The discussion and analysis of our financial condition and results of operations
are based on our financial statements, which we have prepared in accordance with
accounting principles generally accepted in the United States of America. This
discussion should be read in conjunction with the other sections of this Form
10-K, including "Risk Factors," and the Financial Statements. The various
sections of this discussion contain a number of forward-looking statements, all
of which are based on our current expectations and could be affected by the
uncertainties and risk factors described throughout this Annual Report on Form
10-K. See "Forward-Looking Statements." Our actual results may differ
materially. The preparation of these financial statements requires us to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements, as well as the reported revenues and expenses
during the reporting periods. On an ongoing basis, we evaluate estimates and
judgments, including those described in greater detail below. We base our
estimates on historical experience and on various other factors that we believe
are reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
As used in this "Management's Discussion and Analysis of Financial Condition and
Results of Operation," except where the context otherwise requires, the term
"we," "us," "our," or "the Company," refers to the business of Sun Power
Holdings Corp.
Organizational Overview
Utilizing managements history in general contracting, coupled with our subject
matter expertise and intellectual property ("IP") knowledge of solar panels and
other leading-edge technologies, Sun Pacific Holding ("the Company") is focused
on building a "Next Generation" green energy company. The Company offers
competitively priced "Next Generation" solar panel and lighting products by
working closely with design, engineering, integration and installation firms in
order to deliver turnkey solar and other energy efficient solutions. We
provide solar bus stops, solar trashcans and "street kiosks" that utilize our
unique advertising offerings that provide State and local municipalities with
costs efficient solutions and we have started, through a partnership, with
ownership terms to be defined upon securing financing, the opportunity to
develop and build a solar farm in Durango Mexico.
17
Our green energy solutions can be customized to meet most enterprise and/or
government mandated regulations and advanced system requirements. Our portfolio
of products and services allow our clients to select a solution that enables
them to establish a viable standard product offering that focuses on the goals
of the client's entire organization.
Currently, the Company has six (6) subsidiary holdings. Sun Pacific Power Corp
which was the initial company that specialized in solar, electrical and general
construction, Bella Electric, LLC that in conjunction with the Company operates
our electrical contracting work. Bella Electric, LLC is a Pennsylvania limited
liability company. The Company also formed Sun Pacific Security Corp., a New
Jersey corporation. Currently the Company has not begun operations in the
security sector but is reviewing plans to provide residential and commercial
security solutions, including installation and monitoring. The Company also
formed National Mechanical Group Corp, a New Jersey corporation focused on
plumbing operations in the New Jersey and Pennsylvania areas. Currently the
Company is exploring migrating National Mechanical Group Corp from plumbing
operations to partnering on a Solar Farm project in Durango Mexico in which it
will partner with Soluciones De Energia Diversificada Internacional, S.A.P.I.
("SEDI"), a subsidiary of Blissful Holdings, LLC. The partnership has
identified, received preliminary terms, and is proceeding with due diligence
including a site visit in December with a project funding source/partner in
support of its partnership with SEDI to build and develop the Durango Mexico
Solar Farm Project. The proposed project funding would be for up to $80 million
in capital to build a 40 plus megawatt solar farm in which NMG and SEDI would
own a thirty percent equity interest in the completed project. The Company also
formed Street Smart Outdoor Corp, a Wyoming corporation that acts as a holding
company for the Company's state specific operations in unique advertising
through solar bus stops, solar trashcans and "street kiosks." MedRecycler, LLC,
is a wholly owned subsidiary duly formed in the state of Nevada. MedRecycler,
LLC was created in 2018 to act as a holding company for potential waste to
energy projects. MedRecycler, LLC, currently owns 51% of MedRecycler RI, Inc. a
Rhode Island Corporation. MedRecycler RI, Inc. was created for the Medical Waste
to Energy facility that the Company is attempting to finance and operate in West
Warrick, Rhode Island. MedRecycler RI, Inc. is currently exploring permanent
financing options to fund its operations that meet the underwriting requirements
of various bond/debt investors and issuing authorities, which if put into place
would require changes to MedRecycler RI, Inc.'s and or the Company's
organizational structure. The Company is exploring creative solutions that would
meet the requirements of the various financing parties and still provide
equivalent profit sharing arrangements between the parties that allow Sun
Pacific to also undertake other projects as it focuses on the best
organizational structure to allow it to fund and grow its green energy
objectives.
As of today, our principal source of revenues is derived from Street Smart
Outdoor Corp. operations in the outdoor advertising business with contracts in
place in Rhode Island and Tallahassee, Florida, along with some other minor
contracting work that we are currently reviewing to determine if we shall
continue pursuing in the future. We are currently in discussions with a
nationally known outdoor advertising firm to manage and expand our operations,
either through a joint venture, partnership, and or a management arrangement as
a result of the company's insufficient working capital and as an option to allow
for the expansion of our technologies and or contracts by working with other
parties that can bring management expertise and or other resources that may
allow us to further optimize our growth strategies.
Sun Pacific Power Corp. is in the process of providing limited general
contacting services and are reviewing continuing general contracting in the
region as we shift our focus to other green energy opportunities.
Bella Electric, LLC and Sun Pacific Security Corp. have generally ceased
operations, but we maintain the subsidiaries in case we find opportunities to
relaunch our operations.
18
MedRecycler, LLC, a wholly owned subsidiary of Sun Pacific Holding Company
currently holds fifty one percent (51%) of MedRecycler-RI, Inc., a corporation
formed in the state of Rhode Island for the development of waste to energy
projects in the state of Rhode Island. Currently, MedRecycler-RI, Inc. has
entered into an Indenture of Trust in the amount of $6,025,000.00 as bridge
financing for a project in West Warwick, Rhode Island (the "Rhode Island
Project"). This was extended and amended to include an additional $2,700,000.00
as the approval process of permanent bond financing has been delay in the state
of Rhode Island and again amended and extended with the addition of $500,000 in
additional convertible debt being added by a new senior secured lender with such
$500,000 in debt converting into equity in the project upon the completion of
permanent financing that is further being augmented with the ability of the
$500,000 in senior convertible debt expanding up to $2,000,000 with the
conversion of up to 40% equity in MedRecycler RI, Inc. The original plan was for
a facility in Johnston, Rhode Island, but through our negotiations, determined
that the West Warwick location was more suitable. The Indenture of Trust has
been secured by all equity holdings in MedRecycler-RI, Inc., all personal
holdings of equity in the Company held by Nick Campanella, our CEO and member of
the Board of Directors. Mr. Campanella has further pledged personal property
located in Manapalan in excess of $1,000,000. Payment for the Indenture of Trust
is further guaranteed by the Company and Street Smart Outdoor Corp. Currently,
MedRecycler-RI, Inc. has entered into a lease agreement in West Warwick, Rhode
Island, has taken preliminary steps to order the equipment, and is beginning to
engage specialists and staff for building out the Rhode Island Project. In order
to secure actual operations of the Rhode Island Project, we estimate that
MedRecycler-RI, Inc. must still secure enough long term financing that will
extinguish is short-term debt and fund the permanent financing of its
operations. MedRecycler-RI, Inc. is currently negotiating with the state of
Rhode Island and potential bond financiers to secure the long-term financing for
the Rhode Island Project. Although we anticipate, assuming the long-term
financing is secured, the Rhode Island Project may be fully operational as early
as the first quarter of 2021, but, at this time, that schedule could slip as a
result of delays in closing on long-term financing and other regulatory
requirements. All initial operational earnings will be earmarked for interest,
principal repayment, and the fulfillment of other covenants of the long-term
financing until all reserves have been met. As we have not secured long term
financing, we can make no statement regarding the long term success of the Rhode
Island Project, though, even in a best case scenario, the Rhode Island Project
may not be cash flow positive until fully operational and proceeds fulfill
covenants under the terms of the yet to be finalized debt financing. Through
MedRecycler, LLC, the Company currently owns fifty-one percent (51%) of
MedRecycler-RI, Inc., which was pledged by the Company to Mr. Campanella
pursuant to a forbearance agreement related to debts owed to Mr. Campanella. The
remaining forty nine percent (49%) of MedRecycler-RI, Inc. is held by Nicholas
Campanella, personally, Marmac Corporate Advisors, LLC, and Eilers Law Group,
P.A., holding thirty nine percent (39%), eight percent (8%), two percent (2%),
respectfully. With the new senior secured convertible debt as issued these
ownership percentages may change. Mr. Campanella received his ownership as
consideration for his personal pledges securing the Indenture of Trust, Marmac
Corporate Advisors, LLC and Eilers Law Group, P.A. received their respective
ownership as consideration for efforts and services performed. One hundred
percent (100%) of the ownership of MedRecycler-RI, Inc. has been pledged to
bridge financing, including any pledge rights held by Mr. Campanella in
MedRecycler, LLC. MedRecycler RI, Inc. is currently exploring permanent
financing options to fund its operations that meet the underwriting requirements
of various bond/debt investors and issuing authorities, which if put into place
would require changes to MedRecycler RI, Inc.'s and or the Company's
organizational ownership structure. It has been made clear by the Rhode Island
authorities approving long term bond facilities for the MedRecycler-RI, Inc.
project, that the Company cannot have an ownership interest given its poor
creditworthiness and insolvency. The approving authority has expressed a desire
to sever all economic interest in the Rhode Island Project from the Company,
However, we have proposed, and have received initial approval, whereby in
exchange for releasing all guarantees and other security interests of the
Company and its subsidiaries, and forgoing direct ownership in MedRecycler-RI,
Inc., the Company shall receive an economic interest equal to a percentage of
profits derived from MedRecycler-RI, Inc. and as calculated by the equity
ownership as determined by the respective parties upon the closing of its
permanent financing. This will free collateral and cashflow for the development
of new projects of the Company and its subsidiaries, while also removing the
debt of MedRecycler-RI, Inc. from the balance sheet of the Company. At the same
time, once MedRecycler-RI, Inc. becomes profitable, and has met all requirements
of long term financing related to reserve allocations and profit thresholds, the
Company should receive a recurring income from the MedRecycler-RI, Inc. without
the limitations on its assets and additional overhead costs related to
maintaining the subsidiary and financial reporting. Any final agreement will be
subject to final approval of the Rhode Island authority, who has provided
tentative approval of the economic interest structure. Rhode Island Project,
while also balancing the requirements of those parties approving permanent
financing.
Currently the Company is also exploring migrating its subsidiary, National
Mechanical Group Corp from plumbing operations to partnering on a Solar Farm
project in Mexico in which it will partner with other subject matter experts and
seek project financing. If successful, National Mechanical Group Corp would own
equity in the partnership that would own a portion of the project and also
receive compensation for its work in project management and other professional
services.
On September 19, 2019, the United States Patent and Trademark Office published
patent US 2019 288 139 A1 for the Frame-Less Encapsulated Photo-Voltaic (PV)
Solar Power Panel Supporting Solar Cell Modules Encapsulated Within
Optically-Transparent Epoxy-Resin Material Coating a Phenolic Resin Support
Sheet issued to National Mechanical Group Corp. Originally designed for
application in the solar bus shelters operated by Street Smart Outdoor Corp, as
a glassless solar panel, the Company has developed a patent protected product
and process for creating solar panels that can be integrated directly into the
design of products as a molded, weather resistant plastic. The Company will
begin work developing a business plan for expanding on either manufacturing or
licensing of the technology in the future.
19
Currently, the Company has been and is insolvent if you factor in the Company's
debt obligations. Over its history and to augment the Company's strategy, it has
sought out partnerships and other arrangements with professionals and companies
at the operating subsidiary level to counter its insolvent state, coupled with
the Company's use of debt and equity financings. The Company continues to look
for opportunities that will allow it to partner with others in the form of debt
and or equity and other contributions at the subsidiary level, and where
possible attempt to keep control of at least fifty one percent (51%) of those
subsidiaries. While it will also look for the means to correct its insolvent
state at the holding company level, given its current negative economic
condition, many parties continue to prefer to work with the Company at an
operational subsidiary level. The Company is currently exploring other equity
and or debt opportunities to correct its overall insolvent state. Although we
continue operations through our subsidiary holdings, revenues generated do not
fully produce cash flows sufficient to meet our basic capital requirements. In
order to meet our reporting requirements, we may have to seek additional capital
through debt or equity financing and/or request deferred payment or other
in-kind payments for services. Street Smart Outdoor is undercapitalized making
expansion of our advertising products highly unlikely or difficult to expand
without the use of potential partnerships and or commission only sales
representatives. Neither the Company nor Street Smart Outdoor have secured
additional financing to support operations. We are attempting to partner or
otherwise develop a capital strategy to allow us to grow the outdoor advertising
business that includes financing outdoor structures with other parties, in which
we arrange financing arrangements, and we continue to look for other
professional organizations that we can partner with in expanding our contracts.
On January 29, 2021, MedRecycler-RI, Inc., a subsidiary of Sun Pacific Holding
Corp., (the "Company") entered into an amendment to the Indenture of Trust with
UMB Bank, extending the term of the two (2) bond's representing bridge financing
for the Rhode Island medical waste to energy project for a period of up to one
year from the date of signing. The extension of the bonds shall accrue interest,
including a capitalized extension fee of five (5%) percent, at twelve (12%) per
annum. In addition, the Company has been issued an extension for the term of a
secured convertible loan to Pyro SS, LLC, as reported in the Company's Form 10Q
for the quarter ended September 30, 2020, until July 28, 2021 and that were
subsequently further extended through January 29, 2022. The bonds are intended
to be paid and extinguished from proceeds from permanent financing
It has been made clear by the Rhode Island authorities approving long term bond
facilities for the MedRecycler-RI, Inc. project, that the Company cannot have an
ownership interest given its poor creditworthiness and insolvency. The approving
authority has expressed a desire to sever all economic interest in the Rhode
Island Project from the Company, However, we have proposed, and have received
initial approval, whereby in exchange for releasing all guarantees and other
security interests of the Company and its subsidiaries, and forgoing direct
ownership in MedRecycler-RI, Inc., the Company shall receive an economic
interest equal to 51% of all profits derived from the MedRecycler-RI, Inc. This
will free collateral and cashflow for the development of new projects of the
Company and its subsidiaries, while also removing the debt of MedRecycler-RI,
Inc. from the balance sheet of the Company. At the same time, once
MedRecycler-RI, Inc. becomes profitable, and has met all requirements of long
term financing related to reserve allocations and profit thresholds, the Company
should receive a recurring income from the MedRecycler-RI, Inc. without the
limitations on its assets and additional overhead costs related to maintaining
the subsidiary and financial reporting. Any final agreement will be subject to
final approval of the Rhode Island authority, who has provided tentative
approval of the economic interest structure. The Company will engage independent
counsel to negotiate the terms to avoid any potential risks of conflict of
interest.
Strategic Vision
Our objective is to grow our business profitably as a premier green energy-based
provider of both product and services to the public and private sectors. We are
working to deploy our strategy in building upon our general and other
contracting expertise in conjunction with our intellectual property and subject
matter expertise in green energy that may allow us to grow a group of profitable
business lines in solar, waste to energy, efficient lighting, and other unique
energy related areas.
20
Recent advances in a multitude of different yet converging technologies have
significantly improved the ability to integrate energy efficient products and
solutions into infrastructure related projects. These technological advances
decrease the requirements needed to jointly operate a multitude of differing
assets, devices, and tools that create new ways to integrate evolving new
technologies. This technological change and convergence in energy efficient
devices, integrated communications among devices, and societal needs to more
effectively and environmentally friendly we believe presents a significant
opportunity for us in providing and supporting simple to complex integrated
solutions.
Our challenges continue to be reaching critical mass in our solar shelter
business, expanding into other green energy related projects, completion of the
Rhode Island Project and securing operational capital. Except for the bridge
financing for the Rhode Island Project, we do not have any material existing
financing arrangements in place. While the Company has never been adequately
funded from inception, the Company has attempted to use debt, equity, and other
opportunistic in-kind compensation to further the Company's strategic vision.
Going Concern
The Company has an accumulated deficit of $9,417,865 and a working capital
deficit of $3,985,435 as of December 31, 2020. The Company's continuation as a
going concern is dependent on its ability to generate sufficient cash flows from
operations to meet its obligations, which it has not been able to accomplish to
date, and/or obtain additional financing from its stockholders and/or other
third parties.
In order to further implement its business plan and satisfy its working capital
requirements, the Company will need to raise additional capital. There is no
guarantee that the Company will be able to raise additional equity or debt
financing at acceptable terms, if at all.
There is no assurance that the Company will ever be profitable. These
consolidated financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classifications of liabilities that may result should the
Company be unable to continue as a going concern.
Critical Accounting Policies and Estimates
Our significant accounting policies are more fully described in the notes to our
consolidated financial statements. Those material accounting estimates that we
believe are the most critical to an investor's understanding of our financial
results and condition are discussed immediately below and are particularly
important to the portrayal of our financial position and results of operations
and require the application of significant judgment by our management to
determine the appropriate assumptions to be used in the determination of certain
estimates.
Use of estimates in the preparation of financial statements
Preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Significant estimates include the allowance for doubtful accounts and impairment
assessments related to long-lived assets.
Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned, and less-than-wholly owned subsidiaries of which the Company
holds a controlling interest. All significant intercompany balances and
transactions have been eliminated. Amounts attributable to minority interests in
the Company's less-than-wholly owned subsidiary are presented as non-controlling
interest on the accompanying condensed consolidated balance sheets and
statements of operations.
Cash and cash equivalents
For purposes of the consolidated statements of cash flows, cash includes demand
deposits and short-term liquid investments with original maturities of three
months or less when purchased. The Federal Deposit Insurance Corporation (FDIC)
provided insurance coverage of up to $250,000, per depositor, per institution.
At December 31, 2020, none of the Company's cash balances were in excess of
federally insured limits. Any and all withdrawals are strictly controlled by the
lending institution and use of proceeds must be approved prior to release of
funds.
21
Accounts Receivable
In the normal course of business, we decide to extend credit to certain
customers without requiring collateral or other security interests. Management
reviews its accounts receivable at each reporting period to provide for an
allowance against accounts receivable for an amount that could become
uncollectible. This review process may involve the identification of payment
problems with specific customers. Periodically we estimate this allowance based
on the aging of the accounts receivable, historical collection experience, and
other relevant factors, such as changes in the economy and the imposition of
regulatory requirements that can have an impact on the industry. These factors
continuously change and can have an impact on collections and our estimation
process. The Company's allowance for doubtful accounts totaled $0 and $22,835 as
of December 31, 2020 and 2019, respectively.
Leases
In February 2016, the FASB issued ASU No. 2016-02 (Topic 842). Topic 842 amends
several aspects of lease accounting, including requiring lessees to recognize
leases with a term greater than one year as a right-of-use asset and
corresponding liability, measured at the present value of the lease payments. In
July 2018, the FASB issued supplemental adoption guidance and clarification to
Topic 842 within ASU 2018-10 "Codification Improvements to Topic 842, Leases"
and ASU 2018-11 "Leases (Topic 842): Targeted Improvements." The new guidance
aims to increase transparency and comparability among organizations by requiring
lessees to recognize lease assets and lease liabilities on the balance sheet and
requiring disclosure of key information about leasing arrangements. A modified
retrospective application is required with an option to not restate comparative
periods in the period of adoption.
The Company, effective January 1, 2019 has adopted the provisions of the new
standard. The Company has operating leases for warehouses and offices.
Management evaluates each lease independently to determine the purpose,
necessity to its future operations in addition to other appropriate facts and
circumstances.
We adopted Topic 842 using a modified retrospective approach for all existing
leases at January 1, 2019. The adoption of Topic 842 impacted our balance sheet
by the recognition of the operating lease right-of-use assets and the liability
for operating leases. Accordingly, upon adoption, leases that were classified as
operating leases under the previous guidance were classified as operating leases
under Topic 842. The lease liability is based on the present value of the
remaining lease payments, discounted using a market based incremental borrowing
rate as the effective date of January 1, 2019 using current estimates as to
lease term including estimated renewals for each operating lease. As of January
1, 2019, the Company recorded an adjustment of approximately $1,339,000 to
operating lease right-of-use assets ("ROU") and the related lease liability
(Note 7).
Deposits
During the year ended December 31, 2021, the Company made deposits of
approximately $5,000,000 pursuant to a purchase of equipment costing
approximately $7,200,000. We are currently estimating the commencement of
operations as early as of the 4th quarter of 2021 at MedRecycler-RI, Inc.'s West
Warwick, Rhode Island facility.
Contingencies
Certain conditions may exist as of the date financial statements are issued,
which may result in a loss, but which will only be resolved when one or more
future events occur or do not occur. We assess such contingent liabilities, and
such assessment inherently involves an exercise of judgment. In assessing loss
contingencies related to pending legal proceedings that are pending against us
or unasserted claims that may result in such proceedings, we evaluate the
perceived merits of any legal proceedings or unasserted claims as well as the
perceived merits of the amount of relief sought or expected to be sought
therein. If the assessment of a contingency indicates that it is probable that a
liability has been incurred and the amount of the liability can be estimated,
then the estimated liability would be accrued in our consolidated financial
statements. If the assessment indicates that a potentially material loss
contingency is not probable but is reasonably possible, or is probable but
cannot be estimated, then the nature of the contingent liability, together with
an estimate of the range of possible loss if determinable would be disclosed.
22
Fair value of financial instruments
The carrying amounts of the Company's accounts payable, accrued expenses, and
accrued expenses due to related parties approximate fair value due to their
short-term nature. The Company's long-term debt approximates fair value based on
prevailing market rates.
Property and equipment
Property and equipment are stated at cost. Additions and improvements that
significantly add to the productive capacity or extend the life of an asset are
capitalized. Maintenance and repairs are expensed as incurred. Depreciation is
computed using the straight-line method over three to five years for vehicles
and five to ten years for equipment. Leasehold improvements are amortized over
the lesser of the estimated remaining useful life of the asset or the remaining
lease term. Interest costs incurred that are directly related to the
construction of long term assets are capitalized during the construction period.
As of December 31, 2020 and 2019, $892,400 and $651,828, respectively, is
included in proprerty plant and equipment.
Impairment of long-lived assets
The Company periodically reviews for the impairment of long-lived assets
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be realizable. An impairment loss would be recognized when
estimated future cash flows expected to result from the use of the asset and its
eventual disposition is less than its carrying amount. At December 31, 2020 and
2019, the Company has not identified any such impairment losses.
Income taxes
Under ASC Topic 740, "Income Taxes", the Company is required to account for its
income taxes through the establishment of a deferred tax asset or liability for
the recognition of future deductible or taxable amounts and operating loss and
tax credit carry forwards. Deferred tax expense or benefit is recognized as a
result of timing differences between the recognition of assets and liabilities
for book and tax purposes during the year.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Deferred tax assets are
recognized for deductible temporary differences and operating losses, and tax
credit carry forwards. A valuation allowance is established to reduce that
deferred tax asset if it is "more likely than not" that the related tax benefits
will not be realized.
Revenue recognition
100% of the Company's revenue for the years ended December 31, 2020 and 2019 is
recognized based on the Company's satisfaction of distinct performance
obligations identified in each agreement, generally at a point in time as
defined by Topic 606, as amended.
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting
Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. This
standard replaced most existing revenue recognition guidance and is codified in
FASB ASC Topic 606. Effective January 1, 2018, the Company adopted ASU No.
2014-09 using the modified retrospective method. Under the new guidance, the
Company recognizes revenue from contracts based on the Company's satisfaction of
distinct performance obligations identified in each agreement. The adoption of
the guidance under ASU No. 2014-09 did not result in a material impact on the
Company's consolidated revenues, results of operations, or financial position.
As part of the implementation of ASC 606 the Company must present disaggregation
of revenues from contracts with customers into categories that depict how the
nature, timing, and uncertainty of revenue and cash flows are affected by
economic factors. Quantitative disclosures on the disaggregation of revenue are
as follows:
2020 2019
Outdoor Advertising Shelter Revenues $ 252,443 $ 150,636
Contracting Service Revenues $ 36,585 150,097
$ 289,028 $ 300,733
23
Earnings Per Share
Under ASC 260, "Earnings Per Share" ("EPS"), the Company provides for the
calculation of basic and diluted earnings per share. Basic EPS includes no
dilution and is computed by dividing income or loss available to common
shareholders by the weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution of securities that could
share in the earnings or losses of the entity. For the Year ended December 31,
2020 and 2019, basic and diluted loss per share are the same as the calculation
of diluted per share amounts would result in an anti-dilutive calculation. For
the years ended December 31, 2020 and 2019, all potential shares have been
excluded from the calculation of diluted loss per share because their impact was
anti-dilutive.
Results of Operations for the Year Ended December 31, 2020 as Compared to the
Year Ended December 31, 2019
Revenues
During the year ended December 31, 2020, revenues decreased by $11,705, from
$300,733 for the year ended December 31, 2019 to $289,028 in 2020, as a result
of lesser advertising revenues and reduce General Contracting services as the
Company migrates away from General Contracting services and towards the
development of Green Energy Projects including the sale of Solar powered
shelters and other energy related projects that derive income from advertising
sources. Advertising revenue declined as a result of a transition to
commissioned advertising sales personnel during the quarter. The Company has
entered into revenue sharing agreements with the City of Tallahassee, the State
of Rhode Island Transportation Authority, and the State of New Jersey, along
with others to provide and manage up to approximately 1,000 marketing faces and
other related products for a period of up to Ten (10) years that may include
providing WiFi Signal Boosters and Advertising in conjunction with the shelters
and other related other outdoor related products. Depending upon the timing of
installation and advertising revenue generated per shelter and or other
advertising-based product, the Company's Revenue may increase materially from
this green energy offering. The Company has recently raised capital to build and
deploy up to 20 bus shelters in Rhode Island as part of an income sharing
arrangement with an investment group. The Company has recently had 20 bus
shelters delivered and is in the process of deploying the bus shelters into the
marketplace. The Company is currently in discussion with the State of Rhode
Island on the specific details related to those bus shelters. The State of Rhode
Island is also exploring options of purchasing those bus shelters from the
Company. The Company is also presently in the process of adding up to 60 bus
benches in the City of Tallahassee and has engaged two new commissioned sales
individuals to assist the company in increasing its advertising revenues in the
City of Tallahassee market place, along with adding improved sales advertising
capabilities in an effort to improve advertising utilization. The Company's
current Waste to Energy and Durango Solar Farm Project may or may not impact
future revenues depending upon the capital structure and other conditions that
will be required of the Company by its financing partners and or other
regulatory authorities upon closing of its permanent financing for those
projects. These items along with other revenue generating opportunities that is
under review by the Company may cause dramatic shifts in the Company's
comparative revenue profile of the products and services that the Company
provides in the future.
Cost of Revenues
During the year ended December 31, 2020, cost of revenues decreased by $176,088,
from $214,896 for the year ended December 31, 2019 to $38,808 in 2020, as a
result of a higher mix of higher margin advertising generated revenues. Costs of
revenues may shift dramatically depending upon how the Company's comparative
revenue profile of the products and services shift in the future.
24
Operating Expenses
During the year ended December 31, 2020, operating expenses increased by
$22,799, from $1,301,269 for the year ended December 31, 2019 to $1,324,068 in
2020 due materially to increases in professional fees offset slightly by
decreases in wages, fees, and other general and administrative expenses that
were associated with project development costs for the Company's Medical Waste
to Energy initiative and other development projects associated with green energy
development initiatives that the Company is currently exploring. The Company's
Operating Expenses may vary quarter to quarter as a result in upfront
development costs for permits, engineering reviews, and other costs associated
with the Company's new development projects related to its Medical Waste to
Energy project as well as other projects that it is currently reviewing.
Other Expenses
During the year ended December 31, 2020, Other Expenses increased by $225,762
from $564,734 for the year ended December 31, 2019 to $790,496 in 2020 as a
result of greater amounts of interest expense as a result of the issuance of
convertible debt and other capital related events. Given the Company's financing
requirements in developing its new business models, the Company's other (income)
expenses may increase over time as the Company explores the use of additional
debt financing.
Net Loss
As a result of the above, Net Loss inclusive of the net loss attributable of
non-controlling interest of $789,992 decreased $619,068 from $1,693,420 for the
year ended December 31, 2019 to $1,074,352 in 2020.
Liquidity and Capital Resources
Net Working Capital
We have, since inception, financed operations and capital expenditures through
the sale of stock and convertible notes and debt. Our immediate sources of
liquidity include cash and cash equivalents, accounts receivable, and unbilled
receivables.
At December 31, 2020, we had a net working capital deficit of approximately
$3,985,435 compared to $1,788,368 at December 31, 2019. We relied on temporary
financing for the MedRecycler project and proceeds from advertising project
financing in 2020. We relied on proceeds from the sale of common stock,
convertible promissory notes and advances from related parties throughout fiscal
2019.
We must successfully execute our business plan to increase profitability in
order to achieve positive cash flows to sustain adequate liquidity without
requiring additional funds from external sources to meet minimum operating
requirements. We may need to raise additional capital to fund our operations and
there can be no assurance that additional capital will be available on
acceptable terms or at all.
Generally, the Company has insufficient capital to maintain operations.
Cashflows from operations of the Company and all its subsidiary holdings will
not sustain the Company's operations, let alone its filing requirements, unless
there is substantial influx of cash flow through either debt and/or equity
financing.
Cash Flows from Operating Activities
Cash provided by operating activities provides an indication of our ability to
generate sufficient cash flow from our recurring business activities. Fixed
costs such as labor, direct materials, and office rent represent a significant
portion of the Company's continuing operating costs.
For the year ended December 31, 2020, net cash used in operations was
approximately $1,324,513 driven primarily by current year operating loss, offset
primarily increases in accrued officer compensation and accrued expenses.
For the year ended December 31, 2019, net cash used in operations was
approximately $550,010 driven by current year operating loss, offset primarily
by non-cash expenses for the loss on settlement of accrued officer compensation,
accrued expenses, an increase in accounts payable, and loss on the conversion of
debt.
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Cash Flows from Investing Activities
For the year ended December 31, 2020, the Company invested approximately $0.7
million in its MedRecycler project, consisting of $446,492 of equipment
purchases and deposits in equipment of $195,515.
For the year ended December 31, 2019, the Company invested approximately $6.1
million in its MedRecycler project, consisting of $538,242 of equipment
purchases and deposits in equipment of $5,682,329, offset by $42,000 in proceeds
from the sale of vehicles.
Cash Flows from Financing Activities
Cash provided by (used in) financing activities provides an indication of our
debt financing and proceeds from capital raise transactions.
For the year ended December 31, 2020, cash provided by financing activities was
approximately $500,000, primarily from the issuance of convertible debt of
$500,000.
For the year ended December 31, 2019, cash provided by financing activities was
approximately $8,445,588, primarily from the temporary financing for the
MedRecycler project of $8,453,624, and the issuance of convertible debt of
$200,000, offset by the repayment of convertible debt of $150,000 and vehicles
loans of $60,667.
In the short term, we must raise additional capital through debt or equity
financing to support our business operations and grow our business. Over the
long term, we must successfully execute our growth plans to increase profitable
revenue and income streams to generate positive cash flows to sustain adequate
liquidity without impairing growth initiatives or requiring the infusion of
additional funds from external sources to meet minimum operating requirements.
We may need to raise additional capital to fund our operations and there can be
no assurance that additional capital will be available on acceptable terms or at
all.
Off-Balance Sheet Arrangements
We have no off-balance sheet financing arrangements.
Contractual Obligations
Not required of smaller reporting companies.
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