As Filed with the Securities and Exchange Commission on NovemberAugust 23, 20202021

File No:000-55235



United StatesUNITED STATES

Securities and Exchange CommissionSECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 


 

(Mark One)

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDING SEPTEMBERJUNE 30, 20202021

 

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _____to_____   to   

Commission file number: 000-55235

 

ABCO ENERGY, INC.

 (Name(Name of registrant as specified in its Charter)

 

Nevada

46-5342309

(State of Incorporation)

(IRS Employer Identification No.)

 

2505 No.N Alvernon Way, Tucson, AZ

85712

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code:

520-777-0511

(520) 777-0511

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

COMMON STOCK

ABCE

PINK MARKETOTCPINK

 

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

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

 

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

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer ☐

Smaller Reporting Company ☒

Emerging growth company  ☒

 

If an emerging growth company, indicate by check mark (if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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

 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act subsequent to the distribution of securities under a plan confirmed by the court. Yes ☐ No  N/A

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

 

As of NovemberAugust 23, 2020,2021, we had 2,687,999,09555,680,438 shares of common stock issued and outstanding.  

 

 

 

 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

3

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

Item 3. Quantitative and Qualitative Disclosures about Market Risk

24

Item 4. Controls and Procedures

24

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

25

Item 1A. Risk Factors

25

Item 2. Unregistered Sale of Equity Securities and Use of Proceeds

25

Item 3. Defaults upon Senior Securities

25

Item 4. Mine Safety Disclosures

25

Item 5. Other Information

25

Item 6. Exhibits

26

Signatures

27

 


 

 

PART 1 FINANCIAL INFORMATION

Item 1.Financial Statements

ABCO ENERGY, INC.

 

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINESIX MONTHS ENDED JUNE 30, 2021

AND FOR THE YEAR ENDED DECEMBER 31, 2020

 

SEPTEMBER 30, 2020

Consolidated Balance Sheets: As of SeptemberJune 30, 20202021 (Unaudited), and as of December 31, 20192020 (Audited)

4

Consolidated Statements of Operations: For the Three and Six Months Ended SeptemberJune 30, 20202021 and SeptemberJune 30, 2019 and for the Nine months ended September 30, 2019 and September 30, 20182020 (Unaudited)

5

Consolidated Statement of Shareholders Equity forEquity: For the NineSix Months Ended SeptemberJune 30, 2021 and June 30, 2020 and September 30, 2019 (audited)(Unaudited)

6

Consolidated Statements of Cash Flows: For the NineSix Months Ended SeptemberJune 30, 20202021 and SeptemberJune 30, 20192020 (Unaudited)

7

Notes to the Consolidated Financial Statements (Unaudited)

8

 

INTRODUCTORY  STATEMENT

The Form 10-Q below has not been reviewed by the Company’s auditors. Management or it’s representatives have made numerous attempts to contact the auditors about their required review of the Form 10-Q through numerous telephone calls, texts and emails to the Auditors but they have  not responded to any  such attempted communications. Management determined that because this Form 10-Q has been thoroughly vetted by Management and its internal accountants, it is in the best interest of shareholders to have the Company’s up-dated results from current operations contained in the Form 10-Q be given to them at this time without the Auditor’s usual review. Efforts to contact the Auditors continue unabated.

3

 

ABCO ENERGY, INC.

CONSOLIDATED BALANCE SHEETS

 

ASSETS

 

September 30, 2020

Unaudited

  

December 31, 2019

Audited

 

Current Assets

        

Cash

 $36,644  $12,620 

Accounts receivable on completed projects

  31,242   30,408 

Costs and estimated earnings on contracts in progress

  -   243,693 

Amortizable original issue discounts on debt

  32,213   89,561 

Total Current Assets

  100,099   376,282 

Fixed Assets

        

Real Estate, Vehicles, furniture & equipment – net of accumulated depreciation

  354,748   354,938 

Other Assets

        

Investment in long term leases

  3,995  $4,136 

Security deposits

  2,700   5,200 

Total Other Assets

  6,695   9,336 

Total Assets

 $461,542  $740,556 
         
         

LIABILITIES AND STOCKHOLDERS’ EQUITY

        

Current liabilities

        

Accounts payable and accrued expenses

 $590,561  $583,700 

Costs and estimated earnings on contracts in progress

  189,532   - 

Short-term notes payables

  171,805   436,267 

Excess billing on contracts in progress

  194,401   76,052 

Derivative liability on convertible debentures

  143,946   97,974 

Notes payable – from officers

  323,258   248,558 

Convertible debenture

  324,499   472,971 

Current portion of long term debt

  16,717   18,860 

Total Current Liabilities

  1,954,719   1,934,382 
         

         Long term debt, net of current portion

  561,899   300,000 

Total Liabilities

  2,516,618   2,234,382 
         

Commitments and contingencies

  -   - 
         

Stockholders’ Deficit:

        

Preferred stock, 100,000,000 shares authorized, $0.001 par value, and 30,000,000 shares issued and outstanding at September 30, 2020 and 30,000,000 at December 31, 2019.

  30,000   30,000 

Common stock 5,000,000,000 shares authorized, $0.001 value, and 1,516,109,317 Issued and outstanding at September 30, 2020 and 150,590,887 outstanding at December 31, 2019, respectively.

  1,516,109   150,591 

Common shares sold not issued 5,000,000 at September 30, 2020 and -0- at December 31, 2019

  5,000   - 

Additional paid-in capital

  3,754,485   4,887,091 

Accumulated deficit

  (7,360,670

)

  (6,561,508

)

Total Stockholders’ Deficit

  (2,055,076

)

  (1,493,826

)

Total Liabilities and Stockholders’ Deficit

 $461,542  $740,556 

ASSETS

 

June 30,

2021

Unaudited

  

December 31,

2020

Audited

 

Current Assets

        

Cash

 $42,180  $54,268 

Accounts receivable on completed projects

  37,231   43,221 

Costs and estimated earnings on contracts in progress

  211,199   319,001 

Amortizable original issue discount

  26,773   0 

Total Current Assets

  317,383   416,490 

Fixed Assets

        

Fixed assets – net of accumulated depreciation

  380,814   393,887 

Other Assets

        

Investment in long-term leases

  3,787   3,995 

Total Other Assets

  3,787   3,995 

Total Assets

 $701,984  $814,372 
         

LIABILITIES AND STOCKHOLDERS’ EQUITY

        

Current liabilities

        

Accounts payable and accrued expenses

 $568,763  $526,981 

Short term notes payable

  155,979   347,459 

Excess billing on contracts in progress

  245,369   558,907 

Notes payable to related parties

  303,194   311,340 

Debentures payable

  165,535   153,817 

Current portion of long-term debt

  44,022   27,702 

Total Current Liabilities

  1,482,862   1,926,206 
         

Long term debt, net of current portion

  512,388   472,293 

Total Liabilities

  1,995,250   2,398,499 
         

Commitments and contingencies

  -   - 
         

Stockholders’ Deficit:

        

Preferred stock, 100,000,000 shares authorized, $0.001 par value, and 30,000,000 shares

issued and outstanding at June 30, 2021 and 30,000,000 at December 31, 2020

  30,000   30,000 

Common stock 2,000,000,000 shares authorized, $0.001 value, and 40,906,705 and

outstanding at June 30, 2021 and 15,702,037 outstanding at December 31, 2020, respectively.

  40,906   15,702 

Additional paid-in capital

  5,771,278   5,456,438 

Accumulated deficit

  (7,135,450

)

  (7,086,267

)

Total Stockholders’ Deficit

  (1,293,266

)

  (1,584,127

)

Total Liabilities and Stockholders’ Deficit

 $701,984  $814,372 

 

See accompanying notes to the unaudited consolidated financial statements.

 

4

 

ABCO ENERGY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 2019 2021AND 20182020

(UNAUDITED)

 

  

For the Three Months Ended

  

For the Nine Months Ended

 
  

September 30,

2020

  

September 30,

2019

  

September 30,

2020

  

September 30,

2019

 
                 

Revenues

 $246,102  $512,988  $768,133  $1,626,614 
                 

Cost of Sales

  281,419   325,366   715,739   1,004, 252 
                 

Gross Profit

  (35,317

)

  187,622   52,394   622,362 
                 

Operating Expenses:

                

Payroll

  9,645   90,720   94,126   304,309 

Payroll taxes

  30,085   12,070   57,215   46,258 

Share based expense

  -   -   14,500   - 

Consulting

  25,019   15,067   45,028   39,604 

Corporate expense

  13,998   14,962   32,449   34,055 

Professional fees

  45,273   21,301   92,564   96,733 

Rent

  8,311   8,362   25,536   26,137 

Insurance

  40,429   12,176   60,239   49,064 

Other administrative expenses

  17,099   31,848   233,612   112,212 

Total operating expense

  189,859   206,506   655,269   708,372 
                 

Net income (Loss) from operations

  (225,176

)

  (18,884

)

  (602,875

)

  (86,010

)

                 

Other expenses

                

Interest on notes payable

  (20,975

)

  (105,010

)

  (37,657

)

  (210,998

)

Loss on note issuance derivatives

  (25,836

)

            

Change in Derivative Gain (Loss)

  (157,575

)

  64,093   (157,575

)

  (113,840

)

Finance Fees – derivatives

  1,605   (57,075)  (1,055

)

  (57,075

)

Gain (Loss) on extinguishment of debt

              (244,712

)

Total other expenses

  (202,781

)

  (97,992

)

  (196,287

)

  (626,625

)

                 

Net (Loss) before provision for income taxes

  (427,957

)

  (116,876

)

  (799,162

)

  (712,635

)

                 

Provision for income tax

  -   -   -   - 
                 

Net (loss)

 $(427,957

)

 $(116,876

)

 $(799,162

)

 $(712,635

)

                 

Net (loss) Per Share (Basic and Fully Diluted)

 $(.01

)

 $(.01

)

 $(.01

)

 $(.01

)

                 

Weighted average number of common shares used in the calculation – Adjusted for reversal

  1,280,322,222   63,392,630   835,850,102   47,639,460 
  

For the Three Months Ended

  

For the Six Months Ended

 
  

JUNE 30, 2021

  

JUNE 30, 2020

  

JUNE 30, 2021

  

JUNE 30, 2020

 
                 

Revenues

 $432,673  $207,239  $768,399  $522,031 
                 

Cost of Sales

  159,297   220,150   453,439   434,320 
                 

Gross Profit

  273,376   (12,911

)

  314,960   87,711 
                 

Operating Expenses:

                

Payroll

  48,346   46,268   109,130   84,481 

Consulting expense

  32,000   499   36,000   20,009 

Corporate expense

  0   9,511   24,120   18,451 

Insurance

  6,974   13,448   16,264   19,810 

Professional fees

  24,695   33,762   34,600   47,291 

Rent

  0   8,310   0   17,225 

Other selling and administrative expenses

  74,911   193,433   132,976   258,143 

Total operating expense

  186,926   305,231   353,090   465,410 
                 

Net income (Loss) from operations

  86,450   (318,142

)

  (38,130

)

  (377,699

)

                 

Other expenses

                

Interest on notes payable

  (18,112

)

  (13,602

)

  (31,156

)

  (16,682

)

Stock based compensation

  (76,321

)

      (136,321

)

  0 

Change in Derivative Gain (Loss)

  0   315,973   0   25,836 

Derivative amortization - interest expense

  0   (2,660

)

  (49,623

)

  (2,660

)

Gain (Loss) on extinguishment of debt

  52,501   0   206,047   0 

Total other expenses

  (41,932

)

  299,711   (11,053

)

  6,494 
                 

Net income (Loss) before provision for income taxes

  44,518   (18,431

)

  (49,183

)

  (371,205

)

                 

Provision for income tax

  0   0   0   0 
                 

Net income (loss)

 $44,518  $(18,431

)

 $(49,183

)

 $(371,205

)

                 

Net income (loss) Per Share (Basic and Fully Diluted)

 $.01  $(.01

)

 $(.01

)

 $(.08

)

                 

Weighted average number of common shares used in the calculation

  31,599,145   3,515,077   28,304,371   4,424,634 

 

See accompanying notes to the consolidated financial statements.

 

5

 

ABCO ENERGY, INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERSCHANGES IN SHAREHOLDERS EQUITY

FOR THE NINE SIX MONTHS ENDED SEPTEMBERJUNE 30, 20202021 (UNAUDITED)

AND FOR THE YEARSIX MONTHS ENDED DECEMBER 31, 2019

JUNE 30, 2020 (UNAUDITED)

 

  

Common Stock

                 
  

 

 

Shares

  

Amount

$0.001

Par

  

 

Preferred

Stock

  

Additional

Paid in

Capital

  

 

Accumulated

Deficit

  

Total

Stockholders’ 

Deficit

 

Balance at December 31, 2018

  32,756,288  $32,756  $30,000  $4,379,793  $(5,180,431

)

 $(737,882

)

Common shares issued under private placement offering - net of expenses

  4,740,000   4,740       75,516       80,256 

Common shares issued for conversion of convertible debenture notes - net of expenses

  113,094,599   113,095       30,132       143,227 

Re-class derivative liability from conversion

              401,650       401,650 

Net (loss) for the year

                  (1,381,327

)

  (1,381,327

)

Balance at December 31, 2019

  150,590,887  $150,591  $30,000  $4,887,091  $(6,561,508

)

 $(1,493,826

)

Common shares issued for conversion of convertible debenture notes - net of expenses

  1,365,518,430   1,365,518       (1,090,281

)

      275,237 

Shares to be issued for compensation

  5,000,000   5,000       9,500       14,500 

Expenses of capital stock issuances

              (23,000

)

      (23,000

)

Derivative changes to APIC

              (28,825

)

      (28,825

)

Net (loss) for the nine months ended September 30, 2020

                  (799,162

)

  (799,162

)

Balance at September 30 2020

  1,521,109,317  $1,521,109  $30,000  $3,754,485  $(7,360,670

)

 $(2,055,076

)

SIX MONTHS ENDED JUNE 30, 2021

 

  

Common Stock

                 
  

Shares

  

Amount

$0.001

Par

  

Preferred

Stock

  

Additional

Paid in

Capital

  

Accumulated

Deficit

  

Total

Stockholders’ 

Deficit

 

Balance at January 1, 2021

  15,702,037  $15,702  $30,000  $5,456,438  $(7,086,267

)

 $(1,584,127

)

Common shares issued for conversion of convertible debenture notes - net of expenses

  1,747,753   1,748       33,906       35,654 

Common Shares issued for warrants net of expenses

  6,319,930   6,320       53,404       59,724 

Restricted shares issued for insider compensation

  5,000,000   5,000       55,000       60,000 

Rounding from transfer agent for reverse split

  111,410   111       (111

)

      - 

Shares issued for note payments

  5,360,536   5,360       67,330       72,690 

Shares issued for warrants

  5,545,039   5,545       39,231       44,776 

Shares issued for reserve and commitment fees on debt issue

  1,120,000   1,120       66,080       67,200 

Net loss for the six months ended June 30, 2021

                  (49,183

)

  (49,183

)

Balance at June 30, 2021

  40,906,705  $40,906  $30,000  $5,771,278  $(7,135,450

)

 $(1,293,266

)

SIX MONTHS ENDED JUNE 30, 2020

Balance at January 1, 2020

  885,829  $886  $30,000  $5,036,796  $(6,561,508

)

 $(1,493,826

)

Adjustment to prior year balances for reversal of shares on 1-4-21 net of expenses

              (1,055,891

)

      (17,500

)

Common shares issued for conversion of convertible debenture notes - net of expenses

  5,229,084   5,229       149,203   (250

)

  154,182 

Restricted Shares issued for insider compensation

  29,412   29       14,471       14,500 

Derivative changes to paid in capital

              55,471       55,471 

Net (loss) for the six months ended June 30, 2020

                  (371,205

)

  (371,205

)

Balance at June 30, 2020

  6,144,325  $6,144  $30,000  $4,200,320  $(6,932,963

)

 $(1,658,108

)

See accompanying notes to the unaudited consolidated financial statements.

 

6

 

ABCO ENERGY, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE NINE SIX MONTHS ENDED SEPTEMBERJUNE 30, 20202021 AND 20192020

(UNAUDITED)

 

  

September 30,

  

September,

 
  

2020

  

2019

 

Cash Flows from Operating Activities:

        

Net income (loss)

 $(799,162

)

 $(712,635

)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

        

Depreciation

  6,593   7,915 

Shares issued for compensation

  14,500     

Inventory change

  -   (7921

)

Change in amortizable debt discount

  -   14,662 

Finance fees on derivatives

  1,055   57,075 

Change in derivative liability

  45,972   113,841 

Gain or loss on extinguishment of debt

  -   244,712 

       Changes in Accounts receivable on incomplete projects

  432,391   145,542 

Change in prepaid expense and OID

  57,348   (23,201

)

Billings in excess of costs on incomplete projects

  118,349   109,890 

Accounts payable and accrued expenses

  6,861   (28,398

)

Net cash used in operating activities

  (116,093

)

  (78,518

)

         

Cash flows from investing activities

        

Equipment purchased

  (12,770

)

  (2,213

)

Change in security deposits

  2,500   - 

Proceeds from investments in long term leases

  141   6,458 

Net cash provided by (used for) investing activities

  (10,129

)

  4,245 
         

Cash Flows from Financing Activities:

        

Proceeds from sale of common stock – net of expenses

  237,912   15,867 

Proceeds of  affiliate loans

  74,700   25,417 

Proceeds from merchant loans

  -

 

  209,500 

Payments on merchant notes

  (57,470)  (170,517

)

Payments or proceeds from material lender – net of expenses

  (206,993

)

  (46,192

)

Payments or proceeds on long term debt

  259,756   - 

Proceeds from convertible note payable

  (73,058

)

  362,000 

Payments and conversion of convertible notes

  (84,601

)

  (277,000

)

Net cash provided by financing activities

  150,246   119,075 
         

Net increase (decrease) in cash

  24,024   44,802 

Cash, beginning of period

  12,620   67,707 

Cash, end of period

 $36,644  $112,509 
  

June 30, 2021

  

June 30, 2020

 

Cash Flows from Operating Activities:

        

Net income (loss)

 $(49,183

)

 $(371,205

)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

        

Depreciation

  11,673   11,740 

Change in derivative liability

  0   (45,425

)

Shares issued to officers and consultants for services

  136,321   14,500 

Gain on extinguishment of debt

  (206,047

)

  0 

Finance fees on derivatives

  49,623   0 
         

Changes in operating assets and liabilities

        

Changes in Accounts receivable

  113,792   184,556 

Change in amortizable OID

  (26,773

)

  9,642 

Billings in excess of costs on incomplete projects

  (313,538

)

  97,037 

Accounts payable and accrued expenses

  41,782   112,751 

Net cash used in operating activities

  (242,350

)

  13,596 
         

Cash flows from investing activities

        

Change in security deposits

  0   2,500 

Sales of equipment

  1,400   (11,397

)

Proceeds from investments in long term leases

  208   132 

Net cash provided by (used for) investing activities

  1,608   (8,765

)

         

Cash Flows from Financing Activities:

        

Proceeds from sale of common stock – net of expenses

  340,044   164,445 

Proceeds from convertible notes and conversions

  11,718   (73,058

)

Proceeds from financial institution loans

  20,103   (98,956

)

Payments on short term debt

  (191,480

)

  0 

Proceeds (payments) on related party notes payable

  (8,146

)

  65,050 

Increase in loans from material lenders

  0   (54,470

)

(Payments) proceeds from long term debt

  56,415   117,219 

Net cash provided by financing activities

  228,654   120,230 
         

Net increase (decrease) in cash

  (12,088

)

  125,061 

Cash, beginning of period

  54,268   12,620 

Cash, end of period

 $42,180  $137,681 

 

Supplemental disclosures of cash flow information:

Cash paid for interest

 $37,657  $210,998 

Income taxes paid or accrued

  -   - 

Share based compensation

 $14,500  $- 

Cash paid for interest

 $31,156  $16,682 

Shares issued for insider compensation

  136,321   14,500 

 

See accompanying notes to the unaudited consolidated financial statements.

 

7

 

ABCO ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20202021 AND 2019AND

THE YEAR ENDED DECEMBER 31, 20192020

(UNAUDITED)

Note 1 Overview and Description of the Company

 

ABCO Energy, Inc. was organized on July 29, 2004 and operated until July 1, 2011 as Energy Conservation Technologies, Inc. (ENYC).  On July 1, 2011 ENYC entered into a share exchange agreement (SEA) with ABCO Energy, Inc. (“Company”) and acquired all the assets of ABCO.  ENYC changed its name to ABCO Energy, Inc. on October 31, 2011.  As a result of the SEA, the outstanding shares of ENYC as of June 30, 2011 were restated in a one for twenty three (1 for 23) reverse stock split prior to the exchange to approximately 9% of the post-exchange outstanding common shares of the Company.

On January 13, 2017, the Board of Directors of the Company approved a reverse stock split of its common stock, at a ratio of 1-for-10 (the “Reverse Stock Split”).  The Reverse Stock Split became effective with FINRA (the Financial Industry Regulatory Authority) and in the marketplace on January 13, 2017 (the “Effective Date”), whereupon the shares of common stock began trading on a split adjusted basis.  As a result of the Reverse Stock Split the number of authorized shares of common stock was reduced to 50,000,000 from 500,000,000 shares.  The Company held a Special Meeting of Stockholders in May 2017 which authorized an amendment to the Articles of Incorporation to increase the authorized common share capital to 2,000,000,000 common shares and 100,000,000 preferred shares.  Thereafter, on September 27, 2017, by written consent the holders of a majority of the outstanding shares voted to authorize an additional amendment to increase the authorized common shares to 2,000,000,000 shares.

On December 23, 2018 the Board of Directors of the Company approved a reverse stock split of its common stock, at a ratio of 1-for-20 (the “Reverse Stock Split”).  The Reverse Stock Split became effective with FINRA (the Financial Industry Regulatory Authority) and in the marketplace on December 23, 2018 (the “Effective Date”), whereupon the shares of common stock began trading on a split adjusted basis.  

On November 8, 2018, by written consent the holders of a majority of the outstanding shares voted to authorize an additional amendment to increase the authorized common shares to 5,000,000,000 shares. All share numbers through-out these financial statements and notes thereto have been adjusted to reflect this reverse split.

The Company is in the Photo Voltaic (PV) solar systems industry, the LED and energy efficient commercial lighting business and is an electrical product and services supplier. In 2018 ABCO entered the HVAC business with the acquisition of a small company’s assets and qualifying license. The Company plans to build out a network of operations in major cities in the USA to establish a national base of PV, HVAC, lighting and electrical service operations centers. This combination of services, solar and electric, provides the Company with a solid base in the standard electrical services business and a solid base in the growth markets of solar systems industry.

 

ABCO Energy, Inc. was organized on July 29, 2004 and operated until July 1, 2011 as Energy Conservation Technologies, Inc. (ENYC).  On July 1, 2011 ENYC entered into a share exchange agreement (SEA) with ABCO Energy, Inc. (“Company”) and acquired all the assets of ABCO.  ENYC changed its name to ABCO Energy, Inc. on October 31, 2011.  As a result of the SEA, the outstanding shares of ENYC as of June 30, 2011 were restated in a one for twenty three (1 for 23) reverse stock split prior to the exchange to approximately 9% of the post-exchange outstanding common shares of the Company.

On December 13, 2020, the Board of Directors of the Company approved a reverse stock split of its common stock, at a ratio of 1-for-170 (the “Reverse Stock Split”).  The Reverse Stock Split became effective with FINRA (the Financial Industry Regulatory Authority) and in the marketplace on January 4, 2021 (the “Effective Date”), whereupon the shares of common stock began trading on a split adjusted basis. 

On December 23, 2018, the Board of Directors of the Company approved a reverse stock split of its common stock, at a ratio of 1-for 20 (the “Reverse Stock Split”). The Reverse Stock Split became effective with FINRA (the Financial Industry Regulatory Authority) and in the marketplace on December 23, 2018 (the “Effective Date”), whereupon the shares of common stock began trading on a split adjusted basis. 

On November 8, 2018, by written consent the holders of a majority of the outstanding shares voted to authorize an additional amendment to increase the authorized common shares to 5,000,000,000 shares.

On January 13, 2017, the Board of Directors of the Company approved a reverse stock split of its common stock, at a ratio of 1-for-10 (the “Reverse Stock Split”).  The Reverse Stock Split became effective with FINRA (the Financial Industry Regulatory Authority) and in the marketplace on January 13, 2017 (the “Effective Date”), whereupon the shares of common stock began trading on a split adjusted basis.  

As a result of the Reverse Stock Split the number of authorized shares of common stock was reduced to 50,000,000 from 500,000,000 shares.  The Company held a Special Meeting of Stockholders in May 2017 which authorized an amendment to the Articles of Incorporation to increase the authorized common share capital to 2,000,000,000 common shares and 100,000,000 preferred shares.  Thereafter, on September 27, 2017, by written consent the holders of a majority of the outstanding shares voted to authorize an additional amendment to increase the authorized common shares to 2,000,000,000 shares. After the reverse split on January 4, 2021, the holders of the majority of the outstanding shares once again increased the authorized common shares to 2,000,000,000 shares.

DESCRIPTION OF PRODUCTS

 

ABCO sells, installs and installsservices Solar Photovoltaic electric systems that allow the customer to produce their own power on their residence or business property. These products are installed by our crewsstaff and are purchased from both USA and offshore manufacturers. We have available and utilize many suppliers of US manufactured solar products from such companies as Mia Soleil, Canadian Solar, Westinghouse Solar and various Italian, Korean, German and Chinese suppliers. In addition, we purchase from several local and regional distributors whose products are readily available and selected for markets and price. ABCO offers solar leasing and long term financing programs from Service Finance Corporation, Green Sky, AEFC and others that are offered to ABCO customers and other marketing and installation organizations.

 

ABCO also sells and installs energy efficient lighting products, solar powered street lightsstreetlights and lighting accessories. ABCO contracts directly with manufacturers and distributors to purchase its lighting products which are sold to residential and commercial customers.

 

ABCO has Arizona statewide approval as a registered electrical services and solar products installer and as an air conditioning and refrigeration installer. Our license is ROC 258378 Electrical and ROC 323162 HVAC and we are fully licensed to offer commercial and residential electrical services, HVAC and Solar Electric.

 

8

 

ABCO ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20202021 AND 2019

AND THE YEAR ENDED DECEMBER 31, 20192020

 

ABCO has Three subsidiaries, ABCO Solar, Inc. an Arizona Corporation which provides solar and electric services and products, Alternative Energy Finance Corporation, (AEFC) a Wyoming Company which provides funding for leases of photovoltaic systems, and ABCO Air Conditioning Services, Inc., an Arizona Corporation which sells residential and commercial air conditioning equipment and services in Arizona. In addition, AEFC has two subsidiaries, Alternative Energy Solar Fund, LLC, and Arizona limited liability companyCompany that was formed to invest in solar projects and Alternative Energy Finance Corporation, LLC, an Arizona limited liability company formed so AEFC could do business in Arizona.

ABCO Solar offers solar systems “Operations and Maintenance Services” to residential and commercial customers that have solar systems built by ABCO or other solar installers. Many installers have gone out of business and ABCO’s service enables these customer’s system to continue to operate. ABCO’s service enables customers to maintain their warranties, remove and replace their systems for roof maintenance and to maintain peak efficiency. ABCO now operates and maintains systems in many cities in Arizona and intends to continue to expand this operation and maintenance segment of its business.

Note 2 Summary of significant accounting policiespolicies.

 

Critical Accounting Policies and Estimates

 

Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or “GAAP.” The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses. Intercompany transactions and balances have been eliminated. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We have identified the following to be critical accounting policies whose application have a material impact on our reported results of operations, and which involve a higher degree of complexity, as they require us to make judgments and estimates about matters that are inherently uncertain.

 

Cash and Cash Equivalents

There are only cash accounts included in our cash equivalents in these statements. For purposes of the statement of cash flows, the Company considers all short-term securities with a maturity of three months or less to be cash equivalents. There are no short term cash equivalents reported in these financial statements.

 

Fixed Assets

Property and equipment are to be stated at cost less accumulated depreciation. Depreciation is recorded on the straight-line basis according to IRS guidelines over the estimated useful lives of the assets, which range from three to ten years. Maintenance and repairs are charged to operations as incurred.

 

Revenue Recognition

The Company generates revenue from sales of solar products, LED lighting, installation services and leasing fees. During the last two fiscal years, the company had product sales as follows:

 

Sales Product and Services Description

 

September 30, 2020

  

September 30, 2019

 

Solar PV residential and commercial sales

 $615,687   70

%

 $1,574,349   98

%

Air conditioning sales and service

  77,018   15

%

        

Energy efficient lighting & other income

  75,219   15

%

  51,733   2

%

Interest Income

  209   -

%

  532   -

%

 Total revenue

 $768,133   100

%

 $1,626,614   100

%

Sales Product and Services Description

 

June30, 2021

  

June 30, 2020

 

Solar PV residential and commercial sales

 $635,381   82

%

 $392,441   75

%

Air conditioning sales and service

  6,540   1

%

  129,251   24 

Energy efficient lighting & other income

  126,374   17

%

  0   0

%

Interest Income

  104   0

%

  339   1

%

Total revenue

 $768,399   100

%

 $522,031   100

%

 

The Company recognizes product revenue, net of sales discounts, returns and allowances. These statements establish that revenue can be recognized when persuasive evidence of an arrangement exists, delivery has occurred, and all significant contractual obligations have been satisfied, the fee is fixed or determinable, and collection is considered probable. 

 

ABCO ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND

THE YEAR ENDED DECEMBER 31, 2020

Our revenue recognition is recorded on the percentage of completion method for sales and installation revenue and on the accrual basis for fees and interest income.  We recognize and record income when the customer has a legal obligation to pay.  All our revenue streams are acknowledged by written contracts for any of the revenue we record.  There are no differences between major classes of customers or customized orders.  We record discounts, product returns, rebates and other related accounting issues in the normal business manner and experience very small number of adjustments to our written contractual sales.  There are no post-delivery obligations because warranties are maintained by our suppliers. Our lease fees are earned by providing services to contractors for financing of solar systems.  Normally we will acquire the promissory note (lease) on a leased system that will provide cash flow for up to 20 years.  Interest is recorded on the books when earned on amortized leases.

 

9

ABCO ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

AND THE YEAR ENDED DECEMBER 31, 2019

Accounts Receivable and work-in-progress

The Company recognizes revenue upon delivery of product to customers and does not make bill-and-hold sales.  Contracts spanning reporting periods are recorded on the percentage of completion method, based on the ratio of total costs to total estimated costs by project, for recognition of revenue and expenses.  Accounts receivable includes fully completed and partially completed projects and partially billed statements for completed work and product delivery.  The Company records a reserve for bad debts in the amount of 2% of earned accounts receivable.  When the Company determines that an account is uncollectible, the account is written off against the reserve and the balance to expense.  If the reserve is deemed to be inadequate after annual reviews, the reserve will be increased to an adequate level.

 

Inventory

The Company records inventory of construction supplies at cost using the first in first out method.  After review of the inventory on an annual basis, the Company discounts all obsolete items to fair market value and has established a valuation reserve of 10% of the inventory at total cost to account for obsolescence. As of December 31, 2019 all inventory was written off. Inventoryoff resulting in balances at SeptemberJune 30, 2020, was2021 of $0 and at September 30, 2019 was $61,870.December 31, 2020 of $0.

 

Income Taxes

The Company has net operating loss carryforwards as of SeptemberJune 30, 20202021 totaling approximately $4,988,933$4,660,540 net of accrued derivative liabilities and stock-based compensation, which are assumed to be non-tax events. A deferred 21% tax benefit of approximately $1,047,676$978,713 has been offset by a valuation allowance of the same amount as its realization is not assured. The full realization of the tax benefit associated with the carry-forward depends predominately upon the Company’s ability to generate taxable income during future periods, which is not assured.

 

The Company files in the US only and is not subject to taxation in any foreign country. There are three open years for which the Internal Revenue Service can examine our tax returns so 2016, 20172018, 2019 and 20182020 are still open years and 20192020 will soon replace 2016 when2018 at the tax return is filed.end of 2021.

 

Fair Values of Financial Instruments

ASC 825 requires the Corporation to disclose estimated fair value for its financial instruments.  Fair value estimates, methods, and assumptions are set forth as follows for the Corporation’s financial instruments.  The carrying amounts of cash, receivables, other current assets, payables, accrued expenses and notes payable are reported at cost but approximate fair value because of the short maturity of those instruments. The Company evaluates derivatives based on level 3 indicators.

 

ASC 825 requires the Corporation to disclose estimated fair value for its financial instruments.  Fair value estimates, methods, and assumptions are set forth as follows for the Corporation’s financial instruments.  The carrying amounts of cash, receivables, other current assets, payables, accrued expenses and notes payable are reported at cost but approximate fair value because of the short maturity of those instruments.

 

The Company measures assets and liabilities at fair value based on expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale date of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level.

 

ABCO ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND

THE YEAR ENDED DECEMBER 31, 2020

The following are the hierarchical levels of inputs to measure fair value:

 

Level 1:  Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

 

Level 2:  Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

 

Level 3:  Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.    

 

10

ABCO ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

AND THE YEAR ENDED DECEMBER 31, 2019

The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts payable and accrued expenses, approximate their fair values because of the current nature of these instruments. Debt approximates fair value based on interest rates available for similar financial arrangements. Derivative liabilities which have been bifurcated from host convertible debt agreements are presented at fair value. See note __11 for complete derivative and convertible debt disclosure.

 

Derivative Financial Instruments

Fair value accounting requires bifurcation of embedded derivative instruments such as convertible features in convertible debts or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the binomial option-pricing model. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.  

 

Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives. In addition, the fair value of freestanding derivative instruments, such as warrants, are also valued using the binomial option-pricing model.

 

Stock-Based Compensation

The Company accounts for employee and non-employee stock awards under ASC 718, whereby equity instruments issued to employees for services are recorded based on the fair value of the instrument issued and those issued to non-employees are recorded based on the fair value of the consideration received or the fair value of the equity instrument, whichever is more reliably measurable.  

Prior Period Reclassifications

Certain prior period amounts have been reclassified to conform to current period presentation in this Report.

Effects of Recently Issued Accounting Pronouncements

The Company has reviewed all recently issued accounting pronouncements and have determined the following have an effect on our financial statements:

 

Stock-Based Compensation

The Company accounts for employee and non-employee stock awards under ASC 505 and ASC 718, whereby equity instruments issued to employees for services are recorded based on the fair value of the instrument issued and those issued to non-employees are recorded based on the fair value of the consideration received or the fair value of the equity instrument, whichever is more reliably measurable. For employees, the Company recognizes compensation expense for share-based awards based on the estimated fair value of the award on the date of grant and the probable attainment of a specified performance condition or over a service period.

 

Per Share Computations

Basic net earnings per share are computed using the weighted-average number of common shares outstanding. Diluted earnings per share is computed by dividing net income by the weighted-average number of common shares and the dilutive potential common shares outstanding during the period. All shares were considered anti-dilutive at March 31, 2021 and December 31, 2019.2020. Potentially dilutive share issues are: 1) all unissued common shares sold, 2) all convertible debentures have a possibility of a large number of shares being issued and would result in a larger number of shares issued if the price remains low, 3) the preferred stock of the company held by insiders is convertible into common shares and the preferred stock is voted on a 20 to 1 basis, 4) all options issued. All of the above are potential dilutive items.

 

 

ABCO ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND

THE YEAR ENDED DECEMBER 31, 2020

Note 3 Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. Since its inception, the Company has been engaged substantially in financing activitiesmarketing and developing its business plan and marketing.operations. The Company incurred a net loss of $(799,162),$(49,183) for the period ended June 30, 2021 and $(371,205) for the six months ended June 30, 2020. The net cash flow used in operations was $(116,093) and$(242,350) for the period ended June 30, 2021and its accumulated net losses from inception through the period ended SeptemberJune 30, 20202021 is $(7,360,670)$(7,135,450), which raises substantial doubt about the Company’s ability to continue as a going concern. In addition, the Company’s development activities since inception have been financially sustained through capital contributions from shareholders.

 

11

ABCO ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

AND THE YEAR ENDED DECEMBER 31, 2019

The ability of the Company to continue as a going concern is dependent upon its ability to raise additional capital from the sale of common stock or through debt financing and, ultimately, the achievement of significant operating revenues. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might result from this uncertainty.

Note 4 – Accounts Receivable

 

Accounts receivable as of SeptemberJune 30, 20202021 and 2019,December 31, 2021 consists of the following:

 

Description

 

September 30, 2020

  

September 30, 2019

 

Accounts receivable on completed contracts

 $31,242  $30,408 

Costs and estimated earnings on contracts in progress

  -   243,693 

Total

 $31,242  $274,101 

Description

 

June 30, 2021

  

December 31, 2020

 

Accounts receivable on completed contracts

 $37,231  $43,221 

Costs and estimated earnings on contracts in progress

  211,199   319,001 

Total

 $248,430  $362,222 

 

Costs and Estimated Earnings on projects are recognized on the percentage of completion method for work performed on contracts in progress at SeptemberJune 30, 20202021 and September 30, 2019.December 31, 2020.

 

The Company records contracts for future payments based on contractual agreements entered into at the inception of construction contracts. Amounts are payable from customers based on milestones established in each contract. Larger contracts are billed and recorded in advance and unearned profits are netted against the billed amounts such that accounts receivable reflect current amounts due from customers on completed projects and amounts earned on projects in process are reflected in the balance sheet as costs and estimated earnings in excess of billings on contracts in progress. Excess billings on contracts in process are recorded as liabilities and were $194,401$245,369 at September 30, 2020June 30,2021 and $76,052$558,907 at September 30, 2019.December 31, 2020.

Note 5 – Inventory

 

Note 5 – Inventory

Inventory of construction supplies not yet charged to specific projects was $0.00$0 at SeptemberJune 30, 2020,2021, and $ 61,870$0 as of September 30, 2019.December 31, 2020. The Company values items of inventory at the lower of cost or net realizable value and uses the first in first out method to charge costs to jobs. The Company wrote off all of its inventory during 2019.2018. 

Note 6 – Security deposits and Long Term Commitments

 

The Company has paid security deposits on the rented spaces it occupies for offices and warehouse which total $2,700 on September 30,During October 2020, and at December 31, 2019. The Company also made a deposit in the amount of $2,500 on a business purchase that was abandoned and this deposit was refunded during 2020.

On May 1, 2014, the Company rented office and warehouse space at 2100 N. Wilmot #211, Tucson, Arizona 85712. This facility consists of 3,600 square feet.The Company now has one month remaining on a one year lease with monthly rent of $2,741 which was renewed on November 1, 2019 to a term of one year. ABCO has a forward commitment of $2741 for the next four months. Subsequent to this statement, the Company moved into its own building that was purchased in December 2019 and abandoned the Wilmot Avenue rental space. It now occupies 4,800 square foot of office and warehouse space and one-half acre of land. There are no security deposits.

Note 7 – Investment in long term leases

 

Long term leases recorded on the consolidated financial statements were $3,995$3,787 at SeptemberJune 30, 20202021 and $4,136$3,995 at December 31, 20192020, respectively. During the year ended December 31, 2019 oneOne of the leases owned by AEFC was paid in full by the customer andduring the Company recorded net proceeds of $6,376.year ended December 31, 2020.

 

12

 

ABCO ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20202021 AND 2019

AND THE YEAR ENDED DECEMBER 31, 20192020

Note 8 – Fixed Assets

 

Note 8 – Fixed Assets

The Company has acquired all its office and field work equipment with cash payments and financial institution loans. The total fixed assets consist of land and building, vehicles, office furniture, tools and various equipment items and the totals are as follows:

 

  

September 30,

  

December 31,

 

Asset

 

2020

  

2019

 

Land and Building

 $326,400  $326,400 

Equipment

  134,326   121,556 

Accumulated depreciation

  (105,978)  (93,018

)

Fixed Assets, net of accumulated depreciation

 $354,748  $354,938 

Asset

 

June 30, 2021

  

December 31, 2020

 

Land and Building

 $326,400  $326,400 

Equipment

  172,591   173,991 

Accumulated depreciation

  (118,177

)

  (106,504

)

Fixed Assets, net of accumulated depreciation

 $380,814  $393,887 

 

Depreciation expensesexpense for the six months ended SeptemberJune 30, 2021 and the year ended December 31, 2020 was $11,673 and 2019 was $6,593 and $7,915$13,486, respectively.

 

On December 31, 2019, the Company purchased a building at 2505 N Alvernon consisting of 4,800 SF building and approximately ½ acre of land. The property was financed by a $25,000 loan from Green Capital (GCSG) and a mortgage from the seller for the $300,000 balance. The purchase price was $325,000 plus closing costs of $1,400.

 

Note 9 – Notes Payable from Officers andto Related Party TransactionsParties

 

Related party notesNotes payable as of SeptemberJune 30, 20202021 and December 31, 20192020 consists of the following:

 

 

Description

 

September 30,

2020

  

December 31,

2019

 

Notes payable – Director bearing interest at 12% per annum, unsecured, demand notes.

 $60,000,  $60,000 

Note payable – Mr. O’Dowd bearing interest at 12% per annum, unsecured, demand note

  61,052   61,052 

Note payable – other bearing interest at 12% per annum, unsecured, demand note.

  202,206   127,506 

Total

 $323,258  $248,558 

Description

 

June 30, 2021

  

December 31, 2020

 

Note payable – Director bearing interest at 12% per annum, unsecured, demand notes.

 $60,000  $60,000 

Note payable – President bearing interest at 12% per annum, unsecured, demand note.

  243,194   251,340 

Total

 $303,194  $311,340 

 

The first note in the amount of $60,000 provides for interest at 12% per annum and is unsecured. This note resulted in anhas unpaid accrued interest charge of $41,448 accrued$46,835 and unpaid$43,263 at SeptemberJune 30, 20202021 and $36,061 at December 31, 2019.2020, respectively.

 

The second note has a current balance of $61,052$243,194 and unpaid accrued interest of $66,158 as of SeptemberJune 30, 2020.2021. The note is an unsecureda secured demand note covering all assets of the Company and bears interest at 12% per annum. ThisOn April 1, 2021, the promissory note resultedpayable to the President of the Company in anthe amount of $314,636 of principal and interest chargewas converted into a secured note covering all assets of $32,848 accrued and unpaid at September 30, 2020 and $27,368 at December 31, 2019.

the Company. The third note is from a related party and has a current balance of $202,206 as of December 31, 2020. The note is an unsecured demand note andNote bears interest at the rate 12% per annum. This note resultedannum and is due on demand. Financing statement s are expected to be filed in an accumulated interest charge of $45,516 accruedPima County, AZ and unpaid at September 30, 2020 and $28,556 at December 31, 2019. in Las Vegas County, NV covering the assets which are securing this Note.

 

The combined total funds due to Officers and related partiesDirectors totaled $443,069$416,187 with principleprincipal and interest at SeptemberJune 30, 2020.2021.

 

13

ABCO ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

AND THE YEAR ENDED DECEMBER 31, 2019

Note 10 – Short Term Notes Payable

 

 

Description

 

September 30,

2020

  

December 31,

2019

 

Bill’d Exchange, LLC, an equipment capital lender, initial financing August 2, 2019, finances equipment for commercial contracted customers in varying amounts

 $32,859  $239,852 

Merchant loan – Knight Capital Funding, LLC

  38,694   61,747 

Merchant loan – Pearl lending

  51,750   65,664 

Merchant loan – Green Capital

  14,748   35,250 

Private money loan from Perfectly Green Corporation, borrowed January 22, 2018, bearing interest at 3% per annum, unsecured (3) demand note-Original balance $60,000, current balance

  33,754   33,754 

Total

 $171,805  $436,267 

Description

 

June 30, 2021

  

December 31, 2020

 

Bill’ d Exchange, LLC, an equipment capital lender, initial financing August 2, 2019, finances equipment for commercial contracted customers in varying amounts

 $20,000  $31,462 

Merchant loan – Knight Capital Funding, LLC

  0   33,694 

Merchant loan – Pearl lending

  0   51,750 

Merchant loan – Green Capital

  7,747   11,748 

Private money loan from Perfectly Green Corporation

  0   33,754 

Private money loan from prior officer of ABCO

  0   61,052 

PPP loan – SBA loan payable

  0   123,999 

PPP loan -SBA loan payable

  128,232   0 

Total

 $155,979  $347,459 

 

Bill’d

ABCO ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND

THE YEAR ENDED DECEMBER 31, 2020

Bill’ d Exchange, LLC, a customer equipment capital lender, made their initial financing on August 2, 2019. They finance equipment for commercial contracted customers in varying amounts. These loans bear interest at varying rates and are paid weekly for the amount of interest due on the account at each date. Each loan is secured by the accounts receivable from the customer and by personal guarantee of an affiliated officer of ABCO Solar, Inc.  Unpaid principal balance on this note at June 30, 2021 and December 31, 2020 was $20,000 and $31,462, respectively.

 

On January 30, 2019, the Company borrowed $153,092 including principal and interest from Knight Capital Funding, LLC, and [“KCF”] bearing interest at 23% per annum, unsecured.  This loan was refinanced on August 10, 2019 and replaced with a new loan of $144,900 from KCF. The balance and accrued interest at December 31, 2019 was $61,747. On February 18, 2020 ABCO defaulted on this loan due to the reduction in business from Covid-19. AsOn March 29, 2021, the Company made a final negotiated settlement payment on this note for $22,000 and recorded gain on extinguishment of debt of approximately $14,000 during the datesix months ended June 30, 2021.  Outstanding principal balance as of filing this report, no arrangements for resuming payments had been accomplished. The last adjusted balance at the date of defaultJune 30, 2021 and December 31, 2020 was $38,694.$-0- and $33,694, respectively.   

 

On December 6, 2019, the Company borrowed $52,174 from Pearl Delta Funding that contained a repayment in the amount of $72,000 in 160 payments of $450.  This unsecured note bears interest at the imputed rate of approximately 36% per annum. The unpaid balance of principleprincipal and interest at December 31, 2019 was $65,664. On February 18, 2020 ABCO defaulted on this loan due to the reduction in business from Covid-19. AsCovid-19 when the balance of the datenote was $51,750. On March 29, 2021, the Company made a final negotiated settlement payment in the amount of filing this report, no arrangements$36,998 and recorded gain on extinguishment of debt for resuming payments had been accomplished butapproximately $15,000 during the six months ended June 30, 2021.  Outstanding principal balance had been reduced toas of June 30, 2021 and December 31, 2020 on the note was $-0- and $51,750, through payments to the date of defaultrespectively.   

 

On December 31, 2019 ABCO borrowed $25,000 from Green Capital Funding, LLC.  The proceeds from this loan were used to acquire the real estate purchased on the date of the loan.  This unsecured loan bears interest at approximately 36% and has a repayment obligation in the amount of $35,250 in 76 payments. The unpaid balance of principleprincipal and interest at December 31, 20192020 was $35,250. On$11,748 after several months of daily payment and a default on February 18, 2020 ABCO defaulted on this loan due to the reduction in business from Covid-19. As of the date of filing this report, no arrangements for resuming payments had been accomplishedaccomplished; however, the Company has been paying $1,000 for per month for the three months ended September 30, 2020 and has reduced theseveral months. Outstanding principal balance to $14,748 as of June 30, 2021 and December 31, 2020 on the date of this report.note was $7,747 and $11,748, respectively.   

 

On January 22, 2018, the Company borrowed $60,000 from Perfectly Green Corporation, a Texas corporation.  The Company repaidhas paid $26,246 leaving a balance of $33,754 at September 30, 2020 and December 31, 2019. The note bears interest at 3% per annum and is payable upon demand after 60 days’ notice which can be requested at any time after May 31, 2018. Outstanding principal balance as of June 30, 2021 was $-0- and December 31, 2020 was $33,754. During the six months ended June 30, 2021, the Company wrote off the balance on this loan because they have been unable to reach the lender for over two years. It appears they are out of business.

 

Mr. Charles O’Dowd, former President and Director of ABCO Energy resigned from all positions with the Company on October 7, 2019. Prior to his resignation, Mr. O’Dowd had loaned the Company funds in the principal amount of $61,052 which is represented by a Promissory Note that is unsecured that also has unpaid interest accrued at December 31, 2020 of $34,694 leaving a total balance due of $95,746 at June 30, 2021. The note bears interest at the rate of 12% per annum. Mr. O’Dowd has filed legal action against the Company for collection of the amounts due under the Note. He received a default judgment and is attempting to execute on the judgment.  Outstanding principal balance as of June 30, 2021 and December 31, 2020 on the note was $70,500 and $61,052, respectively. During the period ended June 30, 2021 the Company negotiated a settlement with Mr. O’Dowd for a payment of $5,000 in cash and 48 monthly payments of $1,500 totaling $72,000. As of June 30, 2021 the balance on this debt was 70,500 including interest, and the Company recorded a gain on the changes to this note in the amount of $18,746.

On February 24, 2021, the Company executed a promissory note evidencing an unsecured loan (“Loan”) for $128,232 under the Paycheck Protection Plan (“PPP”). The terms of the Loan require 1.00% interest. This loan contains the same clauses as the previous EDIL loan described in the following paragraph. The Loan is forgivable, but no assurance can be given that the Company will receive forgiveness of this Loan.  Outstanding principal balance as of June 30, 2021 and December 31, 2020 on the note was $128,232 and $-0-, respectively.

14

 

ABCO ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND

THE YEAR ENDED DECEMBER 31, 2020

On May 3, 2020, Company entered into a promissory note evidencing an unsecured loan in the amount of $123,999.00 made to the Company under the Paycheck Protection Program (the “Loan”).  The Paycheck Protection Program (or “PPP”) was established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), and is administered by the U.S. Small Business Administration.  The Loan to the Company is being made through Bank of America, N.A., a national banking association (the “Lender”). The interest rate on the Loan will not exceed 1.00%.  The promissory note evidencing the Loan contains customary events of default relating to, among other things, payment defaults, making materially false and misleading representations to the SBA or Lender, or breaching the terms of the Loan documents.  The occurrence of an event of default may result in the repayment of all amounts outstanding, collection of all amounts owing from the Company, or filing suit and obtaining judgment against the Company. Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of loan granted under the PPP.  Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for payment of payroll costs and any payments of mortgage interest, rent, and utilities.  No assurance is provided that the Company will obtain forgiveness of the Loan in whole or in part.  If the SBA does not confirm forgiveness of the Loan or only partly confirms forgiveness of the Loan, including principal and interest (“Loan Balance”); then, in either such case, the Lender will establish the terms of repayment of the Loan Balance via a separate letter to the Company, containing the amount of each monthly payment, the interest rate, etc.  On March 9, 2021, the SBA and Bank of America notified the Company that the entire balance of this note has been forgiven by the Government.  The Company recorded a gain on extinguishment of debt during the six months ended June 30, 2021 for $124,099 ($123,999 plus costs).  Outstanding principal balance as of June 30, 2021 and December 31, 2020 on the note was $-0- and $123,999, respectively. 

Note 11 – Convertible debentures -net- net of discounts and fees.

 

During the year ended December 31, 2019, the Company funded operations with borrowing on new convertible promissory notes. This table presents the positions on the outstanding notes as of Septemberat June 30, 2020.2021 and December 31, 2020, respectively.

 

 

Holder

 

Date

  of Loan  

  

Loan

amount

  

OID and

discounts

  and fees 

  

Interest

 rate

  

Balance

December 31, 2019 

  

Balance

September 30, 2020

 

Power Up Lending Group Ltd

  5-13-19  $96,300  $13,300   8

%

 $4,300  $0 

Power Up Lending Group Ltd

  8-14-19   68,000   13,000   8

%

  68,000   0 

Power Up Lending Group Ltd

  9-11-19   76,000   13,000   8

%

  76,000   57,450 

Crown Bridge Tranche 1

  8-8-19   50,000   5,000   8

%

  50,000   23,540 

Oasis Capital

  9-1-18   150,000   124,671       274,671   243,509 

Totals and balances for 6-30-2020

     $442,300  $164,471      $472,971  $324,499 

Holder

 

Date

of Loan  

  

Loan

amount

  

OID and

discounts

and fees 

  

Interest

rate

  

Balance

June 30, 2021 

  

Balance

December 31, 2020

 

Power Up Lending Group Ltd

  3-29-21   80,000   20,600   12

%

  89,600   0 

Power Up Lending Group Ltd

  5-25-21   48,750   13,987   12

%

  53,625   0 

Oasis Capital

  1-22-20   189,000   17,758   8

%

  30,458   150,553 

Oasis Capital

  9-1-18   150,000   0   8

%

  3,264   3,264 

Totals and balances

     $442,300  $71,658      $176,947  $153,817 

 

The Financial Accounting Standard ASC 815 Accounting for Derivative Instruments and Hedging Activities require that instruments with embedded derivative features be valued at their market values. The Black Scholes model was used to value the derivative liability for the six months ended June 30, 2021 and the fiscal year ending December 31, 2019 and December 31, 2018. The initial valuation of the derivative liability on the non-converted common shares totaled $207,081 at December 31, 2019.2020. This value includes the fair value of the shares that may be issued according to the contracts of the holders and valued according to our common share price at the time of acquisition. 

 

The Company issued to Power Up Lending Group, Inc. a $96,300 Convertible Promissory Note dated May 13, 2019 which contains an original issue discount of $10,000 (OID) and expenses of $3,300 [“Note”]. The Note is convertible into Company common stock beginning six months after the date of the Note with a stated discount rate of 19% as set forth in the Note. There is no trigger of derivative liability from conversion features until six months after initial borrowing date.  Without the OID, the effective discount would have been 35%. The net proceeds from this Note were used for working capital. $92,000 of this note was converted in 2019 and 2020. The balance of $4,300 was converted during the nine months ended September 30, 2020.

The Company issued to Power Up Lending Group, Inc. [“Power Up”], a $68,000 Convertible Promissory Note dated August 14, 2019 [“Note”] which contains an original issue discount of $10,000.00 (OID) and expenses of $3,000.00 [“Note”]. The Note is convertible into Company common stock beginning six months after the date of the Note with an effective discount rate of approximately 19% upon conversion. There is no trigger of derivative liability from conversion features until six months after initial borrowing date.  Without the OID, the effective discount rate would be 35% as set forth in the Note. The net proceeds from the Note, was used for working capital. $68,000 of this note was converted during the six months ended September 30, 2020.

The Company issued to Power Up Lending Group, Inc. [“Power Up”], a $76,000 Convertible Promissory Note dated September 11, 2019 [“Note”] which contains an original issue discount of $10,000.00 (OID) and expenses of $3,000.00 [“Note”]. The Note is convertible into Company common stock beginning six months after the date of the Note with an effective discount rate of approximately 19 % upon conversion. There is no trigger of derivative liability from conversion features until six months after initial borrowing date.  Without the OID, the effective discount rate would be 35% as set forth in the Note. The net proceeds from the Note, was used for working capital. $18,550 of this note was converted during the nine months ended September 30, 2020.

On August 8, 2019 the Company issued to Crown Bridge Partners, LLC a Convertible Promissory Note which contains an original issue discount of $15,000 and expenses of $6,000 [“Note”].  ABCO has borrowed the first tranche of $50,000 and paid the expenses of $5,000 of this agreement. The note is divided into 3 tranches with the 1st being executed on August 8, 2019 and the remaining 2 tranches to be issued at Company’s discretion. The note is convertible into Company common stock beginning six months after the date of the effective date of each tranche with a stated discount rate of 36%. There is no trigger of derivative liability from conversion features until six months after initial borrowing date. At the time of the Buyer’s funding of each tranche under the Note, the Company shall issue to Buyer as a commitment fee, a common stock purchase warrant to purchase an amount of shares of its common stock equal to 150% of the face value of each respective tranche divided by $0.05 (for illustrative purposes, the First Tranche face value is equal to $50,000, which resulted in the issuance of a warrant to purchase 1,500,000 shares of the Company’s common stock) pursuant to the terms provided therein (all warrants issuable hereunder, including now and in the future, shall be referred to, in the aggregate, as the “Warrant”) (all warrants issuable hereunder shall be in the same form as the Warrant issued in connection with the First Tranche). The net proceeds from this Note were used for working capital. A conversion feature is associated with this note and prorated from August 8, 2019 to September 30, 2019 in the amount of $4,314. The derivative liability calculation on this note due to its immediate convertibility resulted in a charge to income of $57,075 and a liability in the amount of $71,764. Management does not intend to exercise the last two options to borrow on this note. $26,460 of this note was converted during the three months ended September 30, 2020.

15

ABCO ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

AND THE YEAR ENDED DECEMBER 31, 2019

As of February 16, 2019, the Company issued to Power Up, a $55,000.00 of shares of the Series C Preferred Stock agreement (Note) net of an original issue discount of $10,000.00 (OID) and expenses of $3,000.00 [“Note”]. The Note was convertible into Company common stock beginning six months after the Effective Date with an effective discount rate of approximately 20%. The OID on this issue that is paid out of proceeds allows a lower purchase price if the Company purchases this liability. The Company redeemed this note for $106,145 before Power up converted it to common stock, so no dilution took place.

As of March 19, 2019, the Company issued to Power Up, a $55,000.00 of shares of the Series C Preferred Stock agreement net of an original issue discount of $10,000.00 (OID) and expenses of $3,000.00 [“Note”]. The Note is convertible into Company common stock beginning six months after the Effective Date with an effective discount rate of approximately 20%. The OID on this issue that is paid out of proceeds allows a lower purchase price if the Company purchases this liability.

As of September 1, 2018, the Company entered into an Equity Purchase Agreement with Oasis Capital, LLC, a Puerto Rico limited liability company (“Investor”) pursuant to which Investor agreed to purchase up to $5,000,000 of the Company’s common stock at a price equal to 85% of the market price at the time of purchase (“Put Shares”). The Company agreed to file a new registration statement to register for resale the Put Shares. The Registration Statement must be effective with the SEC before Investor is obligated to purchase any Put Shares. In addition, the Company [i] issued to Investor a one year $150,000 note which is convertible at a fixed price of $.01 per share as a commitment fee for its purchase of Put Shares and [ii] delivered to Investor a Registration Rights Agreement pursuant to which the Company agreed to register all Put Shares acquired under the Equity Purchase Agreement. During 2019,2020, Investor converted $19,405$59,692 of principal of the Note and received 22,392,161930,165,889 (post reverse 5,471,564) shares of common stock. AtDuring the twelve months ended December 31, 2019,2020, the Notenegotiated note balance was $130,595. Due to change in accounting treatment this note was booked as a prepaid expense with add-on penalties for a total of $144,076 and a liability of $274,671.$3,264.  The difference is charged to expenses for penalties, derivatives and derivative interest in the amount of $144,076. The entire balance of the prepaid amount has been expensed in the amount of $274,671 in 2019. The liability for this note was not recorded in 2018 because the note had not yet matured. During the nine months ended June 30, 2020 Oasis converted $31,162 into shares. Theunpaid principal balance on the original note including interestNote was $3,264 and penalties was $62,956$3,264 at SeptemberJune 30, 2020.2021 and December 31, 2020, respectively.

 

ABCO ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND

THE YEAR ENDED DECEMBER 31, 2020

As of January 21, 2020 (“Effective Date”), the Company issued to Oasis a $208,000 Promissory Note, net of a prorated original issue discount of $16,000 (“1/21/20 Note”). The Company received $34,000 (“First Tranche”) andwith four additional Tranches through December 31, 2020 totaling $85,000. There were three Tranches for the Second in the amountperiod of $25,000 was received in the 1st quarter. The Third Tranches under this Note were due inJanuary 1, 2021 to February and March 2020, respectively. In addition, the note caries an $8,000 credit for Oasis transactional expenses. There have been no additional loans from the transaction since tranche one and two19, 2021, totaling $59,000.$70,000. Each Tranche matures nine months from the effective date of each such payment. The Company issued Warrants with each Tranche totaling [2,100,000] shares. Each Warrant expires five years from the date of issuance and is exercisable at a conversion price of 120% of the closing price on the trading day prior to the funding date of the respective Tranche. The Company also agreed to issue to Oasis 5,000,000 shares of common stock as an incentive/commitment fee in connection with the transactions. The Company valued these shares at $14,500 and they are listed on the balance sheet under the cation Common Shares to be issued.issued these shares in 2020. The Company was required to use the proceeds received from the1/21/20 Note to retire currently outstanding convertible debt from two lenders which have not yet matured for conversion. The Note becomesis convertible into common stock six months after the Effective Date at a 35% discount to market. The cash valuebalance of the Note at June 30, 2021 was $30,458, including all penalties and interest and payments through conversions for $76,224.  Outstanding principal balance as of June 30, 2021 and December 31, 2020 on the note was $30,458 and $150,553, respectively. During the six months ended June 30, 2021 Oasis converted 10,012,508 shares to pay off $120,095 in principle on this note.

On March 29, 2021, the Board of Directors of the Corporation deem it in the best interests of the Corporation to enter into the Securities Purchase Agreement dated March 29, 2021 (the “Agreement”) with Power Up Lending Group Ltd. (“PowerUp”), in connection with the issuance of: (i) a promissory note of the Corporation, in the form attached hereto as Exhibit A, in the aggregate principal amount of $80,000 (including $7,500of Original Issue Discount) (the “Note”), (ii) Three Hundred Seventy Three Thousand Three Hundred Thirty Three (373,333) restricted common shares of the Corporation (“Commitment Shares”) to be delivered to PowerUp in book entry with the Corporation’s transfer agent prior to the Closing Date, (iii) Seventy Hundred Forty Six Thousand Six Hundred Sixty Seven (746,667) restricted common shares of the Corporation (“Security Shares” and together with the Note and the Commitment Shares, collectively, the “Securities”) to be delivered to PowerUp in book entry with the Corporation’s transfer agent prior to the Closing Date; and in connection therewith to enter into an irrevocable letter agreement with Vstock Transfer LLC, the Corporation’s transfer agent, with respect to the reserve of shares of common stock of the Corporation to be issued upon any conversion of the Note (only upon default); the issuance of such shares of common stock in connection with a conversion of the Note (the “Letter Agreement”). The proceeds of this note at Septemberwere specifically slated for payment of the settlement of the Knight Capital Merchant Loan for $22,000 and the final payment of the Pearl Capital merchant note for $36,998. These discounted payoffs of these notes saved the company $26,446 plus future interest.  Outstanding principal balance as of June 30, 2021 and December 31, 2020 on the note was recorded at $180,553 including principal, fees$89,600 and interest.$-0-, respectively.

 

The combinationOn May 25, 2021, the Board of Directors of the two notes at September 30 2020 haveCorporation deem it in the best interests of the Corporation to enter into the Securities Purchase Agreement (the “Agreement”) with Power Up Lending Group Ltd. (“PowerUp”), in connection with the issuance of: (i) a recorded balancepromissory note of $243,509. Oasis andthe Corporation, in the form attached hereto as Exhibit A, in the aggregate principal amount of $53,625 (including $4,875 of Original Issue Discount) (the “Note”), (ii) the rights to acquire 1,340,625 warrants for common shares of the Corporation to be delivered to PowerUp upon submission to the Company have agreed to negotiate this commitmentof the exercise price of $.03 per share. These warrants are exercisable for a period of three years after the Company is current on its filings. Subsequent to the date of this statement, Oasis converted the entire remaining balance of $62,956 into shares of stock.loan.

Note 12 – Fair Value Measurements

 

The Company complies with the provisions of FASB ASC No. 820, Fair Value Measurements and Disclosures (“ASC 820”), in measuring fair value and in disclosing fair value measurements at the measurement date. ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements required under other accounting pronouncements. FASB ASC No. 820-10-35, Fair Value Measurements and Disclosures- Subsequent Measurement (“ASC 820-10-35”), clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820-10-35-3 also requires that a fair value measurement reflect the assumptions market participants would use in pricing an asset or liability based on the best information available. Assumptions include the risks inherent in a particular valuation technique (such as a pricing model) and/or the risks inherent in the inputs to the model.

 

16

 

ABCO ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20202021 AND 2019

AND THE YEAR ENDED DECEMBER 31, 20192020

 

The following table shows the change in the fair value of the derivative liabilities on all outstanding convertible debt at September 30,2020June 30, 2021 and at December 30,2019:2020:

 

 

Description

 

September 30,

 2020

  

December 31,

 2019

 

Purchase price of the convertible debenture - net of discount

 $442,300  $442,300 

Valuation reduction during the period

  (298,354

)

  (344,326

)

Balance of derivative liability net of discount on the notes (See Consolidated Balance sheet liabilities)

 $143,946  $97,974 
         

Derivative calculations and presentations on the Statement of Operations

        

Loss on note issuance

     $- 

Change in Derivative (Gain) Loss

  (157,575

)

  (48,453

)

Derivative Finance fees

  (1,055

)

  (318,972

)

Gain (loss) on extinguishment of debt

      (244,712

)

Derivative expense charged to operations in 2020 and 2019 (See Consolidated Statement of Operations)

 $(158,630

)

 $( 612,137

)

Description

 

June 30, 2021

  

June 30, 2020

 

Purchase price of the convertible debenture - net of discount

 $-  $442,300 

Valuation reduction during the period

  -   (53,119

)

Balance of derivative liability net of discount on the notes (See Consolidated Balance sheet liabilities)

 $-  $389,181 
         

Derivative calculations and presentations on the Statement of Operations

        

Loss on note issuance

 $0  $0 

Change in Derivative (Gain) Loss

  0   (290,137

)

Derivative Finance fees

  (49,623

)

  - 

Gain (loss) on extinguishment of debt

  0   0 

Derivative expense charged to operations in 2021 and 2020 (See Consolidated Statement of Operations)

 $(49,623

)

 $(290,137

)

 

Note 13 – Long term debt

 

 

Holder

 

 Date issued

  

 Interest rate

  

Amount due

September 30,

2020

  

Amount due

December 31,

2019

 

Real Estate Note Allen-Neisen Family trust – Et. Al.

  12-31-19   5

%

 $291,914  $300,000 

US Treasury EIDL payroll loan (Forgivable

  5-04-20   1

%

  124,099   - 

US Treasury SBA guaranteed loan

  7-21-20   3.75

%

  149,900   - 

Ascentium Capital

  10-1-18   13

%

  7,024   11,192 

Fredrick Donze

  9-2-18   6

%

  3,733   4,043 

Charles O’Dowd (officer)

  8-9-18   6

%

  1,946   3,625 

Total long term debt

          578,616   318,860 

Less Current portion

          16,717   18,860 

 Total long-term debt

         $561,899  $300,000 

Holder

 

Date issued

  

Interest rate

  

Amount due

June 30,

2021

  

Amount due

December 31,

2020

 

Real Estate Note Allen-Neisen Family trust – Et. Al.

  12-31-19   5.00

%

 $285,600  $290,271 

US Treasury SBA guaranteed loan

  7-21-20   3.75

%

  150,000   150,000 

Ascentium Capital

  10-1-18   13.00

%

  5,580   6,998 

Fredrick Donze

  9-2-18   6.00

%

  327   2,274 

Charles O’Dowd promissory note

  6-15-21   5.00

%

  70,500   0 

Charles O’Dowd – former officer truck loan

  8-9-18   6.00

%

  0   2,560 

GMAC Chev truck

  10-20-20   5.99

%

  22,127   23,574 

Mechanics Bank – Chev Truck

  12-12-20   8.99

%

  22,276   24,318 

Total long-term debt

          556,410   499,995 

Less Current portion

          44,022   27,702 

Total long-term debt

         $512,388  $472,293 

 

On December 31, 2019 ABCO completed negotiations, financial arrangements and closed on the purchase of a 4,800 square foot office and warehouse building located on one/half acre of paved land on one of Tucson’s busiest streets. This property will be more than adequate to house both the Solar business (Now 3600 SF and theour HVAC business (now 2000 SF) including our previously announced acquisition of a Tucson HVAC service and equipment supplier.expansion. The land and outbuildings will accommodate all of our equipment. The property acquisition was priced at $325,000 the company paid $25,000 down payment and the seller financed $300,000 over a twenty-year mortgage based on a twenty yeartwenty-year amortization and a 5% interest rate with a balloon payment at the end of five (5) years. The monthly payment is $1,980.  Outstanding principal balance as of June 30, 2021 and December 31, 2020 on the note was $285,600 and $290,271, respectively.

 

17

 

ABCO ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20202021 AND 2019

AND THE YEAR ENDED DECEMBER 31, 20192020

 

On May 3, 2020, Company entered into a promissory note evidencing an unsecured loan in the amount of $124,099.00 made to the Company under the Paycheck Protection Program (the “Loan”).  The Paycheck Protection Program (or “PPP”) was established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), and is administered by the U.S. Small Business Administration.  The Loan to the Company is being made through Bank of America, N.A., a national banking association (the “Lender”). The interest rate on the Loan will not exceed 1.00%.  The promissory note evidencing the Loan contains customary events of default relating to, among other things, payment defaults, making materially false and misleading representations to the SBA or Lender, or breaching the terms of the Loan documents.  The occurrence of an event of default may result in the repayment of all amounts outstanding, collection of all amounts owing from the Company, or filing suit and obtaining judgment against the Company. Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of loan granted under the PPP.  Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for payment of payroll costs and any payments of mortgage interest, rent, and utilities.  No assurance is provided that the Company will obtain forgiveness of the Loan in whole or in part.  If the SBA does not confirm forgiveness of the Loan or only partly confirms forgiveness of the Loan, including principal and interest (“Loan Balance”); then, in either such case, the Lender will establish the terms of repayment of the Loan Balance via a separate letter to the Company, containing the amount of each monthly payment, the interest rate, etc.

On July 21, 2020, the Company received an SBA loan from Bank of America in the amount of $150,000 that is guaranteed by the US Treasury Department. Installment payments, including principal and interest, of $731.00 Monthly,monthly, will begin Twelve (12) months from the date of the promissory Note. The balance of principal and interest will be payable Thirty (30) years from the date of the promissory Note. Interest will accrue at the rate of 3.75% per annum and will accrue only on funds actually advanced from the date(s) of each advance. Each payment will be applied first to interest accrued to the date of receipt of each payment, and the balance, if any, will be applied to principal. For loan amounts of greater than $25,000, Borrower hereby grants to SBA, the secured party hereunder, a continuing security interest in and to any and all “Collateral” as described herein to secure payment and performance of all debts, liabilities and obligations of Borrower to SBA hereunder without limitation, including but not limited to all interest, other fees and expenses (all hereinafter called “Obligations”). The Collateral includes the following property that Borrower now owns or shall acquire or create immediately upon the acquisition or creation thereof: all tangible and intangible personal property, including, but not limited to: (a) inventory, (b) equipment, (c) instruments, including promissory notes (d) chattel paper, including tangible chattel paper and electronic chattel paper, (e) documents, (f) letter of credit rights, (g) accounts, including health-care insurance receivables and credit card receivables, (h) deposit accounts, (i) commercial tort claims, (j) general intangibles, including payment intangibles and software and (k) as-extracted collateral as such terms may from time to time be defined in the Uniform Commercial Code. The security interest Borrower grants includes all accessions, attachments, accessories, parts, supplies and replacements for the Collateral, all products, proceeds and collections thereof and all records and data relating thereto. During the six months ended June 30, 2021 and the year ended December 31, 2020, the Company recorded $2792 and $2,812 in interest expense on this loan, respectively.    Unpaid principal balance of the SBA loan at June 30, 2021 and December 31, 2020 was $150,000 and $150,000, respectively.

 

The Company recorded a gain on extinguishment of debt during the six months ended June 30, 2021 of $206,047. 

ABCO acquired the assets of Dr. Fred Air Conditioning services on September 2, 2018 for the total price of $22,000. The allocation of the purchase price was to truck and equipment at $15,000 and the balance was allocated to inventory and the license for period of five or more years. The truck and equipment were financed by Ascentium Capital. The payments on the Ascentium capital note are $435 and the payments on the Donze note are $212 each per monthmonth.

 

The Company purchased an automobile from its then President, Charles O’Dowd, with a promissory note in the amount of $6,575 dated August 9, 2018 and the note bears interest at 6% per annum for the three-year payment plan. Mr. O’Dowd is no longer an officer or employee of the Company. The principle payments during 2019 totaled $2,107. The balance at SeptemberJune 30, 2021 and December 31, 2020 was $1,946.$ 0 and $2,560, respectively.

 

Note 14 – Stockholder’sStockholders Deficit

Common Stock

During the year ended December 31, 2019 the Company sold 4,740,000 shares of restricted common shares in Regulation S offerings to non-US investors. The total proceeds from the offering was $160,305. Commission and expense reimbursements totaled $80,049. The Company recorded net proceeds totaling $80,256.

In addition, debenture holders converted debt into 1,365,518,410 shares which were issued upon conversion of $275,237 of the notes referred to in Note 10 above.

 

18

ABCO ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

AND THE YEAR ENDED DECEMBER 31, 2019

During 2018 the Company issued 1,350,000 restricted common shares to management for services with a fair market value of $27,000. Of these awards, Charles O’Dowd received 450,000 shares and Wayne Marx received 50,000 shares. The balance of 850,000 shares was awarded to consultants to the Company. In October 2019, 1,000,000 shares each were issued to Mikael Mildebrandt and Adrian Balinski in connection with their becoming officers and directors of the Company.

During the three months ended September 30, 2020 the following shares were converted from debt.

Capital Company

 

Shares converted

  

Dollars converted

 

Crown Bridge Partners

  99,000,000  $8,880 

Power Up

  170,000,000   40,800 

Oasis Capital

  1,097,220,189   24,884 

Total

  1,366,220,189  $74,564 

Preferred Stock

 

On September 15, 2017 and on September 15, 2018, the Board of Directors authorized on each such date the issuance of 15,000,000 preferred shares for an aggregate of 30,000,000 shares of Class B Convertible Preferred Stock [“Series B”] to both Directors of the Company and to two unaffiliated Consultants, orof which, David Shorey, President of the Company, is the beneficial owner thereof, a total of 30,000,000 shares of Series B. The Company assigned a value of $15,000 for the shares for 2017 and 2018. Of the Series B, 12,000,000 shares were issued to Charles O’Dowd and 2,000,000 to Wayne Marx, the Directors. Each Consultant received 8,000,000 shares. See the Company’s Schedule 14C filed with the Commission on September 28, 2018. Upon his resignation, Mr. O’ Dowd’s shares were cancelled and reissued to two Consultants. These shares have no market pricing and management assigned an aggregate value of $30,000 to the stock issued based on the par value of $0.001. The 30,000,000 shares of preferredPreferred Stock, each with has 200 votes for each Preferred share held by them of record. The holders of the Preferred are also entitled to an additional 300,000,0008,823,930 common shares upon conversion of the Preferred Stock. As a result of owning of these shares of Common and Preferred Stock, the Control Shareholders will have voting control of the Company.

 

ABCO ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND

THE YEAR ENDED DECEMBER 31, 2020

Common Stock

During the three months ended June 30, 2021 and the year ended December 31, 2020 the following shares were issued for debt conversions:

  

Three Months Ended

June 30, 2021

  

During the Year Ended

December 31, 2020

 

Capital Company

 

Shares converted

  

Dollars converted

  

Shares converted

  

Dollars converted

 

Crown Bridge Partners

  0  $0   2,300,000  $46,540 

Power Up

  0   0   1,633,968   57,450 

Oasis Capital

  18,973,258   147,423   5,173,328   125,775 

Total

  18,973,258  $147,423   9,107,296  $229,765 

After the reverse of shares effective January 4, 2021 the authorized shares were reduced to 29,411,765. Our board of directors believes that it is desirable to have additional authorized shares of common stock available for possible future financings, acquisition transactions, joint ventures and other general corporate purposes. Our board of directors believes that having such additional authorized shares of common stock available for issuance in the future will give us greater flexibility and may allow such shares to be issued without the expense and delay of a special shareholders’ meeting unless such approval is expressly required by applicable law. Although such issuance of additional shares with respect to future financings and acquisitions would dilute existing shareholders, management believes that such transactions would increase the overall value of the Company to its shareholders. Therefore, on January 11, 2021, the shareholders voted to authorize an increase in the Authorized Common Shares to 2,000,000,000 shares. 

Earnings (loss) per share calculation

 

Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period

 

The computation of basic and diluted loss per share at June 30,2021 and December 31, 20192020 excludes the common stock equivalents from convertible debt of the following potentially dilutive securities because their inclusion would be anti-dilutive, and the share issue number is not calculable until conversion takes place.

 

Stock subscriptions executed under an earlier offering included a provision whereby ABCO agrees to pay a dividend (defined as interest) of from 6% to 12% of the total amount invested for a period of one year from receipt of the invested funds. This dividend (defined as interest) is allocated between the broker and the investor with amounts paid to the broker treated as a cost of the offering and netted against additional paid in capital and amounts paid to the investor treated as interest expense. Total amounts paid or accrued under this agreement and charged to additional paid-in capital for the yearssix months ended June 30, 2021 and the year ended December 31, 2019 and 2018, amounted to $0 and $0, respectively. Total amounts paid under this agreement and charged to interest expense for the years ended December 31, 2019 and 2018,2020, amounted to $0 and $0, respectively. The accrued balance due on this obligation to shareholders totals $49,290 at June 30, 2021 and $49,290 at December 31, 2019 and 2018.2020.

 

ABCO has evaluated these agreements under ASC 480-10: Certain Financial Instruments with Characteristics of Bothboth Liabilities and Equity and determined that the capital contributions made under these subscription agreement more closely resemble equity than liabilities as they can only be settled through the issuance of shares and although they have a stated cost associated with them which accrues in the same manner as interest, the cost is only incurred in the first twelve months after placement as is more closely associated with a cost of raising funds than interest expense.

 

19

 

ABCO ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20202021 AND 2019

AND THE YEAR ENDED DECEMBER 31, 20192020

Note 15 Equity Awards

 

Note 15 – Equity Awards

The following table sets forth information on outstanding option and stock awards held by the named executive officers of the Company at SeptemberJune 30, 20202021 and December 31, 2019,2020, including the number of shares underlying both exercisable and un-exercisable portions of each stock option as well as the exercise price and the expiration date of each outstanding option. See Note to Notes to Consolidated Financial Statements.

 

Outstanding Equity Awards After Fiscal Year-End (1)

 

 

 

 

Name

 

Number of securities underlying unexercised

options exercisable (1)

 

 

 

Number of securities underlying unexercised

options un-exercisable (2)

 

 

 

 

Option Exercise Price ($)

 

 

 

 

Option Grant Date

 

 

Option Expiration Date

Charles O’Dowd

 

 

500,000

 

(3) 

 

 

0

 

 

$

.001

 

 

01/01/2017

 

 

01/01/2021

Wayne Marx

 

 

500,000

 

 

 

 

0

 

 

$

.001

 

 

01/01/2017

 

 

01/01/2021

Mikael Mildebrandt

 

 

1,000,000

 

(4) 

 

 

8

 

 

$

.001

 

 

11/01/2019

 

 

11/01/2013

Adrian Balinski

 

 

1,000,000

 

(4) 

 

 

8

 

 

$

.001

 

 

11/01/2019

 

 

11/01/2023

Outstanding Equity Awards After Fiscal Year-End (1)

Name

 

Number of securities underlying unexercised

options exercisable (1)(5)

   

Number of securities underlying unexercised

options un-exercisable (2)

  

Option Exercise Price ($)

 

Option Grant Date

 

Option Expiration Date

Michael Mildebrandt

  3,704 (3)(4)  8  $.001 

11/01/2019

 

11/01/2023

Adrian Balinski

  3,704 (3)(4)  8  $.001 

11/01/2019

 

11/01/2023

 

(1)

No7,408 shares were issued for Equity Awards were issued during the year ended December 31, 2019 or during the six months ended September 30, 2020.2019.

(2)

All options vest 20% per year beginning on the first anniversary of their grant date.

(3)

This option was terminated when Mr. O’Dowd resigned from the Company in October 2019.

(4)

Messrs. Mildebrandt and Balinski were each awarded 1,000,0003,704 shares of restricted common stock as of October 31, 2019,2020, for being officers and directors of the Company.

(4)

(5)

Messers.Mr. Mildebrandt and Mr. Balinski have resigned as officers and directors.

(5)

Mr. Charles O’Dowd, former president of ABCO, resigned on October 7, 2019. All options previously issued to Mr. O’Dowd expired on January 1, 2021 and none were exercised at any time.

 

An aggregate of 2,120,0007,408 stock awards are outstanding under the Equity Incentive Plan as(“EIP”) at June 30, 2021. 

Effective January 9, 2021, the Company issued an aggregate of December 31, 2019.  The 620,0005,000,000 restricted common shares for services rendered, of the options are issuedwhich 500,000 were awarded to a consultant of the Company.Wayne Marx, an officer and Director, 3,500,000 shares to an LLC controlled by David Shorey, President, CEO and CFO, and 1,000,000 shares to an outside consultant.

Note 16 – Subsequent Events

 

On September 21, 2020,July 7,2021, Absaroka Communications Corp  (“ACC”) , a consultant to the Company and an affiliate of the President of the Company, converted 1,000,000 shares of Series B Convertible Rreferred Shares (“Series B Preferred”) into 10,000,000 shares of free-trading common shares. The Series B Preferred is by its terms convertible at the rate of one share of Series B Preferred for 10 shares of common stock.The conversion right was granted  for services rendered.

On July 19, 2021, the Company entered into an Equity Purchase Agreement with Oasis Capital, LLC, converted $15,493.25 of principala Puerto Rico limited liability company (“Investor”) pursuant to which Investor agreed to purchase up to $2,500,000 of the August 6, 2018 convertible note [“Note”] and received 109,724,630 shares. The remaining Note balance was $62,956.44 after this conversion.Company’s common stock at a price equal to 80% of the lowest traded price of the common stock during the five trading days immediately preceding the applicable purchase (“Put Shares”). In addition, the Company entered into a Registration Rights Agreement with Investor pursuant to which the Company agreed to register all Put Shares acquired under the Equity Purchase Agreement. The Company did not receive any proceeds from this conversion. Prior to filing this report, Oasis converted the balance of the note to shares.

On May 29, 2020, Power Up notified the Company that it was in default under the terms of its Convertible Promissory Note dated September 11, 2019 for failureagreed to file this Form 10Ka new registration statement on a timely basis and thereby becoming a non-reporting company underor before August 18, 2021 to register for resale the 1934 Exchange Act. Demand for immediate payment of $98,250 plus accrued interest and accrued default interest was also made.Put Shares. The Company is currently considering its options as to how to respond/proceed with respect thereto.In September 2020, Power Up withdrew its default notice after the Company became current in its filings under the 1934 Exchange ActRegistration Statement must be effective with the SEC.SEC before Investor is obligated to purchase any Put Shares.

 

20

 

Item2.     MANAGEMENT’SMANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

RESULTS OF OPERATIONS OVERVIEW

FOR THE THREE MONTHS ENDED SEPTEMBERJUNE 30, 2020 COMPARED TO THREE MONTHS ENDED SEPTEMBER2021

AND JUNE 30, 2019.2020

 

Our discussion of operating results for the three months ended SeptemberJune 30, 20202021 and September 30, 20192020 are presented below with major category details of revenuerevenues and expenseexpenses including the components of operating expenses.

Sales consist of photovoltaic products, electrical services and LED lighting products and installation during both periods for the three months ended September 30, 2020 and for the three months ended September 30, 2019.periods.

 

Sales for the three months ended SeptemberJune 30, 2021 and 2020 were $246,102 as compared to $512,988 for the same three months in 2019.$432,673 and $207,239, respectively.  This is a decreasean increase of $266886$225,434 or 52%109% of the 20192020 sales. The Solar sales revenue in 20202021 and 20192020 reflected seasonal and changing market conditions in the financing of solar installations.installations in the Arizona markets and the effects of the COVID-19 Pandemic.  ABCO has increased their efforts to sell into the commercial markets and increasedbegun its focus on commercial sales in 2017 and has been able to grow every period since that decision. ABCO has worked diligently to overcome the financial requirementsutility changes by focusing on commercial applications and the increased interest of nonprofit organization’s financing requirements during the 2020 period. The results of these changesbusiness and efforts have begun to materialize and are showngovernment in the results of operations.LED lighting contracts.

 

Cost of sales for the three months ended June 30, 2021 and 2020 was 114%$159,297 and $220,150, respectively, and 37% and 106% of revenues in 2020 and 63% of revenues in 2019.sales for each period then ended.  Gross margins were (14) %63% of revenue in 2020for the first three months ended June 30,2021 and 36 (6)% of revenue for the three months of 2019.ended June 30, 2020.  During 20202021 and 20192020 we have been offering new products and have found our entry market prices for steel parking structures have added gross margins higher than usual because we use outside contractors for the entire projects.  Our gross profit reflects this decision.  We feel that we have made progress in entering the parking shade markets and that our gross margins will stabilize as growth lowers these margins in the future.

 

Total selling, general and administrative expenses were 77%$186,296 or 43% of revenues in 2020during the three months ended June 30, 2021 and 40%$305,231 or 147% of revenues for the same period in 2019.three months ended June 30, 2020, respectively.  Net lossincome from operations for the three-month period ended SeptemberJune 30, 20202021 was $(427,957)$44,518 as compared to thea net loss $(116,876)of $(18,431) for the same three-month period ended SeptemberJune 30, 2019.2020, respectively.  Our operating expenses for thisthe three months ending June 30, 2021 period were lower by $16,647 than$118,305 over the comparative period in 2019.2020. The interest expense during the periodthree months ended SeptemberJune 30, 2020 were lower2021 increased by $84,035 than in$4,510 over the period ended SeptemberJune 30, 20192020 due mostly to the working capital provisionlack of merchantnew convertible loans and convertible debt being borrowed and funds utilizedduring this period where accounting treatment requires the recording of prepaid interest during the first phase of the loan and because no newof higher loans were taken out in 2020 that carry upfront fees..from related parties.  This combination of factors increased the net loss by $(311,081) duringresulted in a profit for the three months ended SeptemberJune 30, 20202021 to $44,518 as compared to a loss of $(18,431) for the three months ended SeptemberJune 30, 2019.  Since our year to date revenues are lower than the previous year, this resulted2020, respectively. 

As noted in lower operating expenses as a percentage of total revenue.

previously, ABCO could not finish its backlog of work and expand into the markets of LED lights and commercial solar markets without maintaining staff, facilities and sales expenses.  When sales revenues fall, and expenses are not reduced in equal amounts or percentages,proportionately, the result is an increase of the percentage ofin operating expenses proportionate to revenue.  Operating expenses for the two periods increased to accommodate our expansion of sales revenue.programs, but not in the same ratio as the increase in sales. ABCO chose to maintain a level of expenses that would not cripplesignificantly impact the Company’s performance in the future.

 

NINERESULTS OF OPERATIONS OVERVIEW

FOR THE SIX MONTHS ENDED SEPTEMBERJUNE 30, 2021

AND JUNE 30, 2020 COMPARED TO NINE MONTHS ENDED SEPTEMBER 20, 2019.

 

Our discussion of operating results for the ninesix months ended SeptemberJune 30, 20202021 and September 30, 20192020 are presented below with major category details of revenuerevenues and expenseexpenses including the components of operating expenses.

Sales consist of photovoltaic products, electrical services and LED lighting products and installation during the nine months ended September 30, 2020 and for the nine months ended September 30, 2019.both periods.

 

Sales for the ninesix months ended SeptemberJune 30, 2021 and 2020 were $768,133 as compared to $1,626,614 for the same nine months in 2019.$768,399 and $522,031, respectively.  This is a decreasean increase of $858,481$246,368 or 53%47% of the 20192020 sales. The Solar sales revenue in 20202021 and 20192020 reflected seasonal and changing market conditions in the financing of solar installations and competition from the public utilities in the Arizona markets.markets and the effects of the COVID-19 Pandemic.  ABCO beganhas begun its focus on commercial sales in 20182017 and has had success in the commercial market.been able to grow every period since that decision. ABCO has worked diligently to overcome the utility changes by focusing on commercial applications and the increased interest of business and government in the LED lighting contracts.

 

21

 

Cost of sales for the six months ended June 30, 2021 and 2020 was $715,739 or 93%$453,439 and $434,320, respectively, and 59% and 83% of revenues in 2020 and $1,004,252 or 62% of revenues in 2019.sales for each period then ended.  Gross margins were 7% of revenue in 2020 and 38%41% of revenue for the ninefirst six months ended June 30, 2021 and 17% of 2019.revenue for the six months ended June 30, 2020.  During 20202021 and 20192020 we have been offering new products and have found our entry market prices for steel parking structures have added gross margins higher than usual because we use outside contractors for the entire projects.  Our gross profit reflects this decision.  We feel that we have made progress in entering the parking shade markets and that our gross margins will stabilize as growth lowers these margins in the future.

 

Total selling, general and administrative expenses were $655,269$353,090 or 85%46% of revenues in 2020during the six months ended June 30, 2021 and $708,372$465,410 or 44%89% of revenues for the same period in 2019.six months ended June 30, 2020, respectively.  Net (loss) incomeloss from operations for the nine-monthsix month period ended SeptemberJune 30, 20202021 was $(799,162)$(49,183) as compared to thea net loss of $(712,635)$(371,205) for the same ninesix month period ended SeptemberJune 30, 2019.2020, respectively.  Our operating expenses for thisthe six months ending June 30, 2021 period were lower by $53,103 than$112,320 over the comparative period in 2019.2020. The interest expense during the periodthree months ended SeptemberJune 30, 2020 was lower2021 increased by $173,341 than in$14,474 over the period ended SeptemberJune 30, 20192020 due mostly to the increase in working capital throughlack of new merchantconvertible loans and derivatives on convertible debt.  Derivative liabilitiesduring this period where accounting treatment requires the recording of convertible debentures were $0prepaid interest during the current period as compared tofirst phase of the prior year.loan and because of higher loans from related parties.  This combination of factors increaseddecreased the loss for the period ending Septembersix months ended June 30, 20202021 to $(799,162)$(49,183) as compared to $(712,635)$(371,205) for the ninesix months ended SeptemberJune 30, 2019.2020, respectively

 

As noted in previous paragraphs discussing market conditions,previously, ABCO could not finish its backlog of work and expand into the markets of LED lights and commercial solar markets without maintaining staff, facilities and sales expenses.  When sales revenues fall, and expenses are not reduced in equal amounts or percentages,proportionately, the result is an increase of the percentage ofin operating expenses proportionate to sales revenue.  Operating expenses for the two periods increased to accommodate our expansion of sales programs, but not in the same ratio as the increase in sales. ABCO chose to maintain a level of expenses that would not cripplesignificantly impact the Company’s performance in the future.

 

STATEMENTS OF CASH FLOWS FOR THE NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20202021 AND 20192020

 

During the ninesix months ended SeptemberJune 30, 20202021 our net cash used in operating activities was $(116,093) and comparatively the net cash used by operating activities was $(242,350) and comparatively the net cash provided by operating activities in the ninesix months ended SeptemberJune 30, 20192020 was $(78,518).$13,596.  Net cash used by operating activities in the period ended SeptemberJune 30, 20202021 consisted primarily of net losses from operations and derivative valuations of $(103,320)$(49,183) for 20202021 as compared to a loss of $(335,352)$(371,205) for 2019.2020.  Depreciation adjustments were of non-cash expenses were $6,593$11,673 and $7,915$11,740 for each period, respectively. Derivative portion of convertible debt accounted for charges to income for future changes in value of the underlying stock in the amount of $(143,946)$49,623 for the period ended SeptemberJune 30, 2020.  None of this expense will be realized if this debt is retired before maturity.2021.  The Company experienced a decrease in accounts payableAccounts Payable and accrued liabilities of $6,861$41,782 and an$112,751 for each period, respectively.  The increase of $28,398 for the nine months period in 2019.  This is primarily due to the Company’s better standing with creditors and increased ability to pay debts. Cashapply cash receipts from investors and operations are being used to pay past and current creditors duringat the end of each period.period, respectively. Accounts receivable decreaseReceivable decreased by $432,391,$113,792, net of adjustments for contracts in process, during the period ended SeptemberJune 30, 20202021 due to contract started last year and finished rapid increases in contracts at the end of the period.compared to June 30, 2020, respectively.

 

Net cash used and provided forby or (used for) investing activities for the periodssix months ended SeptemberJune 30, 2021 and 2020 was $1,608 and 2019 was $(10,129) and $4,245$(8,765) respectively due to receipt of principal on leases paid or terminated and equipment sales and acquisitions.

 

Net cash provided by financing activities for the periodssix months ended SeptemberJune 30, 2021 and 2020 was $228654 and 2019 was $150,246 and $119,075$120,230, respectively. Net cash provided by financing activities resulted primarily from the sale of common stock,Common Stock, loans from a financial institution and loans from a Director, Officer and affiliates. Cash provided by financing activities during the periods ended September 30, 2020 were primarily from the sale of common stock and loans from financial institutions.Directors. Any future conversions will increase the number of shares outstanding and the Stockholders Equity by the amount of the original investment. Management intends to retire some of these notes before maturity.

 

LIQUIDITY AND CAPITAL RESOURCES

 

Our primary liquidity and capital requirements have been for carrying cost of accounts receivable after completion of contracts.  The industry habituallytypically requires the solar contractorcontractors to wait for the utility approval in order to be paid for the contracts. This process can easily exceed 90 days and sometimes requires the Company as the contractor to pay all or most of the cost of the projectprojects without assistance from suppliers. Our working capital deficit at SeptemberJune 30, 20202021 was $(1,854,620)$(1,165,479) and it was $(1,558,100)$(1,509,716) at December 31, 2019.2020.  This increasedecrease of $296,520$344,237 was primarily due to lossesgains from conversion of debt from current to long term or discounting the debt on payoff. Also, the decrease is caused by reductions in debt overall from $1,926,206 at December 31, 2020 to $1,482,862 at June 30, 2021. Losses from operations during the six months ended June 30, 2021 also decreased from $(49,183) to $(371,205) for the same period ended SeptemberJune 30, 2020 and adjustments for possible future losses on derivative conversions.2020. Bank financing has not been available to the Company, but we have been able to increase our credit lines with our suppliers because of good credit.  There are no material covenants on our credit lines, normally due in 30 days since they are standard in the industry and the balances vary on a daily basis.daily. Most are personally guaranteed by the OfficerCEO of the Company.

 

22

 

The total borrowed from Directors Affiliates and officers totaled $323,258$303,194 plus accrued interest of $119,811 as of September$112,993 at June 30, 2020.2021. There are no existing agreements or arrangement with any Director to provide additional funds to the Company.

 

During the ninesix and twelve months period ended SeptemberJune 30, 2020 or the last fiscal year ended2021 and December 31, 20192020 there were no transactions, or proposed transactions, which have materially affected or will materially affect the Company in which any director, executive officer, or beneficial holder of more than 5% of the outstanding common, or any of their respective relatives, spouses, associates, or affiliates, has had or will have any direct or material indirect interest. We have no policy regarding entering into transactions with affiliated parties.

 

PLAN OF OPERATIONS

 

Based on our current financial position, we cannot anticipate whether we will have sufficient working capital to sustain operations for the next year if we do not raise additional capital.  We will not, however, be able to reach our goals and projections for multistate expansion without a cash infusion.   We have been able to raise sufficient capital through the sale of our common shares and we have incurred substantial increases in debt from our trade creditors in the normal course of business.   Management will not expand the business until adequate working capital is provided.  Our ability to maintain sufficient liquidity is dependent on our ability to attain profitable operations or to raise additional capital. We have no anticipated timeline for obtaining neither additional financing nor the expansion of our business.  We will continue to keep our expenses as low as possible and keep our operations in line with available working capital as long as possible.  There is no guarantee that the Company will be able to obtain adequate capital from any sources, or at all.

 

23

Item 3.Quantitative and Qualitative Disclosures about Market Risk

 

Not Applicable to Smaller Reporting Companies.

Item 4.Controls and Procedures

 

(a) Evaluation of Disclosure Controls and Procedures.

 

As of the end of the reporting period, SeptemberJune 30, 2020,2021, we carried out an evaluation, under the supervision and with the participation of our management, including the Company’s Chairman and Chief Executive Officer/Principal Accounting Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”), which disclosure controls and procedures are designed to insure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within required time periods specified by the SEC’s rules and forms. Based upon that evaluation, the Chairman/CEO and the Chief Financial Officer concluded that our disclosure controls and procedures are not currently effective in timely alerting them to material information relating to the Company required to be included in the Company’s period SEC filings. The Company is attempting to expand such controls and procedures, however, due to a limited number of resources the complete segregation of duties is not currently in place.

 

(b) Changes in Internal Control.

 

Subsequent to the date of such evaluation as described in subparagraph (a) above, there were no changes in our internal controls or other factors that could significantly affect these controls, including any corrective action with regard to significant deficiencies and material weaknesses.

 

(c) Limitations.

 

Our management, including our Principal Executive Officer and Principal Financial Officer, does not expect that our disclosure controls or internal controls over financial reporting will prevent all errors or all instances of fraud. However, we believe that our disclosure controls and procedures are designed to provide reasonable assurance of achieving this objective. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and any design may not succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitation of a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

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PART II-OTHER INFORMATION

Item 1.Legal Proceedings

 

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, consolidated financial condition, or operating results.

Item 1A.Risk Factors

 

Not Applicable.

Item 2.Unregistered Sale of Equity Securities and Use of Proceeds

 

None

Item 3.Defaults upon Senior Securities

 

None

Item 4.Mine Safety Disclosures.

 

Not Applicable.

Item 5.Other Information

 

Not Applicable.

 

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Item 6. Exhibits

 

Exhibit No.

Description of Exhibit

3(i)

Articles of Incorporation, as amended (1)

3(ii)

By-Laws (1)

10(a)

Share Exchange Agreement dated July 15, 2011By-Laws (1)

10(b)

8% of12% $40,000 Convertible Note dated March 16, 2016 (3)(4)

10(c)

12%8% $25,000 Convertible Note dated March 23, 2016 (3)(4)

10(d)

10% $55,000 Convertible Note dated April 1, 2016 (4)(5)

10(e)

5% $42,000 Convertible Note dated April 5, 2016 (4)(5)

10(f)

10% $40,000 Convertible Note dated May 3, 2016 (4)(5)

10(g)

8% $30,000 Convertible Note dated May 6, 2016 (4)

10(h)

Knight Capital Future Receivables Sales Agreement dated August 8, 2019 (2)(5)

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Subsidiaries of Registrant (1)

31.1

Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 906302 of the Sarbanes-Oxley Act of 2002. (5)(2)

31.2

CertificationsCertification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 906302 of the Sarbanes-Oxley Act of 2002. (5)(2)

32.1

CertificationCertifications 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. (5)(2)

32.2

Certifications of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (5)(2)

99.1

Engagement Agreement between Adams Fund LLC and ABCO Energy, Inc., dated September 15, 2015 (3)

99.2

Secured Promissory Note dated April 1, 2021 in favor of an affiliate of the Registrant’s President (6)

99.3

SBA Letter of Forgiveness of the 7/21/2020 SBA Guaranteed Note to The Bank of America (6)

101 INS

Inline XBRL Instance Document

101 SCH

Inline XBRL Taxonomy Extension Schema Document

101 CAL

Inline XBRL Taxonomy Calculation Linkbase Document

101 DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101 LAB

Inline XBRL Taxonomy Labels Linkbase Document

101 PRE

Inline XBRL Taxonomy PresentationLabels Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

(1)

Previously filed with the Company’s Form 1010-12G, SEC File No. 000-55235 filed on July 1, 2014, and incorporated herein by this reference as an exhibit to this Form 10-Q.10-K.

(2)

Attached.

(3)

Previously filed with the Company’s Form 10-Q8-K filed with the Commission on August 19, 2019September 17, 2015, and incorporated herein by this reference.reference as an exhibit to this Form 10-K.

(3)(4)

Previously filed with the Company’s Form 10-K, File No. 000-55235, filed with the Commission on April 11, 2016 and incorporated herein by this reference.

(4)(5)

Previously filed with the Company’s Form 10-Q, File No. 000-55235, filed with the Commission on May 20, 2016 and incorporatedincorporate herein by this reference.

(5)(6)

Attached.Previously filed with the Company Form 10-K, File No. 000-55235, filed with the Commission on April 15, 2021 and incorporated herein by this reference.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report or amendment thereto to be signed on its behalf by the undersigned thereunto duly authorized.

 

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

NovemberAugust 23, 20202021

 

ABCO ENERGY, INC

/s/ David Shorey

David Shorey

Title: Acting President and &

Chief Executive Officer (CEO)

/s/ David Shorey

David Shorey

Acting Chief Financial Officer (CFO)

Acting Principal Accounting Officer (PAO)

 

 

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