Previewer: Reports

Note 1 - Organization

NOTE 1 - ORGANIZATION

The condensed consolidated financial statements include the accounts of Summer Energy Holdings, Inc. and its wholly-owned subsidiaries Summer Energy, LLC (“Summer LLC”), Summer Energy Midwest, LLC (“Summer Midwest”), Summer EM Marketing, LLC (“Marketing LLC”) and Summer Energy Northeast, LLC (“Summer Northeast”) (collectively referred to as the “Company,” “we,” “us,” or “our”). All significant intercompany transactions and balances have been eliminated in these consolidated financial statements.

Summer LLC is a retail electric provider in the state of Texas under a license with the Public Utility Commission of Texas (“PUCT”). Summer LLC procures wholesale energy and resells to commercial and residential customers. Summer LLC was organized on April 6, 2011 under the laws of the state of Texas.

Summer Midwest (formerly Summer Energy of Ohio, LLC) was formed in the state of Ohio on December 16, 2013 to procure and sell electricity in the state of Ohio. The Public Utilities Commission of Ohio issued a certificate as a Retail Electric Service Provider to Summer Midwest on June 16, 2015. As of March 31, 2019, there was no business activity in the state of Ohio.

Marketing LLC was formed in the state of Texas on November 6, 2012 to provide marketing services to Summer LLC. Marketing LLC is currently inactive and there is no business activity.

Summer Northeast, a Texas limited liability company formerly named REP Energy, LLC, was acquired on November 1, 2017 and became a wholly-owned subsidiary of Summer Energy Holdings, Inc. Summer Northeast is a retail electric provider serving electric load to both residential and commercial customers in the Northeastern U.S. and holds licenses in Massachusetts, New Hampshire, Connecticut and Rhode Island.

Note 2 - Significant Accounting Policies

3 Months Ended

Mar. 31, 2019

Note 2 - Significant Accounting Policies

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three-month period ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, as filed with the Securities and Exchange Commission (“SEC”) on April 11, 2019.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amount of revenues and expenses during the reporting period. Actual results may differ from these estimates. Certain prior period amounts in the condensed consolidated financial statements and accompanying notes have been reclassified to conform to the current period’s presentation.

Revenue and Cost Recognition

Our revenues are primarily derived from the sale of electricity to residential and small commercial customers. Revenues for sales of electricity are recognized under the accrual method of accounting.

Direct energy costs are recorded when the electricity is delivered to the customer’s meter.

Cost of goods sold (“COGS”) within the Texas market include electric power purchased and pass through charges from the transmission and distribution service providers (“TDSPs”) in the areas serviced by the Company. TDSP charges are costs for metering services and maintenance of the electric grid. TDSP charges are established by regulation of the PUCT. COGS within the Independent System Operator (“ISO”) for the New England market is comprised of wholesale costs based upon the wholesale power tariff rate for volumes purchased during the delivery month and scheduling fees.

The energy portion of our COGS is comprised of two components: bilateral wholesale costs and balancing/ancillary costs. These two cost components are incurred and recognized differently as follows:

Bilateral wholesale costs are incurred through contractual arrangements with wholesale power suppliers for firm delivery of power at a fixed volume and fixed price. We are invoiced for these wholesale volumes at the end of each calendar month for the volumes purchased for delivery during the month, with payment due 20 days after the end of the month.

Balancing/ancillary costs are based on the customer load and are determined by the Electric Reliability Council of Texas (“ERCOT”) and ISO New England through a multiple step settlement process. Balancing costs/revenues are related to the differential between supply that we provided through our bilateral wholesale supply and the supply required to serve our customer load. The Company endeavors to minimize the amount of balancing/ancillary costs through our load forecasting and forward purchasing programs.

Cash and Restricted Cash

The Company considers all short-term investments with an original maturity of three months or less to be cash equivalents. There were no such investments at March 31, 2019 or December 31, 2018.

Restricted cash represents funds held in escrow for customer deposits and securing irrevocable stand-by letters of credit for the benefit of the TDSP’s that provide transmission services to the Company in the amount of $2,785,655 as of March 31, 2019 and $3,402,890 as of December 31, 2018.


		March 31, 2019		December 31, 2018
Cash	$	1,387,043	$	451,995
Restricted cash		2,785,655		3,402,890
Total cash and restricted cash	$	4,172,698	$	3,854,885

Basic and Diluted Income/(Loss) Per Share

Basic income/(loss) per share are computed by dividing net income/(loss) applicable to the weighted-average number of shares outstanding during the period. Diluted income per share is determined using the weighted-average number of shares outstanding during the period, adjusted for the dilutive effect of share equivalents, using the treasury method, consisting of shares that might be issued upon exercise of share equivalents. For the three months ended March 31, 2019, the weighted average number of shares outstanding excludes share equivalents, because their inclusion would be anti-dilutive. The Company had potentially dilutive securities totaling approximately 4,360,230 as of March 31, 2019.

For the three months ended March 31, 2019, the net income amount used to calculate both basic and diluted net income per share was the same. The 985,478 weighted average share difference between basic and diluted was due to dilutive stock options and stock warrants.

Accounting Standards Adopted During the Quarter Ended March 31, 2019

The Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), as of January 1, 2018, using the modified retrospective approach. The modified retrospective approach provides a method for recording existing leases at the application date. In addition, the Company elected the available practical expedients permitted under the transaction guidance within the new standard. The most significant impact from the adoption of the new standard was the recognition of operating lease right-of-use assets and operating lease liabilities. Adoption of the new standard resulted in the recording of additional lease assets and liabilities of $1,265,562 as of January 1, 2019. The standard did not materially impact the consolidated net income and had no impact on cash flows.

Recently Issued Accounting Standards Not Yet Adopted

The Company has reviewed all recently issued, but not yet adopted, accounting standards, in order to determine their effects, if any, on its results of operations, financial position or cash flows. Based on that review, the Company believes that no other pronouncements will have a significant effect on its financial statements.

Note 3 - Revenue

3 Months Ended

Mar. 31, 2019

Revenue from Contract with Customer [Abstract]

Note 3 - Revenue

NOTE 3 – REVENUE

The table below represents the Company’s reportable revenues for the three-months ended March 31, 2019 and 2018, respectively, from customers, net of respective provisions for refund:

		For the Three Months Ended March 31,
		2019		2018
Electricity Revenues from Contracts with Customers
ERCOT Market	$	30,802,698	$	29,536,833
ERCOT Pre-paid Market		1,213,790		817,234
Northeast Market		1,924,411		2,939,019
Total Electricity Revenues from Contracts with Customers		33,940,899		33,293,086
Other Revenues:
Fees Revenue		884,970		757,014

Total Revenues:	$	34,825,869	$	34,050,100

Presented in the following table are the components of accounts receivable and accrued revenue:

		March 31, 2019		December 31, 2018
Accounts receivable from customers
ERCOT Market	$	8,113,204	$	7,729,016
ISO New England Market		420,894		544,454
Total accounts receivable from customers		8,534,098		8,273,470

Accrued revenue from customers
ERCOT Market		26,278,674		25,811,607
ISO New England Market		893,211		1,006,895
Total accrued revenue with customers		27,171,885		26,818,502

Allowance for doubtful accounts		(720,731)		(821,424)

Total accounts receivable and accrued revenue	$	34,985,252	$	34,270,548

The Company recognizes revenue from the sale of electricity to consumers and is recognized upon the performance obligation to deliver electricity to the customer’s meter. This method of revenue recognition is commonly referred to as the flow method. The Company’s customer base consists of a mix of residential and commercial customers in the ERCOT and ISO New England markets. Also, the Company recognizes revenues from contract cancellation fees, disconnection fees and late fees.

The invoice practical expedient within the accounting guidance allows for the recognition of revenue from performance obligations in the amount of consideration to which there is a right to invoice the customer and when the amount for which there is a right to invoice corresponds directly to the value transferred to the customer. The purpose of the invoice practical expedient is to depict an entity’s measure of progress toward completion of the performance obligation within a contract and can only be applied to performance obligations that are satisfied over time and when the invoice is representative of services provided to date. The Company elected to apply the invoice practical expedient to recognize revenue for performance obligations satisfied over time as the invoices from the respective revenue streams are representative of services or goods provided to date to the customer.

Performance Obligations

Residential and Commercial – The Company has performance obligations for the service to deliver electricity to its customers and it satisfies these performance obligations over time as electricity is provided continuously to the customer who simultaneously receives and consumes the benefits provided. The Company recognizes revenue at a fixed base amount and a price per kilowatt hour as it provides these services on a fixed term contract. Contracts generally have fixed terms of 3-month increments not to exceed a 24-month fixed term. For customers whose fixed contracts have expired, the Company recognizes revenue at the market price per kilowatt hour as the service is provided.

Residential pre-paid – The Company has performance obligations for the service to deliver electricity to its customers and these performance obligations are satisfied over time as electricity is provided continuously to the customer who simultaneously receives and consumes the benefits provided. Revenues in the pre-paid market are variable at the market rate per kilowatt hour as the service is provided.

Accounts Receivable and Unbilled Revenue

Account receivables are comprised of trade receivables and unbilled receivables (accrued revenue). Customers are billed monthly in cycles having billing dates that do not generally coincide with the end of a calendar month. This results in customers having received electricity that they have not been billed for as of month-end. Therefore, at the end of each calendar month, revenue is accrued to unbilled receivables based on the estimated amount of power delivered to customers using the flow technique. Unbilled revenue also includes accruals for estimated TDSP charges and monthly service charges applicable to the estimated electricity usage for the period. All charges that were physically billed in the calendar month are recorded from the unbilled account to the customer’s receivable account.

In the Texas market, electricity revenues not billed by month-end are accrued based upon estimated deliveries to customers as tracked and recorded by ERCOT multiplied by our average billing rate per kilowatt hour (“kWh”) in effect at the time. At the end of each calendar month, revenue is accrued to unbilled receivables based on the estimated amount of power delivered to customers using the flow technique. Unbilled revenue also includes accruals for estimated TDSP charges and monthly service charges applicable to the estimated electricity usage for the period. All charges that were physically billed in the calendar month are recorded from the unbilled account to the customer’s receivable account. Accounts receivable are customer obligations billed at the customer’s monthly meter read date for that period’s electricity usage and due within 16 days of the date of the invoice. The past due customer balances are subject to a late fee that is assessed on that billing. Unbilled accounts in the Texas market as of March 31, 2019 and December 31, 2018 were estimated at $26,278,674 and $25,811,607, respectively.

In the ISO New England market, electricity services not billed by month-end are accrued based upon estimated deliveries to customers as tracked and recorded by ISO New England multiplied by our average billing rate per kilowatt hour (“kWh”) in effect at the time. The customer billing in the ISO New England market is performed by the local utility company. Unbilled accounts in the ISO New England market as of March 31, 2019 and December 31, 2018 were estimated at $893,211 and $1,006,895, respectively.

The Company, in the Texas market, determines an allowance for doubtful accounts based upon a review of outstanding receivables, historical write-off experience and existing economic conditions. Receivables past due over 90 days are considered delinquent and reviewed individually for collectability. After all means of collection have been exhausted, delinquent receivables are written off. Billed receivables over 90 days and 2% of unbilled receivables are reserved by the Company. Management has determined that the allowance for doubtful accounts as of March 31, 2019 and December 31, 2018 was $720,731 and $821,424, respectively. Bad debt expense for the three-months ended March 31, 2019 and 2018 was $141,778 and $100,272, respectively. Net write offs and recoveries for the three-months ended March 31, 2019 and 2018 were $242,471 and $850,916, respectively.

Within the ISO New England market, the local utility companies in the state of Massachusetts purchase the Company’s billed receivables at a statutory published discounted rate without recourse; therefore, no allowance for doubtful accounts was recorded as of March 31, 2019 or December 31, 2018.

Note 4 - Letters of Credit

3 Months Ended

Mar. 31, 2019

Note 4 - Letters of Credit

NOTE 4 - LETTERS OF CREDIT

As of March 31, 2019, Summer LLC had five secured irrevocable stand-by letters of credit totaling $565,300 with a financial institution for the benefit of the TDSPs that provide transition services to the Company. Two letters of credit totaling $73,000 expire in June 2019, one letter of credit in the amount of $54,800 expires in July 2019, and two letters of credit totaling $437,500 expire in January 2020. The five letters of credit are subject to automatic extension and renewal provisions.

As of March 31, 2019, Summer Midwest secured one irrevocable stand-by letter of credit in the amount of $50,000 for the benefit of Duke Energy Ohio, Inc. The letter of credit expires in June 2019 and is subject to automatic extension and renewal provisions.

As of March 31, 2019, Summer Northeast secured two irrevocable stand-by letters of credit totaling $750,000. The letters of credit were issued for the benefit of the following parties: Connecticut Department of Public Utility Control in the amount of $250,000 expiring on May 26, 2019 with auto extension provisions and the State of New Hampshire Public Utilities Committee in the amount of $500,000 expiring on May 1, 2020.

As of March 31 2019, none of the letters of credit issued on behalf of the Company were drawn upon.

Note 5 - Financing From Blue Water Capital Funding LLC

3 Months Ended

Mar. 31, 2019

Note 5 - Financing From Blue Water Capital Funding LLC

NOTE 5 - FINANCING FROM BLUE WATER CAPITAL FUNDING LLC

On June 29, 2016, Summer LLC entered into a Loan Agreement (the “Agreement”) with Blue Water Capital Funding, LLC (“Blue Water”) and guaranteed by the Company (the “Guaranty”). Pursuant to the Agreement, Blue Water agreed to provide a revolving loan (the “Loan”) to Summer LLC, and Summer LLC agreed to borrow and repay funds loaned by Blue Water. Further, in connection with the Agreement, Summer LLC granted to Blue Water a second position security interest in and to Summer LLC’s collateral, which includes receivables, equipment, inventory, personal property, other intangibles, and proceeds from any of these, to secure Summer LLC’s payment of its obligation under the Loan.

The amount of available credit under the Loan was $5,000,000. The Loan was revolving in nature and is evidenced by a Revolving Promissory Note (the “Note”). The maturity date of the Loan was June 30, 2018.

On June 27, 2018, Summer LLC entered into an amendment to the agreement (the “Amendment”) with Blue Water with respect to the Agreement.

Pursuant to the Amendment, the maturity date of the Note was extended through June 30, 2020, and the interest rate on the Note was changed from 11% per annum to a variable rate equal to the Prime Rate published by the Wall Street Journal plus 475 basis points. As of March 31, 2019, the interest rate was 10.25%. The amount of credit available pursuant to the Agreement, as amended by the Amendment, continues to be $5,000,000. The Note continues to include a minimum monthly financing fee of $22,500 per month. Interest is payable on the tenth day of each month and on the maturity date of the Note. Summer LLC and Blue Water agreed that the security interest granted pursuant to the Agreement remains in effect, and the Company reaffirmed its obligations under the Guaranty.

Further, under the Agreement, Summer LLC is subject to certain restrictive covenants that, among other things, may limit our ability to obtain additional financing for working capital requirements, product development activities, debt service requirements, and general corporate or other purposes. These restrictive covenants include, without limitation, restrictions on Summer LLC’s ability to: (1) incur additional indebtedness; (2) incur liens; (3) make certain dispositions of assets; (4) merge, dissolve, consolidate or sell all or substantially all of its assets; and (5) enter into certain transactions with affiliates during the term of the Agreement. If Summer LLC breaches any of these restrictive covenants or is unable to pay the indebtedness under the Agreement when due, this could result in a default under the Agreement. In such event, the Lender may elect (after the expiration of any applicable notice or grace periods) to declare all outstanding borrowings, together with accrued and unpaid interest and other amounts payable under the Agreement, to be immediately due and payable. As of March 31, 2019, Summer LLC was in compliance with the covenants of the Agreement.

At March 31, 2019 and December 31, 2018, the outstanding balance of financing from Blue Water Capital was $4,920,000. Interest accrued during the three-months ended March 2019 and 2018 was $126,075 and $76,450, respectively.

Note 6 - Comerica Bank Loan

3 Months Ended

Mar. 31, 2019

Note 6 - Comerica Bank Loan

NOTE 6 – COMERICA BANK LOAN

On December 18, 2018, the Company signed a single payment note (the “Comerica Note”) with Comerica Bank (the “Bank”) in the amount of $2,900,000. The Comerica Note has a maturity date of June 11, 2020, with interest thereon at a per annum rate equal to the “Prime Referenced Rate” plus the “Applicable Margin.” The “Prime Referenced Rate” means, for any day, a per annum interest rate which is equal to the “Prime Rate” in effect on such day, but in no event and at no time shall the “Prime Reference Rate” be less than the sum of the Daily Adjusting LIBOR rate for such day plus two and one-half percent (2.5%) per annum. “Prime Rate” means the per annum rate established by the Bank as its prime rate for its borrowers at any such time. “Applicable Rate” means 0.25% per annum. Accrued and unpaid interest on the unpaid principal balance outstanding on the Note is payable monthly on the first day of each month, commencing on February 1, 2019.

As of March 31, 2019, the outstanding balance of financing from Comerica Bank was $1,600,000. Interest accrued for the Comerica Bank loan during the three-months ended March 31, 2019 was $36,497.

Note 7 - Wholesale Power Purchase Agreement with EDF

3 Months Ended

Mar. 31, 2019

Note 7 - Wholesale Power Purchase Agreement with EDF

NOTE 7 - WHOLESALE POWER PURCHASE AGREEMENT WITH EDF

On May 1, 2018, Summer Energy Holdings, Inc. (for purposes of this Note, “SEH”), together with its subsidiaries Summer LLC and Summer Northeast (collectively the “Company”) closed a transaction with EDF Energy Services, LLC and EDF Trading North America, LLC (collectively, “EDF”). As part of the transaction, Summer LLC, Summer Northeast and EDF entered into an Energy Services Agreement (the “Energy Services Agreement”) pursuant to which Summer LLC and Summer Northeast agreed to purchase their electric power and associated services requirements from EDF, and EDF agreed to provide Summer LLC and Summer Northeast with certain credit facilities to assist Summer LLC and Summer Northeast in the purchase of their electric power and associated service requirements. The terms of the Energy Services Agreement are governed by the ISDA Master Agreement, as well as a Schedule and Power Annex thereto and the Credit Support Annex thereto.

In conjunction therewith, the Company and EDF also entered into a Security Agreement (the “Security Agreement”), a Pledge Agreement (the “Pledge Agreement”) and a Guaranty (the “Guaranty”) in favor of EDF. The Energy Services Agreement has a term of three years, and automatically renews for successive one-year periods unless either party provides written notice of termination 180 days prior to the renewal date. In addition to the market-based commodity price charged by EDF for each underlying commodity transaction, the Company will pay a “Commodity Fee” for each MWh of power that the Company requests for delivery from EDF during the term of the Energy Services Agreement. In addition, the Company is responsible for other mutually agreed upon fees incurred by EDF on its behalf. The Company is also responsible for any reasonable transmission or transportation costs incurred in connection with power transactions. Monthly supply obligations will accrue interest at a rate equal to three-month London Interbank Offered Rate (“LIBOR”) plus 6% per annum. Any additional credit support will bear interest at the per annum rate equal to the lesser of (i) a rate per annum equal to three-month LIBOR rate plus 3% per annum, and (ii) the maximum rate of interest permitted by applicable law.

In consideration of the services and credit support provided by EDF to Summer LLC and Summer Northeast, and pursuant to the Security Agreement, Summer LLC and Summer Northeast agreed to, among other things (i) grant a priority security interest to EDF in all of their assets, equipment and inventory; (ii) require their customers to remit monthly payments into a lockbox account over which EDF has a security interest; and (iii) deliver monthly and annual forecasted and audited statements to EDF.

Pursuant to the Pledge Agreement, SEH pledged to EDF, and granted to EDF a security interest in, all of the membership interests of Summer LLC and Summer Northeast owned by SEH as well as all additional membership interests of such subsidiaries from time to time acquired by SEH. Pursuant to the Guaranty, SEH agreed to guaranty the obligations of Summer LLC and Summer Northeast under the Energy Services Agreement.

The foregoing is only a brief description of the material terms of the transaction with EDF and does not purport to be a complete description of the rights and obligations of the parties thereunder and such descriptions are qualified in their entirety by reference to the text of the Energy Services Agreement, the ISDA Master Agreement, the Security Agreement, the Pledge Agreement and the Guaranty, which are filed as Exhibits 10.1 through 10.5, respectively, to our quarterly report on Form 10-Q filed with the SEC on August 14, 2018.

As of March 31, 2019, EDF has provided additional credit support in the amount of $5,099,066 for cash collateral as well as to secure letters of credit (Note 4) for the benefit of the Company.

For the quarter ended March 31, 2019, the Company accrued $192,765 interest to EDF.

Note 8 - Lease Liability

3 Months Ended

Mar. 31, 2019

Note 9 - Long Term Obligations

Note 8 - Lease Liability

NOTE 8 – LEASE LIABILITY

The Company leases office space and equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense is recognized on a straight-line basis over the term of the lease. For leases beginning in 2018 and later, the Company accounts for lease components separately from the non-lease components.

Most leases include one or more options to renew. The exercise of the lease renewal options is at the sole discretion of the Company. Certain leases also include options to purchase the leased property. The depreciable life of the assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

As of March 31, 2019, the operating lease right-of-use assets and operating lease liabilities were $1,189,239, respectively. The long-term portion of the operating lease liabilities, $940,339, is included in long-term debt (see Note 9). Operating lease expense during the three-months ended March 31, 2019 was $76,323 and was included as part of operating expenses.

As of March 31, 2019, the weighted-average remaining lease term for operating leases was 6.2 years. As of March 31, 2019, the weighted-average discount rate for operating leases was 6.5%.

Operating lease future minimum payments together with their present values as of March 31, 2019 are summarized as follows:

		Operating Leases

2019	$	263,023
2020		204,156
2021		199,494
2022		199,494
2023		197,294
Thereafter		381,387
Total future minimum lease payments		1,444,848
Less amounts representing interest		(255,609)
Present value of lease liability	$	1,189,239

Current-portion operating lease liability		(248,900)

Long-term portion operating lease liability	$	940,339

Note 9 - Long Term Obligations

3 Months Ended

Mar. 31, 2019

Debt Disclosure [Abstract]

NOTE 9 – LONG TERM OBLIGATIONS

Long-term obligations of the Company are comprised as follows:


	Maturity Date		March 31, 2019		December 31, 2018
Financing from Blue Water Capital Funding, LLC (Note 5)	June 30, 2020	$	4,920,000	$	4,920,000
Comerica Bank Loan (Note 6)	June 11, 2020		1,600,000		2,900,000
Collateral credit support from EDF (Note 7)	May 1, 2021⁽¹⁾		5,099,006		4,136,006
Operating lease obligations	October 31, 2019 through December 31, 2025		1,189,239		-
Total obligations		$	12,808,245	$	11,956,006

Less current portion operating lease obligations			(248,900)		-
Long-term portion of obligations		$	12,559,345		11,956,006

⁽¹⁾ Automatically renews for successive one-year periods unless either party provides written notice of termination 180 days prior to renewal date.

Note 10 - 2012 Stock Option and Stock Award Plan

3 Months Ended

Mar. 31, 2019

2012 Stock Option and Stock Award Plan

Note 10 - 2012 Stock Option and Stock Award Plan

NOTE 10 – 2012 STOCK OPTION AND STOCK AWARD PLAN

During 2012, the Company approved the 2012 Stock Option and Stock Award Plan (“2012 Plan”) established to advance the interest of the Company and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Company and by motivating such persons to contribute to the growth and profitability of the Company.

The maximum aggregate number of (i) shares of stock that may be issued under the 2012 Plan, and (ii) shares of stock with respect to which stock appreciation rights may be granted, is 785,000 and consists of authorized but unissued or reacquired shares of stock or any combination thereof. Such number of shares of stock may be may be issued under the 2012 Plan pursuant to incentive stock options, nonstatutory stock options, restricted stock grants, stock appreciation right grants or any combination thereof, so long as the aggregate number of shares so issued does not exceed such number of shares, as adjusted.

The 2012 Plan continues in effect until the earlier of its termination by the Board or the date on which all the shares of stock available for issuance under the 2012 Plan have been issued and all restrictions on such shares under the terms on the 2012 Plan and the agreement evidencing awards granted under the 2012 Plan have lapsed. However, all awards shall be granted, if at all, within ten (10) years from the earlier of the date the 2012 Plan is adopted by the Board or the date the 2012 Plan is duly approved by the stockholders of the Company.

On December 6, 2012, a Form S-8 Registration Statement was filed with the United States Securities and Exchange Commission regarding shares under the 2012 Plan.

During the three-months ended March 31, 2019 and 2018, the Company granted no stock options under the 2012 Plan and recognized no stock compensation expense relating to the vesting of stock options issued from the 2012 Plan.

As of March 31, 2019, 2,000 shares remain available for issuance.

Note 11 - 2015 Stock Option and Stock Award Plan

3 Months Ended

Mar. 31, 2019

2015 Stock Option and Stock Award Plan

Note 11 - 2015 Stock Option and Stock Award Plan

NOTE 11 – 2015 STOCK OPTION AND STOCK AWARD PLAN

During the year ended December 31, 2015, the Company’s stockholders approved the 2015 Stock Option and Stock Award Plan (“2015 Plan”), which was established to advance the interest of the Company and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Company and by motivating such persons to contribute to the growth and profitability of the Company.

The maximum aggregate number of (i) shares of stock that may be issued under the 2015 Plan, and (ii) shares of stock with respect to which stock appreciation rights may be granted, is 1,500,000 and consists of authorized but unissued or reacquired shares of stock or any combination thereof. Such number of shares of stock may be issued under the 2015 Plan pursuant to incentive stock options, nonstatutory stock options, restricted stock grants, stock appreciation right grants or any combination thereof, so long as the aggregate number of shares so issued does not exceed such number of shares, as adjusted.

The 2015 Plan continues in effect until the earlier of its termination by the Board or the date on which all the shares of stock available for issuance under the 2015 Plan have been issued and all restrictions on such shares under the terms on the 2015 Plan and the agreements evidencing awards granted under the 2015 Plan have lapsed. However, all awards shall be granted, if at all, within ten years from the earlier of the date the 2015 Plan is adopted by the Board or the date the 2015 Plan is duly approved by the stockholders of the Company.

On July 2, 2015, a Form S-8 Registration Statement was filed with the United States Securities and Exchange Commission regarding the 2015 Plan.

During the quarter ended March 31, 2019, the Company issued no stock options under the 2015 Plan.

During the quarter ended March 31, 2018, the Company granted a total of 51,000 stock options from the 2015 Plan as compensation with an approximate value of $111,911 on the date of grant. The fair value of the options in the amount of $111,911 was determined using the Black Scholes option pricing model. The weighted average assumptions used to calculate the fair market value are as follows: (i) risk-free interest rate of 2.25% (ii) estimated volatility of 110.73% (iii) dividend yield of 0.00% and (iv) expected life of all options averaging eight years.

During quarters ended March 31, 2019 and 2018, the Company recognized total stock compensation expenses of $16,433 and $130,475, respectively, for vesting options issued from the 2015 Plan.

As of March 31, 2019, the unrecognized expense for vesting of options issued from the 2015 Plan is $180,766 relating to 235,000 of unvested shares expected to be recognized over a weighted average period of approximately 7.73 years.

As of March 31, 2019, 19,000 shares remain available for issuance under the 2015 Plan.

Note 12 - 2018 Stock Option and Stock Award Plan

3 Months Ended

Mar. 31, 2019

2018 Stock Option and Stock Award Plan

Note 12 - 2018 Stock Option and Stock Award Plan

NOTE 12 - 2018 STOCK OPTION AND STOCK AWARD PLAN

Effective February 12, 2018, the Board of Directors of the Company approved and adopted the Summer Energy Holdings, Inc. 2018 Stock Option and Stock Award Plan (“2018 Plan”), which was established to advance the interest of the Company and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Company and by motivating such persons to contribute to the growth and profitability of the Company. The Company’s named executive officers are eligible for grants or awards under the 2018 Plan. The Company’s stockholders approved the 2018 Plan on June 8, 2018.

The maximum aggregate number of (i) shares of stock that may be issued under the 2018 Plan and (ii) shares of stock with respect to which stock appreciation rights may be granted, is 1,500,000 and consists of authorized but unissued or reacquired shares of stock or any combination thereof. Such number of shares of stock may be issued under the 2018 Plan pursuant to incentive stock options, non-statutory stock options, restricted stock grants, restricted stock units, stock appreciation right grants or any combination thereof, so long as the aggregate number of shares so issued does not exceed such number of shares, as adjusted. The 2018 Plan or any increase in the maximum aggregate number of shares of stock issuable thereunder shall be approved by the stockholders of the Company within twelve months of the date of adoption by the Board. Awards granted prior to stockholder approval of the 2018 Plan shall become exercisable no earlier than the date of stockholder approval of the 2018 Plan.

The 2018 Plan continues in effect until the earlier of its termination by the Board or the date on which all shares of stock available for issuance under the 2018 Plan have been issued and all restrictions on such shares under the terms on the 2018

Plan and the agreement evidencing awards granted under the 2018 Plan have lapsed. However, all awards shall be granted, if at all, within ten years from the earlier of the date the 2018 Plan is adopted by the Board or the date the 2018 Plan is duly approved by the stockholders of the Company.

On September 20, 2018, a Form S-8 Registration Statement was filed with the United States Securities and Exchange Commission regarding shares under the 2018 Plan.

During the quarter ended March 31, 2019, the Company granted under the 2018 Plan a total of 53,750 stock options with an exercise price of $2.25 to non-employee members of the Company’s Board of Directors, and a total of 2,500 stock options with an exercise price of $2.50 to a key employee as compensation. The options granted to the non-employee members of the Company’s Board of Director vested immediately on the date of grant, and the 2,500 options granted to the key employee vest one-year from the date of grant. The total 56,250 stock option granted during the quarter ended March 31, 2019 had an approximate fair value of $107,960 determined using the Black Scholes option pricing model. The weighted average assumptions used to calculate the fair market value are as follows: (i) risk-free interest rate of 2.21% (ii) estimated volatility of 147.94% (iii) dividend yield of 0.00% and (iv) expected life of all options averaging eight years.

During the quarter ended March 31, 2018, the Company granted the following options to purchase common stock under the 2018 Plan to key officers of the Company:

Name	Number of Options		Exercise Price	Date of Vest
Angela Hanley	150,000	$	2.50	February 20, 2023
Jaleea George	85,000	$	2.50	February 20, 2023
Angela Hanley	15,000	$	2.50	July 1, 2018
Jaleea George	15,000	$	2.50	July 1, 2018
Neil Leibman	15,000	$	2.50	July 1, 2018
Total	280,000

The options granted to key officers covering a total of 235,000 shares vest five years after the date of grant. The stock options have an exercise price of $2.50 per share and will expire 10 years from the date of grant. The fair value of the options of $539,132 was determined using the Black-Scholes option-pricing model. The assumptions used to calculate the fair market value are as follows: (i) risk-free interest rate of 2.65% (ii) estimated volatility of 119.27% (iii) dividend yield of 0.00% and (iv) expected life of the options of 8 years.

The options to key officers covering a total of 45,000 shares vested on July 1, 2018. The stock options have an exercise price of $2.50 per share and will expire 10 years from the date of grant. The fair value of the options of $103,238 was determined using the Black-Scholes option-pricing model. The assumptions used to calculate the fair market value are as follows: (i) risk-free interest rate of 2.65% (ii) estimated volatility of 119.27% (iii) dividend yield of 0.00% and (iv) expected life of the options of 8 years.

During the quarters ended March 31, 2019 and 2018, the Company recognized total stock compensation expense of $137,951 and $140,926, respectively, for the vesting of options issued from the 2018 Plan.

As of March 31, 2019, the unrecognized expense for vesting of options issued from the 2018 Plan is $431,024 relating to 252,500 of unvested shares expected to be recognized over a weighted average period of approximately 6.93 years.

As of March 31, 2019, the Company had outstanding granted stock options under the 2018 Plan, net of forfeitures to purchase 557,500 shares, and 942,500 remains available for issuance.

Note 13 - Private Placement Offering

3 Months Ended

Mar. 31, 2019

Note 13 - Private Placement Offering

NOTE 13 - PRIVATE PLACEMENT OFFERINGS

During the quarter ended March 31, 2019, the Company commenced a private placement offering (the “2019 Offering”) to certain investors with whom the Company, its management and/or agents have a pre-existing relationship. The 2019 Offering was to accredited investors to purchase shares of the Company’s common stock at a purchase price of $1.50 per share. The 2019 Offering resulted in the issuance of 3,180,000 shares of common stock in exchange for cash proceeds in the amount of $4,770,000.

Note 14 - Warrants

3 Months Ended

Mar. 31, 2019

Note 14 - Warrants

NOTE 14 – WARRANTS

The Company has issued warrants to purchase shares of the Company’s common stock associated with certain agreements and has vested warrants from a previously terminated Master Marketing Agreement.

On January 25, 2019, the Company issued a warrant for 43,772 shares of the Company’s common stock under a Referral Agreement whereby the sales broker introduces the Company potential sales leads. The five-year warrant has an exercise price of $1.50 per share. The fair value of the 43,772 warrants was $80,307 determined using the Black-Scholes option-pricing model. The assumptions used to calculate the fair market value are as follows: (i) risk-free interest rate of 2.58%, (ii) estimated volatility of 148.70%, (iii) dividend yield of 0.00%, and (iv) expected life of the warrant of 5 years.

On January 25, 2019, the Company issued two warrants, each for 6,715 shares, of the Company’s common stock under a Referral Agreement whereby the sales broker introduces the Company potential sales leads. The five-year warrants have an exercise price of $1.50 per share. The fair value of the 13,430 warrants was $24,640 determined using the Black-Scholes option-pricing model. The assumptions used to calculate the fair market value are as follows: (i) risk-free interest rate of 2.58%, (ii) estimated volatility of 148.70%, (iii) dividend yield of 0.00%, and (iv) expected life of the warrant of 5 years.

As of March 31, 2019, the Company had 1,417,202 outstanding warrants of which 1,151,965 are fully vested.

Note 15 - Texas Sales And Use Tax Audit

3 Months Ended

Mar. 31, 2019

Note 15 - Texas Sales Anud Use Tax Audit

NOTE 15 - TEXAS SALES AND USE TAX AUDIT

During the year ended 2018, Summer LLC finalized the audit for Texas sales and use tax with the Comptroller of Public Accounts (“Comptroller”) for the period from February 2013 through July 2016. The Company made payments totaling $419,662 towards the assessment for the Texas sales and use tax liability plus penalties and interest.

As of March 31, 2019, and December 31, 2018, the liability related to the Texas sales and use tax audit was paid in full.

Note 16 - Master Revolver Note

3 Months Ended

Mar. 31, 2019

Note 16 - Master Revolver Note

NOTE 16 – MASTER REVOLVER NOTE

The Company assumed a Master Revolver Note (“Master Note”) held by Summer Northeast (formerly REP Energy, LLC) pursuant to the terms of the Purchase Agreement during 2017.

The amount of available credit under the Master Note was $800,000 issued by Comerica Bank. The Master Note was dated July 25, 2017 and had a maturity date of July 25, 2018. Each advance under the Master Note bore interest thereon at a per annum rate equal to the “Prime Referenced Rate” plus the “Applicable Margin.” The “Prime Referenced Rate” means, for any day, a per annum interest rate which is equal to the “Prime Rate” in effect on such day, but in no event and at no time shall the “Prime Reference Rate” be less than the sum of the Daily Adjusting LIBOR rate for such day plus two and one-half percent (2.5%) per annum. “Prime Rate” means the per annum rate established by Comerica Bank as its prime rate for its borrowers at any such time. “Applicable Margin” means 1 percent per annum. Accrued and unpaid interest on the unpaid principal balance outstanding was payable monthly, in arrears, on the first Business Day of each month.

On February 22, 2018, the Company paid $40,000 to Comerica Bank to pay off the balance of the Master Note assumed by the Company on November 1, 2017.

Guaranty of the Master Note at origination on July 25, 2017 was made by two members of Summer Northeast (Neil Leibman and Tom O’Leary) who are also members of the Company’s Board (Mr. Leibman is also an executive officer). In accordance with the provisions of Purchase Agreement, the Company paid the guarantors monthly interest at the lowest applicable federal rate published by the Internal Revenue Service, on the outstanding balance of such credit facility until the credit facilities secured by the Master Note was replaced by the Company.

Interest paid to Comerica Bank during the quarters ending March 31, 2019 and 2018 was $0 and $312, respectively.

Note 17 - Debt To Related Parties Assumed

3 Months Ended

Mar. 31, 2019

Note 17 - Debt To Related Parties Assumed

NOTE 17 – DEBT TO RELATED PARTIES ASSUMED

On November 1, 2017, the Company assumed $767,677 of related party debt owed by Summer Northeast to members Tom O’Leary and Neil Leibman pursuant to the terms of the Purchase Agreement during 2017. Messrs. O’Leary and Leibman serve on the Company’s Board (Mr. Leibman is also an executive officer).

In accordance with the Amended and Restated Limited Liability Company Agreement of Summer Northeast, the amount of any loan or advance by a member shall not be treated as a contribution to the capital of the lending member but shall be considered a debt. The loan bears interest at the rate of the greater of (i) 12% per annum or (ii) the Prime Rate plus 5%, payable monthly with a maturity date of October 31, 2018.

The related party debt in the amount of $767,677 was paid in full by the Company to the related parties Messrs. O’Leary and Leibman on June 1, 2018.

Interest paid during the quarters ending March 31, 2019 and 2018 on such related party debt assumed was $0 and $69,313, respectively.

Note 18 - Related Party Loans

3 Months Ended

Mar. 31, 2019

Note 18 - Related Party Loans

Note 18 - Related Party Loans

NOTE 18 – RELATED PARTY LOANS

On January 3, 2018, the Company entered into two separate promissory notes in the amount of $125,000 each for an advance of $250,000 by Tom O’Leary and Neil Leibman for purposes of short-term financing. The promissory notes accrued interest at the rate of 5% per annum based upon 365 days a year with a maturity date of July 3, 2018. The loans from Mr. O’Leary and Mr. Leibman were paid in full on June 1, 2018. During the quarters ended March 31, 2019 and 2018, the interest to Messrs. O’Leary and Leibman on the loan was $0 and $3,014, respectively.

On January 8, 2018, the Company entered into a promissory note in the amount of $373,000 for an advance by Mr. Leibman for purposes of short-term financing. The promissory note accrued interest at a rate of 5% per annum based upon 365 days in a year and had a maturity date of July 8, 2018. On March 6, 2018, $200,000 was paid back to Mr. Leibman and on April 16, 2018, the remaining balance of $173,000 was paid. For the quarters ending March 31, 2019 and 2018, the Company paid interest to Mr. Leibman in the amount of $0 and $3,529, respectively.

On January 8, 2018, the Company entered into a promissory note with Pinnacle Power, LLC (“Pinnacle”), in the amount of $80,000 for purposes of short-term financing. Mr. O’Leary and Mr. Leibman hold membership interests in Pinnacle. The promissory note accrued interest at a rate of 5% per annum based upon 365 days a year and had a maturity date of July 8, 2019. On February 22, 2018, $40,000 was repaid to Pinnacle and on March 6, 2018, $40,000 was repaid to Pinnacle. For the quarters ending March 31, 2019 and 2018, the Company paid interest to Pinnacle in the amount of $0 and $558, respectively.

On January 7, 2019, the Company entered into a promissory note in the amount of $473,000 for an advance by Mr. O’Leary for purposes of short-term financing. The promissory note accrued interest at a rate of 5% per annum based upon 365 days in a year and had a maturity date of July 7, 2019. On February 7, 2019, the Company paid back in full the loan from Mr. O’Leary. For the quarter ended March 31, 2019, the Company paid interest to Mr. O’Leary in the amount of $2,009.

On January 7, 2019, the Company entered into a promissory note in the amount of $25,000 for an advance by Messrs. O’Leary and Leibman for purposes of short-term financing. The promissory note accrued interest at a rate of 5% per annum based upon 365 days in a year and had a maturity date of July 7, 2019. On February 7, 2019, the Company paid back in full the loan from Messrs. O’Leary and Leibman. For the quarter ended March 31, 2019, the Company paid interest to Messrs. O’Leary and Leibman in the amount of $53.

Note 19 - Other Related Party Transactions

3 Months Ended

Mar. 31, 2019

Note 19 - Other Related Party Transactions

NOTE 19 – OTHER RELATED PARTY TRANSACTIONS

On October 31, 2017, Summer Northeast entered into a sublease agreement with PDS for office space located at 800 Bering Drive, Suite 250, Houston, Texas. PDS is 100% owned by Tom O’Leary who is a member of the Company’s Board of Directors. During the quarters ended March 31, 2019 and 2018, the Company paid $6,993 and $12,325, respectively, for lease expense related to the agreement with PDS.

In January 2018, Mr. Leibman provided aviation transportation and the Company paid $4,000 in fuel costs for purposes of a company off-site management meeting.

On June 28, 2018, the Company entered into individual Securities Purchase Agreements and Registration Rights Agreements with four investors for such investors to purchase from the Company a total of 125,000 shares of common stock at a purchase price of $1.50 per share for a total purchase price of $187,500. A member of the Company’s Board of Directors, Andrew Bursten, purchased 85,100 of such shares and his family members purchased 39,900 of such shares.

On December 18, 2018, four members of the Company’s Board of Directors, Stuart Gaylor, Andrew Bursten, Tom O’Leary and Neil Leibman (Mr. Leibman is also an executive officer) (collectively, the “Guarantors”) guaranteed a single payment note with Comerica Bank (See Note 6) in the amount of $2,900,000. The Company agreed to pay interest at a rate of 12% for the guarantee and such interest is to be paid with the issuance of the Company’s common stock. During the quarter ended March 31, 2019 and December 31, 2018, the Company accrued interest payable to the four guarantors in the amount of $76,167 and $12,566, respectively. As of March 31, 2019, the total interest payable to the four guarantors was $88,733.

In February 2019, Mr. Leibman provided aviation transportation for business purposes, and the Company paid $23,469 in fuel costs.

Note 20 - Summer Energy 401(K) Plan

3 Months Ended

Mar. 31, 2019

Note 20 - Summer Energy 401(k) Plan

NOTE 20 - SUMMER ENERGY 401(K) PLAN

In January 2017, the Company adopted a qualified 401(K) Retirement Plan (the “Plan”) whereby eligible employees may elect to save for retirement on a tax-advantaged basis. There are two types of salary deferrals: pre-tax 401(K) deferrals and Roth 401(K) deferrals. Eligible employee participants are automatically enrolled at 3% of compensation unless a participant elects an alternative deferral percentage limited to dollar amount of $19,000 in 2019 or elects not to defer under the Plan. There is no Company match to the Plan.

Note 21 - Employee Stock Purchase Plan

3 Months Ended

Mar. 31, 2019

Note 21 - Employee Stock Purchase Plan

NOTE 21 - EMPLOYEE STOCK PURCHASE PLAN

Effective May 2017, the Company began offering an Employee Stock Purchase Plan (the “ESPP”) whereby eligible employees may elect to purchase common stock of the Company through a registered broker/dealer. Eligible employees who so elect may authorize payroll deductions for contributions to the ESPP up to a maximum of $25,000 each calendar year. The Company will match 10% of eligible employee contributions up to an aggregate maximum of $24,000 for all ESPP participants (not each individual ESPP participant). The employer match for the quarters ended March 31, 2019 and 2018 was $927 and $1,872, respectively.

Note 22 - Subsequent Events

3 Months Ended

Mar. 31, 2019

Note 22 - Subsequent Events

NOTE 22 - SUBSEQUENT EVENTS

During April and May 2019, the Company issued 640,000 shares of common stock in exchange for cash proceeds in the amount of $960,000 by the Company entering into two Securities Purchase Agreements in a private placement offering of the Company’s common stock at a purchase price of $1.50 per share.

On April 12, 2019, the Company granted from the 2018 Stock Option and Stock Award Plan a total of 100,000 stock options with an exercise price of $1.50 to a key employee of the Company as compensation. The stock options granted to the key employee vested on the date of grant. The stock options granted during the quarter ended March 31, 2019 had an approximate fair value of $145,369 determined using the Black Scholes option pricing model. The weighted average assumptions used to calculate the fair market value are as follows: (i) risk-free interest rate of 2.38% (ii) estimated volatility of 149.93% (iii) dividend yield of 0.00% and (iv) expected life of all options averaging eight years.

On May 2, 2019, the Company issued 14,789 shares of the Company common stock in lieu of cash, at a per share price of $1.50 to each of the individuals acting as guarantors of the Comerica Loan (Note 6) for a total of 59,156 shares. The Company agreed to pay interest at a rate of 12% for the guarantee and such interest is to be paid with the issuance of the Company’s common stock. The four individuals are also members of the Company’s Board of Directors: Neil Leibman, Tom O’Leary, Andrew Bursten and Stuart Gaylor (see Note 19).

On May 3, 2019, the Company entered into a Referral Agreement whereby if the sales broker introduces the Company potential sales leads then in consideration for the services, the Company shall pay the broker based on customers who enroll with the Company, through the brokers efforts, a warrant to purchase common stock of the Company. No warrants have been issued related to this Referral Agreement.

On May 10, 2019, the Company paid $900,000 towards the outstanding balance due on the Comerica Note (see Note 6) bringing the remaining outstanding balance to $700,000.

Note 2 - Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2019

Policy Text Block [Abstract]

Revenue and Cost Recognition

Our revenues are primarily derived from the sale of electricity to residential and small commercial customers. Revenues for sales of electricity are recognized under the accrual method of accounting.

Direct energy costs are recorded when the electricity is delivered to the customer’s meter.

Cost of goods sold (“COGS”) within the Texas market include electric power purchased and pass through charges from the transmission and distribution service providers (“TDSPs”) in the areas serviced by the Company. TDSP charges are costs for metering services and maintenance of the electric grid. TDSP charges are established by regulation of the PUCT. COGS within the Independent System Operator (“ISO”) for the New England market is comprised of wholesale costs based upon the wholesale power tariff rate for volumes purchased during the delivery month and scheduling fees.

The energy portion of our COGS is comprised of two components: bilateral wholesale costs and balancing/ancillary costs. These two cost components are incurred and recognized differently as follows:

Bilateral wholesale costs are incurred through contractual arrangements with wholesale power suppliers for firm delivery of power at a fixed volume and fixed price. We are invoiced for these wholesale volumes at the end of each calendar month for the volumes purchased for delivery during the month, with payment due 20 days after the end of the month.

Balancing/ancillary costs are based on the customer load and are determined by the Electric Reliability Council of Texas (“ERCOT”) and ISO New England through a multiple step settlement process. Balancing costs/revenues are related to the differential between supply that we provided through our bilateral wholesale supply and the supply required to serve our customer load. The Company endeavors to minimize the amount of balancing/ancillary costs through our load forecasting and forward purchasing programs.

Cash and Restricted Cash

The Company considers all short-term investments with an original maturity of three months or less to be cash equivalents. There were no such investments at March 31, 2019 or December 31, 2018.

Restricted cash represents funds held in escrow for customer deposits and securing irrevocable stand-by letters of credit for the benefit of the TDSP’s that provide transmission services to the Company in the amount of $2,785,655 as of March 31, 2019 and $3,402,890 as of December 31, 2018.


		March 31, 2019		December 31, 2018
Cash	$	1,387,043	$	451,995
Restricted cash		2,785,655		3,402,890
Total cash and restricted cash	$	4,172,698	$	3,854,885

Basic and Diluted Income/(Loss) Per Share

Basic income/(loss) per share are computed by dividing net income/(loss) applicable to the weighted-average number of shares outstanding during the period. Diluted income per share is determined using the weighted-average number of shares outstanding during the period, adjusted for the dilutive effect of share equivalents, using the treasury method, consisting of shares that might be issued upon exercise of share equivalents. For the three months ended March 31, 2019, the weighted average number of shares outstanding excludes share equivalents, because their inclusion would be anti-dilutive. The Company had potentially dilutive securities totaling approximately 4,360,230 as of March 31, 2019.

For the three months ended March 31, 2019, the net income amount used to calculate both basic and diluted net income per share was the same. The 985,478 weighted average share difference between basic and diluted was due to dilutive stock options and stock warrants.

Accounting Standards Adopted During the Quarter Ended March 31, 2019

The Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), as of January 1, 2018, using the modified retrospective approach. The modified retrospective approach provides a method for recording existing leases at the application date. In addition, the Company elected the available practical expedients permitted under the transaction guidance within the new standard. The most significant impact from the adoption of the new standard was the recognition of operating lease right-of-use assets and operating lease liabilities. Adoption of the new standard resulted in the recording of additional lease assets and liabilities of $1,265,562 as of January 1, 2019. The standard did not materially impact the consolidated net income and had no impact on cash flows.

Recently Issued Accounting Standards Not Yet Adopted

The Company has reviewed all recently issued, but not yet adopted, accounting standards, in order to determine their effects, if any, on its results of operations, financial position or cash flows. Based on that review, the Company believes that no other pronouncements will have a significant effect on its financial statements.

Note 2 - Significant Accounting Policies (Table)

3 Months Ended

Mar. 31, 2019

Schedule of cash and cash equivalent


		March 31, 2019		December 31, 2018
Cash	$	1,387,043	$	451,995
Restricted cash		2,785,655		3,402,890
Total cash and restricted cash	$	4,172,698	$	3,854,885

Note 3 - Revenue (Tables)

3 Months Ended

Mar. 31, 2019

Revenue from Contract with Customer [Abstract]

Summary of revenues from customers net of respective provisions for refund

The table below represents the Company’s reportable revenues for the three-months ended March 31, 2019 and 2018, respectively, from customers, net of respective provisions for refund:

		For the Three Months Ended March 31,
		2019		2018
Electricity Revenues from Contracts with Customers
ERCOT Market	$	30,802,698	$	29,536,833
ERCOT Pre-paid Market		1,213,790		817,234
Northeast Market		1,924,411		2,939,019
Total Electricity Revenues from Contracts with Customers		33,940,899		33,293,086
Other Revenues:
Fees Revenue		884,970		757,014

Total Revenues:	$	34,825,869	$	34,050,100

Components of accounts receivable and accrued revenue

Presented in the following table are the components of accounts receivable and accrued revenue:

		March 31, 2019		December 31, 2018
Accounts receivable from customers
ERCOT Market	$	8,113,204	$	7,729,016
ISO New England Market		420,894		544,454
Total accounts receivable from customers		8,534,098		8,273,470

Accrued revenue from customers
ERCOT Market		26,278,674		25,811,607
ISO New England Market		893,211		1,006,895
Total accrued revenue with customers		27,171,885		26,818,502

Allowance for doubtful accounts		(720,731)		(821,424)

Total accounts receivable and accrued revenue	$	34,985,252	$	34,270,548

Note 8 - Lease Liability (Tables)

3 Months Ended

Mar. 31, 2019

Schedule of Future Minimum Rental Payments for Operating Leases

Operating lease future minimum payments together with their present values as of March 31, 2019 are summarized as follows:

		Operating Leases

2019	$	263,023
2020		204,156
2021		199,494
2022		199,494
2023		197,294
Thereafter		381,387
Total future minimum lease payments		1,444,848
Less amounts representing interest		(255,609)
Present value of lease liability	$	1,189,239

Current-portion operating lease liability		(248,900)

Long-term portion operating lease liability	$	940,339

Note 9 - Long Term Obligations (Tables)

3 Months Ended

Mar. 31, 2019

Debt Disclosure [Abstract]

Schedule of Long-term debt

Long-term obligations of the Company are comprised as follows:


	Maturity Date		March 31, 2019		December 31, 2018
Financing from Blue Water Capital Funding, LLC (Note 5)	June 30, 2020	$	4,920,000	$	4,920,000
Comerica Bank Loan (Note 6)	June 11, 2020		1,600,000		2,900,000
Collateral credit support from EDF (Note 7)	May 1, 2021⁽¹⁾		5,099,006		4,136,006
Operating lease obligations	October 31, 2019 through December 31, 2025		1,189,239		-
Total obligations		$	12,808,245	$	11,956,006

Less current portion operating lease obligations			(248,900)		-
Long-term portion of obligations		$	12,559,345		11,956,006

⁽¹⁾ Automatically renews for successive one-year periods unless either party provides written notice of termination 180 days prior to renewal date.

Note 12 - 2018 Stock Option and Stock Award Plan (Tables)

3 Months Ended

Mar. 31, 2019

Schedule of options granted to purchase common stock

During the quarter ended March 31, 2018, the Company granted the following options to purchase common stock under the 2018 Plan to key officers of the Company:

Name	Number of Options		Exercise Price	Date of Vest
Angela Hanley	150,000	$	2.50	February 20, 2023
Jaleea George	85,000	$	2.50	February 20, 2023
Angela Hanley	15,000	$	2.50	July 1, 2018
Jaleea George	15,000	$	2.50	July 1, 2018
Neil Leibman	15,000	$	2.50	July 1, 2018
Total	280,000

Note 1 - Organization (Details)	3 Months Ended
Note 1 - Organization (Details)	Mar. 31, 2019
Midwest
Entity Incorporation, Date of Incorporation	Dec. 16, 2013
Marketing LLC
Entity Incorporation, Date of Incorporation	Nov. 06, 2012
Summer LLC
Entity Incorporation, Date of Incorporation	Apr. 06, 2011

Note 2 - Significant Accounting Policies: Cash and Restricted Cash (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Text Block [Abstract]
Restricted cash	$ 2,785,655	$ 3,402,890
Investments	$ 0	$ 0

Note 2 - Significant Accounting Policies: Cash and Restricted Cash: Schedule of Cash and Restricted Cash (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018	Dec. 31, 2017
Text Block [Abstract]
Cash	$ 1,387,043	$ 451,995
Restricted cash	2,785,655	3,402,890
Total cash and restricted cash	$ 4,172,698	$ 3,854,885	$ 2,403,800	$ 1,992,036

Note 2 - Significant Accounting Policies: Basic and Diluted Loss Per Unit (Details)	3 Months Ended
	Mar. 31, 2019 shares
Text Block [Abstract]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	985,478

Note 2 - Significant Accounting Policies: Accounting Standards Adopted (Details)	Jan. 02, 2019 USD ($)
Text Block [Abstract]
Additional lease assets and liabilities	$ 1,265,562

Note 3 - Revenue (Details) - USD ($)	3 Months Ended
Note 3 - Revenue (Details) - USD ($)	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Allowance for doubtful accounts	$ 720,731		$ 821,424
Bad debt expense	141,778	$ 100,272
Net write offs and recoveries	242,471	$ 850,916
Texas Market
Unbilled accounts	26,278,674		25,811,607
ISO New England Market
Unbilled accounts	893,211		1,006,895
Allowance for doubtful accounts	$ 0		$ 0

Note 3 - Revenue: Summary of revenues from customers net of respective provisions for refund (Details) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Total Electricity Revenues from Contracts with Customers	$ 33,940,899	$ 33,293,086
Fees Revenue	884,970	757,014
Total Revenues	34,825,869	34,050,100
ERCOT Market
Total Electricity Revenues from Contracts with Customers	30,802,698	29,536,833
ERCOT Pre-Paid Market
Total Electricity Revenues from Contracts with Customers	1,213,790	817,234
Northeast Market
Total Electricity Revenues from Contracts with Customers	$ 1,924,411	$ 2,939,019

Note 3 - Revenue: Components of accounts receivable and accrued revenue (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Total accounts receivable from customers	$ 8,534,098	$ 8,273,470
Total accrued revenue with customers	27,171,885	26,818,502
Allowance for doubtful accounts	(720,731)	(821,424)
Total accounts receivable and accrued revenue	34,985,252	34,270,548
ERCOT Market
Total accounts receivable from customers	8,113,204	7,729,016
Total accrued revenue with customers	26,278,674	25,811,607
ISO New England Market
Total accounts receivable from customers	420,894	544,454
Total accrued revenue with customers	893,211	1,006,895
Allowance for doubtful accounts	$ 0	$ 0

Note 4 - Letter of Credit (Details) - Letter of Credit - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2019	Dec. 31, 2018
Line of Credit Facility, Maximum Borrowing Capacity	$ 565,300
Line of Credit Facility, Description	Two letters of credit totaling $73,000 expire in June 2019, one letter of credit in the amount of $54,800 expires in July 2019, and two letters of credit totaling $437,500 expire in January 2020. The five letters of credit are subject to automatic extension and renewal provisions.
Letters of Credit Outstanding, Amount	$ 0
Letters of credit facility	750,000
Connecticut Department
Letters of credit facility	250,000
Letters of credit facility, expiration period		May 26, 2019
State of New Hampshire
Letters of credit facility	500,000
Letters of credit facility, expiration period		May 01, 2020
Summer Midwest
Letters of credit facility	$ 50,000
Letters of credit facility, expiration period		Jun. 30, 2019

Note 5 - Financing From Blue Water Capital Funding LLC (Details) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Long-term debt	$ 12,559,345		$ 11,956,006
Blue Water Capital Funding
Debt Instrument, Face Amount	$ 5,000,000
Debt Instrument, Maturity Date	Jun. 30, 2020
Debt Instrument, Interest Rate, Stated Percentage	10.25%
Financing fee	$ 22,500
Long-term debt	4,920,000		$ 4,920,000
Interest paid	$ 126,075	$ 76,450

Note 6 - Comerica Bank Loan (Details) - USD ($)	Dec. 18, 2018	Mar. 31, 2019
Comerica Bank Loan outstanding		$ 1,600,000
Accrued interest		$ 36,497
Comerica Bank
Proceeds from Comerica Bank note	$ 2,900,000
Maturity Date	Jun. 11, 2020

Note 7 - Wholesale Power Purchase Agreement with EDF (Details) - USD ($)	3 Months Ended
	Mar. 31, 2019	Dec. 31, 2018
Long-term debt	$ 12,559,345	$ 11,956,006
EDF
Long-term debt	5,099,066
Interest expenses	$ 192,765

Note 8 - Lease Liability (Details) - USD ($)	3 Months Ended
Note 8 - Lease Liability (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Notes to Financial Statements
Operating lease right-of-use assets	$ 1,189,239	$ 0
Operating lease liabilities	1,189,239	$ 0
Long-term portion operating lease liability	940,339
Operating lease expense	$ 76,323
Weighted-average remaining lease term for operating leases	6 years 2 months 12 days
Weighted-average discount rate for operating leases	6.50%

Note 8 - Lease Liability: Operating lease future minimum payments (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Notes to Financial Statements
2019	$ 263,023
2020	204,156
2021	199,494
2022	199,494
2023	197,294
Thereafter	381,387
Total future minimum lease payments	1,444,848
Less amounts representing interest	(255,609)
Present value of lease liability	1,189,239	$ 0
Current-portion operating lease liability	(248,900)	$ 0
Long-term portion operating lease liability	$ 940,339

Note 9 - Long Term Obligations: Schedule of Long-term debt (Details) - USD ($)

3 Months Ended

Mar. 31, 2019

Dec. 31, 2018

Operating lease obligations

$ 1,189,239

$ 0

Less current portion operating lease obligations

12,808,245

11,956,006

248,900

0

Long-term debt

$ 12,559,345

11,956,006

Operating lease obligations maturity date

October 31, 2019 through December 31, 2025

Comerica Bank Loan

$ 1,600,000

2,900,000

Maturity Date

Jun. 11, 2020

EDF

Blue Water Capital Funding

$ 5,099,006

4,136,006

Long-term debt

$ 5,099,066

Maturity Date

^[1]

May 01, 2021