Incoming, Inc. - FORM 10-Q - August 14, 2015

Attached files

file	filename
EX-31.2 - EXHIBIT 31.2 - Incoming, Inc.	ex312.htm
EX-31.1 - EXHIBIT 31.1 - Incoming, Inc.	ex311.htm
EX-32.1 - EXHIBIT 32.1 - Incoming, Inc.	ex321.htm
EX-32.2 - EXHIBIT 32.2 - Incoming, Inc.	ex322.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended June 30, 2015

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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 [ ]

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.

Large accelerated filer [ ]		Accelerated filer [ ]

Non-accelerated filer [ ]		Smaller reporting company [X]

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, 2015, there are 31,774,332 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.

ITEM 1. FINANCIAL STATEMENTS

Index to the Unaudited Financial Statements	3

CONSOLIDATED UNAUDITED BALANCE SHEETS	4

CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS	5

CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS	6

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS	7

INCOMING, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30, 2015			December 31, 2014

ASSETS
Current Assets
Cash	$	372,233		$	344
Accounts receivable, trade, net		3,282			5,728
Accounts receivable, related party		23,187			-
Inventory		36,516			10,352
Prepaid expenses		13,492			3,704
Other current assets		400			400
Total current assets		449,110			20,528

Property and equipment, net		648,342			695,496
Total Assets	$	1,097,452		$	716,024


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable		269,318			268,423
Current maturities of debt		9,823			21,465
Accrued liabilities		39,998			39,856
Accounts payable – related parties		274,916			274,916
Total current liabilities		594,055			604,660

Total Liabilities		594,055			604,660

Capital stock $.001 par value; 200,000,000 shares authorized
Class A – 31,774,332 and 29,274,332 shares issued and outstanding, respectively		31,774			29,274
Convertible Class B – 1,980,000 shares issued and outstanding		1,980			1,980
Additional paid in capital		6,482,070			6,134,570
Accumulated deficit		(6,012,427	)		(6,054,460	)
Total Stockholders’ Equity		503,397			111,364
Total Liabilities and Stockholders' Equity	$	1,097,452		$	716,024

The accompanying notes are an integral part of these unaudited consolidated financial statements.

INCOMING, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three months ended June 30, 2015			Three months ended June 30, 2014			Six months ended June 30, 2015			Six months ended June 30, 2014
Revenue	$	7,338		$	49,148		$	25,424		$	159,186
Revenue from related parties		23,800			9,768			23,800			9,768
Total revenue		31,138			58,916			49,224			168,954

Cost of revenue		141,793			128,821			185,742			205,412
Depreciation		25,827			23,380			51,370			46,546
Gross profit (loss)		(136,482	)		(93,285	)		(187,888	)		(83,004	)

Selling, General, and Administrative Expenses		27,813			22,850			399,017			54,842

Other income (expense)
Grant and other income		586,200			-			629,878			78,991
Interest expense		(641	)		(827	)		(940	)		(1,564	)
Total other income (expense)		585,559			(827	)		628,938			77,427

Net Income (Loss)	$	421,264		$	(116,962	)	$	42,033		$	(60,419	)

Net Income (Loss) per Class A Common Share (Basic and Diluted)	$	0.01		$	(0.00	)	$	0.00		$	(0.00	)
Net Income (Loss) per Class B Common Share (Basic and Diluted)	$	0.21		$	(0.06	)	$	0.02		$	(0.03	)
Weighted Average Number of Class A Common Shares Outstanding (Basic and Diluted)		31,774,332			29,274,332			31,097,536			29,274,332
Weighted Average Number of Class B Common Shares Outstanding (Basic and Diluted)		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.

INCOMING, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six months ended June 30, 2015			Six months ended June 30, 2014
Cash Flows from operating Activities
Net income (loss)	$	42,033		$	(60,419	)
Adjustments to reconcile net income (loss)
to net cash provided by operations:
Depreciation		51,370			46,546
Stock-based compensation		350,000			-
Changes in operating assets and liabilities
Accounts receivable		2,446			2,287,361
Accounts receivable – related party		(23,187	)		127,238
Prepaid expenses		(9,788	)		3,433
Inventory		(26,164	)		(28,699	)
Other current assets		-			300
Accounts payable		895			(2,347,901	)
Accounts payable – related party		-			-
Accrued expenses		8,061			(3,282	)
Net cash provided by operating activities		395,666			24,577
Cash flows from investing activities
Purchase of fixed assets		(4,216	)		(55,796	)
Net cash used in investing activities		(4,216	)		(55,796	)
Cash flows from financing activities
Proceeds from related party debt		105,929			-
Payments on related party debt		(105,929	)		-
Principal payments on debt		(19,561	)		(26,803	)
Net cash used in financing activities		(19,561	)		(26,803	)
Net cash increase for period		371,889			(58,022	)
Cash at beginning of period		344			91,920
Cash at end of period	$	372,233		$	33,898

Supplemental disclosure of cash flow information
Cash paid for interest	$	940			1,564
Cash paid for income taxes		493			-
Non-cash investing and financing activities:
Construction in process transferred to property and equipment		-			131,081
Write-off of fully depreciated assets		-			5,339
Unpaid additions to prepaid expenses with debt		-			9,520

The accompanying notes are an integral part of these unaudited consolidated financial statements.

INCOMING, INC.

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, 2014 included in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on April 15, 2015. 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, 2015 are not necessarily indicative of the operating results that may be expected for the full year ending December 31, 2015.

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. In addition to operating as NABE, our subsidiary also does business as Foothills Bio-Energies, LLC (“Foothills”).

Note 2 Going Concern

These financial statements have been prepared on a going concern basis. As of December 31, 2014, the Company had a working capital deficiency of $584,132, and had accumulated a deficit of $6,054,460. As of June 30, 2015, the Company had a working capital deficiency of $144,945, and had an accumulated deficit of $6,012,427. Its ability to continue as a going concern is dependent upon the ability of the Company to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. The outcome of these matters cannot be predicted with any certainty at this time. These factors raise substantial doubt that the Company will be able to continue as a going concern. The Company to date has funded its initial operations through the issuance of capital stock and common stock options, loans from related parties, and revenue generated in the normal course of business. Management plans to continue to provide for its capital needs by the issuance of common stock and related party advances. These financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern.

Note 3 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, 2015, sales to the related company totaled $23,800. As of June 30, 2015, the Company had outstanding receivables from the related party company of $23,187. During the first quarter of 2015, the Company accumulated outstanding debt payables to Echols totaling $105,929. As of June 30, 2015, the Company had repaid its debt to Echols and 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 4 Equity Transactions

Effective February 10, 2015, the Board of Directors of the Company approved the Incoming, Inc. 2014 Stock Incentive Plan (the “Plan”). The Plan, under which awards can be granted until February 10, 2025 or the Plan’s earlier termination, provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights (“SARs”), restricted awards in the form of restricted stock awards and restricted stock units, performance awards in the form of performance shares and performance units, phantom stock awards and other stock-based awards to selected employees, directors and independent contractors of the Company and its affiliates.

On February 18, 2015, the Compensation Committee of the Board of Directors of the Company approved grants of shares to each of Samuel Bell, the Company’s Chief Executive Officer and Felix Leslie, the Company’s Vice President of Corporate Development. Mr. Bell was awarded two million (2,000,000) shares. Mr. Leslie was awarded Five Hundred Thousand (500,000) shares. Mr. Bell’s award was in consideration of foregone cash compensation over the prior three years. Mr. Leslie’s award was in consideration of service to the Company and foregone cash compensation therefore over the prior year and a half. Each grant was pursuant to the newly adopted Plan. As a result of granting the combined 2.5 million shares of stock, the Company recognized $350,000 in stock-based compensation expense based on our stock’s closing price of $0.14 per share on February 18, 2015.

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, 2014.

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.

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, 2015, 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 $31,138 during the period April 1, 2015 through June 30, 2015.

Revenue generated during the period was due to sales of biodiesel and materials recovered during glycerin purification processing. During the period April 1, 2015 through June 30, 2015, our biodiesel sales to third parties totaled approximately $3,292 and our sales to related parties amounted to $23,800. There were no RIN sales transacted during the second quarter of 2015. 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 $3,874 while recovered methanol sales were $172 for the period under consideration.

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. Sales of high fatty acid oil totaled $36,609 for the period under consideration.

Comparing the Company’s activity for the period April 1, 2015 through June 30, 2015 to the activity for the period April 1, 2014 through June 30, 2014, there was a decrease in revenue of $27,778 from $58,916 to $31,138. The period-over-period decrease was primarily due to unfavorable biodiesel market forces. Since NABE typically sells biodiesel against diesel rack prices, the decline in petroleum market prices has adversely affected the Company’s ability to sell biodiesel at a profit. In addition, feedstock costs have not dropped in linear proportion with decreased petroleum market prices and the blender tax credit remains expired. The Company had no RIN sales during either the second quarter of 2015 or the same period in 2014. Also impacting comparative revenues were sales of high fatty acid oil, de-methylated glycerin and recovered methanol. The Company had high fatty acid oil sales of $3,874 during the second quarter of 2015, while sales of high fatty acid oil totaled $36,159 during the same period in 2014. The Company had no glycerin sales during the second quarter of 2015, while glycerin sales were $9,299 during the same period in 2014. The Company recognized $172 in recovered methanol sales during the second quarter of 2015, while there were no recovered methanol sales during the same period in 2014.

The Company generated revenues of $49,224 during the period January 1, 2015 through June 30, 2015. Revenue generated during the period was due to sales of biodiesel and materials recovered during glycerin purification processing. Our third party sales of own-produced biodiesel totaled $3,559 in the first half of 2015. We had biodiesel sales to related parties totaling $23,800 during the period under consideration. Sales of high fatty acid oil totaled $19,930 while de-methylated glycerin sales totaled $1,346 during the period January 1, 2015 through June 30, 2015. Recovered methanol sales were $589 for the period under consideration.

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.

Comparing the Company’s activity for the period January 1, 2015 through June 30, 2015 to the activity for the period January 1, 2014 through June 30, 2014, there was a decrease in revenue of $119,730 from $168,954 to $49,224. The period-over-period decrease was primarily due to unfavorable biodiesel market forces. Since NABE typically sells biodiesel against diesel rack prices, the decline in petroleum market prices has adversely affected the Company’s ability to sell biodiesel at a profit. In addition, feedstock costs have not dropped in linear proportion with decreased petroleum market prices and the blender tax credit remains expired. 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 2015. The Company had no RIN sales during the first half of 2015. 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. Also impacting comparative revenues were sales of high fatty acid oil, glycerin, and recovered methanol. The Company had high fatty acid oil sales of $19,930 during the first half of 2015 while sales of high fatty acid oil totaled $46,819 during the same period in 2014. The Company had glycerin sales of $1,346 during the first half of 2015, while glycerin sales were $12,234 during the same period in 2014. The Company recognized $589 in recovered methanol sales during the first half of 2015, while there were no recovered methanol sales during the same period in 2014.

Cost of Revenue

Cost of revenue totaled $141,793 during the period April 1, 2015 through June 30, 2015. 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 $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.

Comparing the Company’s activity for the period April 1, 2015 through June 30, 2015 to the activity for the period April 1, 2014 through June 30, 2014, there was an increase in cost of revenues of $12,972 as the cost of revenues increased from $128,821 to $141,793. The period-over-period increase was due to advantageous purchasing of feedstock in the current quarter. Comparing the current quarter to the same period in the prior year, biodiesel material costs increased $47,010. All feedstock was converted to biodiesel with some finished product remaining in inventory at the end of the current quarter. When allowable, the Company recognizes a reduction in cost of goods sold resulting from filing for blender tax credits. The Company did not file for any blender tax credits during the second quarter of 2015, nor did we file for any blender tax credits during the same period in 2014.

Cost of revenue totaled $185,742 during the period January 1, 2015 through June 30, 2015. 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 $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.

Comparing the Company’s activity for the period January 1, 2015 through June 30, 2015 to the activity for the period January 1, 2014 through June 30, 2014, there was a decrease in cost of revenues of $19,670 as the cost of revenues dropped from $205,412 to $185,742. The period-over-period decrease was in line with reduced biodiesel sales. During the first half of 2015, 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. During the same period in the prior year, the Company recognized an offset to the cost of goods sold totaling $39,312 resulting from blender tax credit activity.

Gross Profit

The Company had a gross loss of $136,482 for the period April 1, 2015 through June 30, 2015. The primary reason for the gross loss during the period was the Company’s inability to produce and sell biodiesel under adverse market conditions, including the expired biodiesel blender tax credit.

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.

The Company had a gross loss of $187,888 for the period January 1, 2015 through June 30, 2015. The primary reason for the gross loss during the period was the Company’s inability to produce and sell biodiesel under adverse market conditions, including lower petroleum benchmark prices and the expired biodiesel blender tax credit.

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.

Selling, General and Administrative (SG&A) Expenses

SG&A expenses totaled $27,813 for the period April 1, 2015 through June 30, 2015. During the period under consideration, SG&A expenses primarily consisted of costs associated with payroll, office overhead and professional fees.

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.

Comparing the Company’s activity for the period April 1, 2015 through June 30, 2015 to the activity for the period April 1, 2014 through June 30, 2014, there was an increase in SG&A expenses of $4,963 as SG&A increased from $22,850 to $27,813. 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 $399,017 for the period January 1, 2015 through June 30, 2015. During the period under consideration, SG&A expenses primarily consisted of $350,000 in consulting expenses associated with stock based compensation. The balance of the SG&A expenses were comprised of costs associated with payroll, office overhead and professional fees.

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.

Comparing the Company’s activity for the period January 1, 2015 through June 30, 2015 to the activity for the period January 1, 2014 through June 30, 2014, there was an increase in SG&A expenses of $344,175 as SG&A rose from $54,842 to $399,017. The period-over-period increase was due primarily to the consulting expenses recognized in the current quarter that did not occur during the same period in the prior year. General overhead remained stable considering the second quarter of the current year compared with the second quarter of the prior year.

Other Income (Expense)

Other Income totaled $586,200 during the period April 1, 2015 through June 30, 2015. December 31, 2013 marked the expiration of the IRS tax credit of one dollar per blended gallon of biodiesel. During the first quarter of 2014, NABE sold biodiesel to a customer with the agreement that, in the event the tax credit were to be reinstated, the benefit of the tax credit would be shared equally between the companies. In late December of 2014, the blender tax credit was reinstated retroactively to January 1, 2014 and was effective through December 31, 2014. The IRS issued guidance for filing for the tax credit during the first quarter of 2015. After the end of the first quarter of 2015, the Company was notified by our customer that they had successfully filed for and received the tax credit funds. NABE has subsequently recognized Other Income and has been paid $510,030 for its half of the blender tax credit dollars. During the April 1, 2015 through June 30, 2105, additional Other Income was recognized on the final insurance settlement from the fire experienced at the biodiesel plant in Lenoir, NC. Insurance coverage provided $76,170 for damages associated with the fire incident on August 1, 2014.

The Company had no Other Income during the period April 1, 2014 through June 30, 2014.

Other Income totaled $629,878 during the period January 1, 2015 through June 30, 2015. During the first six months of 2015, this amount was attributable to funding received from prior-period tax credit sharing, from the USDA Biofuel Program and from continued insurance payments stemming from the fire experienced at the biodiesel plant in Lenoir, NC. Insurance coverage provided $119,746 for cleaning expenses and for replacing items damaged during the fire incident on August 1, 2014. NABE recognized Other Income of $510,030 for its half of the blender tax credit dollars attributable to prior-period activity. An additional $102 was received in USDA Biofuel Program funding during the quarter. 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 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 $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 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.

Liquidity and Capital Resources

Working Capital

	As of June 30, 2015			As of December 31, 2014
Current Assets	$	449,110		$	20,528
Current Liabilities	$	594,055		$	604,660
Working Capital Deficiency	$	(144,945	)	$	(584,132	)
Accumulated Deficit	$	(6,012,427	)	$	(6,054,460	)

Cash Flows

	Six Months Ended June 30, 2015			Six Months Ended June 30, 2014
Cash provided by operating activities	$	395,666		$	24,577
Cash used in investing activities		(4,216	)		(55,796	)
Cash used in financing activities		(19,561	)		(26,803	)
Net increase (decrease) in cash	$	325,977		$	(58,022	)

As of June 30, 2015, our current assets totaling $449,110 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 $594,055 as of June 30, 2015. As a result, we had a working capital deficiency of $144,945.

Current assets for the Company totaled $20,528 as of December 31, 2014. Current liabilities for the Company totaled $604,660 as of December 31, 2014, which resulted in a working capital deficiency of $584,132.

Comparing the working capital deficiency at June 30, 2015 to the deficiency at December 31, 2014, there was a decrease of $439,187 as the deficiency decreased from $584,132 to $144,945. The biggest contributor to the overall decrease was the Other Income recognized by the Company during the second quarter of 2015.

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, 2014 balance sheet date, total receivables have increased $20,741 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, 2015, the Company generated a gross loss of $187,888 on sales of $49,224 over the same period. 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.

As of June 30, 2015, NABE had paid off all outstanding balances on bank borrowings, which originally totaled $250,000 when the loan was first executed. The loan represented a term loan that resulted from the conversion of a line of credit.

A portion of the Company’s operations have been funded through the issuance of common stock shares. As of June 30, 2015, the Company has issued 33,754,332 shares of common stock (31,774,332 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, 2015 through June 30, 2015, the Company’s cash provided by operating activities totaled $395,666. For the same period, the Company’s cash provided by operating activities was primarily attributable to recognizing $350,000 in consulting expense (stock-based compensation), generating trade receivables associated with biodiesel sales, and making payments on trade payables. Third party trade receivables decreased $2,446 and related party receivables increased $23,187 while inventories increased $26,164. Trade payables increased $895 for the same period. Depreciation expense was $51,370 for the first six months of 2015.

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. Third party trade receivables decreased $2,287,361 and related party receivables decreased $127,238 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.

Cash Used In Investing Activities

During the period January 1, 2015 through June, 2015, the Company’s cash used in investing activities totaled $4,216. The total amount represents funds paid for boiler fan repair and replacement ($2,643) and for a petroleum diesel tank/pump set ($1,573) at the NABE facility in Lenoir, NC.

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.

Cash Used In Financing Activities

During the period January 1, 2015 through June 30, 2015, the Company’s cash used in financing activities totaled $19,561. This amount represents payments on long-term debt to third-party creditors. Also during the first half of 2015, the Company borrowed $105,929 from a related party and repaid the full amount during the same period.

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.

Future Financings

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

(a)	Evaluation of Disclosure Controls and Procedures

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, 2015. 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 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, 2015.

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.

(b)	Changes in Internal Controls Over Financial Reporting

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.

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:

Exhibit No.	Description

3.1	Articles of Incorporation (1)
3.2	Bylaws (1)
31.1	Section 302 Certification of CEO*
31.2	Section 302 Certification of Principal Financial Officer *
32.1	Section 906 Certification of CEO*
32.2	Section 906 Certification of Principal Financial Officer*

*filed herewith

(1) Incorporated by reference to the Form S-1 registration statement filed on June 30, 2008.

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, 2015

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)

Incoming, Inc. - FORM 10-Q - August 14, 2015

Attached files

Incoming, Inc. Reports