RESULTS OF OPERATIONS - OVERVIEW
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022
AND SEPTEMBER 30, 2021
UNAUDITED
Our discussion of operating results for the nine months ended September 30,
2022, and September 30, 2021 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 nine months ended September 30, 2022, and 2021 were $1,286,928 and
$998,228, respectively. This is an increase of $287,967 or 22% of the 2022
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 nine months ended September 30, 2022, and 2021 was
$868,946 and $619,173, respectively, and 68 and 62% of sales for each period
then ended. Gross margins were 33% of revenue for the nine months ended
September 30, 2022, and 38% of revenue for the nine months ended September 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 $545,741 or 42% of
revenues during the nine months ended September 30, 2022, and $539,970 or 54% of
revenues for the nine months ended September 30, 2021, respectively. Net loss
from operations for the nine -month period ended September 30, 2022, was
$(245,207) as compared to a net loss of $(209,295) for the same nine -month
period ended September 30, 2021, respectively. Our operating expenses for the
nine months ending September 30, 2022, period was higher by $5,771 over the
comparative period in 2021. The interest expense during the nine months ended
September 30, 2022, decreased by $8,459 over the period ended September 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. Our sales
have increased dramatically during 2022 due to the end of the lockdowns and this
is reflected in our sales numbers. However, a great number of projects were
sold close to the period ending on September 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 September 30 is the substantial
increase in Excess Billings on Contracts in Process and the large increase in
accounts receivable on incomplete projects. Both increases will be worked out as
the backlog projects are completed over the next few months and will result in
sales in the future.
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STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
AND THE YEAR ENDED DECEMBER 31, 2021
During the nine months ended September 30, 2022, our net cash used by operating
activities was $(305,976) and comparatively the net cash used by operating
activities in the nine months ended September 30, 2021, was $(372,337). Net cash
used by operating activities in the period ended September 30, 2022, consisted
primarily of net losses from operations of $(245,207) for 2022 as compared to a
loss of $(209,295) for 2021. Depreciation adjustments of non-cash expenses were
$18,210 and $16,841 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 $206,690 for the period ended September
30, 2022, as compared to derivative liability change of $0 in the nine months
period ended September 30, 2021. The Company experienced an increase in Accounts
Payable of $69,225 during the nine months in 2022 as compared to an increase of
$81,600 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 $365,745, net of adjustments for contracts in process,
during the period ended September 30, 2022, due to increases in contracts as
compared to a decrease of $89,781 on September 30, 2021.
Net cash provided by or (used for) investing activities for the nine months
ended September 30, 2022, and 2021 was $(4,506) and $2,315 respectively due to
receipt of principal on leases paid or terminated and equipment sales and
acquisitions.
Net cash provided by financing activities for the nine months ended September
30, 2022, and 2021 was $295,723 and $319,286, 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 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 September 30, 2022 was
$(1,654,326) and it was $(1,886,313) at December 31, 2021. This decrease of
$231,987 was primarily due to increases in incomplete projects which were
finished and the liability change 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 $663,328 including
accrued interest of $175,236 on September 30, 2022. There are no existing
agreements or arrangement with any Director to provide additional funds to the
Company.
During the nine and twelve months ended September 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.
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