RESULTS OF OPERATIONS - OVERVIEW
FOR THE SIX MONTHS ENDED JUNE 30, 2022
AND JUNE 30, 2021
UNAUDITED
Our discussion of operating results for the six months ended June 30, 2021 and
June 30, 2020 are presented below with major category details of revenues and
expenses including the components of operating expenses. Sales consist of
photovoltaic products, electrical services and LED lighting products and
installation during both periods.
Sales for the six months ended June 30, 2022 and 2021 were $982,552 and
$768,399, respectively. This is an increase of $214,153 or 28% of the 2021
sales. The Solar sales revenue in 2022 and 2021 reflected seasonal and changing
market conditions in the financing of solar installations in the Arizona markets
and the effects of the COVID-19 Pandemic. ABCO has worked diligently to overcome
the COVID 19 effects on sales and the public utility changes by focusing on
commercial applications and the increased interest of business and government in
the LED lighting contracts.
Cost of sales for the six months ended June 30, 2022 and 2021 was $696632 and
$453,439, respectively, and 71% and 59% of sales for each period then ended.
Gross margins were 29% of revenue for the six months ended June 30, 2022 and 41%
of revenue for the six months ended June 30, 2021. During 2022 and 2021 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 $379,439 or 48% of
revenues during the six months ended June 30, 2022 and $353,090 or 46% of
revenues for the six months ended June 30, 2021, respectively. Net loss from
operations for the six-month period ended June 30, 2022 was $(208,164) as
compared to a net loss of $(49,183) for the same six-month period ended June 30,
2021, respectively. Our operating expenses for the six months ending June 30,
2022 period were lower by $26,079 over the comparative period in 2020. The
interest expense during the six months ended June 30, 2022 increased by $5,768
over the period ended June 30, 2021 due mostly to the lack of new convertible
loans during this period where accounting treatment requires the recording of
prepaid interest during the first phase of the loan and because of higher loans
from related parties. This combination of factors decreased the loss for the six
months ended June 30, 2022 to $(208,164) as compared to $49,183 for the six
months ended June 30, 2021, respectively. Our sales have increased dramatically
during 2022 due to the end of the lock-downs and this is reflected in our sales
numbers. However, a great number of projects were sold close to the period
ending on June 30, 2022 and resulted in a large increase in unfinished projects
at that time. All or most of these projects will be completed by year end, but
the result at June 30 is the substantial increase in Excess Billings on
Contracts in Process and the large increase in accounts receivable on incomplete
projects. Both of these increases will be worked out as the backlog projects
are completed over the next few months and will result in sales in the future.
21
--------------------------------------------------------------------------------
Table of Contents
STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021
AND THE YEAR ENDED DECEMBER 31, 2021During the six months ended June 30, 2022 our net cash used by operating
activities was $(129,053) and comparatively the net cash used by operating
activities in the six months ended June 30, 2021 was $(242,350). Net cash used
by operating activities in the period ended June 30, 2022 consisted primarily of
net losses from operations of $(208,164) for 2022 as compared to a loss of
$(49,183) for 2020. Depreciation adjustments of non-cash expenses were $12,140
and $11,673 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 $202,690 for the period ended June 30, 2022 as
compared to derivative liability change of $136,382 in the six months period
ended June 30, 2021. The Company experienced an increase in Accounts Payable of
$91,184 during the six months in 2022 as compared to an increase of $41,782 for
the comparative period in 2021. This increase is primarily due to the Company's
ability to apply cash receipts from investors and operations to pay past and
current creditors at the end of each period, respectively. Accounts Receivable
increased by $615,671, net of adjustments for contracts in process, during the
period ended June 30, 2022 due to increases in contracts as compared to a
decrease of $113,792 at June 31, 2021.
Net cash provided by or (used for) investing activities for the three months
ended June 30, 2022 and 2021 was $(24,211) and $1,608 respectively due to
receipt of principal on leases paid or terminated and equipment sales and
acquisitions.
Net cash provided by financing activities for the six months ended June 30, 2022
and 2021 was $143,095 and $228,654, respectively. Net cash provided by financing
activities resulted primarily from the sale of Common Stock, loans from a
financial institution and loans from a Director, Officer and Directors. Any
future conversions will increase the number of shares outstanding and the
Stockholders Equity by the amount of the original investment.
LIQUIDITY AND CAPITAL RESOURCES
Our primary liquidity and capital requirements have been for carrying cost of
accounts receivable after completion of contracts. The industry typically
requires solar contractors to wait for the utility approval in order to be paid
for contracts. This process can exceed 90 days and sometimes requires the
Company as the contractor to pay all or most of the cost of projects without
assistance from suppliers. Our working capital deficit at June 30, 2022 was
$(1,615,540) and it was $(1,439,632) at December 31, 2021. This decrease of
$175,908 was primarily due to increases in incomplete projects and the liability
occurring therefrom. 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 daily.
Most are personally guaranteed by the Officer of the Company.
The total borrowings from Directors and officers totaled $597,913 including
accrued interest of $106,559 at June 30, 2022. There are no existing agreements
or arrangement with any Director to provide additional funds to the Company.
During the six and twelve months ended June 30, 2022 and December 31, 2021 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.
22
--------------------------------------------------------------------------------
Table of Contents
© Edgar Online, source Glimpses
ABCO ENERGY, INC. 
