UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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Commission file number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)
(Address of principal executive offices, including zip code.)
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(Registrant's telephone number, including area code)
(IRS Employer Identification No.)
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.
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).
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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 | ☐ |
☐ | Smaller reporting company | ||
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| Emerging growth company |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
As of August 14, 2019, there are
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 Statements3
UNAUDITED CONSOLIDATED BALANCE SHEETS4
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS5
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT6
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS7
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS8
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INCOMING, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
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| June 30, 2019 |
| December 31, 2018 |
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ASSETS | ||||||
Current Assets |
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| Cash | $ | $ | | ||
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Right of use asset |
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Total Assets | $ | $ | ||||
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LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||
Current Liabilities |
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| Accounts payable | $ | $ | |||
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| Accounts payable – related parties |
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| Operating lease liability |
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| Related party debt – short-term |
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Total current liabilities |
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Total Liabilities |
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Capital stock $ |
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| Convertible Class B – |
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Additional paid in capital |
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Accumulated deficit |
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Total Stockholders’ Deficit |
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Total Liabilities and Stockholders' Deficit | $ | $ | ||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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INCOMING, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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| Three months ended June 30, 2019 |
| Three months ended June 30, 2018 |
| Six months ended June 30, 2019 |
| Six months ended June 30, 2018 |
Operating expenses |
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Depreciation |
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Selling, General, and Administrative Expenses |
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Loss from Operations | ( |
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Other income (expense) |
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| Interest expense |
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Net Loss | $( |
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| Net Loss per Class A Common Share (Basic and Diluted) | $( |
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| Net Loss per Class B Common Share (Basic and Diluted) | $( |
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| Weighted Average Number of Class A Common Shares Outstanding (Basic and Diluted) |
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| Weighted Average Number of Class B Common Shares Outstanding (Basic and Diluted) |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
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INCOMING, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
For the six months ended June 30, 2018 and the six months ended June 30, 2019
(Unaudited)
| Common Stock |
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| Class A Shares | Par | Class B Shares | Par | Additional Paid-In Capital | Accumulated Deficit | Total Equity |
Balances, December 31, 2017 | 31,774,332 | $ | | $ | $ | $ ( | $ ( |
Net loss | - | | | | | ( | ( |
Balances, March 31, 2018 | 31,774,332 | $ | | $ | $ | $ ( | $ ( |
Net loss | - | | | | | ( | ( |
Balances, June 30, 2018 | 31,774,332 | $ | | $ | $ | $ ( | $ ( |
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| Common Stock |
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| Class A Shares | Par | Class B Shares | Par | Additional Paid-In Capital | Accumulated Deficit | Total Equity |
Balances, December 31, 2018 | 31,774,332 | $ | | $ | $ | $ ( | $ ( |
Net loss | - | | | | | ( | ( |
Balances, March 31, 2019 | 31,774,332 | $ | | $ | $ | $ ( | $ ( |
Net loss | - | | | | | ( | ( |
Balances, June 30, 2019 | 31,774,332 | $ | | $ | $ | $ ( | $ ( |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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INCOMING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Six months ended June 30, 2019 |
| Six months ended June 30, 2018 |
Cash Flows from operating Activities |
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| Net loss | $ | ( | $ | ( | |
| Adjustments to reconcile net loss to net cash used in operations: |
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| Depreciation |
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| Changes in operating assets and liabilities |
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| Prepaid expenses |
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| Accounts payable |
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| Accrued expenses |
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Net cash used in operating activities |
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Cash flows from investing activities |
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| Proceeds from sale of equipment |
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Net cash provided by investing activities |
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Cash flows from financing activities |
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| Payments on short-term debt |
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Net cash provided by financing activities |
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Net decrease in cash for the period |
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Cash at beginning of period |
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Cash at end of period | $ | | $ | | ||
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Supplemental disclosure of cash flow information |
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| Cash paid for interest | $ | | $ | | |
| Cash paid for income taxes | $ | | $ | | |
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Non-cash financing transactions |
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| Right of use asset and operating lease liability recognized during the period | $ | | $ | | |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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INCOMING, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1Basis of Presentation, Organization, and Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements of Incoming, Inc., a Nevada corporation, have been prepared in accordance with accounting principles generally accepted in the United States of America, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial information and, therefore, do not include all disclosures normally required by generally accounting principles 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, 2018 included in our Annual Report on Form 10-K filed with the SEC on April 16, 2019. In the opinion of management, all adjustments necessary for a fair presentation have been included in the accompanying financial statements and consist of only normal recurring adjustments. The results of operations presented in the accompanying financial statements for the period ended June 30, 2019 are not necessarily indicative of the operating results that may be expected for the full year ending December 31, 2019.
Organization
Incoming, Inc. (“we” or the “Company”) was incorporated on
Reclassification
Certain reclassifications have been made to conform the prior period’s financial information to the current period’s presentation. These reclassifications had no effect on previously reported net loss or accumulated deficit.
Loss per Share
The Company follows ASC Topic 260 to account for the loss per share. Basic loss per common share calculations are determined by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted loss per common share calculations are determined by dividing net loss by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.
Leases
The Company follows Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”), which increased the transparency and comparability about leases
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among entities. Additional ASUs have been issued subsequent to ASU 2016-02 to provide supplementary clarification and implementation guidance for leases related to, among other things, the application of certain practical expedients, the rate implicit in the lease, lessee reassessment of lease classification, lessor reassessment of lease term and purchase options, variable payments that depend on an index or rate and certain transition adjustments. ASU 2016-02 and these additional ASUs are now codified as Accounting Standards Codification Standard 842 - “Leases” (“ASC 842”). ASC 842 supersedes the lease accounting guidance in Accounting Standards Codification 840 “Leases” (“ASC 840”), and requires lessees to recognize a lease liability and a corresponding lease asset for virtually all lease contracts. It also requires additional disclosures about leasing arrangements. The Company elected to utilize the “package” of three expedients, as defined in ASC 842, which retain the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. The Company also has elected to not evaluate land easements that existed as of, or expired before, adoption of the new standard. The Company’s Consolidated Financial Statements for the periods prior to the adoption of ASC 842 are not adjusted and are reported in accordance with the Company’s historical accounting policy. As of the date of implementation on January 1, 2019, the impact of the adoption of ASC 842 resulted in the recognition of a right of use asset and lease payable obligation on the Company’s Consolidated Balance Sheet of $
Nonemployee Share-Based Payments
On June 20, 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, as part of its ongoing Simplification Initiative. Currently, share-based payments to nonemployees are accounted for under Subtopic 505-50, which significantly differs from the guidance for share-based payments to employees under Topic 718. This ASU supersedes Subtopic 505-50 by expanding the scope of Topic 718 to include nonemployee awards and generally aligning the accounting for nonemployee awards with the accounting for employee awards (with limited exceptions). The amendments specify that Topic 718 applies to all share-based payment transactions where the grantor is acquiring goods or services being used or consumed in its own operations by issuing these awards. They do not apply to share-based payments that are used to effectively provide financing for the grantor/issuer or that are granted in conjunction with selling goods or services to customers as part of a contract which should be accounted for under Topic 606. This standard went into effect January 1, 2019, and has no impact on our consolidated financial statements.
Note 2Going Concern
These financial statements have been prepared on a going concern basis. As of June 30, 2019, the Company had a working capital deficit of $
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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 3Related Party Transactions
As of June 30, 2019, the Company had notes payable to a related party, R. Samuel Bell, Jr., totaling $
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, 2018.
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.
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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 has historically been 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. The Lenoir plant is currently idle due to adverse market conditions. Our facility has the ability to produce 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. At times, we have strategically purchased 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, 2019 and 2018, 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.
Depreciation
Depreciation expense totaled $8,164 during the second quarter of 2018. There was no depreciation expense in 2019 as all depreciable fixed assets were fully impaired during the third quarter of 2018.
Depreciation expense totaled $16,238 during the first two quarters of 2018. There was no depreciation expense in 2019 as all depreciable fixed assets were fully impaired during the third quarter of 2018.
Selling, General and Administrative (SG&A) Expenses
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SG&A expenses totaled $23,367 for the period April 1, 2019 through June 30, 2019. During the period under consideration, SG&A expenses primarily consisted of costs associated with payroll, office overhead and professional fees.
SG&A expenses totaled $28,212 for the period April 1, 2018 through June 30, 2018. 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, 2019 through June 30, 2019 to the activity for the period April 1, 2018 through June 30, 2018, SG&A expenses were consistent and comparable to the prior year.
SG&A expenses totaled $46,598 for the period January 1, 2019 through June 30, 2019. During the period under consideration, SG&A expenses primarily consisted of costs associated with payroll, office overhead and professional fees.
SG&A expenses totaled $56,234 for the period January 1, 2018 through June 30, 2018. 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, 2019 through June 30, 2019 to the activity for the period January 1, 2018 through June 30, 2018, SG&A expenses were consistent and comparable to the prior year.
Other Income (Expense)
The Company had no Other Income during the period April 1, 2019 through June 30, 2019 or during the same period in the prior year.
The Company had no Other Income during the period January 1, 2019 through June 30, 2019.
The Company had interest expense of $70 during the period January 1, 2018 through June 30, 2018.
Liquidity and Capital Resources
Working Capital
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| As of June 30, 2019 |
| As of December 31, 2018 |
Current Assets | $ | 628 | $ | 628 |
Current Liabilities | $ | 849,471 | $ | 796.489 |
Working Capital Deficit | $ | (848,843) | $ | (795,861) |
Accumulated Deficit | $ | (7,358,283) | $ | (7,311,685) |
Cash Flows
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| Six Months Ended June 30, 2019 |
| Six Months Ended June 30, 2018 |
Cash used in operating activities | $ | (50,700) | $ | (60,960) |
Cash provided by investing activities |
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Cash provided by financing activities |
| 50,700 |
| 57,760 |
Net (decrease) in cash | $ | - | $ | (3,200) |
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As of June 30, 2019, our current assets totaling $628 consisted of accounts receivable and other current assets. Our accounts payable and accrued liabilities and current portion of amounts due to related parties and third parties were $849,471 as of June 30, 2019. As a result, we had a working capital deficit of $848,843.
Current assets for the Company totaled $628 as of December 31, 2018. Current liabilities for the Company totaled $796,489 as of December 31, 2018, which resulted in a working capital deficit of $795,861.
Comparing the working capital deficit at June 30, 2019 to the deficit at December 31, 2018, there was an increase of $52,982 as the deficit increased from $795,861 to $848,843. The biggest contributor to the overall increase was the Company’s additional related party borrowings to fund operations.
On a short-term basis, it is anticipated that the Company’s liquidity needs will be met 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. Since the December 31, 2018 balance sheet date, no amounts of receivables were written off.
Historically, 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, 2019, the Company generated a loss from operations of $46,598 on no sales over the same period. For six months ended June 30, 2018, the Company generated a loss from operations of $72,472, including depreciation expense of $16,238, on no sales over the same period.
A portion of the Company’s operations have been funded through the issuance of common stock shares. As of June 30, 2019, 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).
Historically, 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 Used In Operating Activities
During the period January 1, 2019 through June 30, 2019, the Company’s cash used in operating activities totaled $50,700. For the same period, the Company’s cash used in operating activities was primarily attributable to making payments on trade payables.
During the period January 1, 2018 through June 30, 2018, the Company’s cash used in operating activities totaled $60,960. For the same period, the Company’s cash used in operating activities was primarily attributable to amortizing prepaid insurance and to making payments on trade payables. Insurance amortization totaled $3,821 while payables decreased $8,433 during the first six months of 2018. Depreciation expense was $16,238 for the first six months of 2018.
Cash Provided By Investing Activities
During the period January 1, 2019 through June 30, 2019, the Company had no cash flow related to investing activities.
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During the period January 1, 2018 through June 30, 2018, the Company had no cash flow related to investing activities.
Cash Provided By Financing Activities
During the period January 1, 2019 through June 30, 2019, the Company’s cash provided by financing activities totaled $50,700. This amount represents proceeds provided from short-term financing from a related party, net of payments on short-term debt.
During the period January 1, 2018 through June 30, 2018, the Company’s cash provided by financing activities totaled $57,760. This amount represents proceeds provided from short-term financing from a related party, net of payments on short-term debt.
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
In February 2016, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”) to increase the transparency and comparability about leases among entities. Additional ASUs have been issued subsequent to ASU 2016-02 to provide supplementary clarification and implementation guidance for leases related to, among other things, the application of certain practical expedients, the rate implicit in the lease, lessee reassessment of lease classification, lessor reassessment of lease term and purchase options, variable payments that depend on an index or rate and certain transition adjustments. ASU 2016-02 and these additional ASUs are now codified as Accounting Standards Codification Standard 842 - “Leases” (“ASC 842”). ASC 842 supersedes the lease accounting guidance in Accounting Standards Codification 840 “Leases” (“ASC 840”), and requires lessees to recognize a lease liability and a corresponding lease asset for virtually all lease contracts. It also requires additional disclosures about leasing arrangements. The Company elected to utilize the “package” of three expedients, as defined in ASC 842, which retain the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. The Company also has elected to not evaluate land easements that existed as of, or expired before, adoption of the new standard. The Company’s Consolidated Financial Statements for the periods prior to the adoption of ASC 842 are not adjusted and are reported in accordance with the Company’s historical accounting policy. As of the date of implementation on January 1, 2019, the impact of the adoption of ASC 842 resulted in the recognition of a right of use asset and lease payable obligation on the Company’s Consolidated Balance Sheets of $6,384. As the right of use asset and the lease payable obligation were the same upon adoption of ASC 842, there was no cumulative effect impact on the Company’s retained earnings.
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On June 20, 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, as part of its ongoing Simplification Initiative. Currently, share-based payments to nonemployees are accounted for under Subtopic 505-50, which significantly differs from the guidance for share-based payments to employees under Topic 718. This ASU supersedes Subtopic 505-50 by expanding the scope of Topic 718 to include nonemployee awards and generally aligning the accounting for nonemployee awards with the accounting for employee awards (with limited exceptions). The amendments specify that Topic 718 applies to all share-based payment transactions where the grantor is acquiring goods or services being used or consumed in its own operations by issuing these awards. They do not apply to share-based payments that are used to effectively provide financing for the grantor/issuer or that are granted in conjunction with selling goods or services to customers as part of a contract which should be accounted for under Topic 606. The adoption did not have an impact on our consolidated financial statements.
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, 2019. 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, 2019.
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
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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
In June of 2015, a Plaintiff filed suit against the Company and its subsidiary, NABE. The filing claimed that the Company did not have the right to retain the $510,030 that was received and recognized as Other Income. The Company is currently defending the action and does not believe that the suit will result to an unfavorable outcome to the Company.
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
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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
3.1Articles of Incorporation (1)
3.2Bylaws (1)
31.1Section 302 Certification of CEO*
31.2Section 302 Certification of Principal Financial Officer *
32.1Section 906 Certification of CEO*
32.2Section 906 Certification of Principal Financial Officer*
*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, 2019
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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