Attached files
| file | filename |
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| EXCEL - IDEA: XBRL DOCUMENT - Incoming, Inc. | Financial_Report.xls |
| EX-32.1 - Incoming, Inc. | exhibit32_1.htm |
| EX-31.1 - Incoming, Inc. | exhibit31_1.htm |
| EX-32.2 - Incoming, Inc. | exhibit32_2.htm |
| EX-31.2 - Incoming, Inc. | exhibit31_2.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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OR
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Commission file number 000-53616
Incoming, Inc.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation or organization)
244 5th Avenue, Ste V235
New York, NY 10001
(Address of principal executive offices, including zip code.)
(800) 385-5705
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-Y (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES [X] NO [ ]
1
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer [ ]
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Accelerated filer [ ]
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Non-accelerated filer [ ]
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Smaller reporting company [X]
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]
As of August 14, 2014, there are 29,274,332 shares of Class A common stock and 1,980,000 shares of Class B common stock outstanding.
All references in this Report on Form 10-Q to the terms “we”, “our”, “us”, the “Company”, “ICNN” and the “Registrant” refer to Incoming, Inc. unless the context indicates another meaning.
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CONSOLIDATED BALANCE SHEETS
(Unaudited)
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June 30, 2014
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December 31, 2013
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ASSETS
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Current Assets
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Cash
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$ | 33,898 | $ | 91,920 | ||||
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Accounts receivable, trade
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16,693 | 2,304,054 | ||||||
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Accounts receivable, related parties
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146,244 | 273,482 | ||||||
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Inventory
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41,782 | 13,083 | ||||||
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Prepaid expenses
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10,175 | 4,088 | ||||||
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Other current assets
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400 | 700 | ||||||
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Total current assets
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249,192 | 2,687,327 | ||||||
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Property and equipment, net
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673,752 | 571,620 | ||||||
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Construction in progress
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- | 92,881 | ||||||
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Total Assets
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$ | 922,944 | $ | 3,351,828 | ||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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Current Liabilities
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Accounts payable
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171,227 | 2,519,127 | ||||||
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Current maturities of long term debt
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54,980 | 57,657 | ||||||
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Accrued liabilities
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21,838 | 25,120 | ||||||
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Accounts payable – related parties
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274,916 | 274,916 | ||||||
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Total current liabilities
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522,961 | 2,876,820 | ||||||
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Long-term debt
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- | 14,606 | ||||||
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Total Liabilities
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522,961 | 2,891,426 | ||||||
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Capital stock $.001 par value; 200,000,000 shares authorized
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Class A – 29,274,332 shares issued and outstanding
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29,274 | 29,274 | ||||||
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Convertible Class B – 1,980,000 shares issued and outstanding
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1,980 | 1,980 | ||||||
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Additional paid in capital
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6,134,570 | 6,134,570 | ||||||
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Accumulated deficit
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(5,765,841 | ) | (5,705,422 | ) | ||||
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Total Stockholders’ Equity
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399,983 | 460,402 | ||||||
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Total Liabilities and Stockholders' Equity
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$ | 922,944 | $ | 3,351,828 | ||||
4
INCOMING, INC.
(Unaudited)
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Three months
ended
June 30,
2014
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Three months ended
June 30,
2013
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Six months ended
June 30,
2014
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Six months
ended
June 30,
2013
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Revenue
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$ | 49,148 | $ | 584,710 | $ | 159,186 | $ | 615,719 | ||||||||
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Revenue from related parties
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9,768 | 53,640 | 9,768 | 74,080 | ||||||||||||
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Total revenue
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58,916 | 638,350 | 168,954 | 689,799 | ||||||||||||
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Cost of revenue
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128,821 | 421,019 | 205,412 | 547,534 | ||||||||||||
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Depreciation
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23,380 | 26,294 | 46,546 | 52,408 | ||||||||||||
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Gross profit (loss)
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(93,285 | ) | 191,037 | (83,004 | ) | 89,857 | ||||||||||
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Selling, General, and Administrative Expenses
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22,850 | 21,392 | 54,842 | 38,378 | ||||||||||||
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Other income (expense)
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Grant and other income
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- | 52,440 | 78,991 | 53,730 | ||||||||||||
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Interest expense
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(827 | ) | (1,579 | ) | (1,564 | ) | (2,724 | ) | ||||||||
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Total other income (expense)
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(827 | ) | 50,861 | 77,427 | 51,006 | |||||||||||
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Net Income (Loss)
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$ | (116,962 | ) | $ | 220,506 | $ | (60,419 | ) | $ | 102,485 | ||||||
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Net Income (Loss) per Class A Common Share (Basic and Diluted)
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$ | (0.00 | ) | $ | 0.01 | $ | (0.00 | ) | $ | 0.00 | ||||||
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Net Income (Loss) per Class B Common Share (Basic and Diluted)
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$ | (0.06 | ) | $ | 0.11 | $ | (0.03 | ) | $ | 0.05 | ||||||
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Weighted Average Number of Class A Common Shares Outstanding (Basic and Diluted)
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29,274,332 | 29,274,332 | 29,274,332 | 29,274,332 | ||||||||||||
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Weighted Average Number of Class B Common Shares Outstanding (Basic and Diluted)
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1,980,000 | 1,980,000 | 1,980,000 | 1,980,000 | ||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
5
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Six months
ended
June 30,
2014
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Six months
ended
June 30,
2013
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Cash Flows from operating Activities
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Net loss
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$ | (60,419 | ) | $ | 102,485 | |||
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Adjustments to reconcile net loss
to net cash provided by operations: |
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Depreciation
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46,546 | 52,408 | ||||||
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Changes in operating assets and liabilities
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Accounts receivable
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2,287,361 | (80,161 | ) | |||||
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Accounts receivable – related party
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127,238 | 67,451 | ||||||
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Prepaid expenses
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3,433 | 2,965 | ||||||
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Inventory
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(28,699 | ) | (39,468 | ) | ||||
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Other current assets
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300 | (300 | ) | |||||
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Accounts payable
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(2,347,901 | ) | 75,695 | |||||
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Accounts payable – related party
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- | (7,650 | ) | |||||
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Accrued expenses
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(3,282 | ) | 450 | |||||
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Net cash provided by operating activities
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24,577 | 173,875 | ||||||
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Cash flows from investing activities
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Purchase of fixed assets
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(55,796 | ) | (56,960 | ) | ||||
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Net cash used in investing activities
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(55,796 | ) | (56,960 | ) | ||||
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Cash flows from financing activities
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Principal payments on debt
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(26,803 | ) | (22,329 | ) | ||||
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Net cash used in financing activities
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(26,803 | ) | (22,329 | ) | ||||
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Net cash increase for period
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(58,022 | ) | 94,586 | |||||
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Cash at beginning of period
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91,920 | 2,348 | ||||||
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Cash at end of period
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$ | 33,898 | $ | 96,934 | ||||
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Supplemental disclosure of cash flow information
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Cash paid for interest
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$ | 1,564 | 2,724 | |||||
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Cash paid for income taxes
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- | - | ||||||
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Non-cash investing and financing activities:
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Construction in process transferred to property and equipment
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131,081 | - | ||||||
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Write-off of fully depreciated assets
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5,339 | - | ||||||
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Unpaid additions to prepaid expenses with debt
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9,520 | 8,476 | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 Basis of Presentation, Organization, and Summary of Significant Accounting Policies
Basis of Presentation
The accompanying condensed unaudited financial statements of Incoming, Inc., a Nevada corporation, are condensed and, therefore, do not include all disclosures normally required by accounting principles generally accepted in the United States of America. These statements should be read in conjunction with the Company's most recent annual financial statements for the year ended December 31, 2013 included in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on April 15, 2014. In the opinion of management, all adjustments necessary for a fair presentation have been included in the accompanying condensed financial statements and consist of only normal recurring adjustments. The results of operations presented in the accompanying condensed financial statements for the period ended June 30, 2014 are not necessarily indicative of the operating results that may be expected for the full year ending December 31, 2014.
Organization
Through our wholly-owned subsidiary North American Bio-Energies LLC (“NABE”), we operate in the alternative energy industry in the development and acquisition of commercial grade biodiesel facilities and the distribution and marketing of petroleum and biofuel products.
Note 2 Related Party Transactions
NABE sells a portion of its finished goods to Echols Oil Company, a company owned by our CEO, R. Samuel Bell, Jr. During the six months ended June 30, 2014, sales to the related company totaled $9,768. As of June 30, 2014, the Company had outstanding receivables from the related party company of $146,244. As of June 30, 2014, the Company had no outstanding payables to Echols, but did have $274,916 in related party payables to Green Valley Bio-Fuels. Green Valley Bio-Fuels is considered a related party since it is majority-owned by Mr. Frank A. Gay, who sits on the Company’s Board of Directors.
Note 3 Subsequent Event
On the evening of August 1, 2014, filtration equipment was damaged in a fire at our biodiesel production facility in Lenoir, NC. The on-site fire suppression system and emergency responders contained the fire to the filtration equipment. No individuals were harmed. A preliminary assessment indicates that the fire started due to spontaneous combustion of filter cake within the filtration media. The plant will be temporarily idled while the formal investigation is concluded and replacement equipment is sourced. We are currently not able to accurately estimate the financial effects of the loss related to the fire.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF THE RESULTS OF OUR OPERATIONS AND FINANCIAL CONDITION SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL STATEMENTS AND THE NOTES THERETO INCLUDED ELSEWHERE IN THIS REPORT.
This section of the report includes a number of forward-looking statements that reflect the Company’s current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: "believe," "expect," "estimate," "anticipate," "intend," "project" and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this annual report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.
The following discussion provides an analysis of the results of our operations, an overview of our liquidity and capital resources and other items related to our business. The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and our audited financial statements and notes included in our Annual Report on Form 10-K as of and for the year ended December 31, 2013.
Overview
Company references herein are referring to consolidated information pertaining to Incoming, Inc., the registrant.
The following discussion is an overview of the important factors that management focuses on in evaluating our businesses, financial condition and operating performance and should be read in conjunction with the financial statements included in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those anticipated in these forward looking statements as a result of any number of factors, including those set forth in this Quarterly Report and elsewhere in the Company’s Annual Report on Form 10-K and other public filings.
All written and oral forward-looking statements made in connection with this Quarterly Report on Form 10-Q that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Given the uncertainties that surround such statements, you are cautioned not to place undue reliance on such forward-looking statements.
Company Overview
NABE is a refiner and producer of commercial-grade biodiesel as specified by the American Society of Testing and Materials (ASTM D6751). Our refining and production facility is located in Lenoir, North Carolina with a nameplate annual capacity of five million gallons. Our facility produces biodiesel from virgin, agri-based feedstock using commercial specifications. The biodiesel we produce is sold throughout North Carolina, South Carolina and Virginia directly or through wholesale distributors. Currently, we are engaged in producing biodiesel and strategically purchasing biodiesel from other producers to meet commercial requirements. We also purify and sell glycerin, which is created as a byproduct of the biodiesel production process. Once the facility has accumulated sufficient glycerin to make full loads, it is typically sold to the market.
Our production process starts with purchasing the most cost effective and suitable agri-based feedstock (e.g., soy, canola, sunflower, cotton seed and chicken/pork fat). A sample of every feedstock is tested by our in-house laboratory in order to develop the proper recipe of catalysts for the transesterification process. The glycerin byproduct is then separated from the biodiesel and any excess methanol is recovered. Recovered methanol is either sold or reused in the production process. Glycerin is sold on the open market as either a crude product or as a further-processed tech grade product. While biodiesel is our main product, glycerin is a popular chemical used in pharmaceutical and hygiene applications and serves as an additional source of revenue.
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Our facility is capable of producing biodiesel from a wide range of agri-based feedstocks: soy, canola, sunflower, cotton seed and chicken/pork fat. Biodiesel production costs are highly dependent on the cost of feedstock, and we believe the ability to utilize a variety of feedstocks efficiently and interchangeably is imperative to gaining a competitive advantage in the biodiesel production market.
Results of Operations
The following is a discussion and analysis of our results of operations for the three and six-month periods ended June 30, 2014, and the factors that could affect our future financial condition. This discussion and analysis should be read in conjunction with our financial statements and the notes thereto included elsewhere in this report. Our financial statements are prepared in accordance with United States generally accepted accounting principles. All references to dollar amounts in this section are in United States dollars unless expressly stated otherwise.
Revenue and Revenue From Related Parties
The Company generated revenues of $58,916 during the period April 1, 2014 through June 30, 2014.
Revenue generated during the period was due to sales of biodiesel, glycerin, and materials recovered during glycerin purification processing. During the period April 1, 2014 through June 30, 2014, our biodiesel sales to third parties totaled approximately $3,240 and our sales to related parties amounted to $9,768. There were no RIN sales transacted during the second quarter of 2014. For the period under consideration, de-methylated glycerin sales amounted to $9,299. During the glycerin purification process, acid is added to the crude glycerin. As a result, high fatty acid oil separates from the glycerin and yields another commodity, high fatty acid oil. Sales of the high fatty acid oil totaled $36,609 for the period under consideration.
The Company generated revenues of $638,350 during the period April 1, 2013 through June 30, 2013. Revenue generated during the period was due to sales of biodiesel, glycerin, and materials recovered during glycerin purification processing. During the period April 1, 2013 through June 30, 2013, our biodiesel sales to third parties totaled approximately $355,900 and our sales to related parties amounted to $53,640. RIN sales accounted for $126,370 in revenue during the second quarter of 2013. For the period under consideration, de-methylated glycerin sales amounted to $20,570 while recovered methanol sales totaled $5,389. Sales of the high fatty acid oil totaled $76,481 for the second quarter of 2013.
Comparing the Company’s activity for the period April 1, 2014 through June 30, 2014 to the activity for the period April 1, 2013 through June 30, 2013, there was a decrease in revenue of $579,434 from $638,350 to $58,916. The period-over-period decrease was due to fewer gallons of biodiesel being produced in the current year in light of the issues with commissioning of new processing equipment and with calibrating lab equipment. Sales of own-produced biodiesel experienced a decrease of approximately 100,297 gallons during the period April 1, 2014 through June 30, 2014 compared to the period April 1, 2013 through June 30, 2013. The Company had no RIN sales during the period April 1, 2014 through June 30, 2014, but transacted $126,370 in RIN sales during the period April 1, 2013 through June 30, 2013. Also impacting comparative revenues were sales of high fatty acid oil, methylated glycerin and
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recovered methanol. The Company had high fatty acid oil sales of $36,159 during the second quarter of 2014, while sales of high fatty acid oil totaled $76,481 during the same period in 2013. The Company had glycerin sales of $9,299 during the second quarter of 2014, while glycerin sales were $20,570 during the same period in 2013. The Company had no recovered methanol sales during the second quarter of 2014, while recovered methanol sales totaled $5,389 during the same period in 2013.
The Company generated revenues of $168,954 during the period January 1, 2014 through June 30, 2014. Revenue generated during the period was due to sales of imported biodiesel with RINs, glycerin, and materials recovered during glycerin purification processing. During the first half of 2014, our sales on imported biodiesel to third parties totaled $96,443. Our third party sales of own-produced biodiesel totaled $3,240 in the first half of 2014. We had biodiesel sales to related parties totaling $9,768 during the period under consideration. Sales of high fatty acid oil totaled $47,269 while de-methylated glycerin sales totaled $12,234 during the period January 1, 2014 through June 30, 2014.
The Company generated revenues of $689,799 during the period January 1, 2013 through June 30, 2013. Revenue generated during the period was due to sales of biodiesel, glycerin, and materials recovered during glycerin purification processing. During the period January 1, 2013 through June 30, 2013, our own-produced biodiesel sales to third parties totaled $365,635 and our sales to related parties amounted to $74,080. RIN sales accounted for $126,370 in revenue during the first half of 2013. For the period under consideration, de-methylated glycerin sales amounted to $30,005 while recovered methanol sales totaled $5,389. Sales of high fatty acid oil totaled $88,320 for the period under consideration.
Comparing the Company’s activity for the period January 1, 2014 through June 30, 2014 to the activity for the period January 1, 2013 through June 30, 2013, there was a decrease in revenue of $520,845 from $689,799 to $168,954. The period-over-period decrease was due to fewer gallons of biodiesel being produced in the current year in light of the issues surrounding commissioning of new processing equipment. In addition, NABE experienced calibration issues with its on-site biodiesel testing laboratory. During the prior year, NABE’s EPA registration was enhanced to allow generation of RINs on imported biodiesel. Revenue on import sales totaled $96,443 during the first half of 2014 while there were no import sales during the same period in the prior year. Sales of own-produced biodiesel experienced a decrease of approximately 110,558 gallons during the period January 1, 2014 through June 30, 2014 compared to the period January 1, 2013 through June 30, 2013. RINs transferred during the first half of 2014 were included with the biodiesel sold under the importing category. As a result, there were no direct RIN sales during the first half of 2014. The Company had RIN sales totaling $126,370 during the same period in 2013. Also impacting comparative revenues were sales of high fatty acid oil and glycerin. The Company had high fatty acid oil sales of $46,819 during the first half of 2014 while sales of high fatty acid oil totaled $88,320 during the same period in 2013. The Company had glycerin (methylated and demethylated) sales of $12,234 during the first half of 2014, while glycerin sales were $30,005 during the same period in 2013.
Cost of Revenue
Cost of revenue totaled $128,821 during the period April 1, 2014 through June 30, 2014. For the same period, cost of revenue consisted of costs associated with raw material (feedstocks, methanol, and catalyst) purchases, labor, overhead, and utilities.
Cost of revenue totaled $421,019 during the period April 1, 2013 through June 30, 2013. For the same period, cost of revenue consisted of costs associated with raw material (feedstocks, methanol, and catalyst) purchases, labor, overhead, and utilities.
Comparing the Company’s activity for the period April 1, 2014 through June 30, 2014 to the activity for the period April 1, 2013 through June 30, 2013, there was a decrease in cost of revenues of $292,198 as
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the cost of revenues increased from $421,019 to $128,821. The period-over-period decrease was due to fewer gallons of biodiesel being produced in light of the issues surrounding commissioning of new processing equipment. In addition, NABE experienced calibration issues with its on-site biodiesel testing laboratory. Approximately 100,297 fewer gallons were sold during the second quarter of the current year when compared with the second quarter of the prior year. Cost of sales decreased in line with reduced biodiesel sales. During the second quarter of 2013, the Company recognized a reduction in cost of goods sold totaling $105,338 as a result of filing for the blender tax credit associated with blended gallons sold during 2012. Filing for the 2012 credits during 2013 was made possible due to the retroactive reinstatement of the credit during 2013. The Company did not file for any blender tax credits during the second quarter of 2014.
Cost of revenue totaled $205,412 during the period January 1, 2014 through June 30, 2014. For the same period, cost of revenue consisted of costs associated with raw material (feedstocks, methanol, and catalyst) purchases, labor, overhead, and utilities.
Cost of revenue totaled $547,534 during the period January 1, 2013 through June 30, 2013. For the same period, cost of revenue consisted of costs associated with raw material (feedstocks, methanol, and catalyst) purchases, labor, overhead, and utilities.
Comparing the Company’s activity for the period January 1, 2014 through June 30, 2014 to the activity for the period January 1, 2013 through June 30, 2013, there was a decrease in cost of revenues of $342,122 as the cost of revenues dropped from $547,534 to $205,412. The period-over-period decrease was due to fewer gallons of biodiesel being produced in light of the issues surrounding commissioning of new processing equipment. In addition, NABE experienced calibration issues with its on-site biodiesel testing laboratory. Approximately 110,558 fewer gallons were sold during the first half of the current year when compared with the first half of the prior year. Cost of sales decreased in line with reduced biodiesel sales. During the first half of 2014, the Company recognized an offset to the cost of goods sold totaling $39,211 as a result of filing for the blender tax credit associated with blended gallons.
Gross Profit
The Company had a gross loss of $93,285 for the period April 1, 2014 through June 30, 2014. The primary reasons for the gross loss during the period were the Company’s inability to sell produce biodiesel while adjustments were being made during commissioning of new processing equipment and calibration issues with lab equipment.
Gross profit for the Company was $191,037 for the period April 1, 2013 through June 30, 2013. The primary reasons for the gross profit during the period were the ability to sell more gallons of biodiesel given the limited reinstatement of the biodiesel blenders’ tax credit. Additionally, we were better able to sell RINs into the RIN market as liquidity improved compared with tight market conditions that had existed as a result of RIN fraud perpetrated by other parties in 2011. The gross profit was also directly affected by the $105,338 of tax credit income received during the period April 1, 2013 through June 30, 2013.
The Company had a gross loss of $83,004 for the period January 1, 2014 through June 30, 2014. The primary reasons for the gross loss during the period were the Company’s inability to sell produce biodiesel while adjustments were being made during commissioning of new processing equipment and calibration issues with lab equipment. Offsetting the inability to produce biodiesel at the NABE plant in Lenoir was sales of imported biodiesel during the first quarter of 2014.
Gross profit for the Company was $89,857 for the period January 1, 2013 through June 30, 2013. The gross profit during the period under consideration takes into account the gross loss of $101,180 that was
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experienced during the first quarter of 2013. For the six-month period under consideration, the Company was able to sell 69,330 more gallons during the first half of 2013 than during the same period during 2012. The gross profit was also directly affected by the $105,338 of tax credit income received during the period January 1, 2013 through June 30, 2013.
Selling, General and Administrative (SG&A) Expenses
SG&A expenses totaled $22,850 for the period April 1, 2014 through June 30, 2014. During the period under consideration, SG&A expenses primarily consisted of costs associated with payroll, office overhead and professional fees.
SG&A expenses totaled $21,392 for the period April 1, 2013 through June 30, 2013. During the period under consideration, SG&A expenses primarily consisted of costs associated with payroll, office overhead and professional fees.
Comparing the Company’s activity for the period April 1, 2014 through June 30, 2014 to the activity for the period April 1, 2013 through June 30, 2013, there was an increase in SG&A expenses of $1,458 as SG&A increased from $21,392 to $22,850. The period-over-period increase was due primarily to legal consultation expenses. General overhead remained stable considering the second quarter of the current year compared with the second quarter of the prior year.
SG&A expenses totaled $54,842 for the period January 1, 2014 through June 30, 2014. During the period under consideration, SG&A expenses primarily consisted of costs associated with payroll, office overhead and professional fees.
SG&A expenses totaled $38,378 for the period January 1, 2013 through June 30, 2013. During the period under consideration, SG&A expenses primarily consisted of costs associated with payroll, office overhead and consulting fees.
Comparing the Company’s activity for the period January 1, 2014 through June 30, 2014 to the activity for the period January 1, 2013 through June 30, 2013, there was an increase in SG&A expenses of $16,464 as SG&A rose from $38,378 to $54,842. The period-over-period increase was due primarily to legal consultation fees and professional fees associated with operating a publicly traded company. General overhead remained stable considering the first half of the current year compared with the first half of the prior year.
Other Income (Expense)
The Company had no Other Income during the period April 1, 2014 through June 30, 2014.
Other Income totaled $52,440 during the period April 1, 2013 through June 30, 2013. The primary reason for the balance was $50,760 in funding received from the North Carolina Land & Lakes Grant (NCLLG). NCLLG awarded funding to NABE on a reimbursement basis. The Company recognized Other Income from NCLLG only after we had demonstrated completion of program milestones and reimbursement funds were actually received.
Other Income totaled $78,991 during the period January 1, 2014 through June 30, 2014. This amount was solely attributable to funding received from the USDA Biofuel Program during the first half of 2014. Each quarter, the company submits a Payment Request (Form RD-4288) and supporting documents to the USDA delineating those gallons produced/sold. Along with the documentation, the Company informs the USDA regarding the type and quantity of feedstocks utilized. These Payment Requests are reviewed by an agent of the USDA and then submitted as part of the “pool” for funding. Biodiesel producers compete
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for whatever funding is available from the USDA’s pool. Since it is difficult to predict the amount of funding that may be received, the Company only recognizes Other Income associated with the USDA Biofuel Program when the funds are received.
Other Income totaled $53,730 during the period January 1, 2013 through June 30, 2013. The primary reason for the balance was $50,760 in funding received from the North Carolina Land & Lakes Grant.
Liquidity and Capital Resources
Working Capital
|
As of
June 30, 2014
|
As of
December 31, 2013
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Current Assets
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$ | 249,192 | $ | 2,687,327 | ||||
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Current Liabilities
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$ | 522,961 | $ | 2,876,820 | ||||
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Working Capital Deficiency
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$ | (273,769 | ) | $ | (189,493 | ) | ||
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Accumulated Deficit
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$ | (5,765,841 | ) | $ | (5,705,422 | ) | ||
Cash Flows
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Six Months
Ended
June 30, 2014
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Six Months
Ended
June 30, 2013
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|||||||
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Cash provided by operating activities
|
$ | 24,577 | $ | 173,875 | ||||
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Cash used in investing activities
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(55,796 | ) | (56,960 | ) | ||||
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Cash used in financing activities
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(26,803 | ) | (22,329 | ) | ||||
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Net increase (decrease) in cash
|
$ | (58,022 | ) | $ | 94,586 | |||
As of June 30, 2014, our current assets totaling $249,192 consisted of cash, accounts receivable, inventory, other current assets and prepaid expenses. Our accounts payable and accrued liabilities and current portion of amounts due to related parties and third parties were $522,961 as of June 30, 2014. As a result, we had a working capital deficiency of $273,769.
Current assets for the Company totaled $2,687,327 as of December 31, 2013. Current liabilities for the Company totaled $2,876,820 as of December 31, 2013, which resulted in a working capital deficiency of $189,493.
Comparing the working capital deficiency at June 30, 2014 to the deficiency at December 31, 2013, there was an increase of $84,276 as the deficiency increased from $189,493 to $273,769. The biggest contributor to the overall increase was the Company’s reduced production activity. Production activity was hampered due commissioning of new processing/filtration equipment and laboratory maintenance required at the NABE biodiesel production facility in Lenoir, NC.
On a short-term basis, it is anticipated that the Company’s liquidity needs will be met through selling biodiesel and RIN-gallons, through borrowing from related parties and through the sale of common stock. Considering the long-term view, the Company intends to provide liquidity through operation of its biodiesel plant in Lenoir, North Carolina and through its import activities. Since the December 31, 2013 balance sheet date, total receivables have decreased $2,414,599 with no amounts written off.
To date, cash flow requirements have been primarily met through sales of biodiesel related products, through collections of accounts receivable, through share issuances, and through gross proceeds from bank and related party loans. For the six months ended June 30, 2014, the Company generated a gross loss of $83,004 on sales of $168,954 over the same period. For the six months ended June 30, 2013, the Company generated gross income of $89,857 on sales of $689,799 over the same period.
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As of June 30, 2014, NABE had outstanding balances on bank borrowings of $47,364, which originally totaled $250,000 when the loan was first executed. The loan represents a term loan that resulted from the conversion of a line of credit. An additional balance of $7,616 was outstanding as of June 30, 2014, which represented financing of NABE’s general liability insurance.
A portion of the Company’s operations have been funded through the issuance of common stock shares. As of June 30, 2014, the Company has issued 31,254,332 shares of common stock (29,274,332 shares of Class A stock and 1,980,000 shares of Class B stock).
To date, our cash flow requirements have been primarily met by equity financings and from operating the Company's biodiesel production facility in Lenoir, NC. Management expects to keep operational costs to a minimum until cash is available through financing or operating activities. Management plans to continue to seek other sources of financing on favorable terms; however, there are no assurances that any such financing can be obtained on favorable terms, if at all.
Cash Provided By Operating Activities
During the period January 1, 2014 through June 30, 2014, the Company’s cash provided by operating activities totaled $24,577. For the same period, the Company’s cash provided by operating activities was primarily attributable to the net effect of import activities, collecting trade receivables associated with biodiesel sales, and making payments on trade payables. Trade receivables decreased $2,287,361 while inventories increased $28,699. Trade payables decreased $2,347,901 for the same period. Depreciation expense was $46,546 for the first half of 2014.
During the period January 1, 2013 through June 30, 2013, the Company’s cash provided by operating activities totaled $173,875. For the same period, the Company’s cash provided by operating activities was primarily attributable to the net effect of making credit sales, collecting trade receivables associated with biodiesel and RIN sales, and making payments on trade payables. Trade receivables increased $12,710 while inventories increased $39,468. NABE collected $105,338 in tax credits attributable to blended gallons sold during 2012. Payables increased $68,045 for the same period.
Cash Used In Investing Activities
During the period January 1, 2014 through June 30, 2014, the Company’s cash used in investing activities totaled $55,796. Of the six-month total, $40,912 represented billings for biodiesel processing and filtration equipment that was installed at the production facility in Lenoir, North Carolina. Portions of the newly installed equipment had been captured in Construction in Progress (CIP) at December 31, 2013. All of the equipment has been transferred out of CIP and into fixed assets. Additional investing activities included leasehold improvements (piping and steelwork) installed in support of the processing equipment.
During the period January 1, 2013 through June 30, 2013, the Company’s cash used in investing activities totaled $56,960. This amount represents billings for glycerin processing equipment ($50,760) and two horizontal storage tanks ($6,200) that NABE purchased from the neighboring Google facility.
Cash Used In Financing Activities
During the period January 1, 2014 through June 30, 2014, the Company’s cash used in financing activities totaled $26,803. This amount represents payments on long-term debt to third-party creditors.
During the period January 1, 2013 through June 30, 2013, the Company’s cash used in financing activities totaled $22,329. This amount represents payments on long-term debt to third-party creditors.
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We anticipate that additional funding will be required in the form of equity financing from the sale of our common stock in order to proceed with our acquisition and expansion plan. However, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our marketing and acquisition plans. At this time, we do not have any arrangements in place for any future equity financing.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Recent Accounting Pronouncements
Management does not expect any financial statement impact from any recently-issued pronouncements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
ITEM 4. CONTROLS AND PROCEDURES
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(a)
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Evaluation of Disclosure Controls and Procedures
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As of the end of the period covered by this Quarterly Report on Form 10-Q, we conducted an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) of our disclosure controls and procedures (as defined in Rules13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, the CEO concluded that our disclosure controls and procedures were not effective as of June 30, 2014. We have identified the following material weaknesses in our internal control over financial reporting:
Lack of Independent Board of Directors and Audit Committee
Management is aware that an audit committee composed of the requisite number of independent members along with a qualified financial expert has not yet been established. Considering the costs associated with procuring and providing the infrastructure to support an independent audit committee and the limited number of transactions, management has concluded that the risks associated with the lack of an independent audit committee are not sufficient to justify the creation of such a committee at this time. Management will periodically reevaluate this situation.
Deficiencies in Our Control Environment.
Our control environment did not sufficiently promote effective internal control over financial reporting throughout the organization. This material weakness exists because of the aggregate effect of multiple
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deficiencies in internal control which affect our control environment, including: a) the lack of an effective risk assessment process for the identification of fraud risks; b) the lack of an internal audit function or other effective mechanism for ongoing monitoring of the effectiveness of internal controls; c) deficiencies in our accounting system and controls; d) and insufficient documentation and communication of our accounting policies and procedures as of June 30, 2014.
Deficiencies in the staffing of our financial accounting department.
The number of qualified accounting personnel with experience in public company SEC reporting and GAAP is limited. This weakness does not enable us to maintain adequate controls over our financial accounting and reporting processes regarding the accounting for non-routine and non-systematic transactions. There is a risk that a material misstatement of the financial statements could be caused, or at least not be detected in a timely manner, by this shortage of qualified resources.
Deficiencies in Segregation of Duties.
The limited number of qualified accounting personnel results in an inability to have independent review and approval of financial accounting entries. Furthermore, management and financial accounting personnel have wide-spread access to create and post entries in our financial accounting system. There is a risk that a material misstatement of the financial statements could be caused, or at least not be detected in a timely manner, due to insufficient segregation of duties.
Because of its inherent limitation, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our financial accounting staff is actively attending and receiving training. Management is still determining additional measures to remediate deficiencies related to staffing.
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(b)
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Changes in Internal Controls Over Financial Reporting
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There were no changes that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Currently we are not involved in any pending litigation or legal proceeding.
ITEM 1A. RISK FACTORS
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. OTHER INFORMATION
None.
ITEM 5. EXHIBITS
The following documents are filed as a part of this report or are incorporated by reference to previous filings, if so indicated:
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Exhibit No.
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Description
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3.1
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Articles of Incorporation (1)
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3.2
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Bylaws (1)
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31.1
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Section 302 Certification of CEO*
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31.2
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Section 302 Certification of Principal Financial Officer *
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32.1
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Section 906 Certification of CEO*
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32.2
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Section 906 Certification of Principal Financial Officer*
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*filed herewith
(1) Incorporated by reference to the Form S-1 registration statement filed on June 30, 2008.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
August 14, 2014
By:
INCOMING, INC.
/s/ R. Samuel Bell, Jr.
R. Samuel Bell, Jr., CEO and Chairman, Board of Directors
/s/ Eric Norris
Vice President, Finance (Principal Financial Officer)
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