As Filed with the Securities and Exchange Commission on Aug 19, 2019



File No:  000-55235

United States

Securities 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 JUNE 3 0 , 2019

 

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

 

For the transition period from _____to_____ 

Commission file number: 000-55235

 

ABCO ENERGY, INC.

 (Name of registrant as specified in its Charter)

 

Nevada

46-5342309

(State of Incorporation)

(IRS Employer Identification No.)

 

2100 North Wilmot #211, Tucson, AZ

85712

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code:

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

OTCQB

 

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 August 19, 2019, we had 63,392,630 shares of common stock issued and outstanding. 

 

 

 

T ABLE 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

20

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

23

 

 

Item 4. Controls and Procedures

23

 

 

PART II. OTHER INFORMATION

 

 

 

Item 1. Legal Proceedings

24

 

 

Item 1A. Risk Factors

24

 

 

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

24

 

 

Item 3. Defaults upon Senior Securities

24

 

 

Item 4. Mine Safety Disclosures

24

 

 

Item 5. Other Information

24

 

 

Item 6. Exhibits

25

 

 

Signatures

26

 

 

 

PART 1 – FINANCIAL INFORMATION

 

 

Item 1.     Financial Statements

ABCO ENERGY, INC.

 

CONSOLIDATED FINANCIAL STATEMENTS

 

FOR THE SIX MONTHS ENDED

 

JUNE 30, 2019

 

Consolidated Balance Sheets: As of June 30, 2019 (Unaudited), and as of December 31, 2018 (Audited)

4

 

 

Consolidated Statements of Operations: For the Three Months Ended June 30, 2019 and June 30, 2018 and for the Six months ended June 30, 2019 and June 30, 2018(Unaudited)

5

 

 

Consolidated Statement of Shareholders Equity for the Six Months Ended June 30, 2019 and for the Year Ended December 31, 2018 (Unaudited)

6

 

 

Consolidated Statements of Cash Flows: For the Six Months Ended June 30, 2019 and June 30, 2018 (Unaudited)

7

 

 

Notes to the Consolidated Financial Statements (Unaudited)

8

 

 

 

ABCO ENERGY, INC.

CONSOLIDATED BALANCE SHEETS

 

ASSETS

 

June 30, 2019

Unaudited

 

 

December 31, 2018

Audited

 

Current Assets

 

 

 

 

 

 

 

 

Cash

 

$

55,625

 

 

$

67,707

 

Accounts receivable on completed projects

 

 

140,811

 

 

 

105,187

 

Costs and estimated earnings on contracts in progress

 

 

52,829

 

 

 

184,212

 

Inventory

 

 

61,997

 

 

 

53,950

 

Prepaid expenses and discounts on debt

 

 

32,445

 

 

 

 

 

Total Current Assets

 

$

343,707

 

 

$

411,056

 

Fixed Assets

 

 

 

 

 

 

 

 

Vehicles, office furniture & equipment – net of accumulated depreciation

 

 

32,172

 

 

 

36,538

 

Other Assets

 

 

 

 

 

 

 

 

Investment in long term leases

 

 

4,234

 

 

 

10,512

 

Security deposits

 

 

2,700

 

 

 

2,700

 

Total Other Assets

 

 

6,934

 

 

 

13,212

 

Total Assets

 

$

382,813

 

 

$

460,806

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

376,558

 

 

$

549,611

 

Excess billing on contracts in progress

 

 

303,317

 

 

 

85,777

 

Convertible note payable, net

 

 

196,817

 

 

 

189,680

 

Derivative liability on convertible debentures

 

 

-

 

 

 

74,848

 

Notes payable – merchant loans

 

 

48,711

 

 

 

53,362

 

Note payable – non-affiliate

 

 

40,301

 

 

 

49,563

 

Notes payable – related parties

 

 

188,054

 

 

 

169,549

 

Current portion of long term debt

 

 

7,582

 

 

 

7,628

 

Total Current Liabilities

 

 

1,161,340

 

 

 

1,180,018

 

 

 

 

 

 

 

 

 

 

         Long term debt, net of current portion

 

 

15,066

 

 

 

18,670

 

Total Liabilities

 

 

1,176,406

 

 

 

1,198,688

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

0

 

 

 

0

 

 

 

 

 

 

 

 

 

 

Stockholders’ Deficit:

 

 

 

 

 

 

 

 

Preferred stock , 100,000,000 shares authorized, $0.001 par value, and 30,000,000 shares issued and outstanding at June 30, 2019 and 30,000,000 at December 31, 2018.

 

 

30,000

 

 

 

30,000

 

Common stock  5,000,000,000 shares authorized, $0.001 value, and 63,392,630 Issued and outstanding at June 30, 2019 and 32,756,289 outstanding at December 31, 2018, respectively.

 

 

63,393

 

 

 

31,886

 

Common shares sold not issued -0- at June 30, 2019 and 870,000 at December 31, 2018

 

 

0

 

 

 

870

 

Additional paid-in capital

 

 

4,889,205

 

 

 

4,379,793

 

Accumulated deficit

 

 

(5,776,191

)

 

 

(5,180,431

 

Total Stockholders’ Deficit

 

 

(793,593

)

 

 

(737,882

)

Total Liabilities and Stockholders’ Deficit

 

$

382,813

 

 

$

460,806

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

 

ABCO ENERGY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 3 0 , 2019 AND 2018

(UNAUDITED)

 

 

 

For the Three Months Ended

 

 

For the Six Months Ended

 

 

 

JUNE 30, 2019

 

 

JUNE 30, 2018

 

 

JUNE 30, 2019

 

 

JUNE 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

459,616

 

 

$

558,726

 

 

$

1,113,626

 

 

$

1,081,021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of Sales

 

 

268,662

 

 

 

417,882

 

 

 

678,886

 

 

 

746,260

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

190,954

 

 

 

140,844

 

 

 

434,740

 

 

 

334,761

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payroll

 

 

133,272

 

 

 

73,023

 

 

 

213,589

 

 

 

143,710

 

Payroll taxes

 

 

14,652

 

 

 

35,671

 

 

 

34,188

 

 

 

37,076

 

Consulting

 

 

12,413

 

 

 

31,231

 

 

 

24,537

 

 

 

33,699

 

Professional fees

 

 

44,315

 

 

 

46,765

 

 

 

75,432

 

 

 

52,945

 

Rent

 

 

9,194

 

 

 

9,833

 

 

 

17,775

 

 

 

18,945

 

Insurance

 

 

19,111

 

 

 

8,839

 

 

 

36,888

 

 

 

16,824

 

Other selling and administrative expenses

 

 

7,848

 

 

 

49,581

 

 

 

99,457

 

 

 

111,680

 

Total operating expense

 

 

240,805

 

 

 

254,943

 

 

 

501,866

 

 

 

414,879

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (Loss) from operations

 

 

(49,851

)

 

 

(114,099

)

 

 

(67,126

)

 

 

(80,118

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on notes payable

 

 

(27,074

)

 

 

(28,272

)

 

 

(105,988

)

 

 

(36,746

)

Loss on note issuance derivatives

 

 

 

 

 

 

(36,230

)

 

 

 

 

 

 

(36,230

)

Change in Derivative Gain (Loss)

 

 

-

 

 

 

74,905

 

 

 

(177,934

)

 

 

63,793

 

Finance Fees – derivatives

 

 

 

 

 

 

(118,577

)

 

 

 

 

 

 

(125,384

)

Derivative amortization - interest expense

 

 

 

 

 

 

(38,953

)

 

 

 

 

 

 

(38,953

Gain (Loss) on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

(244,712

)

 

 

39,355

 

Total other expenses

 

 

(27,074

)

 

 

(147,127

)

 

 

(528,634

)

 

 

(134,165

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (Loss) before provision for income taxes

 

 

(76,925

)

 

 

(261,226

)

 

 

(595,760

)

 

 

(214,283

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(76,925

)

 

$

(261,226

)

 

$

(595,760

)

 

$

(214,283

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

(.00

)

 

$

(.01

)

 

$

(.01

)

 

$

(.01

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares used in the calculation

 

 

47,817,667

 

 

 

27,852,317

 

 

 

48,074,460

 

 

 

25,961,483

 

 

See accompanying notes to the consolidated financial statements.

 

 

ABCO ENERGY, INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY

FOR THE SIX MONTHS ENDED JUNE 30 , 2019

AND FOR THE YEAR ENDED DECEMBER 31, 2018

(UNAUDITED)

 

   

Shares

   

Par amount

   

Preferred stock

   

APIC

   

Acc. Deficit

   

Total stockholders' deficit

 
                                                 
                                                 

Balance as of December 31, 2017

    6,349,909       6,350       15,000       3,379,536       (4,540,163 )     (1,139,277 )
                                                 

Shares issued under Regulation S – net of expenses

    7,080,100       7,080               441,919               448,999  
                                                 

Net loss for period ended June 30, 2018

                                    (214,283 )     (214,283 )
                                                 

Balance as of June 30, 2018

    13,430,009       13,430       15,000       3,821,455       (4,754,446 )     (904,561 )

 

   

Shares

   

Par amount

   

Preferred stock

   

APIC

   

Acc. Deficit

   

Total stockholders' deficit

 
                                                 

Balance as of December 31, 2018

    32,756,289       32,756       30,000       4,379,793       (5,180,431 )     (737,882 )
                                                 

Shares issued under Regulation S – Net of expenses

    4,740,000       4,740               43,493               48,233  
                                                 

Shares issued for CNP-Preferred series C

    20,451,633       20,452               28,228               48,680  
                                                 

Derivative liability converted

                            405,591               405,591  
                                                 

Shares issued

    4,444,708       4,445               28,000               32,445  
                                                 

Shares issued

    1,000,000       1,000               4,100               5,100  
                                                 

Net loss for period ended June 30, 2019

                                    (595,760 )     (595,760 )
                                                 

Balance as of June 30, 2019

    63,392,630       63,393       30,000       4,889,205       (5,776,191 )     (793,593 )

 

See accompanying notes to the consolidated financial statements.  

 

 

ABCO ENERGY, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30 , 2019 AND 2018

(UNAUDITED)

 

   

June 30,

   

June 30,

 
   

2019

   

2018

 

Cash Flows from Operating Activities:

               

Net income (loss)

  $ (595,760

)

  $ (214,283

)

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

               

Depreciation

    5,290       8,120  

Inventory change

    (8,046

)

    (577

)

Change in amortizable debt discount

    28,706       38,953  

Gain on derivative conversion

            36,230  

Change in derivative liability

    177,934          

Gain or loss on extinguishment of debt

    244,712       (39,355

)

Change in convertible debentures

            (61,590 )

Changes in Accounts receivable

    95,759       (461,328

)

Billings in excess of costs on incomplete projects

    217,540       448,246  

Accounts payable and accrued expenses

    (264,958

)

    (67,032 )

Net cash used in operating activities

    (98,823

)

    (312,616

)

                 

Cash flows from investing activities

               

Equipment purchased

    (924

)

    (2,436 )

Proceeds from investments in long term leases

    6,278       245  

Net cash provided by (used for) investing activities

    5,354       (2,191 )
                 

Cash Flows from Financing Activities:

               

Proceeds from sale of common stock – net of expenses

    53,335       282,110  

Proceeds of related party notes payable

    18,505       (11,439

)

Proceeds from financial institution loans

            110,000  

Payments on long term debt

    (142,601

)

    (63,350

)

Payments on merchant notes

    (4,652

)

       

Payments on preferred stock Series C

    (141,000

)

       

Proceeds from convertible note payable

    193,300          

Proceeds from loans non-affiliate

    104,500          

Net cash provided by financing activities

    81,387       317,321  
                 

Net increase (decrease) in cash

    (12,082

)

    2,514  

Cash, beginning of period

    67,707       5,046  

Cash, end of period

  $ 55,625     $ 7,560  

 

 

Supplemental disclosures of cash flow information:

Cash paid for interest

  $ 105,988     $ 15,281  

Income taxes paid or accrued

  $ -     $ -  

 

See accompanying notes to the consolidated financial statements.

 

 

ABCO ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MO NTHS ENDED JUNE 30 , 2019 AND DECEMBER 31, 2018

(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.

 

OVERALL STRATEGIC DIRECTION

 

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, and is an electrical product and services supplier.   The Company plans to build out a network of operations in major cities in the USA to establish a national base of PV suppliers , lighting suppliers and electrical service operations centers.  This combination of services, solar and electric, provides the Company with a solid base in the standard electrical services business and a solid base in the growth markets of solar systems industry.

 

OVERVIEW

 

As of the date of this report, ABCO Energy operated in Tucson and Phoenix, Arizona.  The Company plan is to expand to more locations in North America in the next year as funding becomes available. We believe that the solar and energy efficiency business functions better if the employees are local individuals working and selling in their own community. Our customers have indicated a preference for dealing with local firms and we will continue our focus on company-owned integrated product and services offices. Once a local firm is established, growth tends to come from experience, quality and name recognition. We remain committed to high quality operations.

 

DESCRIPTION OF PRODUCTS

 

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

 

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

 

 

ABCO has Arizona statewide approval as a registered electrical services and solar products installer 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 services, HVAC and solar. 

 

The ABCO subsidiary, Alternative Energy Finance Corporation (AEFC), a Wyoming company provides funding for leases of photovoltaic and HVAC systems.  AEFC financed its owned leases from its own cash and now arranges financing with funds provided by other lessors.  

 

Note 2 – Summary of significant accounting policies

 

Critical Accounting Policies and Use of Estimates

 

These financial statements consist of the consolidated financial positions and results of operations of both the parent, ABCO Energy, Inc. and the subsidiary companies.  In the opinion of Management, all adjustments necessary for a fair statement of results for the fiscal years presented have been included.  These financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) generally accepted in the United States of America.

 

GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets. On an on-going basis, the Company evaluates its estimates and judgments, including those related to revenue recognition, inventories, adequacy of allowances for doubtful accounts, valuation of long-lived assets, income taxes, equity-based compensation, litigation and warranties.  The Company bases its estimates on historical and anticipated results and trends and on various other assumptions that the Company believes are reasonable under the circumstances, including assumptions as to future events.

 

Significant estimates include but are not limited to the estimated useful lives of equipment for purposes of depreciation, percentage of completion and the valuation of common and preferred shares issued for services, equipment and the liquidation of liabilities

 

The policies discussed below are considered by management to be critical to an understanding of the Company’s financial statements.  These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  By their nature, estimates are subject to an inherent degree of uncertainty.  Actual results may differ from those estimates.

 

C ash and Cash Equivalents

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

 

Property and Equipment

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

 

Revenue Recognition

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

 

Sales Product and Services Description

 

June 3 0 , 2019

   

June 3 0 , 2018

 

Solar PV residential and commercial sales

  $ 1,086,010       98

%

  $ 910,284       84

%

Energy efficient lighting & other income

    27,168       2

%

    169,701       15

%

Interest Income

    448       -

%

    496       1

%

 Total revenue

  $ 1,113,626       100

%

  $ 1,081,021       100

%

 

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

 

 

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

 

Accounts Receivable and work-in-progress

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

 

Inventory

The Company records inventory of construction supplies at cost using the first in first out method.  After review of the inventory on an annual basis, the Company discounts all obsolete items to fair market value and has established a valuation reserve of 10% of the inventory at total cost to account for obsolescence.

 

Income Taxes

The Company has net operating loss carryforwards as of December 31, 2018 totaling approximately $4,191,760.  Accrued derivative liabilities and stock-based compensation are assumed to be non-tax events. A deferred 21% tax benefit of approximately $880,270 has been offset by a valuation allowance of the same amount as its realization is not assured.

 

Due to the current uncertainty of realizing the benefits of the tax NOL carry-forward, a valuation allowance equal to the tax benefits for the deferred taxes has not been established. The full realization of the tax benefit associated with the carry-forward depends predominately upon the Company’s ability to generate taxable income during future periods, which is not assured.

 

The Company files in the US only and is not subject to taxation in any foreign country.  There are three open years for which the Internal Revenue Service can examine our tax returns so 2015, 2016 and 2017 are still open years and 2018 will replace 2015 when the tax return is filed.

 

Fair Values of Financial Instruments

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

Derivative Financial Instruments

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

 

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

 

Stock-Based Compensation

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

 

Effects of Recently Issued Accounting Pronouncements

The Company has reviewed all recently issued accounting pronouncements noting that they do not affect the financial statements.

 

Per Share Computations

Basic net earnings per share are computed using the weighted-average number of common shares outstanding.  Diluted earnings per share is computed by dividing net income by the weighted-average number of common shares and the dilutive potential common shares outstanding during the period. All shares were considered anti-dilutive at December 31, 2018.  Potentially dilutive share issues are: 1) all unissued common shares sold, the convertible debentures are dilutive, 2) all convertible debentures have a possibility of a large number of shares being issued and would result in a larger number of shares issued if the price remains low, 3) the preferred stock of the company held by insiders is convertible into common shares and the preferred stock is voted on a 20 to 1 basis.  All of the above are potential dilutive items.

 

Reclassification

Certain reclassifications have been made to conform to prior periods’ data to the current presentation. These reclassifications had no effect on reported income.

 

Note 3 – Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. Since its inception, the Company has been engaged substantially in financing activities and developing its business plan and marketing.  The Company incurred a net loss of $(595,760), the net cash flow used in operations was $98,823 and its accumulated net losses from inception through the period ended June 30, 2019 is $5,776,191, which raises substantial doubt about the Company’s ability to continue as a going concern. In addition, the Company’s development activities since inception have been financially sustained through capital contributions from shareholders.

 

 

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

 

Note 4 – Warranties of the Company

 

ABCO Energy provides a five and ten year workmanship warranties for installed systems that cover labor and installation matters only.  All installed products are warranted by the manufacturer.  In the last four years of operations, all claims on workmanship have been handled expeditiously and inexpensively by the company.  Management does not consider the warranties as a significant or material risk and therefore there is no reserve.

 

Note 5 – Accounts Receivable and Work in Process

 

Accounts receivable as of June 30, 2019 and 2018, consists of the following:

 

Description

 

June 3 0 , 2019

   

December 31 , 2018

 

Accounts receivable on completed contracts

  $ 140,811     $ 105,187  

Costs and estimated earnings on contracts in progress

    52,829       184,212  

Total

  $ 193,640     $ 289,399  

 

Work in process consists of costs recorded and revenue earned on projects recognized on the percentage of completion method for work performed on contracts in progress at June 30, 2019 and 2018. The company records contracts for future payments based on contractual agreements entered into at the inception of construction contracts. Amounts are payable from customers based on milestones established in each contract. Amounts are billed in advance and unearned profits are netted against the billed amounts such that accounts receivable reflect current amounts due from customers on completed projects and amounts earned on projects in process are reflected in the balance sheet as costs and estimated earnings in excess of billings on contracts in progress.

 

Billings in excess of costs and earnings were $303,317 at June 30, 2019 and $85,777 at December 31, 2018.

 

Note 6 – Inventory

 

Inventory of construction supplies not yet charged to specific projects was $61,996 at June 30, 2019 and $53,950 as of December 31, 2018. The Company values items of inventory at the lower of cost or market and uses the first in first out method to charge costs to jobs. The Company has established a valuation reserve of 10% of the value of inventory after write downs for obsolescence.

 

Note 7 – Security deposits and Long Term Commitments

 

The Company has paid security deposits on the rented spaces it occupies for offices and warehouse which total $2,700 on June 30, 2019 and December 31, 2018.

 

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 a one year lease with monthly rent of $2,770 which was renewed on November 1, 2018 to a term of one year.  ABCO has a forward commitment of $11,081.

 

Note 8 – Alternative Energy Finance Corporation (AEFC)

 

AEFC is a wholly owned subsidiary of ABCO Energy.  AEFC provides funding for leases of photovoltaic systems and finances its own leases from its own cash.  Long term leases recorded on the consolidated financial statements were $4,234 at June 30, 2019 and $10,512 at December 31, 2018. During the quarter ended March 31, 2019 one of the leases paid in full as the owner’s property was sold.

 

 

Note 9 – Property and equipment

 

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

 

Asset

 

June 3 0 , 2019

   

December 31, 2018

 

Equipment

  $ 120,267     $ 119,343  

Accumulated depreciation

    (88,095

)

    (82,805

)

Net Fixed Assets

  $ 32,172     $ 36,538  

 

Depreciation expenses for the periods ended June 30, 2019 and June 30, 2018 was $5,290 and $8,120 respectively.

 

Note 10 – Notes Payable Officers and Related Party Transactions

 

Related party notes payable as of June 30, 2019 and December 31, 2018 consists of the following:

 

Description

 

June 30, 2019

   

December 31, 2018

 

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

  $ 60,000     $ 60,000  

Note payable - Officer bearing interest at 12% per annum, unsecured, demand note

    61,052       61,052  

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

    67,002       48,497  

Total

  $ 188,054     $ 169,549  

 

The first note in the amount of $60,000 provides for interest at 12% per annum and is unsecured.  This note resulted in an interest charge of $32,450 accrued and unpaid at June 30, 2019. 

 

The second note has a current balance of $61,052 as of June 30, 2019.  The note is an unsecured demand note and bears interest at 12% per annum. This note resulted in an interest charge of $23,694 accrued and unpaid at June 30, 2019.

 

The third note is from a related party and has a current balance of $67,002 as of June 30, 2019.  The note is an unsecured demand note and bears interest at 12% per annum. This note resulted in an accumulated interest charge of $22,663 accrued and unpaid at June 30, 2019. 

 

Note 11 – Short Term Notes Payable

 

Description

 

June 3 0 , 2019

   

December 31, 2018

 

Private money loan from Perfectly Green Corporation, borrowed 1-22-18, bearing interest at 3% per annum, unsecured (3) demand note-Original balance $60,000, current balance

  $ 40,301     $ 49,563  

Knight Capital Funding, LLC, borrowed 1-30-19, bearing interest at 23% per annum, unsecured

    48,711       -  

Total

  $ 89,012     $ 49,563  

  

(1) On January 22, 2018 the Company borrowed $60,000 from Perfectly Green Corporation, a Texas corporation.  The Company repaid $19,699 prior to June 30, 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.

 

(2) On January 30, 2019 the Company borrowed $153,092 including principal and interest from Knight Capital Funding, LLC, [“KCF”] bearing interest at 23% per annum, unsecured. The balance and accrued interest at June 30, 2019 was $48,711. This loan was paid in full on August 10,2019 and replaced with a new loan of $144,900 from KCF. See Note 14 below.

 

 

During May 2018, the Company authorized a Series C Preferred Stock and has sold three issuances for cash to Power Up Lending Group Ltd as shown in the table below. The Series C Preferred Stock has no voting rights and is subordinate to the Series B Preferred Stock. The Series C Preferred Stock is convertible into common stock after 6 months at the option of the Holder. The conversion into common stock shares is determined by the use of the lowest price of the trading common stock in a 20 day period prior to the elected date to convert. The price is determined by the discount rate of 35% of the lowest price to determine the number of shares. The Series C Preferred is classified as a liability on the Balance Sheet because it is mandatorily redeemable after its 15 month term if not fully converted by that date. The classification of this investment as a liability on the balance sheet will also require a calculation of a derivative liability on future statements.

 

Name of Holder

 

Date of issuance

 

 

Date of maturity

 

 

Amount of issuance

 

Power Up Lending Group, LTD

 

 

5-7-18

 

 

 

11-7-18

 

 

$

78,000

 

Power Up Lending Group, LTD

 

 

7-6-18

 

 

 

1-6-19

 

 

$

68,000

 

Power Up Lending Group, LTD

 

 

8-24-18

 

 

 

2-24-19

 

 

$

73,000

 

     Total amount sold

 

 

 

 

 

 

 

 

 

$

219,000

 

Conversions during 2018

 

 

 

 

 

 

 

 

 

 

29,320

 

Balance on Preferred Stock Series C liability at December 31, 2018

 

 

 

 

 

 

 

 

 

$

189,680

 

 

Effective as of September 2, 2018 Redstart Holdings Corp. (“RHC”) acquired from Power Up Lending Group Ltd., all of the $219,000 Series C Preferred Stock of ABCO Energy, Inc. owned by Power-Up for a one year promissory note from RHC for the principal amount of $328,500 plus interest at 8% per annum pursuant to a Stock Purchase Agreement dated October 31, 2018 (“SPA”). The Company agreed to the transactions contemplated by the SPA.

 

During the quarter ended March 31, 2019, the Company redeemed from Redstart 68,000 shares and 73,000 shares, respectively, of the Series C Preferred and retired these shares. Redstart converted all of the 78,000 Series C Preferred into common shares in 2018 and 2019. The balance of this note at June 30, 2019 was $-0- and it was $48,680 at December 31, 2018 all of which was converted into common shares during January 2019.

 

Note 12 – Long term debt

 

Holder

 

Date issued

 

 

Interest rate

 

 

Amount due June 3 0 , 2019

 

 

Amount due

December 31, 201 8

 

Ascentium Capital

 

 

10-1-18

 

 

 

13

%

 

$

12,778

 

 

$

14,285

 

Fredrick Donze

 

 

9-2-18

 

 

 

6

%

 

 

5,180

 

 

 

6,283

 

Charles O’Dowd (officer)

 

 

8-9-18

 

 

 

6

%

 

 

4,690

 

 

 

5,731

 

Total long term debt

 

 

 

 

 

 

 

 

 

 

22,648

 

 

 

26,298

 

Less Current portion

 

 

 

 

 

 

 

 

 

 

7,582

 

 

 

7,628

 

     Total long-term debt

 

 

 

 

 

 

 

 

 

$

15,066

 

 

$

18,670

 

 

ABCO acquired the assets of Dr. Fred Air Conditioning services on September 2, 2018 for the total price of $22,000. The allocation of the purchase price was to truck and equipment at $15,000 and the balance was allocated to inventory.  The truck and equipment were financed by Ascentium Capital.  Mr. Fred Donze, the owner, received a three year promissory note for the balance of $7,000 at 6% interest and with monthly payments of $213.

 

The Company purchased an automobile from its President with a promissory note in the amount of $6,575 dated August 9, 2018 and bears interest at 6% per annum for the three year payment plan.

 

Note 13 – Convertible Debt and Derivative Valuation

 

In accordance with the Statement of Financial Accounting Standard ASC 820-10-35-37 Fair Value in Financial Instruments, Statement of Financial Accounting Standard ASC 815 Accounting for Derivative Instruments and Hedging Activities require that instruments with embedded derivative features be valued at their market values.  The Company hired a valuation consultant to value the Convertible Debentures for the derivative portion of the instruments. The Binomial model was used to value the derivative liability for the fiscal year ending December 31, 2019 and December 31, 2018.

 

 

During the year ended December 31, 2018, the Company funded operations with borrowing on new convertible promissory notes and had other debentures due from 2017. This table presents the positions on the notes at June 30, 2019 and December 31, 2018.

 

Holder

 

Date

of Loan

   

Loan

amount

   

OID and

discounts

and fees

   

Interest

rate

   

Maturity Dates

   

Balance

June 30,

2019

 

Power Up Lending Group Ltd

    2-16-19     $ 68,000     $ 13,000       8

%

    8-16-19       68,000  

Power Up Lending Group Ltd

    3-18-19       68,000       13,300       8

%

    9-18-19       68,000  

Power Up Lending Group Ltd -

    5-13-19       83,000       13,300       8

%

    8-13-20       83,000  
                                              219,000  

Less non-amortized discounts

                                            22,182  

Totals and balances for 6-30-19

          $ 219,000     $ 39,300                     $ 196,818  

 

The initial valuation of the derivative liability on the converted common shares totaled $-0- at June 30, 2019 and $74,848, net of discount, at December 31, 2018 as calculated by consultants for the Company when all notes were issued, but before any conversions.  This value includes the fair value of the shares issued according to the contracts of the holders and valued according to our common share price at the time of acquisition. 

 

Note 14 – Convertible Debt and Derivative Liabilities on Other Notes

 

The Company, effective as of September 1, 2018, entered into an Equity Purchase Agreement with Oasis Capital, LLC, a Puerto Rico limited liability company (“Investor”) pursuant to which Investor agreed to purchase up to $5,000,000 of the Company’s common stock at a price equal to 85% of the market price at the time of purchase (“Put Shares”). The Company agreed to file a new registration statement to register for resale the Put Shares. The Registration Statement must be effective with the SEC before Investor is obligated to purchase any Put Shares. In addition, the Company [i] issued to Investor a one year $150,000 note (“Commitment Note”) which is convertible at 57 ½ %  of the lowest trading price for the 15 day trading period ending on the last trading date prior to the Conversion Date 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. No transaction occurred on this matter through March 31, 2019 and no derivative was calculated on the note because it was not yet mature. The Company issued 4,444,708 common shares to Oasis and the price of the shares was classified as a prepaid expense. In addition, Oasis acquired 1,000,000 shares of common stock and paid ABCO $5,100 in May of 2019 under the Registration Statement referred to in the next sentence. This note is not recorded as a liability on the balance sheet until Oasis provides services by purchasing shares under the Registration Statement. See Note 17 below on page 18 with respect to the filing on April 26, 2019 and the effectiveness on May 7, 2019, of a Form S-1 Registration Statement filed for the Put Shares.

 

The Company had entered into Securities Purchase Agreement with Blackbridge Capital, LLC, a Delaware limited liability company [“SPA”], operating out of New York, New York (“Blackbridge”) whereby Blackbridge has agreed to purchase up to $5,000,000 worth of shares of the Company’s common stock.  The Company has agreed to file a Registration Statement to register such shares for sale to Blackbridge.  In addition, the Company has issued [i] a convertible promissory note to Blackbridge pursuant to the Securities Purchase Agreement equal to $150,000 as a commitment fee, that is currently charged to prepaid expenses until services are provided (the “Blackbridge Note”), [ii] and a $100,000 Convertible Note to cover the expenses to be incurred for the preparation and filing of the Registration Statement and related matters (“Expenses Note”). Blackbridge converted an additional $14,575 for 12,500,000 shares on January 17, 2018 bringing the total note balance to $78,150 as of the date the note was acquired by Oasis Capital, LLC.

 

 

On March 13, 2017, the Company and Blackbridge, entered into an Agreement, effective as of March 1, 2017, terminating the SPA.  The Registration Statement on Form S-1 filed by the Company pursuant to the SPA could not be processed because of technical issues raised by the SEC and was withdrawn on February 28, 2017.  In addition, the Blackbridge Note issued by the Company as a commitment fee was declared null and void and was cancelled on March 1, 2017.

 

Effective as of January 31, 2019, Company acquired through redemption from Redstart Holdings Corp, [“RHC”] 68,000 shares of the Series C Preferred Stock [“Redeemed Preferred Shares”] owned by RHC. The redemption price for the Redeemed Preferred Shares was $101,810.55 which was financed through a cash advance transaction of future receivables.

 

Effective as of February 22, 2019, Company acquired through redemption from RHC 73,000 shares of the Series C Preferred Stock [“Redeemed Preferred Shares”] owned by RHC. The redemption price for the Redeemed Preferred Shares was $106,145 which was financed through available cash and the promissory note referred to in the next paragraph.

 

Effective August 8, 2019 the Company entered into a Future Receivable Sale Agreement with Knight Capital Funding in the amount of $105,000 in order to fund a redemption of the Redstart Series C Preferred Stock. The agreement calls for 176 daily payments of $823.30 to retire this note in the amount of $144,900 representing principal and discount of collection of future receivables. The Company’s decision to redeem the Preferred shares was primarily to prevent the conversion of this note from diluting the common shares in 2019.

 

The Company issued to Power Up Lending Group, Inc. [“Power Up”], a $68,000 Convertible Promissory Note dated February 16, 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 20 % upon conversion. Without the OID, the effective discount rate would be 35% as set forth in the Note. The net proceeds from the Note, combined with Company working capital in the amount of $51,145, was used to redeem the February 22, 2019 acquisition above in the amount of $106,145.

 

The Company issued to Power Up Lending Group, Inc. a $68,000 Convertible Promissory Note dated March 13, 2019 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 a stated discount rate of 19% as set forth in the Note. Without the OID, the effective discount would have been 35%. The net proceeds from this Note were used for working capital.

 

The Company issued to Power Up Lending Group, Inc. a $83,000 Convertible Promissory Note dated May 13, 2019 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 a stated discount rate of 19% as set forth in the Note. Without the OID, the effective discount would have been 35%. The net proceeds from this Note were used for working capital.

  

The Company determined that the conversion feature embedded within the Power Up Series C Preferred shares that reached maturity in 2018 in the amount of $78,000 is a financial derivative. The Generally Accepted Accounting Principles (GAAP) required that the Company’s embedded conversion option be accounted for at fair value. The following schedule shows the change in fair value of the derivative liabilities on June 30, 2019 and December 31, 2018:

 

Description

 

June 3 0 , 2019

   

December 31, 2018

 

Purchase price of the convertible debenture -net of discount

  $ 74,848     $ 78,000  

Valuation reduction during the period

    (74,848

)

    3,152  

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

  $ -     $ 74,848  
                 

Derivative calculations and presentations on the Statement of Operations

               
                 

Loss on note issuance

  $ -     $ (36,230

)

Change in Derivative (Gain) Loss

    (177,934

)

    61,251  

Derivative Finance fees

    -       (33,018

)

Gain (loss) on extinguishment of debt

    (244,712

)

    (410,157

)

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

  $ (422,646

)

  $ (418,154

)

 

 

The Company measured and utilized quoted prices in active markets for identical liabilities (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (level 3) in applying valuation technology to derivative values for June 30, 2019 and 2018 and throughout the year.

 

Note 15 – Stockholder’s Equity

 

Common Stock

 

During the six months ended June 30, 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 $79,927. The Company recorded net proceeds totaling $80,317.

 

Legal and other professional fees charged to additional paid in capital totaled $29,000 for the six months ended June 30, 2019.

 

During the fiscal year ended December 31, 2018 the Company sold 6,162,119 restricted common shares in Regulation S offerings to non-US investors. The total proceeds from the offering was $581,859.  Commission and expense reimbursements totaled $292,042.  The Company recorded net proceeds totaling $ 289,817.

 

Legal and other professional fees charged to additional paid in capital totaled $39,176 for the six months ended December 31, 2018.

 

In addition, debenture holders converted debt into 16,767,650 shares which were issued upon conversion of $256,742 of the notes referred to in Note 13 above. 

 

During the year ended December 31, 2018 the Company issued 369,599 common restricted shares and recorded equity in the amount of $10,000 from vendors for services and issued 1,350,000 restricted common shares to management for services with a fair market value of $27,000.

 

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 or 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.  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 preferred Stock, each with has 20 votes for each Preferred share held by them of record. The holders of the Preferred are also entitled to an additional 300,000,000 common shares upon conversion of the Preferred Stock.  As a result of owning of these shares of Common and Preferred Stock, the Control Shareholders will have voting control the Company.

 

Earnings (loss) per share calculation

 

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

 

The computation of basic and diluted loss per share at December 31, 2018 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. 

 

Note 16 – Other Matters

 

During the six months ended June 30, 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 $79,927. The Company recorded net proceeds totaling $80,317.

 

Legal and other professional fees charged to additional paid in capital totaled $29,000 for the six months ended June 30, 2019.

 

 

During the fiscal year ended December 31, 2018 the Company sold 6,162,119 restricted common shares in Regulation S offerings to non-US investors. The total proceeds from the offering was $581,859.  Commission and expense reimbursements totaled $292,042.  The Company recorded net proceeds totaling $ 289,817.

 

Legal and other professional fees charged to additional paid in capital totaled $39,176 for the six months ended December 31, 2018.

 

Stock subscriptions executed under an earlier offering included a provision whereby ABCO agrees to pay a dividend (defined as interest) of from 6% to 12% of the total amount invested for a period of one year from receipt of the invested funds. This dividend (defined as interest) is allocated between the broker and the investor with amounts paid to the broker treated as a cost of the offering and netted against additional paid in capital and amounts paid to the investor treated as interest expense. Total amounts paid or accrued under this agreement and charged to additional paid-in capital for the years ended December 31, 2018 and 2017, amounted to $0 and $0, respectively. Total amounts paid under this agreement and charged to interest expense for the years ended December 31, 2018 and 2017, amounted to $0 and $0, respectively.  The accrued balance due on this obligation to shareholders totals $49,290 at June 30, 2019 and December 31, 2018.

 

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

 

On November 8, 2017, the Company entered into a Consulting Agreement (“CA”) with Eurasian Capital, LLC [“Consultant”] which was to provide institutional funding services and shareholder and third-party sponsorship services for a nine month term ending May 7, 2018. Consultant was to be paid a monthly retainer of $10,000 payable in ABCO restricted common stock based upon the 5 day average of the closing bid price commencing on the first day of each month during the effectiveness of the Consulting Agreement.  The CA was terminated by the Company on March 29, 2018 for non-performance by Consultant.  Consultant was issued 198,413 restricted shares for services in November 2017 which were delivered to Consultant in December 2017.  The shares for services rendered in December of 2017 [208,308] and for January 2018 [161,271] were issued in January 2018 but were not delivered until early April 2018 when a dispute with respect to the CA termination was resolved with   the execution of releases.  A dispute has arisen with respect to the number of shares due Consultant as a result of the CA termination. The parties resolved this matter by the delivery of an aggregate of 369,599 shares to Consultant in 2018 and the execution of releases.

 

The Company, effective as of September 1, 2018, entered into an Equity Purchase Agreement with Oasis Capital, LLC, a Puerto Rico limited liability company (“Investor”) pursuant to which Investor agreed to purchase up to $5,000,000 of the Company’s common stock at a price equal to 85% of the market price at the time of purchase (“Put Shares”). The Company agreed to file a new registration statement to register for resale the Put Shares. The Registration Statement must be effective with the SEC before Investor is obligated to purchase any Put Shares. In addition, the Company [i] issued to Investor a one year $150,000 note (“Commitment Note”) which is convertible at 57 ½ %  of the lowest trading price for the 15 day trading period ending on the last trading date prior to the Conversion Date 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. No transaction occurred on this matter through March 31, 2019 and no derivative was calculated on the note because it was not yet mature. The Company issued 4,444,707 common shares to Oasis and the price of the shares was classified as a prepaid expense..  This note is not recorded as a liability on the balance sheet until Oasis provides services by purchasing shares under the Registration Statement. See Note 17 below on page 18 with respect to the filing on April 26, 2019 and the effectiveness on May 7, 2019, of a Form S-1 Registration Statement filed for the Put Shares.

 

The Company issued 1,350,000 restricted common shares to management for services with a fair market value of $27,000. during the Year Ended December 31, 2018. Of these awards, Charles O’Dowd received 45,000 shares and Wayne Marx received 50,000 shares.  The balance of 850,000 shares were awarded to consultants to the Company.

 

 

Note 17 – Subsequent Events

 

Effective August 8, 2019 the Company entered into a Future Receivable Sale Agreement with Knight Capital Funding in the amount of $105,000 in order to fund a redemption of the Redstart Series C Preferred Stock. The agreement calls for 176 daily payments of $823.30 to retire this note in the amount of $144,900 representing principal and discount of collection of future receivables. The Company’s decision to redeem the Preferred shares was primarily to prevent the conversion of this note from diluting the common shares in 2019.

 

Equity Awards

 

The following table sets forth information on outstanding option and stock awards held by the named executive officers of the Company at December 31, 2018, 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 16 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

 

 

 

0

 

 

$

.001

 

 

01/01/2017

 

 

01/01/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Wayne Marx

 

 

500,000

 

 

 

0

 

 

$

.001

 

 

01/012017

 

 

01/01/2021

 

 

(1)     No Equity Awards were issued during the year ended December 31, 2018.

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

 

An aggregate of 1,620,000 stock awards are outstanding under the Equity Incentive Plan as of December 31, 2018.

 

 

Item 2.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

RESULTS OF OPERATIONS – OVERVIEW

 

THREE MONTHS ENDED JUNE 30, 2019 COMPARED TO THREE MONTHS ENDED JUNE 30, 2018.

 

Our discussion of operating results for the Three months ended June 30, 2019 and June 30, 2018 are presented below with major category details of revenue and expense 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 June 30, 2018 and for the three months ended June 30, 2018.

 

Sales for the three months ended June 30, 2018 were $459,616 as compared to $558,726 for the same three months in 2018. This is a decrease of $99,110 or 18% of the 2018 sales. The Solar sales revenue in 2019 and 2018 reflected seasonal and changing market conditions in the financing of solar installations. ABCO has increased their efforts to sell into the commercial markets and increased focus on the financial requirements of nonprofit organization’s financing requirements during the 2019 period. The results of these changes and efforts have begun to materialize and are shown in the results of operations.

 

Cost of sales was 58% of revenues in 2019 and 75% of revenues in 2018.  Gross margins were 42% of revenue in 2018 and 75 % of revenue for the three months of 2018.  During 2019 and 2018 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 52% of revenues in 2019 and 46% of revenues for the same period in 2018.  Net loss for the three-month period ended June 30, 2018 was $(48,143) as compared to the net loss $(261,226) for the same three-month period ended June 30, 2018.  Our operating expenses for this period were lower by $14,138 than the comparative period in 2018. The interest expense during the period ended June 30, 2019 was lower by $1,198 than in the period ended June 30, 2018 due mostly to the working capital provision of merchant loans and convertible debt being reduced. This combination of factors decreased the net loss by $213,083 during the three months ended June 30, 2019 as compared to the three months ended June 30, 2018.  Since our year to date revenues are lower than the previous year, this resulted in lower operating expenses as a percentage of total revenue.

 

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, the result is an increase of the percentage of operating expenses to sales revenue.  ABCO chose to maintain a level of expenses that would not cripple the Company’s future.

 

SIX MONTHS ENDED JUNE 30, 2019 COMPARED TO SIX MONTHS ENDED JUNE 20, 2018.

 

Our discussion of operating results for the six months ended June 30, 2019 and June 30, 2018 are presented below with major category details of revenue and expense including the components of operating expenses.

 

Sales consist of photovoltaic products, electrical services and LED lighting products and installation during the six months ended June 30, 2019 and for the six months ended June 30, 2018.

 

Sales for the six months ended June 30, 2019 were $1,113,626 as compared to $1,018,021 for the same three months in 2018.  This is an increase of 32,605 or 3% of the 2018 sales. The Solar sales revenue in 2019 and 2018 reflected seasonal and changing market conditions in the financing of solar installations and competition from the public utilities in the Arizona markets.  ABCO has begun its focus on commercial sales in 2018 and has 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.

 

 

Cost of sales was $678,886 or 61% of revenues in 2019 and $746,260 or 70% of revenues in 2018.  Gross margins were 39% of revenue in 2019 and 30% of revenue for the six months of 2018.  During 2019 and 2018 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 $501,866 or 50% of revenues in 2019 and $414,879 or 38% of revenues for the same period in 2018.  Net (loss) income from operations for the three-month period ended June 30, 2019 was $(67,126) as compared to the net loss of $(80,118) for the same six month period ended June 30, 2018.  Our operating expenses for this period were higher by $86,987 than the comparative period in 2018. The interest expense during the period ended June 30, 2019 was higher by $69,242 than in the period ended June 30, 2018 due mostly to the increase in working capital through new merchant loans and derivatives on convertible debt.  Derivative liabilities of convertible debentures increased by $97,419 during the current period as compared to the prior year. This combination of factors decreased the loss for the period ending June 30, 2019 to $(566,978)  as compared to $(214,165) for the six months ended June 30, 2018, due almost entirely by the change in derivative income and expenses. 

 

As noted in previous paragraphs discussing market conditions, 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, the result is an increase of the percentage of operating expenses 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 cripple the Company’s future.

 

STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND 2018

 

During the six months ended June 30, 2019 our net cash used in operating activities was $(98,323) and comparatively the net cash used by operating activities in the six months ended June 30, 2018 was $(312,616).  Net cash used by operating activities in the period ended June 30, 2019 consisted primarily of net losses from operations of $(595,760) for 2019 as compared to a loss of $(214,238) for 2018.  Depreciation adjustments were of non-cash expenses were $5,290 and $8,120 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 $(177,934) for the period ended June 30, 2019.  None of this expense will be realized if this debt is retired before maturity.  The Company experienced a decrease in accounts payable of $(264,956) and an increase of $67,032 for each period respectively.  This is primarily due to the Company’s ability apply cash receipts from investors and operations to pay past and current creditors during each period. Accounts receivable increase by $95,759, net of adjustments for contracts in process, during the period ended June 30, 2019 due to rapid increases in contracts at the end of the period.

 

Net cash used for investing activities for the periods ended June 30, 2019 and 2018 was $5,354 and $2,191 respectively due to receipt of principal on leases paid or terminated and equipment acquisitions.

 

Net cash provided by financing activities for the periods ended June 30, 2019 and 2018 was $81,387 and $317,321 respectively. Net cash provided by financing activities for 2019 and 2018 resulted primarily from the sale of common stock, loans from a financial institution and loans from a Director, Officer and affiliates. Cash provided by financing activities during the periods ended June 30, 2019 were primarily from the sale of common stock and loans from financial institutions. 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 habitually requires the solar contractor 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 project without assistance from suppliers. Our working capital at June 30, 2019 was $(817,634) and it was $(768,962) at December 30, 2018.  This decrease of $48,672 was primarily due to losses from operations during the period ended June 30, 2019 and adjustments for possible future losses on derivative conversions.  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. Most are personally guaranteed by the Officer of the Company.

 

 

The total borrowed from Directors, Affiliates and officers totaled $188,054 plus accrued interest of $78,808 as of June 30, 2019. There are no existing agreements or arrangement with any Director to provide additional funds to the Company.

 

During the six months period ended June 30, 2019 or the last fiscal year ended December 31, 2018 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.

 

 

 

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, June 30,, 2019, 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.

 

 

 

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

 

During the six months ended June 30, 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 $79,927. The Company recorded net proceeds totaling $80,317.

 

Legal and other professional expenses for this offering and other matters totaled $ 29,000.

  

Item 3.     Defaults upon Senior Securities

 

None

 

Item 4.     Mine Safety Disclosures.

 

Not Applicable.

 

Item 5.     Other Information

 

Not Applicable.

 

 

 

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, 2011 (1)

10(b)

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

10(c)

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

10(d)

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

10(e)

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

10(f)

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

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)

21

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 906 of the Sarbanes-Oxley Act of 2002.(2)

31.2

Certifications of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(2)

32.1

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

101 INS

XBRL, Instance Document

101 SCH

XBRL Taxonomy Extension Schema Document

1010 CAL

XBRL Taxonomy Calculation Linkbase Document

101 DEF

XBRL Taxonomy Extension Definition Linkbase Document

101 LAB

XBRL Taxonomy Labels Linkbase Document

101 PRE

XBRL Taxonomy Labels Linkbase Document

 

 

(1)

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

(2)

Attached.

(3)

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)

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

 

 

 

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.

 

August 19, 2019

 

 

ABCO ENERGY, INC

 

 

 

 

 

/s/ Charles O’Dowd

 

 

Charles O’Dowd

 

Title: President &

 

Chief Executive Officer (CEO)

 

 

 

 

 

/s/ Charles O’Dowd

 

 

Charles O’Dowd

 

Chief Financial Officer (CFO)

 

Principal Accounting Officer (PAO)

 

 

26
 

 

 

Exhibit 10 (h)

 

 

FUTURE RECEIVABLES SALE AGREEMENT

 

This FUTURE RECEIVABLES SALE AGREEMENT (“ Agreement ”) dated 08/08/2019 (“ Effective Date ”), is made by and between the undersigned Knight Capital entity (“Purchaser”), and 

ABCO SOLAR, INC. (“Merchant”).

 

 

Purchase Price:

 

(The dollar amount

Purchaser is paying

for the Amount Sold.)

 

 

 

 

 

 

$105,000.00

 

Amount   Sold:

 

(The amount of Future

Receivables being sold

by Merchant.)

 

 

 

 

 

 

$144,900.00

 

Purchased Percentage:

 

(The percentage of daily

Future Receivables that

Merchant agrees to remit

to Purchaser.)

 

 

 

 

 

12.09%

 

Dollar   Amount   of

Purchased Percentage:

 

(This amount represents

the daily dollar amount of

the Purchased

Percentage based upon

the financial information

Merchant provided to

Purchaser.)

 

$823.30

 

Purchaser and Merchant agree as follows:

 

 

1.

Sale . Merchant hereby sells to Purchaser a finite amount of its Future Receivables, the dollar value of which is set forth above as “Amount Sold”, in exchange for the Purchase Price. Merchant agrees to remit the Purchased Percentage of Merchant’s Future Receivables until Purchaser receives the total Amount Sold. “Future Receivables ”, when used anywhere in this Agreement, means:

 

 

All funds that Merchant receives from electronic payment cards to purchase Merchant’s products and services;

 

All funds that Merchant receives from cash, checks, money orders, electronic transfer, electronic payment cards or other forms of payment to purchase Merchant’s products and services.

 

THIS IS NOT A LOAN . This is a sale of future receivables and, as such, there is no predetermined repayment term. Merchant is selling a portion of its future revenue stream to Purchaser at a discount, not borrowing money from Purchaser. If Merchant’s business declines or if Merchant’s business ceases to operate naturally, and in the normal, ordinary course of business (and Merchant has not violated, or deliberately frustrated performance of, the terms of this Agreement, or otherwise deliberately deceived Purchaser), Merchant will not be in default under this Agreement. Purchaser is entering into this Agreement knowing the risks that Merchant’s business may decline or fail, and Purchaser assumes these risks based on Merchant’s representations, warranties, and covenants in this Agreement, which are designed to give Purchaser a reasonable and fair opportunity to receive the benefit of its bargain.

 

FOR THE AVOIDANCE OF DOUBT, THIS FUTURE RECEIVABLES SALE AGREEMENT IS BY AND BETWEEN MERCHANT, THE PURCHASER AND THE UNDERSIGNED PRINCIPAL OR PRINCIPALS. ANY INDEPENDENT SALES ORGANIZATION OR BROKER THAT PLAYED A ROLE IN THE INTRODUCTION OF MERCHANT TO THE PURCHASER IS IN NO WAY AUTHORIZED TO ACT AS AN AGENT OF, OR BIND PURCHASER IN ANY MANNER, WHATSOEVER. THE INDEPENDENT SALES ORGANIZATION OR BROKER DOES NOT HAVE THE AUTHORITY OR RIGHT TO MAKE, ALTER, MODIFY, OR DISCHARGE ANY CONTRACT, AGREEMENT, OR ANY PORTION THEREOF THAT MAY BE ENTERED INTO BY AND BETWEEN MERCHANT AND PURCHASER. MERCHANT IS HEREBY ADVISED AND AFFIRMATIVELY ACKNOWLEDGES ITS UNDERSTANDING THAT IT IS NOT TO CHANGE ITS POSITION IN RELIANCE UPON ANY REPRESENTATIONS OR PROMISES MADE BY AN INDEPENDENT SALES ORGANIZATION OR BROKER, UNLESS EXPRESSLY AUTHORIZED BY THE PURCHASER, IN WRITING, ON PURCHASER’S LETTERHEAD.

 

 

2.

Fees.  Purchaser does not charge interest, late fees, or broker fees. Purchaser purchases the Future Receivables at a discount. A setup fee in the amount of 3% will be paid by Merchant to Purchaser at the time of sale via setoff against the Purchase Price. This setup fee covers the costs incurred by Purchaser as a result of underwriting, evaluating and analyzing Merchant’s business, pursuant to Merchant’s request.

 

 

 

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3.

Right to Cancel. Merchant may cancel this transaction provided that it is no later than one (1) day after Merchant receives written approval that the Merchant has been approved for funding from Purchaser. Merchant must return the entire Purchase Price to Purchaser. Any setup fees charged by Purchaser are non-refundable .

 

 

4.

Purchased Percentage and Remittance Method. Purchaser cannot increase the Purchased Percentage without Merchant’s consent. Purchaser agrees to accept the daily remittance of the Purchased Percentage: by debiting, via ACH, Merchant’s bank account (“ Direct Debit ”).Purchaser may, in its sole discretion, upon notice to Merchant, change the method by which it will accept the remittance of the Purchased Percentage.

 

Merchant irrevocably authorizes Purchaser or its designated successor or assignee to initiate a debit of the Purchased Percentage via Automatic Clearing House (“ACH”) from Merchant’s authorized bank account (“Direct Debit Account”) or other Approved Accounts, as defined in the Terms and Conditions section of this Agreement. Merchant authorizes Purchaser to debit, via ACH, the Direct Debit Account for the Purchased Percentage each business day until such time as the Amount Sold has been remitted in full.

 

Merchant understands that due to the delay of the receipt of data by Purchaser and the operations and rules of the ACH system under the National Automated Clearing House Association (“ NACHA ”), the Direct Debit method may result in a mismatch between the timing of the receipt of Future Receivables and of the debit. If Purchaser withdraws an incorrect amount from the Direct Debit Account, Merchant authorizes Purchaser to cure and correct the error, after Merchant notifies Purchaser. Merchant understands and agrees that the Dollar Amount of Purchased Percentage is calculated from the financial information that the Merchant provided and is obligated to continually provide to the Purchaser. Merchant agrees to follow the NACHA rules.

 

In the event of default of Merchant’s obligations under the Agreement, including, without limitation, if Merchant changes its Direct Debit Account, blocks Purchaser’s ACH withdrawals, or otherwise hinders or impedes the exercise of Purchaser’s rights hereunder, Merchant authorizes Purchaser to debit any of the Merchant’s Approved Accounts for any portion of the Purchased Percentage that was not remitted, in breach of this Agreement. Further, Merchant authorizes all of its banking institutions to accept and to charge any debit entries initiated by Purchaser to any of Merchant’s bank accounts.

 

Merchant understands that the foregoing ACH authorization is a fundamental condition to induce Purchaser to enter into the Agreement. Consequently, such authorization is intended to be irrevocable. If Merchant terminates its ACH authorization, Purchaser may deem such termination to be an Event of Default.

 

 

5.

Calculation of Dollar Amount of Purchased Percentage. Purchaser bases its calculation of the dollar amount to which the Purchased Percentage correlates (“Dollar Amount of Purchased Percentage”), on the financial information submitted by Merchant to Purchaser. The Dollar Amount of Purchased Percentage was calculated by evaluating at least the preceding three (3) months of Merchant’s bank statements. Purchaser added the total amount of each month’s deposits and then deducted any amounts that did not appear to represent proceeds derived from the sale of Merchant’s products or services; that number represents the gross monthly revenue of Merchant. The total gross monthly revenue for those months was summed, then divided by the number of calendar months over which that revenue was generated; this is the average monthly revenue. The percentage set forth as the Purchased Percentage, above, was then applied to the average monthly revenue; this is the dollar amount that correlates to the percentage of receivables that Merchant sold to Purchaser. The dollar amount correlating to that percentage of average monthly revenue was then divided by twenty-one (the average number of business days in a calendar month); this is the Dollar Amount of Purchased Percentage. This calculation utilizes the average number of business days in a month, not the average number of calendar days, since Purchaser only collects the Dollar Amount of Purchased Percentage on business days. Every day but Saturdays, Sundays, and days on which the Federal Reserve is closed shall be considered a business day. By executing this Agreement, Merchant hereby acknowledges that the Dollar Amount of Purchased Percentage, above, accurately represents Purchased Percentage, and that Purchaser’s analysis of financial information that Merchant provided and the corresponding calculations are correct. The amount reflected in the Dollar Amount of Purchased Percentage will be debited each business day for the first calendar month of this Agreement, as it represents Merchant’s most up-to-date financial information.

In order to ensure that Purchaser’s debits represent the actual Purchased Percentage that Merchant sold to

 

 

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Purchaser, Merchant shall provide full monthly bank statements for all Approved Accounts within ten (10) days of receipt for Purchaser’s analysis. If the updated bank statements reflect a change in the Future Receivables, the dollar amount debited by Purchaser will change, accordingly, to accurately reflect the Purchased Percentage. If the Merchant fails to provide an updated bank statement for a calendar month, Merchant agrees that it is affirmatively representing to Purchaser that the Future Receivables have not changed from the prior month and that the dollar amount being remitted to Purchaser accurately reflects the Purchased Percentage. If, at any time during the term of this Agreement, Merchant submits updated bank statements for any calendar month, Purchaser may request and Merchant shall provide, any and all updated bank statements since the date of execution of this Agreement. Upon receipt of the bank statements, Purchaser shall analyze and determine whether the total dollar amount debited by Purchaser is greater than the actual Purchased Percentage of Future Receivables that Merchant sold to Purchaser. If so, at Merchant’s election, Purchaser shall: (i) credit Merchant the difference between the dollar amount debited and the actual Purchased Percentage; (ii) suspend any further ACH withdrawals until Merchant generates Future Receivables such that the Purchased Percentage of those Future Receivables is equivalent to the amount previously debited in excess of the actual Purchase Percentage of Future Receivables that Merchant sold to Purchaser; or (iii) adjust the dollar amount debited to accurately reflect the Purchased Percentage. If the updated bank statements reflect that the amounts debited by Purchaser are less than the actual Purchased Percentage, at Merchant’s election, Merchant shall either: (i) promptly pay the difference between the actual Purchased Percentage and the amounts debited by Purchaser; or (ii) double the Dollar Amount of Purchased Percentage until Merchant remits the actual Purchased Percentage of Future Receivables that Merchant sold to Purchaser.

 

Purchaser agrees to analyze Merchant’s bank statements and other pertinent financial information that Purchaser may request when Merchant provides that information to Purchaser, but Merchant understands and acknowledges that the initial analysis of Merchant’s bank statements may not take place until 45-60 days after Purchaser furnishes the Purchase Price to Merchant. Furthermore, Merchant affirmatively acknowledges that the Dollar Amount of the Purchase Percentage accurately reflects Merchant’s normal, average revenue stream, based upon Merchant’s prior business history. If Merchant experiences an abnormal increase or decrease in its monthly revenue stream, Merchant agrees that it shall provide supporting documentation to Purchaser demonstrating the abnormal increase or decrease in Merchant’s revenue for a particular month. Merchant agrees that it shall continue to provide aforementioned supporting financial documentation for subsequent months if the abnormal increase or decrease in revenue persists. Merchant agrees that if it fails to provide financial documentation for subsequent months, it is affirmatively representing to Purchaser that its revenue stream has returned to normalcy, and that the Dollar Amount of Purchased Percentage is an accurate representation of the Purchased Percentage for those months in which Merchant does not provide such information.

 

Merchant affirmatively agrees that it has sole and exclusive control over its bank statements, which are the only source from which Purchaser can verify and confirm that the receivables are generated by Merchant. Merchant further affirmatively agrees that upon request by the Purchaser, it will produce all requested bank statements, and if Merchant fails to do so, Purchaser may deem such failure to be an Event of Default which will entitle Purchaser to all Future Receivables generated by Merchant, until Purchaser receives the Amount Sold. Moreover, Merchant further understands and agrees that its production of its bank statements to Purchaser are the only evidence that the Purchaser will use and rely on to ensure that Purchaser’s debits represent the actual Purchased Percentage that Merchant sold to Purchaser. If Merchant fails to produce requested bank statements to Purchaser, then by such failure, Merchant is affirmatively representing that the Dollar Amount of Purchased Percentage is an accurate representation of the Purchased Percentage and that such Receivables have been and continue to be generated accordingly. If Merchant grants Purchaser electronic view only access to its bank accounts, Merchant understands and agrees that such access is granted subject to paragraph 4 of the Terms and Conditions, attached hereto and incorporated by reference herein, and that Purchaser will not use such access to perform an analysis of the Purchaser’s accounts to determine whether the Purchaser’s debits represent the actual Purchased Percentage that Merchant sold to Purchaser.

 

 

6.

Timing, Method of Payment by Purchaser. Purchaser will pay the Purchase Price or any portion thereof to Merchant at a time and by a method at Purchaser’s discretion. Before executing this Agreement, Purchaser may conduct a processing trial to determine whether the Purchased Percentage will be correctly processed and reported to Purchaser. If the processing trial is not completed to Purchaser’s satisfaction, it will refund to Merchant all funds retained during the processing trial.

 

 

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7.

Merchant  expressly acknowledges that Purchaser’s acceptance of this Agreement is contingent upon subsequent verification of certain information provided by Merchant. By executing this Agreement, Merchant offers to sell the Future Receivables to Purchaser, subject to the terms hereunder, and Purchaser shall not be deemed to have accepted this Agreement, nor shall it become binding, until Purchaser affirmatively acknowledges its acceptance by paying the Purchase Price to Merchant.

 

 

8.

Merchant and any individual signing on Merchant’s behalf, or in his/her individual capacity as the Principal (as defined in the Terms and Conditions) of Merchant, below, agree that he/she has read, understands, and agrees to abide by these foregoing contract terms and all provisions contained in the Terms and Conditions attached hereto and incorporated by reference herein, including without limitation Section 6 of the Terms and Conditions entitled “Individual Liability of Principal(s) for Breach of Representations, Warranties and Covenants” and the binding arbitration provision within Section 10 of the Terms and Conditions. Furthermore, the persons signing below on behalf of any entity represent that they are authorized and empowered to execute this Agreement on behalf of the entity for which they are signing, and that the execution, delivery, and performance under this Agreement is duly authorized by the entity for which they are signing. Merchant and any individual signing on Merchant’s behalf, or in his/her individual capacity as the Principal (as defined in the Terms and Conditions) of Merchant, understand and agree that Purchaser may assign this Agreement, or any claims arising from, or rights granted to Purchaser pursuant to, this Agreement, without restriction or limitation, including without limitation the right to file a lawsuit, litigate, and/or otherwise resolve any claims against the Principal(s) arising from this Agreement, including without limitation a claim for a breach of Section 6 of the Terms and Conditions.

 

PURCHASER:

   

MERCHANT:

 
         

By:  

   

By:  

/s/ Charles O'Dowd
         

Print Name:  

   

Print Name:  

Charles O'Dowd
         

Title:  

   

Title:  

Owner
         

Date:  

   

Date:  

Aug 8, 2019
         
         
     

PRINCIPAL:  

/s/ Charles O'Dowd
         
     

Print Name:  

Charles O'Dowd
         
     

Date:  

Aug 8, 2019
         
         
     

ADDITIONAL   PRINCIPAL:  

 
         
     

Print Name:  

 
         
     

Date:  

 
         
         

 

 

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TERMS AND CONDITIONS

 

1.      These Terms and Conditions are incorporated into any Future Receivables Sale Agreement (an “FRSA”) between Purchaser and Merchant, (together, the “ Agreement ”) and together with all Merchant’s answers and other disclosures on the Merchant Verification Form, all of which are fundamental representations made by Merchant for the purpose of inducing Purchaser to enter into this Agreement, are the entire agreement between the parties and supersede all prior agreements, undertakings, negotiations, and discussions, whether oral or written, of the parties.

 

2.     Merchant’s Representations, Warranties and Covenants. Merchant represents, warrants, and covenants that at all times that any portion of the Amount Sold remains unpaid: (i) the Future Receivables are not and will not be voluntarily subjected to any claims, charges, liens, restrictions, encumbrances or security interests of any nature, unless previously disclosed to Purchaser and to which Purchaser consented in writing; (ii) Merchant has not and will not sell the Future Receivables to any other party without Purchaser’s express, prior written consent; (iii) Merchant will not change or add credit card processors, take any action to discourage the use of any electronic payment cards, or cause a diversion of any of Merchant’s Future Receivables, without the prior, written consent of Purchaser; (iv) Merchant will use the Purchase Price solely for business purposes and not for personal, family, or household expenses; (v) Merchant is financially solvent (i.e. the assets that Merchant owns exceed the value of Merchant’s liabilities and Merchant is able to pay its obligations as they come due) as of the date of this Agreement and anticipates that it will remain solvent; (vi) Merchant will not conduct its business under any name, or through any entity, other than the entity that is printed on the FRSA, will not change its business location(s), and will not temporarily or permanently close its business for renovations or for any other purpose without the prior, written consent of Purchaser; (vii) Merchant acknowledges that this is not a loan and agrees that it will not enter into any agreement with a third party that offers debt restructuring, debt settlement, debt management, debt balance reduction, creditor reduction, creditor negotiation, financial mitigation or other similar services, as they are not applicable to this Agreement; (viii) Merchant will not undertake any transaction involving the sale of any part of Merchant’s business without Purchaser’s prior, written consent; (ix) Merchant will not willingly forfeit control of its business without Purchaser’s prior, written consent; (x) Merchant has not filed for protection under any chapter of the Bankruptcy Code in the last six months, has not consulted with a bankruptcy attorney in the last six months, and is not currently contemplating the filing of a bankruptcy proceeding or closing Merchant’s business; (xi) all information provided by Merchant to Purchaser is true, accurate and correct; (xii) Merchant possesses and will maintain adequate insurance coverage to protect against all risks that are necessary to protect its business and will show proof upon demand; (xiii) Merchant has been, and is currently, in compliance will all statutes, rules, ordinances, or other laws or regulations governing permits, licenses, and approvals that are necessary to conduct its business, and has paid, and will continue to pay, all necessary local, state, and federal taxes and fees; (xiv) Merchant and the person(s) signing this Agreement on behalf of Merchant have full power and authority to enter into and perform under this Agreement; (xv) Merchant will sign all documents that Purchaser deems necessary to perform under this Agreement, and will provide Purchaser copies of all bank statements, documents related to Merchant’s credit card processing activity, or other documents related to Merchant’s financial and banking affairs (including copies of tax returns), within five (5) days of Purchaser’s request; (xvi) Purchaser shall have the right to inspect, audit, check and make copies of any of the books, records, journals, orders, receipts, correspondence that relate to Merchant’s accounts or other transactions between the parties thereto and the general financial condition of Merchant; (xvii) Merchant will permit Purchaser or its agent to conduct site inspections of Merchant’s business, at any reasonable time this Agreement is in effect, without prior notice to Merchant and shall permit the site inspector to photograph the interior and exterior of any of Merchant’s places of business, including any signage; (xviii) Merchant is not in default of any agreement with any creditor with which it established a relationship prior to the execution of this Agreement, nor has Merchant entered into any forbearance agreement with a creditor unless it has been previously disclosed to Purchaser, and to which Purchaser consented in writing; (xix) Merchant will not share its portal log- on credentials, provided by Purchaser, with any non-party to this Agreement; (xx) Merchant acknowledges that Purchaser has agreed to purchase its Future Receivables based upon Merchant’s current operational structure and business plan, and agrees that it shall not enter into any transaction, such as the sale, assignment, pledge, or alienation, in any form, of stock or assets that could result in a change of control or devaluation of Merchant, or make any material change in operational structure or business plan of Merchant, without Purchaser’s prior written consent; and (xxi) in the event that business revenue has declined or the business has ceased operations, Merchant shall provide all bank statements and other documents demonstrating the same.

 

3.     Authorization to Obtain Credit and Background Reports. By signing this Agreement, Merchant and each individual signing this Agreement are providing “written instructions” to Purchaser under the Fair Credit Reporting Act authorizing Purchaser to obtain information in the form of business and personal credit reports and other information from, but not limited to, TransUnion, Thompson Reuters, and/or LexisNexis. The report(s) that Purchaser obtains may include, without limitation, the business’s or individuals’ credit history or similar characteristics, employment and education verifications, social security verification, criminal and civil history, and Department of Motor Vehicle records, or related information. Any reports obtained may be used by Purchaser to determine if it will proceed with the purchase of the Future Receivables from Merchant. Purchaser is authorized to update such information and financial and credit profiles from time to time as it deems appropriate.

 

4.     Approved Accounts and Monitoring. Merchant shall maintain an account (the “ Direct Debit Account ”) into which its Future Receivables will be deposited, and will not change or add bank accounts without the prior, written approval of Purchaser. All bank accounts that have been approved by Purchaser shall be “ Approved Accounts. ” Merchant agrees to complete all necessary forms to establish the Direct Debit Account and will ensure that all Future Receivables are deposited in, or otherwise

 

 

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immediately credited to, the Direct Debit Account until Merchant remits the total Amount Sold to Purchaser. Merchant will provide Purchaser and its authorized agents with all information, authorizations, and passwords necessary for verifying Merchant’s receivables, receipts, and deposits into the Direct Debit Account. Merchant authorizes Purchaser to contact Merchant’s current and prior banking institutions to get information Purchaser deems necessary to review and evaluate Merchant’s application or to monitor Merchant’s Approved Accounts, Direct Debit Account, or any other bank account Merchant or Merchant’s agent later provides to Purchaser. However, it shall be incumbent upon the Merchant, and Merchant shall have the affirmative duty and obligation, to furnish its monthly bank statements to Purchaser, in order to ensure that all ACH debits accurately correspond to the Purchased Percentage, and to produce its bank statements upon request by Purchaser. Merchant agrees that the Purchased Percentage of any Future Receivables deposited into an Approved Account will remain in an Approved Account until the daily Purchased Percentage amount of Future Receivables is withdrawn from the Direct Debit Account by Purchaser. Merchant agrees to hold Purchaser harmless for any overdraft fees or rejected transactions that may result from Purchaser ACH debiting of the Purchased Percentage in accordance with the terms of this Agreement.

 

5.     Security Interest. Merchant acknowledges that it is selling its Future Receivables to Purchaser and that, in accordance with Article 9 of the Uniform Commercial Code, such transaction constitutes either the sale of accounts or general intangibles. The Uniform Commercial Code denotes the seller of accounts or general intangibles as a debtor, and the buyer of accounts or general intangibles as a secured creditor. In order to secure Merchant’s full performance of its obligations under this Agreement, Merchant hereby grants to Purchaser (or one of its affiliates or assignees) a first priority, continuing security interest in and to all of Merchant’s present and future accounts receivable, chattel paper, deposit accounts, personal property, assets and fixtures, general intangibles, instruments, equipment, inventory wherever located, and proceeds now or hereafter owned or acquired by Merchant. Upon any Event of Default, Purchaser may exercise all remedies available to secured parties under the Uniform Commercial Code or any other applicable law. Merchant also consents to Purchaser’s creation and perfection of all instruments that Purchaser determines are reasonably necessary to perfect Purchaser’s rights under this security interest including, without limitation, a UCC-1 financing statement.

 

6.     I NDIVIDUAL LIABILITY OF PRINCIPAL(S) FOR BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS . By signing the FRSA in his/her individual capacity (each such signer, a “ Principal ” of the Merchant), in the event that Principal(s) causes, allows, or fails to prevent Merchant’s breach or violation of any of the representations, warranties and covenants in Section 2 of the Terms and Conditions, Principal(s) hereby assumes and, jointly and severally, guarantees the full, complete and timely performance of all of Merchant’s obligations under the Agreement. If Principal(s) causes or allows Merchant to intentionally act in any manner or intentionally make any omission such that either the act or omission would constitute an Event of Default pursuant to Section 7 of the Terms and Conditions of the Agreement, Principal(s) hereby agrees to be personally liable for Merchant’s failure to perform any and all of Merchant’s obligations under this Agreement. All parties hereto agree that Principal(s) is agreeing to guaranty performance , not payment or collection. It shall not constitute an Event of Default if Merchant’s Future Receivables decline sharply or Merchant goes out of business or ceases to operate, naturally, and in the normal, ordinary course of business, and the decline in business is not a result of an intentional act or omission by Merchant, Principal(s) or their agents, officers, or representatives. However, in the event that business revenue has declined or the business has ceased operations, Merchant shall provide all bank statements and other documents demonstrating the same, and showing that because of factors beyond its control, that Merchant did not directly, or indirectly, act or fail to act in a manner that would compromise the solvency or financial health of Merchant, and failure to do the same will constitute an Event of Default pursuant to Section 7 of the Terms and Conditions of the Agreement. Purchaser may enforce its rights against any Principal before, during, or after any enforcement against Merchant, or without any enforcement against Merchant. Principal’s obligations are continuing and shall remain in full force and effect and shall not be released, discharged or affected by any reason or thing except by Purchaser’s written release. If payment of any sum by Merchant is recovered as a preference or fraudulent conveyance under any bankruptcy or insolvency law, the liability of any Principal under this guaranty shall continue and remain in full force and effect notwithstanding such recovery. Each Principal acknowledges receiving a copy of this Agreement and having read the terms of this Agreement. Each Principal’s signature on the FRSA will serve as confirmation that Principal(s) understands all terms and conditions of this Agreement. Each Principal agrees that this guaranty is continuing and absolute and that Purchaser may compromise with, settle with, or release any other obligor under this Agreement without notice to, or consent by, Principal(s) and without affecting Principal’s liability. For the avoidance of doubt, if an Event of Default should occur or Merchant breaches the representations, warranties and covenants in Section 2, Principal(s) agree to assume liability for (i) all damages sustained by Purchaser; (ii) any and all costs, including reasonable attorneys’ fees, incurred by Purchaser in connection with the defense, protection or enforcement of Purchaser’s rights under this Agreement; and (iii) all other remedies available to Purchaser under applicable law.

 

7.     Events of Default. Merchant shall be in default of the Agreement should any of the following events occur: (i) Merchant makes any misrepresentation hereunder or breaches any warranty, agreement, promise or covenant in this Agreement; (ii) Merchant instructs its banking institution to stop payment on any authorized ACH withdrawal initiated by Purchaser; (iii) Merchant fails to remit the purchased percentage of the Merchant’s receivables and fails to provide bank statements and other documents demonstrating that business revenue has declined or that the business has ceased operations; (iv) Merchant applies for, or agrees to, any merchant cash advance or any other form of financing without the prior, written consent of Purchaser; (v) the sale of any of Merchant’s assets outside the ordinary course of business or material change to the operational structure or business plan of the business, without Purchaser’s prior, written consent; (vi) the sale of any of Merchant's Future Receivables, without Purchaser's prior, written consent; (vii) Merchant deliberately depletes the balance in any Approved Account; (viii)

 

 

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Merchant diverts funds away from any Approved Account or changes its Processor, without prior, written authorization from Purchaser; or (ix) Merchant otherwise obstructs, hinders, or interferes with the remittance of the Amount Sold to Purchaser through any other deliberate act, or omission by or on behalf of Merchant.

 

8.     Remedies on Events of Default. Upon any Event of Default enumerated in Section 7, above: (i) Merchant agrees that Purchaser shall be entitled to all Future Receivables generated by Merchant, until Purchaser receives the Amount Sold; (ii) Purchaser may exercise any and all remedies available to secured creditors under the Uniform Commercial Code; (iii) Purchaser may elect to rescind this Agreement in its entirety; (iv) the prevailing party in any action will be entitled to any and all costs, including reasonable attorneys’ fees, in connection with the defense, protection or enforcement of rights under this Agreement; and (v) Purchaser will otherwise be entitled to all remedies available to it under applicable law.

 

9.     Governing Law, Forum Selection, and Waivers. The parties agree and acknowledge that this Agreement is accepted, executed and performed in the State of Florida. The parties to this agreement further agree and acknowledge that all Future Receivables are to be remitted to Purchaser at its principle place of business in Broward County, Florida. This Agreement will be governed by and enforced in accordance with the laws of the State of Florida, without regard to principles of conflict of laws to the extent such principles would require application of any other law. All parties agree that all legal proceedings and any other action or claim arising out of or relating to this Agreement, or a transaction that is subject, or relates in any way, to this Agreement, whether based in contract, statute, tort or otherwise, shall be held in the mandatory and exclusive forum and venue of the state courts in Broward County, Florida, and waive the right to remove any proceedings or action to, federal court. This forum selection clause and choice of law provision shall be construed as mandatory, rather than permissive, and no action may be brought in any other state or jurisdiction. The parties herby waive any claim against or objection to venue in, and in personam jurisdiction of, the state courts in Broward County, Florida. The parties hereby irrevocably waive any objection, defense, and any right of immunity on the grounds of venue or the inconvenience of the forum, or to the jurisdiction of such courts, or from the execution of judgments resulting therefrom. ALL PARTIES HEREBY WAIVE TRIAL BY JURY IN ANY LAWSUIT ARISING OUT OF, OR RELATED, IN ANY WAY, TO THIS AGREEMENT, OR ANY TRANSACTION ARISING OUT OF, THAT IS THE SUBJECT OF, OR RELATES IN ANY WAY TO THIS AGREEMENT.

 

10.     DISPUTE RESOLUTION. THE PARTIES SHALL RESOLVE ANY CLAIMS, DISPUTES, OR CONTROVERSIES ARISING OUT OF, OR RELATED IN ANY WAY, TO THIS AGREEMENT BY NEUTRAL, BINDING ARBITRATION IN BROWARD COUNTY, FLORIDA, UNLESS THE PARTIES MUTUALLY AGREE ON A DIFFERENT LOCATION. THE ARBITRATION ORGANIZATION, AMERICAN ARBITRATION ASSOCIATION (“AAA”), WILL BE UTILIZED, UNLESS THE PARTIES MUTUALLY AGREE TO USE ANOTHER ORGANIZATION. THE ARBITRATION ORGANIZATION SHALL APPLY THE APPROPRIATE RULES FOR COMMERCIAL CLAIMS TO ARBITRATE THE DISPUTE. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT THAT HAS JURISDICTION. NO CLAIM SUBMITTED TO ARBITRATION WILL BE HEARD BY A JURY. THE PARTIES SHALL MUTUALLY AGREE UPON AN ARBITRATOR. IF THE PARTIES CANNOT AGREE ON AN ARBITRATOR, EACH PARTY WILL CHOOSE THEIR OWN ARBITRATOR, THEN THOSE TWO ARBITRATORS SHALL MUTUALLY AGREE UPON A THIRD ARBITRATOR, WHICH SHALL GOVERN THE ARBITRATION. ARBITRATION WILL BE GOVERNED BY THE FEDERAL ARBITRATION ACT (9 U.S.C. § 1 ET. SEQ.) AND NOT BY ANY STATE LAW CONCERNING ARBITRATION. THIS SECTION 10 WILL SURVIVE ANY TERMINATION OR TRANSFER OF THIS AGREEMENT. IF ANY PART OF THIS ARBITRATION CLAUSE, OTHER THAN WAIVERS OF CLASS ACTION RIGHTS, AS SET FORTH BELOW, IS DEEMED OR FOUND TO BE UNENFORCEABLE FOR ANY REASON, THE REST WILL REMAIN ENFORCEABLE. IF A WAIVER OF CLASS ACTION RIGHTS IS DEEMED OR FOUND TO BE UNENFORCEABLE FOR ANY REASON IN A CASE IN WHICH CLASS ACTION ALLEGATION HAVE BEEN MADE, THE REMAINDER OF THIS ARBITRATION CLAUSE WILL BE UNENFORCEABLE. YOU CAN DECLINE THIS AGREEMENT TO ARBITRATE BY SUBMITTING A WRITTEN REQUEST TO OPT OUT OF ARBITRATION WITHIN THIRTY (30) DAYS OF EXECUTION OF THIS AGREEMENT. THE WRITTEN REQUEST SHOULD BE SENT TO OPTOUT@KNIGHTCAPITALFUNDING.COM OR SENT BY CERTIFIED MAIL RETURN RECEIPT REQUESTED TO KNIGHT CAPITAL FUNDING, C/O LEGAL DEPARTMENT, 9 E. LOOCKERMAN STREET, STE 202-543, DOVER, DE 19901.

 

FURTHERMORE, ALL PARTIES HERETO AGREE THAT NEITHER WILL JOIN ANY CLAIM WITH THE CLAIM OF ANY OTHER PERSON OR ENTITY IN A LAWSUIT, ARBITRATION OR OTHER PROCEEDING; THAT NO CLAIM ANY PARTY HAS AGAINST THE OTHER SHALL BE RESOLVED ON A CLASS-WIDE BASIS; AND THAT NEITHER PARTY WILL ASSERT A CLAIM IN A REPRESENTATIVE CAPACITY ON BEHALF OF ANYONE ELSE. EACH PARTY HERETO WAIVES ANY RIGHT TO ASSERT ANY CLAIMS AGAINST ANY OTHER PARTY AS A REPRESENTATIVE OR MEMBER IN ANY CLASS OR REPRESENTATIVE ACTION, EXCEPT WHERE SUCH WAIVER IS PROHIBITED BY PUBLIC POLICY. TO THE EXTENT ANY PARTY IS PERMITTED BY LAW OR COURT OF LAW TO PROCEED WITH A CLASS OR REPRESENTATIVE ACTION AGAINST ANY OTHER PARTY, THE PARTIES HEREBY AGREE THAT: (i) THE PREVAILING PARTY WILL NOT BE ENTITLED TO RECOVER ATTORNEYS’ FEES OR COSTS ASSOCIATED WITH PURSUING THE CLASS OR REPRESENTATIVE ACTION (NOTWITHSTANDING ANY OTHER PROVISION IN THIS AGREEMENT); AND (ii) THE PARTY WHO INITIATES OR PARTICIPATES AS A MEMBER OF THE CLASS WILL NOT SUBMIT A CLAIM OR OTHERWISE PARTICIPATE IN ANY RECOVERY SECURED THROUGH THE CLASS OR REPRESENTATIVE ACTION.

 

11.     Telephone Monitoring, Recording and Contacts. Merchant and Principal(s) agree that any call between Purchaser (and its agents, employees, and representatives), Merchant, (and its agent, employee or representative of Merchant), and/or

 

 

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Principal(s) may be monitored and recorded. Merchant and Principal(s) expressly consent to conduct business by electronic means, including sending and receiving messages electronically, via SMS or MMS messages (including text messages), artificial or prerecorded voice messages and automatic dialing technology, at any telephone number that Merchant and/or Principal(s) or its representatives provided or may provide in the future (including any cellular telephone number), even if the telephone number is currently listed on any internal, corporate, state, federal or national Do-Not-Call (DNC) list. Merchant and Principal(s) further agree that: (i) it has an established business relationship with Purchaser and may be contacted periodically by Purchaser regarding transactions with Purchaser; (ii) such contacts are not considered unsolicited or inconvenient. Merchant and Principal(s) further authorize Purchaser, and its affiliate companies, and those acting on its behalf to deliver or cause to be delivered advertisements or telemarketing messages, including calls, text messages, SMS and MMS messages using an automatic telephone dialing system (often referred to as an autodialer) or an artificial or prerecorded voice, to the telephone numbers you have provided or will provide in the future (including any cellular telephone number), even if the telephone number is currently listed on any internal, corporate, state, federal or national Do-Not-Call (DNC) list. Merchant and Principal(s) are not required to agree to this Section 11 in order to enter into this Agreement. If Merchant or Principal(s) wishes to opt out of this Section, or if Merchant or Principal(s) wants to change how Purchaser contacts them, including with respect to any telephone number that Purchaser may use, please call Purchaser at (855) 462-4249 (and select Customer Service from the menu prompts) or send an e-mail to optout@knightcapitalfunding.com.

 

12.     Waiver. Purchaser’s failure to exercise, or delay in exercising, any right under this Agreement, will not constitute a waiver of such right, nor will any single or partial exercise by Purchaser of any right under this Agreement preclude the future exercise of any other right.

 

13.     Irreparable Harm. The parties expressly agree and acknowledge that a violation of this Agreement by Merchant will cause Purchaser irreparable injury, not adequately compensable by monetary damages. Merchant therefore agrees that in the event it breaches this Agreement, Purchaser shall be entitled to, as a matter of right, equitable relief in the form of, but not limited to a restraining order, an injunction, a decree or decrees of specific performance, or any other form of adequate equitable relief in a court of competent jurisdiction, in addition to any other remedies available at law or in equity.

 

14.     Indemnity . Merchant will indemnify, defend and hold Purchaser harmless from and against all lawsuits, costs, causes of action, judgments, complaints, orders, and claims, including, without limitation, attorneys’ fees arising from or relating to any claim that Merchant has breached this Agreement or that any representation, warranty, or statement Merchant has made is not accurate. Purchaser will notify Merchant of any claim for indemnity hereunder, select counsel of Purchaser’s choice, and Merchant will promptly pay all defense costs and satisfy any judgments.

 

15.     RELEASE AND LIMITATION OF LIABILITY. MERCHANT AND PRINCIPAL(S) AGREE TO HOLD PURCHASER HARMLESS FOR, AND RELEASE PURCHASER FROM, ANY AND ALL CLAIMS, DEMANDS, DAMAGES, ACTIONS, CAUSES OF ACTION, SUITS IN EQUITY OF WHATEVER KIND OR NATURE, IN EXCESS OF $1,000, WHICH MAY RESULT FROM ANY AND ALL ACTS OR OMISSIONS OF PURCHASER OR ANY PURCHASER’S AGENTS, EMPLOYEES, REPRESENTATIVES, OR ASSIGNEES (INCLUDING NEGLIGENT ACTS OR OMISSIONS, REGARDLESS OF WHETHER OR NOT THOSE ACTIONS OR OMISSIONS CONSTITUTE GROSS NEGLIGENCE). MERCHANT AND PRINCIPAL(S) AGREE THAT REGARDLESS OF ANY CLAIMS MERCHANT OR PRINCIPAL(S) MAY HAVE AGAINST PURCHASER, MERCHANT’S AND PRINCIPAL’S SOLE REMEDY WILL BE AN ACTION AT LAW, AND THAT MERCHANT WILL NOT BE ENTITLED TO AND HEREBY WAIVES ANY AND ALL CLAIMS FOR PUNITIVE, EXEMPLARY, CONSEQUENTIAL, STATUTORY, OR SPECIAL DAMAGES AND LOST PROFITS OF ANY KIND. IF MERCHANT OR PRINCIPAL FILES AN ACTION AGAINST PURCHASER AND PURCHASER IS THE PREVAILING PARTY, MERCHANT AND/OR PRINCIPAL AGREE TO PAY ALL OF PURCHASER’S ATTORNEYS’ FEES AND COSTS INCURRED IN THE MATTER.

 

16.     Account Information from Third Party Sites. Merchant and Principal(s) authorize Purchaser to retrieve company and personal information, respectively, from third-party financial institutions with which Merchant or Principal(s) have relationships. Purchaser may work with one or more online financial service providers under contract to access this account information and review bank statements, including Yodlee, Inc. and Clarilogic, Inc. d/b/a DecisionLogic (“Approved Service Providers”).

 

By accepting these Terms and conditions, Merchant and Principal(s) authorize Purchaser and Approved Service Providers to access third party sites designated by Merchant and Principal(s), to retrieve information requested by Merchant, and to register for accounts requested by Merchant. Merchant hereby grants Purchaser and Approved Service Providers a limited power of attorney, and Merchant hereby appoints Purchaser and Approved Service Providers as Merchant's true and lawful attorney-in-fact, to access third-party internet sites, servers, or documents, retrieve information, and use Merchant's information, with the full power and authority to do and perform every act and thing necessary to accomplish those means. MERCHANT ACKNOWLEDGES AND AGREES THAT WHEN PURCHASER AND APPROVED SERVICE PROVIDERS ACCESS AND RETRIEVE INFORMATION FROM THIRD PARTY SITES, PURCHASER AND APPROVED SERVICE PROVIDERS ARE ACTING AS MERCHANT'S AGENT, AND NOT THE AGENT OF, OR ON BEHALF OF, THE THIRD PARTY AND AGREES TO HOLD PURCHASER AND APPROVED SERVICE PROVIDERS HARMLESS AGAINST ALL

CLAIMS THAT MAY ARISE AGAINST THE THIRD PARTY SITES. Merchant understands and agrees that the Service (as defined below) is not endorsed or sponsored by any third party account providers accessible through the Service.

 

 

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17.     DISCLAIMER OF WARRANTIES. MERCHANT EXPRESSLY UNDERSTANDS AND AGREES THAT MERCHANT'S USE OF APPROVED SERVICE PROVIDERS’ SERVICE (“SERVICE”) AND ALL INFORMATION, PRODUCTS AND OTHER CONTENT (INCLUDING THAT OF THIRD PARTIES) INCLUDED IN OR ACCESSIBLE FROM THE SERVICE IS AT MERCHANT’S SOLE RISK. THE SERVICE IS PROVIDED ON AN “AS IS” AND “AS AVAILABLE” BASIS. PURCHASER AND APPROVED SERVICE PROVIDERS EXPRESSLY DISCLAIM ALL WARRANTIES AS TO THE SERVICE AND ALL INFORMATION, PRODUCTS AND OTHER CONTENT (INCLUDING THAT OF THIRD PARTIES) ACCESSIBLE FROM THE SERVICE, WHETHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT. PURCHASER AND ANY APPROVED SERVICE PROVIDERS MAKE NO WARRANTY THAT (i) THE SERVICE WILL MEET MERCHANT'S REQUIREMENTS, (ii) THE SERVICE WILL BE UNINTERRUPTED, TIMELY, SECURE, OR ERROR-FREE, (iii) THE RESULTS THAT MAY BE OBTAINED FROM THE USE OF THE SERVICE WILL BE ACCURATE OR RELIABLE, (iv) THE QUALITY OF ANY PRODUCTS, SERVICES, INFORMATION, OR OTHER MATERIAL PURCHASED OR OBTAINED BY MERCHANT THROUGH THE SERVICE WILL MEET MERCHANT’S EXPECTATIONS, OR (v) ANY ERRORS IN THE TECHNOLOGY WILL BE CORRECTED. ANY MATERIAL OBTAINED THROUGH THE USE OF THE SERVICE IS DONE AT MERCHANT’S OWN DISCRETION AND RISK, AND MERCHANT IS SOLELY RESPONSIBLE FOR ANY DAMAGE TO MERCHANT'S COMPUTER SYSTEM OR LOSS OF DATA THAT RESULTS FROM THE DOWNLOAD OF ANY SUCH MATERIAL. NO ADVICE OR INFORMATION, WHETHER ORAL OR WRITTEN, OBTAINED BY MERCHANT FROM PURCHASER OR APPROVED SERVICE PROVIDERS THROUGH OR FROM THE SERVICE WILL CREATE ANY WARRANTY NOT EXPRESSLY STATED IN THESE TERMS.

 

18.     LIMITATION OF LIABILITY RELATED TO THE SERVICE. MERCHANT AGREES THAT NEITHER PURCHASER NOR APPROVED SERVICE PROVIDERS NOR ANY OF THEIR AFFILIATES, WILL BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES, INCLUDING, BUT NOT LIMITED TO, DAMAGES FOR LOSS OF PROFITS, GOODWILL, USE, DATA OR OTHER INTANGIBLE LOSSES, EVEN IF PURCHASER HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, RESULTING FROM: (i) THE USE OR THE INABILITY TO USE THE SERVICE; (ii) THE COST OF GETTING SUBSTITUTE GOODS AND SERVICES, (iii) ANY PRODUCTS, DATA, INFORMATION OR SERVICES PURCHASED OR OBTAINED OR MESSAGES RECEIVED OR TRANSACTIONS ENTERED INTO, THROUGH OR FROM THE SERVICE; (iv) UNAUTHORIZED ACCESS TO ALTERATION OF MERCHANT’S TRANSMISSIONS OR DATA; (v) STATEMENT OR CONDUCT OF ANYONE ON THE SERVICE; (vi) THE USE, INABILITY TO USE, UNAUTHORIZED USE, PERFORMANCE OR NON-PERFORMANCE OF ANY THIRD PARTY ACCOUNT PROVIDER SITE, EVEN IF THE PROVIDER HAS BEEN ADVISED PREVIOUSLY OF THE POSSIBILITY OF SUCH DAMAGES; OR (vii) ANY OTHER MATTER RELATED TO THE SERVICE.

 

19.     Content Merchant Provides. Merchant is licensing to Purchaser and its Approved Service Providers any information, data, passwords, materials or other content (“Content”) Merchant provides through or to the Service. Purchaser may use, modify, display, distribute, and create new material, using that content, to provide the Service to Merchant. By submitting Content, Merchant automatically agrees, or promises that the owner of such Content has expressly agreed that, without any particular time limit, and without the payment of any fees, Purchaser may use the Content for the purposes set out above. As between Purchaser and Approved Service Providers, Purchaser owns Merchant's confidential account information.

 

20.     Proprietary Rights. Merchant is only permitted to use content delivered to Merchant, through Purchaser’s Merchant portal on the Merchant portal or the Service, on the Service. Merchant may not copy, reproduce, distribute, or create derivative works from Purchaser’s Merchant portal or the Service. Further, Merchant agrees not to reverse engineer or reverse compile any of the Purchaser’s Merchant portal or the Service technology.

 

21.      Miscellaneous. Merchant may not assign this Agreement or any rights and licenses granted hereunder. Purchaser may assign this Agreement, or any claims arising from, or rights granted to Purchaser pursuant to, this Agreement, without restriction or limitation, including without limitation the right to file a lawsuit, litigate and/or otherwise resolve any claims against Merchant and Principal(s) arising from this Agreement, including without limitation a claim for a breach of Section 6 of the Terms and Conditions. This Agreement, including without limitation the performance guarantees provided hereunder, will be binding upon Merchant and Principal(s) and inure to the benefit of Purchaser, its successors and assigns. Certain authorizations effective upon Merchant’s signing of this Agreement (as expressly set forth in this Agreement) will be effective and binding immediately upon Merchant’s signature and will not be deemed withdrawn or revoked should Purchaser determine not to sign the Agreement. In the event o f any inconsistencies between the Terms and Conditions and any FRSA between Purchaser and Merchant, the FRSA will control. No modification of this Agreement will be effective unless it is in writing and signed by each of the parties, except that Purchaser can amend the Agreement, to the extent permitted herein and not otherwise prohibited by law, by giving Merchant prior written notice. If any provisions of this Agreement are determined to be invalid, illegal or unenforceable in any respect, the remaining provisions will not be affected in any manner, and that provision shall be interpreted as modified to the minimum extent necessary to make it enforceable, so long as the law allows such a modification. The signatures to this Agreement may be evidenced by facsimile copies or other electronic means reflecting the party’s signature hereto, including the use of services that comply with the requirements of the ESIGN Act and any such copy or signature shall have the same legal and evidentiary effect as if it were an original signature. This Agreement may be executed in multiple counterparts, each of which will be deemed to be an original, but all of which together will constitute but one and the same instrument. Merchant consents to the electronic delivery of the disclosures, notices, terms and conditions, other documents, and any future changes from Purchaser. Merchant also agrees that Purchaser does not need to provide

 

 

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Merchant with an additional copy of the disclosures, notices, terms and conditions, and other documents, and any future changes, unless specifically requested. The headings of the sections contained in this agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this agreement. This Agreement is the product of collaboration between the Parties. The Parties acknowledge and agree that each has been given an opportunity to independently review this Agreement with legal counsel, has agreed to the particular language of the provisions here and that this Agreement shall be construed as though both Parties fully participated in the drafting of this Agreement..

 

 

 

 

 

 

 

 

 

 

 

 

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ACH AUTHORIZATION AGREEMENT

 

This Authorization Agreement for Direct Deposit (ACH Credit) and Direct Collections (ACH Debits) is part of (and incorporated by reference into) the Future Receivables Sale Agreement. Merchant should keep this important legal document for Merchant’s records. Any capitalized term(s) that are not otherwise defined shall retain the same meaning set forth in the Future Receivables Sale Agreement.

 

DISBURSEMENT OF RECEIVABLES SALE PROCEEDS. By signing below, Merchant authorizes Purchaser to disburse the Purchase Price, less the amount of any applicable setup fee, by initiating an ACH credit, wire transfer, or similar means to the bank account indicated below (or a substitute bank account Merchant or Merchant’s agent later provides to Purchaser, including without limitation, other bank account(s) that are presented to Purchaser in consideration of additional funding) (hereinafter referred to as the “Designated Bank Account”) in the disbursal amount set forth in the accompanying Future Receivables Sale Agreement.

 

COLLECTION OF FUNDS ARISING FROM FUTURE RECEIPTS. By signing below, Merchant authorizes Purchaser to collect amounts Purchaser is entitled to receive under the Future Receivables Sale Agreement by initiating ACH Debits of the Purchased Percentage of Merchant’s daily receivables to the Designated Bank Account each business day until Purchaser receives the Amount Sold. At the time of execution of the Future Receivables Sale Agreement, the Parties agree that the Purchased Percentage equates to the Dollar Amount of Purchased Percentage set forth in the Future Receivables Sale Agreement, and that the Dollar Amount of Purchased Percentage shall be debited each business day. However, Merchant acknowledges and agrees that the Dollar Amount of Purchased Percentage may change and fluctuate so that it directly correlates to the fluctuation of the amount of Future Receivables generated by Merchant.

 

Merchant authorizes Purchaser to increase the amount of any scheduled ACH debit entry or assess multiple ACH debits for the amount of any previously scheduled payment(s) that was not paid because Merchant’s financial institution was not open or was not able to process ACH transactions. If a transaction is rejected by Merchant’s financial institution for any reason other than termination of this authorization, including without limitation insufficient funds, Merchant understands that Purchaser may, at its discretion, attempt to process the transaction again as permitted under the NACHA Rules. Merchant also authorizes Purchaser to initiate ACH entries to correct any erroneous payment transaction. Merchant understands that Merchant is responsible for ensuring that funds arising from Future Receivables of Merchant remain in the Designed Bank Account each day until Purchaser debits the amount to which it is entitled under the Future Receivables Sale Agreement. Merchant agrees to notify Purchaser promptly if there are any changes to the account and routing numbers of the Designated Bank Account. Purchaser is not responsible for any overdrafts, rejected transactions, or other fees that may result from credits or debits initiated under this Authorization Agreement. This authorization is to remain in full force and effect until Purchaser has received written notification from Merchant at Knight Capital Funding, Attn: Customer Service, 9 E. Loockerman Street, Ste 202-543, Dover, DE 19901, at least 5 banking days prior to its termination, to afford Purchaser a reasonable opportunity to act on it. The origination of ACH transactions to the Designated Bank Account must comply with, and both Merchant and Purchaser agree to be bound by, the provisions of applicable law and the NACHA Rules.

 

BUSINESS PURPOSE ACCOUNT. By signing below, Merchant attests that the Designated Bank Account was established for business purposes and not primarily for personal, family or household purposes.

 

The individual signing below on behalf of Merchant certifies that he/she is an authorized signer on the Designated Bank Account. Merchant will not dispute any ACH transaction initiated pursuant to this Authorization Agreement, provided the transaction corresponds to the terms of this Authorization Agreement. Merchant requests the financial institution that holds the Designated Bank Account to honor all ACH entries initiated in accordance with this Authorization Agreement.

 

 

 

 

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By signing below I agree that $823.30 accurately reflects 12.09% of the business s average daily receivables, and I hereby certify that my responses to the questions above are true, accurate and correct, to the best of my knowledge. Furthermore, I hereby authorize my landlord and credit card processor to discuss confidential account information for the purpose of satisfying the requirements of the Future Receivables Sale Agreement.

 

 

Completed and attested by:  
     

Signature

/s/ Charles O'Dowd  
     

Print Name:  

Charles O'Dowd  
     

Date:  

Aug 8, 2019  

 

 

 

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FUTURE RECEIVABLES SALE AGREEMENT ADDENDUM

 

This Addendum pertains to the FUTURE RECEIVABLES SALE AGREEMENT corresponding with APP- 652264 (“FRSA#1”) entered into by and between KNIGHT CAPITAL FUNDING III LLC, ABCO SOLAR, INC.

(“Merchant”), and any party that signed or personally guaranteed the FRSA #1 (“Principal(s)”) and the subsequent FUTURE RECEIVABLES SALE AGREEMENT corresponding with APP-781872 (“FRSA #2”) entered into by and between the undersigned Knight Capital entity (“Purchaser”), the Merchant, and the Principal(s).

 

Purchaser, Merchant, and Principal(s) (collectively, the “Parties”) acknowledge and agree as follows:

 

1.      Payment of Unpaid Future Receivables Outstanding under FRSA #1 . The Parties agree that the unpaid Future Receivables1 outstanding under the FRSA #1 are $ 21,869.98 (“Unpaid Receivables”). The Unpaid Receivables shall be paid from the proceeds of the Purchase Price from the FRSA #2, in order to satisfy the Amount Sold from the FRSA #1. The Unpaid Receivables do not include any pending remittances which have not settled into Purchaser’s account. If any pending remittances under the FRSA #1 are received after execution of this Addendum, they shall be accredited to unpaid Future Receivables outstanding under FRSA #2.

 

2.        Terms and Conditions . This Addendum is subject to and made part of the FRSA #1 and the FRSA #2, including the Terms and Conditions which are referenced and incorporated therein.

 

PURCHASER:

 

MERCHANT:

         

By:  

   

By:  

/s/ Charles O'Dowd
  (Signature)     (Signature)
         

Print Name:  

   

Print Name:  

Charles O'Dowd
         

Title:  

   

Title:  

Owner
         

Date:  

   

Date:  

Aug 8, 2019
         
         
ADDITIONAL   PRINCIPAL:   

PRINCIPAL:  

         
By:       By:  s/ Charles O'Dowd
  (Signature)     (Signature)
         
Print Name:      

Print Name:  

Charles O'Dowd
         
Date:      

Date:  

Aug 8, 2019

 

 

 

 

Page 13 of 13
 

 

 

 

Exhibit 31.1

 

Sarbanes-Oxley Act of 2002 CEO 302 CERTIFICATION PURSUANT TO RULE 13A-15(E)/15D-15(E)

 

Certification of the Chief Executive Officer

 

I, Charles O’Dowd, certify that:

 

(1)

I have reviewed this Quarterly Report on Form 10-Q of ABCO Energy, Inc.

 

(2)

Based on my knowledge, this Quarterly Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report;

 

(3)

Based on my knowledge, the financial statements and other financial information included in this Quarterly Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for the periods presented in this Quarterly Report;

 

(4)

The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

 

(a)      Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its subsidiaries, if any, is made known to us by others within those entities, particularly during the period in which this Quarterly Report is being prepared;

 

(b)      Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)      Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

 

(d)      Disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

(5)

The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

 

(a)       all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)      any fraud, whether material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

Date: August 19, 2019

ABCO ENERGY, INC.

 

 

 

 

 

 

By:

/s/ Charles O’Dowd

 

 

 

Charles O’Dowd

 

 

 

President & CEO

 

 

 

 

 

 

 

Exhibit 31.2

 

Sarbanes-Oxley Act of 2002 CFO 302 CERTIFICATION PURSUANT TO RULE 13A-15(E)/15D-15(E)

 

Certification of the Chief Financial Officer

 

I, Charles O’Dowd, certify that:

 

(1)

I have reviewed this Quarterly Report on Form 10-Q of ABCO Energy, Inc.

 

(2)

Based on my knowledge, this Quarterly Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report;

 

(3)

Based on my knowledge, the financial statements and other financial information included in this Quarterly Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Quarterly Report;

 

(4)

The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

 

(a)      Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its subsidiaries, if any, is made known to us by others within those entities, particularly during the period in which this Quarterly Report is being prepared;

 

(b)      Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)      Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

 

(d)      Disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

(5)

The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

 

(a)       all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)      any fraud, whether material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 19, 2019

ABCO ENERGY, INC.

 

 

 

 

 

 

By:

/s/ Charles O’Dowd

 

 

 

Charles O’Dowd

 

 

 

CFO & PAO

 

 

 

 

 

 

 

Exhibit 32.1

 

Chief Executive Officer Certification (Section 906)

 

CERTIFICATION PURSUANT TO

 18 U.S.C., SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

Pursuant to 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002), I, the undersigned Chief Executive Officer of ABCO Energy, Inc., (the “Company”), hereby certify that, to the best of my knowledge, the Quarterly Report on Form 10-Q of the Company for the period ended June 30, 2019 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. A signed original of this written statement required by Section 906 has been provided to the registrant and will be retained by it and furnished to the Securities and Exchange Commission or its staff upon request.

 

Dated: August 19, 2019

 

 

 

 

ABCO ENERGY, INC.

 

 

 

/s/ Charles O’Dowd

 

 

Charles O’Dowd

 

President & CEO

 

 

 

Exhibit 32.2

 

Chief Financial Officer Certification (Section 906)

 

CERTIFICATION PURSUANT TO

18 U.S.C., SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

Pursuant to 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002), I, the undersigned Chief Financial Officer of ABCO Energy, Inc., (the “Company”), hereby certify that, to the best of my knowledge, the Quarterly Report on Form 10-Q of the Company for the period ended June 30, 2019 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. A signed original of this written statement required by Section 906 has been provided to the registrant and will be retained by it and furnished to the Securities and Exchange Commission or its staff upon request.

 

Dated: August 19, 2019

 

 

 

 

ABCO ENERGY, INC.

 

 

 

/s/ Charles O’Dowd

 

 

Charles O’Dowd

 

Chief Financial Officer