were impacted by a $45,661 conversion of the trade payables to related party notes payable (see Cash Provided By Financing Activities below). Accrued expenses increased $12,388 during 2017. Depreciation expense was $64,083 in 2017.

 

During 2016, the Company’s cash used in operating activities totaled $46,755. For the same period, the Company’s cash used in operating activities was primarily attributable to generating trade receivables associated with sales of biodiesel, RINs, and kerosene, and with making payments on trade payables. Third party trade receivables increased $11,796 and related party receivables decreased $57,205 while inventories increased $10,492. Trade payables and related party payables increased $17,277 and $31,154, respectively, for the same period. Depreciation expense was $74,948 in 2016.

 

Cash Provided By Investing Activities

 

During 2017, the Company’s cash flows provided by investing activities totaled $14,271.  Cash provided by investing activity resulted from the sale of equipment comprising the diesel exhaust fluid (DEF) production system. The equipment was sold to a third party at book value, therefore, no gain or loss was recorded on the sale.

 

During 2016, the Company had no cash flows related to investing activities.

 

Cash Provided By (Used In) Financing Activities

 

During 2017, the Company’s cash provided by financing activities totaled $57,558.  Of this amount, $66,494 represents proceeds provided from short-term financing from a related party and from an employee loan, which was subsequently repaid, during the year. The difference, or $8,936, represents cash used in financing prepaid insurance. At December 31, 2016, the Company recognized a


14



related party payable totaling $31,154.  This amount, and an additional $46,204, were converted to a note payable during the current year.

 

During 2016, the Company’s cash used in financing activities totaled $13,281. This amount represents funds paid for short-term debt during the year.

 

Future Financings

 

We anticipate that additional funding will be required in the form of equity financing from the sale of our common stock in order to proceed with our acquisition and expansion plan. However, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our marketing and acquisition plans. At this time, we do not have any arrangements in place for any future equity financing.

 

Off-Balance Sheet Arrangements

 

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

 

Recent Accounting Pronouncements

 

Management does not expect any financial statement impact from any recently-issued pronouncements.

 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

 

Item 8. Financial Statements and Supplementary Data.


15



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of

Incoming, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Incoming, Inc. and its subsidiary (collectively, the “Company”) as of December 31, 2017 and 2016, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

Going Concern Matter

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a working capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

 

/s/ MaloneBailey, LLP

www.malonebailey.com

We have served as the Company's auditor since 2010.

Houston, Texas

April 17, 2018


16



INCOMING, INC.

CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

December 31, 2017

 

December 31,

2016

 

 

 

 

 

 

 

ASSETS

Current Assets

 

 

 

 

Cash

$

3,480

$

11,460

Accounts receivable, trade, net

 

228

 

12,046

Inventory

 

-

 

25,810

Prepaid expenses

 

3,821  

 

4,851  

Other current assets

 

400

 

400

Total current assets

 

7,929

 

54,567

 

 

 

 

 

 

 

Property and equipment, net

 

271,654

 

549,839

Total assets

$

279,583

$

604,406

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities

 

 

 

 

 

Accounts payable

$

196,883

 $

222,773

Short-term debt

 

1,690  

 

2,176  

Accrued liabilities

 

81,865

 

69,477

Accounts payable – related parties

 

274,916

 

307,332

Related party debt – short-term

 

143,852

 

-

Total current liabilities

 

699,206

   

601,758

 

 

 

 

 

 

 

Total Liabilities

 

699,206

 

601,758

 

 

 

 

 

Capital stock $0.001 par value; 200,000,000 shares authorized

 

 

 

 

Class A – 31,774,332 shares issued and outstanding, respectively

 

31,774

 

 31,774

Convertible Class B – 1,980,000 shares issued and outstanding

 

1,980

 

1,980

Additional paid in capital

 

6,482,070

 

6,482,070

Accumulated Deficit

 

(6,935,447)

 

(6,513,176)

Total Stockholders’ Equity (Deficit)

 

 

   

 

 

 

 

 

(419,623) 

 

2,648 

Total Liabilities and Stockholders' Equity (Deficit)

$

279,583

$

604,406

 

 

The accompanying notes are an integral part of these consolidated financial statements .


17



INCOMING, INC.

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

Year ended

December 31, 2017

 

Year ended

December 31, 2016

Revenue

$

6,380

$

27,789

Revenue from related parties

 

64,655

 

224,206

Total revenue

 

71,035

 

251,995

 

 

 

 

 

Cost of revenue

 

155,998

 

294,478

Depreciation

 

64,083

 

74,948

Gross loss

 

(149,046)

 

(117,431)

 

 

 

 

 

Selling, general, and administrative expenses

 

74,692

 

108,277

Loss on impairment of property and equipment

 

199,831

 

-

 

 

 

 

 

Loss from operations

 

(423,569)

 

(225,708)

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

Other income

 

1,666

 

720

Interest expense

 

(368)

 

(671)

Total other income

 

1,298

 

49

Net Loss

$

(422,271)

$

(225,659)

 

 

 

 

 

 

 

Net Loss per Class A Common Share (Basic and Diluted)

 

(0.01)

 

(0.01)

Net Loss per Class B Common Share (Basic and Diluted)

 

(0.21)

 

(0.11)

 

 

 

 

 

Weighted Average Number of Class A Common Shares Outstanding (Basic and Diluted)

 

31,774,332

 

31,774,332

Weighted Average Number of Class B Common Shares Outstanding (Basic and Diluted)

 

1,980,000

 

1,980,000

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.


18



INCOMING, INC.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

Year Ended

December 31, 2017

 

Year Ended

December 31, 2016

Cash flows from operating activities

 

 

 

 

Net Loss

$

(422,271)

$

(225,659)

Adjustments to reconcile net loss to net cash provided by operations

 

 

 

 

Loss on impairment of fixed assets

 

199,831

 

-

Write off of inventory

 

10,761

 

-

Depreciation

 

64,083  

 

74,948  

Changes in operating assets and liabilities

 

 

 

 

Accounts receivable

 

11,818

 

(11,796)

Accounts receivable – related party

 

-

 

57,205

Prepaid expenses

 

9,480

 

12,451  

Inventory

 

15,049

 

(10,492)

Accounts payable

 

5,807

 

17,277

Accounts payable – related party

 

13,245

 

31,154

Accrued expenses

 

12,388

 

8,157

Net cash used in operating activities

 

(79,809)

 

(46,755)

Cash flows from investing activities

 

 

 

 

Proceeds from sale of equipment

 

14,271  

 

-

Net cash provided by (used) in investing activities

 

14,271

 

-

 

Cash flows from financing activities

 

 

 

 

Proceeds from loan from employee

 

5,072

 

-

Payments on loan from employee

 

(5,072)

 

-

Proceeds from related party debt

 

66,494

 

-

Payments on short-term debt

 

(8,936)

 

(13,281)

Net cash provided by (used in) financing activities

 

57,558

 

(13,281)

 

 

 

 

 

Net change in cash for period

 

(7,980)

 

(60,036)

Cash at beginning of period

 

11,460

 

71,496

Cash at end of period

$

3,480

$

11,460

 

 

 

 

 

Supplemental disclosure of cash flow information

 

 

 

 

Cash paid for interest

$

368

$

671

Cash paid for income taxes

 

-

 

226

 

 

 

 

 

Non-cash investing and financing activities

 

 

 

 

Accounts payable-related party converted to notes payable-related party

 

77,358

 

-

Prepaid insurance financed with notes payable

 

8,450

 

12,171

 

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.


19



INCOMING, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

For the Years Ended December 31, 2017 and 2016

 

 

 

Common Stock

 

 

 

 

Class A Shares

Par

Class B Shares

Par

Additional Paid-In Capital

Accumulated Deficit

Total

Equity

Balances, December 31, 2015

31,774,332

$31,774

1,980,000

$1,980

$  6,482,070

$    (6,287,517)

$  228,307

 

 

 

 

 

 

 

 

Net Loss

-

-

-

-

-

(225,659)

(225,659)

Balances, December 31, 2016

31,774,332

$31,774

1,980,000

$1,980

$  6,482,070

$    (6,513,176)

$  2,648

 

 

 

 

 

 

 

 

Net Loss

-

-

-

-

-

(422,271)

(422,271)

Balances, December 31, 2017

31,774,332

$31,774

1,980,000

$1,980

$  6,482,070

$    (6,935,447)

$ (419,623)

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements .


20



INCOMING, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

 

Note 1 Nature and Continuance of Operations  

 

Organization

 

On December 22, 2006, Incoming, Inc. (“we” or the “Company”) was incorporated in Nevada. Through our wholly-owned subsidiary North American Bio-Energies LLC (“NABE”), we operate in the alternative energy industry in the development and acquisition of commercial grade biodiesel facilities and the distribution and marketing of petroleum and biofuel products. In addition to operating as NABE, our subsidiary also does business as Foothills Bio-Energies, LLC (“Foothills”).

 

Going Concern

 

The consolidated financial statements presented in this document have been prepared on a going-concern basis. As of December 31, 2017, the Company has a working capital deficiency of $691,277 and has an accumulated deficit of $6,935,447. Its ability to continue as a going concern is dependent upon the ability of the Company to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay liabilities arising from normal business operations when they come due. The outcome of these matters cannot be predicted with any certainty at this time. These factors raise substantial doubt that the Company will be able to continue as a going concern. The Company to date has funded its initial operations through the issuance of capital stock and common stock options, loans from related parties, and revenue generated in the normal course of business. Management plans to continue to provide for the Company’s capital needs by the issuance of common stock and related party loans. These financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern.  

 

Note 2 Summary of Significant Accounting Policies  

 

Use of Estimates

 

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates, which have been made using careful judgment. Actual results may vary from these estimates.

 

Consolidation

 

The accompanying consolidated financial statements represent the consolidated operations of Incoming, Inc. and its wholly-owned subsidiary North American Bio-Energies, LLC (“NABE”). Intercompany balances and transactions have been eliminated in consolidation.

 

Cash and Cash Equivalents

 

Cash and cash equivalents include all cash balances and highly liquid investments with an initial maturity of three months or less at the date of purchase. The Company places its temporary cash investments with high credit quality financial institutions. At times such investments may be in excess of the Federal Deposit Insurance Corporation (FDIC) insurance limit. As of December 31, 2017 and 2016, the Company had cash of $3,480 and $11,460, respectively, held in FDIC insured accounts.

 

Revenue Recognition

 

The Company derives all of its revenue from operations of the NABE biodiesel plant in Lenoir, North Carolina, which was acquired in August of 2010.  Through NABE, the Company’s operations are focused primarily on biodiesel production and sales. Currently, we derive revenue from biodiesel sales, from glycerin (a by-product from bio-diesel production) sales, from RIN (Renewable Identification Numbers) sales, and from kerosene sales.  We also generate revenue from biodiesel import


21



activities. The Company records revenue when all of the following criteria are met: a) persuasive evidence of an arrangement with the customer exists, b) the price to the customer is fixed and determinable, c) product is shipped or delivery is complete (depending on the terms) and collection probability is reasonably assured.

 

Related Party Transactions

 

Related parties are defined as: affiliates of the Company, entities for which investments are accounted for by the equity method, trusts for the benefit of employees, principal owners, management, members of the Board, members of immediate families of principal owners or management, other parties with which the company may deal with if one party controls or can significantly influence management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests,10% ownership, etc. Transactions with related parties may not be conducted on terms equivalent to those prevailing in arm’s-length transactions (e.g. a company may receive services from a related party without cost).  It is the policy of the Board of Incoming that all related party transactions are subject to review. All related party transactions that are required to be disclosed in the Company’s filings with the SEC, as required by the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, and related rules and regulations, shall be so disclosed in accordance with such laws, rules and regulations.

 

Accounts Receivable

 

Accounts receivable represent valid claims against customers and are recognized when products are sold or services are rendered. We extend credit terms to certain customers based on historical dealings and to other customers after review of various credit indicators, including the customer’s credit rating. Outstanding customer receivable balances are regularly reviewed for possible non-payment indicators and allowances for doubtful accounts are recorded based upon management’s estimate of collectability at the time of their review. Accounts receivable are written off when the account is deemed uncollectible. The allowance for doubtful accounts balance outstanding at December 31, 2017 and 2016 was $11,096.

 

Inventories

 

Inventories consist primarily of raw materials, work-in-process and production by-products that are valued at the lower of cost, determined by the first-in, first-out method, or net realizable value.  

 

Property and equipment

 

Property and equipment is recorded at cost and depreciated over the estimated useful lives of the assets (which range from 5 to 20 years) using the straight-line method. Repair and maintenance expenditures, which do not result in improvements, are charged to expense as incurred.

 

Impairment of Long-Lived Assets

 

Long-lived assets, including property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The evaluation of recoverability is performed using undiscounted estimated net cash flows generated by the related asset. If an asset is deemed to be impaired, the amount of impairment is determined as the amount by which the net carrying value exceeds discounted estimated net cash flows.

 

Net Income/(Loss) per Share

 

In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 260, “Earnings per Share”, basic net loss per common share is computed by dividing net loss for the period by the weighted average number of common shares outstanding during the period. Under ASC 260, diluted net income/(loss) per share is computed by dividing the net income/(loss) for the period by the weighted average number of common shares and common equivalent shares, such as stock options and warrants, outstanding during the period. The Company does not have any stock options or warrants outstanding in 2017 and 2016. As a result, the Company did not have to consider the impact of equivalent shares on its diluted net income/(loss) per share calculation.

 

Stock-based Compensation

 


22



The Company accounts for stock-based compensation in accordance with FASB ASC 718, which requires the measurement and recognition of compensation expense for all share-based payments made to employees and directors based on estimated fair values. Share-based payments awarded to consultants are accounted for in accordance with  ASC 505-50, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Connection with Selling, Goods or Services.”

 

Income Taxes

 

Income taxes are recorded in accordance with FASB ASC 740, “Accounting for Income Taxes”. This statement requires the recognition of deferred tax assets and liabilities to reflect the future tax consequences of events that have been recognized in the financial statements or tax returns. Measurement of the deferred items is based on enacted tax laws. In the event the future consequences of differences between financial reporting bases and tax bases of the Company’s assets and liabilities result in a deferred tax asset, ASC 740 requires an evaluation of the probability of being able to realize the future benefits indicated by such assets. A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some portion or the entire deferred tax asset will not be realized.

 

For financial reporting purposes, the Company has incurred a loss in each period since its inception. Based on the available objective evidence, including the Company’s history of losses, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation allowance against its net deferred tax assets at December 31, 2017 and December 31, 2016.

 

Fair Value of Financial Instruments

 

The carrying value of the Company’s financial instruments consisting of cash, accounts receivable, accounts payable and accrued liabilities, due to related parties and short-term debt approximate their carrying value due to the short-term maturity of such instruments. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.

 

Recent Accounting Pronouncements

 

In May 2017, the FASB issued ASU No. 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting, to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation—Stock Compensation, to a change to the terms or conditions of a share-based payment award. The ASU provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in ASC 718. The amendments are effective for fiscal years beginning after December 15, 2017, and should be applied prospectively to an award modified on or after the adoption date. Early adoption is permitted, including adoption in an interim period. The Company does not expect this amendment to have a material impact on its financial statements.

  

In February 2017, the FASB issued ASU No. 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets, to clarify the scope of Subtopic 610-20, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets, and to add guidance for partial sales of nonfinancial assets. Subtopic 610-20, which was issued in May 2014 as a part of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. The amendments are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, which is the same time as the amendments in ASU No. 2014-09, and early adoption is permitted. The Company is currently evaluating the impact of this amendment on its financial statements.

 

In January 2017, the FASB issued ASU No. 2017-03, Accounting Changes and Error Corrections (Topic 250). The ASU adds SEC disclosure requirements for both the quantitative and qualitative impacts that certain recently issued accounting standards will have on the financial statements of a registrant when such standards are adopted in a future period. Specially, these disclosure requirements apply to the adoption of ASU No. 2014- 09, Revenue from Contracts with Customers (Topic 606); ASU No. 2016-02, Leases (Topic 842); and ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.   As indicated below, the Company does not believe


23



that the adoption of ASU No. 2014-09 will have a material impact on its revenue recognition as it pertains to current revenue streams.

 

Between May 2014 and December 2016, the FASB issued several ASU’s on Revenue from Contracts with Customers (Topic 606). These updates will supersede nearly all existing revenue recognition guidance under current U.S. generally accepted accounting principles (GAAP). The core principle is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. A five-step process has been defined to achieve this core principle, and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standards are effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standards in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting the standards recognized at the date of adoption (which includes additional footnote disclosures). The Company is currently evaluating the impact of its pending adoption of these standards on its financial statements and expects to adopt the modified retrospective approach. However, the adoption of these new standards will not have a material impact on its revenue recognition as it pertains to current revenue streams.

 

Note 3   Inventory  

 

Inventory consisted of the following as of December 31, 2017 and 2016:

 

 

 

 

 

 

 

2017

 

2016

Raw materials

 

$              -

 

$   11,545

Finished goods

 

-

 

11,393

By-products

 

-

 

2,872

Total

 

$              -

 

$    25,810

 

Inventory is reviewed periodically for slow-moving and obsolete items. The Company wrote off the remaining inventory balance of $10,761 as of December 31, 2017. The write-off to cost of goods sold was deemed appropriate as all inventory items were associated with biodiesel production.

 

Note 4 Property and Equipment, Net  

 

Property and equipment consisted of the following as of December 31, 2017 and 2016:

 

 

 

 

 

2017

 

2016

Plant and equipment (1-20 years)

 

 

 

$456,100

 

$803,522

Leasehold improvements (2-5 years)

 

 

 

-

 

48,272

Vehicle (5 years)

 

 

 

-

 

9,800

 

 

 

 

456,100

 

861,594

Less: accumulated depreciation

 

 

 

(184,446)

 

(311,755)

Total

 

 

 

$271,654

 

$549,839

 

Depreciation expense totaled $64,083 and $74,948 for the years ended 2017 and 2016, respectively.

 

During 2017, the Company failed to generate significant revenues. Further, near-term activity is anticipated to generate additional losses from operations. Based on the declining activity, the Company used FASB Accounting Standards Codification (ASC) 360 to evaluate the need to impair its property and equipment. As a result of the analysis, the Company determined it necessary to record an impairment loss of $199,831 on property and equipment during the year ended December 31, 2017.

 

Operations at the Company’s plant in Lenoir, NC may be considered in two broad categories – biodiesel production and kerosene re-selling. Certain plant equipment components are used for both biodiesel production and for re-selling kerosene.  The impairment amount was attributable to equipment solely related to biodiesel production.  The Company also wrote off fully depreciated assets with a total cost of $80,893 in 2017.


24



 

During 2016, NABE did no t recognize any loss on impairment of fixed assets.

 

Note 5 Third Party Notes Payable  

 

NABE entered into a term note totaling $8,450 in April 2017 that matured in February 2018.  The note was to finance the Company’s insurance premiums and was payable in ten monthly principal and interest installments of $880.  Interest was payable at a rate of $35 per month.  During 2017, payments on the short-term debt totaled $8,936. The balance outstanding at December 31, 2017 was $1,690. There was no collateral required for the note.  The note was fully paid in February 2018.

 

NABE entered into a term note totaling $9,733 in April 2016 that matured in February 2017.  The note was to finance the Company’s insurance premiums and was payable in monthly principal and interest installments of $1,012 Interest was payable at a rate of $39 per month.  During 2016, payments on the short-term debt totaled $13,281. The balance outstanding at December 31, 2016 was $1,947. There was no collateral required for the note.  The note was fully paid in February 2017.

 

Note 6 Related Party Transactions  

 

NABE sells a portion of its finished goods to Echols Oil Company (“Echols”), a company owned by Incoming, Inc.’s CEO, R. Samuel Bell, Jr.  During 2017 and 2016, sales to the related party were $64,655 and $224,206, respectively.  As of December 31, 2017, the Company had notes payable to Echols totaling $143,852 which are non-interest bearing and due on demand. Notes payable to Echols resulted from accepting loans from the related party during the year. Of the $143,852 in total payables to Echols, 77,358 represents a conversion from related party accounts payable to related party notes payable. The remaining $66,494 represents funds borrowed during the year for operations at NABE. There are no formal agreements for the notes payable to Echols.  As of December 31, 2017 and 2017, the Company also had outstanding related party payables to Echols of $0 and $32,416, respectively.  As of December 31, 2017 and 2016, the Company had no outstanding related party receivables and had outstanding related party payables of $274,916to Green Valley Bio-Fuels. Payables to Green Valley Bio-Fuels resulted from purchasing off-spec biodiesel for re-work in prior years. Green Valley Bio-Fuels is considered a related party since it is majority-owned by Mr. Frank A. Gay, who sits on the Company’s Board of Directors.

 

During 2017, the Company received proceeds totaling $5,072 in short-term financing from an employee. This amount was fully repaid during the year.

 

Note 7 Equity Transactions  

 

Holders of Class A common stock are entitled to one vote for each share of Class A common stock outstanding, are entitled to receive the assets of the Company ratably in proportion to the number of shares held by them, and are entitled to receive dividends for each share held as declared by the Board of Directors. Holders of Class B common stock are entitled to two votes for each share of Class B common stock outstanding, can convert their shares into Class A common stock at a ratio of 1:1, are entitled to receive the assets of the Company ratably in proportion to the number of shares held by them, and are entitled to receive dividends for each share held as declared by the Board of Directors.

 

There are no options or warrants issued or outstanding as of December 31, 2017 and 2016.

 

During 2017 and 2016, the Company consummated no equity transactions.

 

Note 8 Income Taxes  

 

The Company uses the liability method, where deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes. The Company is current on all of its corporate tax filings. Tax year 2017 is currently under extension and we expect to file the returns by the due date.

 

Due to the enactment of the Tax Reform Act of 2017, the corporate tax rate for those tax years beginning with 2018 has been reduced to 21%. The net deferred tax asset generated by the loss carry-forward has been fully reserved. The cumulative net operating loss carry-forward is approximately $2,180,000 and $1,758,000 at December 31, 2017 and 2016 and will expire beginning in 2028.


25



 

At December 31, 2017 and 2016, deferred tax assets consisted of the following:

 

 

2017

 

2016

Deferred tax assets

 

 

 

  Net operating losses

$   458,000

 

$   615,000

  Less: valuation allowance

(458,000)

 

(615,000)

 

 

 

 

Net deferred tax asset

$               -

 

$               -

 

Note 9 Major Customers and Vendors  

 

During 2017, one related party customer accounted for 91% of total revenue. During 2017, there was a single third party vendor who accounted for 71% of direct material costs while one related party vendor accounted for 29% of direct material costs.

 

During 2016, one related party customer accounted for 89% of total revenue while two third-party customers accounted for 9% of total revenue. The customers to whom the third-party sales were made included Customer A (8% of total) and Customer B (1%). During 2016, there were three third party vendors who accounted for 100% of direct material costs.

 

Note 10 Contingencies  

 

The Company may be subject to various legal proceedings and claims that arise in the ordinary course of business. The Company records a liability when it is probable that a loss has been incurred and the amount is reasonably estimable. There is significant judgment required in both the probability determination and as to whether an exposure can be reasonably estimated. If any legal matter, that may arise, were resolved against the Company in a reporting period for amounts in excess of management’s expectations, the Company’s would reflect any potential claim in the consolidated financial statements for that reporting period.

 

In June of 2015, a Plaintiff filed suit against the Company and its subsidiary, NABE. The filing claimed that the Company did not have the right to retain the $510,030 that was received and recognized as Other Income. The Company is currently defending the action and does not believe that the suit will result to an unfavorable outcome to the Company.

 

 

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

 

None.

 

 

Item 9A. Controls and Procedures

 

(a) Evaluation of Disclosure Controls and Procedures  

 

As of the end of the period covered by this Annual Report, we conducted an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Principal Financial Officer (“PFO”) of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on this evaluation, the CEO and PFO concluded that, because of the material weaknesses in our internal control over financial reporting described below, our disclosure controls and procedures were not effective as of December 31, 2017.

(b) Internal Control over Financial Reporting

 

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles ("GAAP"). The Company’s internal controls over financial reporting include policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; (2) provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with


26



GAAP, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’ assets that could have a material effect on our financial statements. Under the supervision and with the participation of our management, including our CEO, we evaluated the effectiveness of our internal control over financial reporting as of December 31, 2017. In its evaluation, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on our assessment and the criteria described above, management has concluded that, as of December 31, 2017, our internal control over financial reporting was not effective. We have noted the following material weaknesses in our internal control over financial reporting:

 

1. Deficiencies in Our Control Environment . Our control environment did not sufficiently promote effective internal control over financial reporting throughout the organization. This material weakness exists because of the aggregate effect of multiple deficiencies in internal control which affect our control environment, including: a) the lack of an effective risk assessment process for the identification of fraud risks; b) the lack of an internal audit function or other effective mechanism for ongoing monitoring of the effectiveness of internal controls; c) deficiencies in our accounting system and controls; d) and insufficient documentation and communication of our accounting policies and procedures as of December 31, 2017.

 

2. Deficiencies in the staffing of our financial accounting department . The number of qualified accounting personnel with experience in public company SEC reporting and GAAP is limited. This weakness does not enable us to maintain adequate controls over our financial accounting and reporting processes regarding the accounting for non-routine and non-systematic transactions. There is a risk that a material misstatement of the financial statements could be caused, or at least not be detected in a timely manner, by this shortage of qualified resources.

 

3. Deficiencies in Segregation of Duties . The limited number of qualified accounting personnel results in an inability to have independent review and approval of financial accounting entries. Furthermore, management and financial accounting personnel have wide-spread access to create and post entries in our financial accounting system. There is a risk that a material misstatement of the financial statements could be caused, or at least not be detected in a timely manner, due to insufficient segregation of duties. Because of its inherent limitation, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our financial accounting staff is actively attending and receiving training. Management is still determining additional measures to remediate deficiencies related to staffing.

 

4. Lack of Independent Board of Directors and Audit Committee . Management is aware that an audit committee composed of the requisite number of independent members along with a qualified financial expert has not yet been established.  Considering the costs associated with procuring and providing the infrastructure to support an independent audit committee and the limited number of transactions, management has concluded that the risks associated with the lack of an independent audit committee are not sufficient to justify the creation of such a committee at this time.  Management will periodically reevaluate this situation.

 

This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management’s report in this Annual Report.

 

There were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation of such internal control that occurred during the Company’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

We believe that a controls system, no matter how well designed and operated, cannot provide absoluter assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

 

Item 9B. Other Information

 

At this time the Company has no other information to disclose.


27



PART III

 

Item 10. Directors, Executive Officers and Corporate Governance

 

The following table sets forth our directors and executive officers, their ages and all offices and positions with our company. Other employees will serve at the will of the Board of Directors:

 

Name

Age

Position

R. Samuel Bell, Jr.

62

CEO, Chairman

William D. Curtis

61

Director

Frank A. Gay

56

Director

James Gay

57

Director

David Mixson

57

Director

Eric S. Norris

49

Treasurer, Director

 

The directors will serve as directors until our next annual shareholder meeting or until a successor is elected who accepts the position. Directors are elected for one-year terms. Officers hold their positions at the will of the Board of Directors, absent any employment agreement. There are no arrangements, agreements or understandings between non-management shareholders and management under which non-management shareholders may directly or indirectly participate in or influence the management of the Company’s affairs.

 

Involvement in Certain Material Legal Proceedings During the Last Ten Years

 

To the best of our knowledge, none of our directors or executive officers, during the past ten years, has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, or has been a party to any judicial or administrative proceeding during the past ten years that has resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws, except for matters that were dismissed without sanction or settlement.  Except as set forth in our discussion below in “Certain Relationships and Related Transactions, and Director Independence,” none of our directors, director nominees or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to SEC rules or regulations.

 

Code of Ethics

 

We have previously adopted a code of ethics that applies to our employees. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code.

 

Audit Committee and Charter

 

Currently, we have no independent audit committee nor have we adopted an audit committee charter.  In lieu of an audit committee, our full Board of Directors assumes the responsibilities that would normally be those of an audit committee.  None of our directors or officers has the qualifications or experience to be considered an audit committee financial expert. We believe the cost related to retaining an audit committee financial expert at this time is prohibitive. Further, given our limited operations to date, we believe the services of an audit committee financial expert are not warranted.

 

Item 11. Executive Compensation

 

The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to the named persons for services rendered in all capacities during the noted periods. No executive officer received total annual salary, bonus compensation, stock awards, option awards, non-equity incentive plan compensation, or non-qualified deferred compensation earnings in excess of $100,000.


28



Name and Principal Position

(a)

Year

(b)

Salary ($)

(c)

Bonus ($)

(d)

Stock Awards ($)

(e)

Option Awards ($)

(f)

Non-Equity Incentive Plan Compensation ($)

(g)

Nonqualified Deferred Compensation Earnings

($)

(h)

All Other Compensation ($)

(i)

Total

($)

(j)

R. Samuel Bell, Jr., Chief Executive Officer and Chairman

2016

-0-

-0-

-0-

-0-

-0-

-0-

-0-

-0-

 

2017

-0-

-0-

-0-

-0-

-0-

-0-

-0-

-0-

Eric S. Norris, Treasurer and Director

2016

-0-

-0-

-0-

-0-

-0-

-0-

-0-

-0-

 

2017

-0-

-0-

-0-

-0-

-0-

-0-

-0-

-0-

__________________________________

 

Employment Agreements

 

We currently do not have employment agreements with any of our directors or executive officers.

 

Outstanding Equity Awards at Fiscal Year End

 

For the fiscal year ended December 31, 2017, no director or executive officer has received compensation from us pursuant to any compensatory or benefit plan and there is no plan or understanding, express or implied, to pay any compensation to any director or executive officer pursuant to any compensatory or benefit plan.  We anticipate that we will compensate our officers and directors in the future for services to us with stock or options to purchase common stock, in lieu of cash.

 

Compensation of Directors

 

No member of our board of directors received any compensation for their services as a director during the years ended December 31, 2017 and 2016 and currently no compensation arrangements are in place for the compensation of directors.

 

Compensation Committee

 

In August of 2014, the Board of Directors formed a Compensation Committee. The committee’s purpose is to determine appropriate pay programs that serve the Company’s best interests and are aligned with our business strategy. Eric S. Norris and W. Dennis Curtis, Jr. were appointed to serve on the committee having been determined to meet the necessary requirements.

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

The following table sets forth information with respect to the beneficial ownership of the Company’s outstanding common stock by: (i) each person who is known by the Company to be the beneficial owner of five percent (5%) or more of the Company’s common stock; (ii) the Company’s chief executive officer, its other executive officers, and each director; and (iii) all of the Company’s directors and officers as a group.  Unless otherwise specified, the address of each of the persons set forth below is in care of the Company, 244 Fifth Avenue, Suite V235, New York, New York 10001.  Except as indicated in the footnotes to this table and subject to applicable community property laws, the persons named in the table to our knowledge have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. The information in this table is as of March 5, 2018 based upon: (i) 31,774,332 shares of Class A Common Stock outstanding; and (ii) 1,980,000 shares of Class B Common Stock outstanding.  Information relating to beneficial ownership of common stock by our principal stockholders and management is based upon information furnished by each person using “beneficial ownership” concepts under the rules of the Commission. Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power to vote or direct the voting of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under the Commission rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary beneficial interest. Except as noted below, each person has sole voting and investment power.


29



Name and Address of Beneficial Owner

Office, If

Any

Title of Class

Amount and Nature of  Beneficial Ownership

Percent  of Class A Common Stock

Percent  of Class

B Common

Stock

 

 

Officers & directors

 

 

 

R. Samuel Bell, Jr.

c/o Incoming Inc

244 5 th Ave Ste V235

New York, NY 10001

 

CEO, Chairman of the Board

Class A Common Stock/

Class B Common Stock (1)

7,700,000/

1,980,000

24.2%

100%

W. Dennis Curtis, Sr.

c/o Incoming Inc

244 5 th Ave Ste V235

New York, NY 10001

 

Director

Class A Common Stock

125,000

0.4%

--

Frank Aaron Gay

c/o Incoming Inc

244 5 th Ave Ste V235

New York, NY 10001

 

Director

Class A Common Stock

2,000,000

6.3%

--

David Mixson

c/o Incoming Inc

244 5 th Ave Ste V235

New York, NY 10001

 

Director

Class A Common Stock

250,000

0.8%

--

Eric S. Norris

c/o Incoming Inc

244 5 th Ave Ste V235

New York, NY 10001

 

Treasurer, Director

Class A Common Stock

1,500,000

4.7%

--

All officers and directors as a group (5 total)

 

Class A Common Stock/

Class B Common Stock (1)

11,575,000/

1,980,000

36.5%

100%

 

 

5% Beneficial Owners

 

 

Aaron West

1635 N Cahuenga Blvd.

Los Angeles, CA  90028

 

 

Class A Common Stock

3,000,000

9.4%

--

Steve Gilcrease

3103 Pluto Street

Dallas, TX 75212

 

Class A Common Stock

2,750,000

8.7%

--

_________________________

 

(1) In accordance with the terms of the Exchange Transaction, the holder of Class B Common Stock is entitled to two votes per share on all matters and votes with holders of Class A Common Stock together on all matters as one class.

 

Item 13. Certain Relationships and Related Transactions, and Director Independence

 

Certain Relationships and Related Transactions

 

The following includes a summary of transactions since the beginning of the 2017 fiscal year of the Company, or any currently proposed transaction, in which we were or are to be a participant and the amount involved exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which any related person had or will have a direct or indirect material interest (other than compensation described under “Executive Compensation”).  We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, in an arm’s length transaction.


30



In 2017, the Company’s subsidiary, NABE, has sales totaling $64,655 to Echols Oil Company. In addition to related party sales, the Company has related party debt owed to Echols Oil Company totaling $143,852 as of December 31, 2017. The Company’s current Chairman and CEO, R. Samuel Bell, Jr., is the majority owner of Echols Oil Company.

 

Except for the foregoing, neither our directors and officers, nor any proposed nominee for election as a director, nor any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to all of our outstanding shares, nor any promoter, nor any relative or spouse of any of the foregoing persons has any material interest, direct or indirect, in any transaction since our incorporation or in any presently proposed transaction which, in either case, has or will materially affect us.

 

Our management is involved in other business activities and may, in the future become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between our business and their other business interests. In the event that a conflict of interest arises at a meeting of our directors, a director who has such a conflict will disclose his interest in a proposed transaction and will abstain from voting for or against the approval of such transaction.

 

Director Independence

 

We currently do not have any independent directors as the term “independent” is defined by the rules of the Nasdaq Stock Market.

 

Item 14. Principal Accountant Fees and Services

 

The following table shows the audit and tax fees that were billed or are expected to be billed for fiscal years 2017 and 2016:

 

 

 

 

2017

 

2016

Audit Fees

 

 

 

33,500

 

35,000

 

 

 

 

 

 

 

Audit Related Fees

 

 

 

-

 

-

 

 

 

 

 

 

 

Tax Fees

 

 

 

-

 

-

 

 

 

 

 

 

 

All Other Fees

 

 

 

-

 

-

 

 

 

 

 

 

 

TOTAL

 

 

 

$33,500

 

$35,000

 

 

 

 

 

 

 

 

Audit fees consist of the aggregate fees billed for services rendered for the audit of our annual financial statements, the reviews of the financial statements included in our Forms 10-Q and for any other services that are normally provided by our independent auditors in connection with our statutory and regulatory filings or engagements.

 

Audit related fees consist of the aggregate fees billed for professional services rendered for assurance and related services that reasonably related to the performance of the audit or review of our financial statements that were not otherwise included in Audit Fees.

 

Tax fees consist of the aggregate fees billed for professional services rendered for tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and local tax compliance and consultation in connection with various transactions and acquisitions.

 

All other fees consist of the aggregate fees billed for products and services provided by our independent auditors and not otherwise included in Audit Fees, Audit Related fees or Tax Fees.


31



PART IV

 

Item 15. Exhibits

 

 

Exhibit No.

 

Description

 

 

 

 

(1)

3.1

 

Articles of Incorporation, as amended

 

 

 

 

(1)

3.2

 

Bylaws of Incoming, Inc.

 

 

 

 

(2)

3.3

 

Certificate of Amendment to the Articles of Incorporation, as filed with the Nevada Secretary of State on August 19, 2010

 

 

 

 

*

3.4

 

Form of Certificate of Amendment to the Articles of Incorporation to be effective March 17, 2011

 

 

 

 

(3)

4.1

 

Promissory Note issued by Incoming, Inc. to Christian Fauria, dated November 25, 2009, as amended by that certain extension of promissory note dated January 14, 2010

 

 

 

 

(4)

4.2

 

Note Modification Agreement by and between North American Bio-Energies, LLC and Branch Banking and Trust Company dated April 27, 2010.

 

 

 

 

(4)

4.3

 

Note Modification Agreement by and between North American Bio-Energies, LLC and Branch Banking and Trust Company dated April 27, 2010.

 

 

 

 

(2)

10.1

 

Second Amended and Restated Exchange Agreement by and among Incoming, Inc., North American Bio-Energies, LLC and the members of North

American Bio-Energies, LLC, dated August 18, 2010

 

 

 

 

(2)

10.2

 

Exchange Agreement by and among Incoming, Inc., North American Bio-Energies, LLC and the members of North American Bio-Energies, LLC, dated

June 18, 2010

 

 

 

 

(5)

10.3

 

Exchange Agreement by and among Incoming, Inc., North American Bio-Energies, LLC and the members of North American Bio-Energies, LLC, dated June 18, 2010

 

 

 

 

(2)

10.4

 

Loan Agreement by and between Incoming, Inc. and Ephren Taylor II, dated October 1, 2009

 

 

 

 

(2)

10.5

 

Loan Agreement by and between Incoming, Inc. and City Capital Corporation, dated November 6, 2009

 

 

 

 

(2)

10.6

 

Loan Agreement by and between Incoming, Inc. and Resilient Innovations, LLC, dated April 14, 2010

 

 

 

 

(4)

10.7

 

Lease Agreement by and between North American Bio-Energies, LLC and Neptune, Inc. dated April 1, 2007.

 

 

 

 

*

31.1

 

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

*

31.2

 

Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

*

32.1

 

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

*

32.2

 

Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


32



* Filed herewith.

 

(1) Incorporated by reference to the Company's Registration Statement on Form S-1 filed on June 30, 2008.

(2) Incorporated by reference to the Company's Current Report on Form 8-K filed on August 24, 2010.

(3) Incorporated by reference to Amendment No. 1 to the Company's Current Report on Form 8-K filed on September 9, 2010.

(4) Incorporated by reference to Amendment No. 2 to the Company's Current Report on Form 8-K filed on November 19, 2010.

(5) Incorporated by reference to the Company's Current Report on Form 8-K filed on February 16, 2010.


33



SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.  

 

INCOMING, INC.  

 

By: /s/ R. Samuel Bell, Jr.  

R. Samuel Bell, Jr.  

Chairman and CEO  

 

 

 

Date: April 17, 2018

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.  Each of the undersigned, being a director or officer of Incoming, Inc. (the “Company”), hereby constitutes and appoints R Samuel Bell and Eric Norris, and each of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent for him or her and in his or her name, place and stead in any and all capacities, to sign the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 under the Securities Exchange Act of 1934, as amended, and any and all amendments thereto, and to file the same with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission and any other appropriate authority, granting unto such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing required and necessary to be done in and about the premises in order to effectuate the same as fully to all intents and purposes as he or she might or could do if personally present, hereby ratifying and confirming all that such attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof.  

 

 

 

 

 

 

 

 

Signature

 

Title

 

Date

 

 

 

 

 

 

 

 

 

 

 

 

/s/  R. Samuel Bell, Jr.

R. Samuel Bell, Jr.

 

CEO and Chairman, Board of Directors

(Principal Executive Officer)

 

April 17, 2018

 

 

 

 

 

/s/  Eric Norris

Eric Norris

 

Vice President of Finance, Director

(Principal Financial Officer)

 

April 17, 2018


34