NWMH National Waste Management Holdings Inc (CE)

UNAUDITED CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

Note 1 – Business Organization

These financial statements represent the financial statements of National Waste Management Holdings, Inc. (“NWMH”) and its wholly owned operating subsidiaries, Sand/Land of Florida Enterprises, Inc. (“Sand/Land”), Waste Recovery Enterprises, LLC (“WRE”) and Gateway Rolloff Services, LP (“Gateway”). NWMH, Sand/Land, WRE and Gateway are collectively referred to herein as the “Company”.

Sand/Land is a solid waste management company headquartered in Central Florida, currently operating a licensed Construction & Demolition landfill. The Company’s primary operations are based near Tampa, Florida. The Company was founded in 1986 and principally serves the following Florida counties: Citrus, Hernando, and Marion counties. 

WRE is a waste management company that offers trash collection services, roll-off services, data destruction and shredding services and a full-service transfer station. The Company also offers wood grinding, demolition, and mulch and gravel services. The Company’s primary operations are based near Binghamton, New York. The Company was founded in 1998 and principally serves the Northeastern U.S. industrial and residential markets.

Gateway offers commercial and residential dumpster service and roll-off boxes for construction and cleanup projects specializing in the removal of debris, garbage, waste, hauling construction and demolition debris, focused on servicing general contractors, new home builders, reconstruction, renovation, landscaping and home improvement professionals. The Company’s primary operations are based near Tampa, FL.

The Company, as a consolidated entity, is a full service solid waste management company headquartered near Tampa, Florida with operations in Florida and New York.

Basis of Presentation

The interim financial statements are condensed and should be read in conjunction with the Company’s latest annual financial statements filed with the Securities and Exchange Commission on April 17, 2017; interim disclosures generally do not repeat those in the annual statements.

The financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Consolidated financial statements include the operations of Sand/Land, WRE and Gateway, together, NWMH.

It is Management’s opinion that all adjustments necessary for a fair presentation of the results for the interim periods have been made and that all adjustments are of a normal recurring nature except for the purchase accounting related to the acquisition of Burt’s Refuse on February 28, 2017. Purchase price accounting and disclosure is only necessary when acquisitions are completed by the Company. See note 10, “Acquisitions” for the purchase price allocation and pro-forma income statement presentation related to the acquisition.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates.

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

UNAUDITED CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

Note 2 – Significant Accounting Policies

Fair Value of Financial Instruments

For certain financial instruments, including accounts receivable, accounts payable, accrued expenses, interest payable, advances payable and notes payable, the carrying amounts approximate fair value due to their relatively short maturities and associated market interest rates.

The Company adopted Accounting Standards Codification (“ASC”) 820-10, “Fair Value Measurements and Disclosures.” ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurements that enhances disclosure requirements for fair value measures. The three levels of valuation hierarchy are defined as follows:

The Company did not identify any non-recurring assets and liabilities that are required to be presented in the balance sheets at fair value in accordance with ASC 815.

ASC 825-10, “Financial Instruments” permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings.  

The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities, long-term debt, capital leases and Series B, 10% cumulative preferred stock each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period between the origination of such instruments and their expected realization or their current market rates of interest or dividend yield. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment, and therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates. The Company does not hold or issue financial instruments for trading purposes, nor does it utilize derivative instruments in the management of foreign exchange, commodity price, or interest rate market risks.

Revenue and Cost Recognition

The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all the following criteria are met: (i) persuasive evidence of an arrangement exists; (ii) the sales price is fixed or determinable; (iii) collectability is reasonably assured; and (iv) goods have been shipped and/or services rendered.

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

UNAUDITED CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

Note 2 – Significant Accounting Policies (Continued)

Cash and Cash Equivalents

For purposes of reporting cash flows, the Company considers cash and cash equivalents to be all highly liquid deposits with maturities of three months or less. Cash equivalents are carried at cost, which approximates market value.

The Company maintains its cash and cash equivalents at various financial institutions where they are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. The balances of these accounts from time to time may exceed federally insured limits. The Company has not experienced any losses in such accounts.

Accounts Receivable, Bad Debts and Allowance for Doubtful Accounts

An allowance for doubtful accounts is provided for as a percentage of trade accounts receivable based on historical loss experience. As of March 31, 2017 and December 31, 2016, the consolidated allowance for doubtful accounts was $20,000. Consolidated bad debt expense recognized for the three months ended March 31, 2017 and 2016 was $245 and $335, respectively.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost less accumulated depreciation. Expenditures for major additions and improvements are capitalized. As property and equipment are sold or retired, the applicable cost and accumulated depreciation are removed from the accounts and any resulting gain or loss thereon is recognized as other income or expenses.

Depreciation is calculated using the straight-line method over the estimated useful lives or, in the case of leasehold improvements, the term of the related lease, including renewal periods, if shorter. Estimated useful lives are as follows:

The Company reviews property, plant, equipment and all amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Recoverability is based on estimated undiscounted cash flows. Measurement of the impairment loss, if any, is based on the difference between the carrying value and fair value.

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

UNAUDITED CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

Note 2 – Significant Accounting Policies (Continued)

Impairment of Long-Lived Assets and Amortizable Intangible Assets

The Company follows ASC 360-10, “Property, Plant, and Equipment,” which established a “primary asset” approach to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting for a long-lived asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less the cost to sell.

Goodwill

Goodwill consists of the excess of cost over identifiable net tangible and intangible assets of company’s acquired. In accordance with ASC 350, “Intangibles-Goodwill and Other”, the carrying amount of goodwill and intangible assets is to be reviewed at least annually for impairment, and losses in value, if any, will be charged to operations in the period of impairment. Goodwill was determined to not be impaired as of March 31, 2017. The test for impairment was done in accordance with guidance in Accounting Standards Update (“ASU”) 2011-8 for the year ended December 31, 2016; no qualitative factors occurred during the three months ended March 31, 2017 that led the Company to believe goodwill was impaired during that period. ASU 2011-8 permits an entity to evaluate qualitative factors to assess whether impairment is more likely than not to have occurred.

The Company acquired two related entities during 2015, WRE and Gateway, assigning $1,265,406 and $1,006,897 of Goodwill to the purchase prices of those entities, respectively. The Company acquired one related entity and one non-related entity during 2016, assigning $36,053 and $9,609 of goodwill to the purchase prices of those entities, respectively.

Total Goodwill at March 31, 2017 and December 31, 2016 was $2,317,965. See Note 10, “Acquisitions” for the purchase price allocations of the businesses acquired during three months ended March 31, 2017 and December 31, 2016.

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

UNAUDITED CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

Note 2 – Significant Accounting Policies (Continued)

Amortizable Intangible Assets

The Company has certain intangible assets resulting from business combinations and acquisitions that are recorded at cost. Intangible assets with finite lives are amortized on a straight-line basis over their respective estimated useful lives.

Intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the estimated undiscounted future cash flows related to the asset are less than the carrying value, the Company recognizes a loss equal to the difference between the carrying value and the estimated fair value, usually determined by the estimated discounted future cash flows of the asset. See note 10, “Acquisitions” for details related to the purchase price allocation of identified definite lived amortizable intangible assets, including customer lists, licenses, permits, and non-compete agreements. The Company has a customer list that was bought from a related party in 2011, a website built in 2015 and engineering costs as part of a 10-year permit renewal with the Department of Environmental Protection. The Company purchased two related entities during 2015, one related business and one unrelated business in 2016, assigning a portion of the purchase prices to amortizable intangible assets, primarily customer lists. See note 4, “Amortizable Intangible Assets” and Note 10, “Acquisitions”.

Advertising Costs

The Company expenses all advertising costs as incurred. Consolidated advertising expenses for the three months ended March 31, 2017 and 2016 were $3,832 and $2,800, respectively.

Income Taxes

The Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company reviews the tax positions taken or expected to be taken on tax returns to determine whether and to what extent a benefit can be recognized in our consolidated financial statements. To the extent interest and penalties would be assessed by taxing authorities on any underpayment of income tax, such amounts are accrued and classified as a component of income tax expense. For the three months ended March 31, 2017 and 2016, we did not recognize any accrued interest or penalties.

The Company files income tax returns in the United States and Florida, which are subject to examination by the tax authorities in these jurisdictions, generally for three years after the filing date.

Management has evaluated tax positions in accordance with FASB ASC 740, Income Taxes, and has not identified any tax positions that require disclosure.

As of March 31, 2017, the following tax years are subject to examination:

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

UNAUDITED CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

Note 2 – Significant Accounting Policies (Continued)

Environmental Remediation Liability

The Company accrues for losses associated with environmental remediation obligations when such losses are probable and reasonably estimable. Accruals for estimated losses from environmental remediation obligations generally are recognized no later than completion of the remedial feasibility study. Such accruals are adjusted as further information develops or circumstances change. Costs of future expenditures for environmental remediation obligations are not discounted to their present value. Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed probable.

Selling, General and Administrative Expenses

Business operating costs, including expenses generated from administration and purchasing functions, are recorded in “Selling, general and administrative expenses” in the Consolidated Statements of Operations. Business operating costs include items such as wages, benefits, utilities, supplies, repairs and maintenance, advertising costs and credits, rent, insurance, depreciation not related to equipment used in operations, amortization of intangible assets, leasehold amortization and costs for outside provided services.

Stock Issued to Non-Employees for Services Rendered

The Company accounts for stock issued to non-employees in accordance with the provisions of ASC 505-50, “Equity Based Payments to Non-Employees.” ASC 505-50 states that equity instruments that are issued in exchange for the receipt of goods or services should be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The measurement date occurs as of the earlier of (a) the date at which a performance commitment is reached or (b) absent a performance commitment, the date at which the performance necessary to earn the equity instruments is complete (that is, the vesting date).

Earnings Per-Share

Earnings per share are based on the weighted-average number of common shares outstanding at each reporting period.

Reclassifications

Certain reclassifications have been made in prior year balances to conform to the current year presentation. Such reclassifications had no effect on net income or retained earnings as previously reported.

Depreciation expense for the three months ended March 31, 2017 and 2016 was $203,427 and $185,554, respectively.

Amortization expense for the three months ended March 31, 2017 and 2016 was $73,318 and $72,597, respectively.

Impairment expense for the three months ended March 31, 2017 and 2016 and the year ended December 31, 2016 was $0, $0 and $159,977, respectively. The 2016 impairment charge was due to four of the significant customers originally included in the customer list valuation for WRE having significantly lower revenues in 2016.

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

UNAUDITED CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

Note 5 – Commitments and Contingencies

General

During the normal course of business, the Company may be exposed to litigation. When the Company becomes aware of potential litigation, it evaluates the merits of the case in accordance with ASC 450, Contingencies. The Company evaluates its exposure to the matter, possible legal or settlement strategies and the likelihood of an unfavorable outcome. If the Company determines that an unfavorable outcome is probable and can be reasonably estimated, it establishes the necessary accruals. Certain insurance policies held by the Company may reduce the cash outflows with respect to an adverse outcome of certain of these litigation matters.

Landfill Related Environmental Remediation

The Company currently operates a fully licensed landfill under approval by the Florida Department of Environmental Protection. As such, the company has set up a reserve allowance of $324,950 against estimated future closing costs. As of December 31, 2016, the Florida Department of Environmental Protection has approved the secured letter of credit cash reserve of $324,950 set aside by the Company at March 31, 2017 and December 31, 2016, respectively, to be in compliance with the financial assurance requirements for long term care cost of the facility. It is reasonably possible that the recorded estimate of the obligation may change in the near term.

Concentrations of Revenues and Receivables

As discussed in Note 8, “Related Party Transactions,” during the three months ended March 31, 2017 and 2016, approximately 10% and 12% of the Company’s revenues were generated from a related party, respectively. As of March 31, 2017 and December 31, 2016, 7% and 16% of consolidated accounts receivable were due from a related party, respectively.

The aggregate annual maturities of non-related party long-term debt are as follows:

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

UNAUDITED CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

Note 7 – Capital Leases

During 2014, the Company purchased equipment under a capital lease obligation. The lease is payable in 60 monthly payments of $3,750, beginning December 20, 2014, maturing December 20, 2019. The capital lease is collateralized by the equipment purchased. The capital lease is personally guaranteed by the Chairman and CEO of the Company.

Following is a breakdown of the capital lease obligation as of March 31, 2017 and December 31, 2016:

Minimum future lease payments under the capital leases as of March 31, 2017 are as follows:

The following is a summary of leased assets included in machinery and equipment as of March 31, 2017 and December 31, 2016:

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

UNAUDITED CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

Note 8 – Related Party Transactions

Related Party Sales and Accounts Receivable

The Company generates a portion of its revenue from a related entity transfer station, owned by the majority shareholder of the Company. This related entity uses the Company’s landfill (Sand/Land) as its primary source of disposal for construction and demolition debris. Sand/Land also trucks the disposal costs from the Company’s site, either directly or through a third party and bills the Company accordingly for trucking services. Total revenue generated from the related entity during the three months ended March 31, 2017 and 2016 were $167,618 and $181,535 or 10% and 12% of total consolidated revenue, respectively. Total related party accounts receivable as of March 31, 2017 and December 31, 2016 related to these sales were $50,780 and $93,450, respectively, or 7% and 16% of total net accounts receivable, respectively.

Gateway disposes a portion of its construction and debris collected in the related entities transfer station. Total expenses incurred from the related entity during the three months ended March 31, 2017 and 2016, were $36,183 and $34,779 respectively. Total related party accounts payable due to the related entity as of March 31, 2017 and December 31, 2016 were approximately $24,000 and $21,000, respectively.

Related Party Shareholder Loan

The Company had a note due the largest shareholder of the Company. This note was unsecured, had a maturity date of December 31, 2016 and carried a 1% interest rate. On January 1, 2016, the Note was converted to Series B, 10% cumulative preferred stock and the note was cancelled. The total converted debt was $2,000,000. Total related party Series B preferred stock outstanding at March 31, 2017 and December 31, 2016 was $2,000,000. Total related party accrued dividends at March 31, 2017 and December 31, 2016 were $250,000 and $200,000 respectively.

Related Party Acquisitions

On December 31, 2016, the Company closed on the acquisition of Northeast Data Destruction and Recycling, LLC (“Northeast Data”). This acquired entity was owned 50% by the majority shareholder of the Company prior to the acquisition. A second, non-related party owner owned the second 50% of the acquired entity. Northeast was acquired for $100,000 in cash and 1,425,000 shares of the Company’s restricted common stock. The majority shareholder of the Company received only restricted common stock consideration of 1,025,000 shares and the second Member of the acquired LLC received 400,000 shares of the Company’s restricted common stock and $100,000 cash. The restricted common stock was valued at $0.077 per share, equivalent with the closing price of the quoted market price of NWMH on December 30, 2016, the last trading business day of 2016. Total consideration paid for the acquisition was $209,725, including the $100,000 cash payment and $109,725 in restricted common stock. See note 10, “Acquisitions” for further information related to the acquisitions and the purchase price allocation for acquired entity.

Related Party Consulting Agreement

The Chairman of the Board is a consultant for the Company and meets with each subsidiary general manager on a regular basis, consulting on matters such as acquisitions and integration, growth plan objectives, operating effectiveness, organization structure, and equipment and financing requirements, among other matters. Total related party consulting expenses incurred and paid to the Chairman for the three months ended March 31, 2017 and 2016 was $33,000 and $23,000, respectively.

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

UNAUDITED CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

Note 8 – Related Party Transactions (Continued)

Related Party Consolidated Workers Compensation Policy and Receivables Due from Related Party Transfer Station for Advances and Expenses Paid on Behalf of the Transfer Station

The Company has a consolidated workers compensation policy with a related entity transfer station company (the “Transfer Station”). The related party receivable for the workers compensation payments at March 31, 2017 and December 31, 2016 were $4,985 and $2,279, respectively. The Company loaned the Transfer Station $8,400 for equipment purchase needs in 2014. The receivable carries 0% interest. The balance of the related party receivable was $8,400 at March 31, 2017 and December 31, 2016. The Company engaged an appraiser for the Transfer Station, which Sandland paid for on behalf of the Transfer Station; $6,075 is due from the related party at March 31, 2017 for the appraisal. Total due from the Related Entity related to the equipment advance, workers compensation consolidated policy and the appraisal costs at March 31, 2017 and December 31, 2016 were $19,460 and $16,754, respectively.

Note 9 – Stockholders’ Deficit

Shares issued to Strategic for Expenses, Deposits and Acquisitions paid for on Behalf of the Company:

At December 31, 2015, the Company had an amount payable due to Strategic Capital Markets, LLC, a previous Financier of the Company who paid public company professional fees on behalf of the Company and assisted in financing acquisitions. The amount due the Company as of December 31, 2015 was $592,829 which was settled for 592,829 shares of the Company’s restricted common stock ($1 per share conversion) during the three months ended March 31, 2016.

Shares granted to independent board of director members for services:

During the three months ended March 31, 2017, the Company granted two-independent members of the Board of Directors a total of 25,000 shares of the Company’s restricted common stock valued at $2,421. Currently, the Company grants each independent director 12,500 shares of the Company’s common stock quarterly, valued based on the 10-day moving average of the stock price at the end of the related quarter.

Shares issued to consultant for professional fees:

The Company entered into an agreement with a consulting firm for investor relation services throughout a 12-month period, from May 10, 2016 through May 9, 2017. A total of 400,000 restricted common shares were granted and distributed to that firm during the year ended December 31, 2016. The granted shares were valued based on the value of the stock on the date of grant, May 10, 2016 of $0.13. The total value of the shares issued was approximately $53,000, amortized monthly over the term of the contract. The Company subsequently cancelled this contract and settled with the vendor to return 200,000 shares of the restricted common stock issued. Total expenses incurred for this contract were $26,300 and restricted common stock valued at approximately $26,300 was returned and common shares outstanding were reversed by 200,000 during the three months ended March 31, 2017.

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

UNAUDITED CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

Note 9 – Stockholders’ Deficit (Continued)

Shares subscribed during the three months ended June 30, 2016:

During the three months ended March 31, 2016, the Company incurred amounts due to a related entity for expenses paid on behalf of the Company by the related entity and for payment of the short-term acquisition note paid on behalf of the Company by the related entity as part of the WRE acquisition, totaling $250,000 during January 2016. The $250,000 acquisition note with WRE was settled for $1 per share of the Company’s stock for a total of 250,000 subscribed shares of the Company’s restricted common stock. The Company settled $112,154 of expenses paid by the third party for expenses incurred by the Company during the period from January 1, 2016 through March 31, 2016, primarily for professional fees for $0.50 per share subscribed, or 224,308 subscribed shares of the Company’s restricted common stock. All shares subscribed due to Strategic as of March 31, 2016 were issued during the three months ended June 30, 2016.

Preferred Stock

Related Party Series A Preferred Stock, No Par Value:

During May 2015, the Company amended the Articles of Incorporation to authorize 10,000,000 shares of the Company’s Series A preferred stock, no par value per share. On September 17, 2015, the Company issued one share of Series A Preferred Stock, no par value, to the Company’s Chairman of the Board. As a holder of the outstanding shares of Series A Preferred Stock, the Chairman is entitled to voting power equivalent to the number of votes equal to the total number of the Company’s common stock outstanding as of the record date for the determination of stockholders entitled to vote at each meeting of stockholders of the Company and entitled to vote on all matters submitted or required to be submitted to a vote of the stockholders of the Company.

Related Party Series B, 10% Cumulative Preferred Stock, No Par Value:

On January 1, 2016, the Company’s Board of Directors approved 10,000,000 shares of Series B, 10%, cumulative preferred stock and $2,000,000 of Shareholder debt was converted into 10,000 shares of the Series B, 10% cumulative preferred stock. During the three months and year ended March 31, 2017 and December 31, 2016, $50,000 and $200,000 of dividends were accrued, respectively, but not paid to the holder. Total related party accrued dividends at March 31, 2017 and December 31, 2016 were $250,000 and $200,000, respectively.

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

UNAUDITED CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

Note 10 – Acquisitions

Acquisition of Business – Unrelated Entity – Three Months Ended March 31, 2017

On February 28, 2017, the Company purchased a garbage hauler and roll-off business, servicing both commercial and residential customers in Upstate New York, incorporating it into WRE’s operations. The business was purchased for $420,000.

Operations subsequent to February 28, 2017 are included in the accompanying consolidated financial statements. The purchase price of $420,000 included a $270,000, 5 year, 6% owner financed note, collateralized by a portion of the equipment acquired and a $150,000 cash payment. The acquisition has been accounted for using the purchase method of accounting; the $420,000 purchase was allocated as follows:

Related Party Acquisitions - Fiscal Year Ended December 31, 2016

Northeast Data Destruction and Recycling, LLC (Northeast Data)

On March 31, 2016, the Company acquired Northeast Data, an entity that was 50% owned by the majority shareholder of the Company. Northeast Data offers document shredding and destruction, hard-drive shredding, and cardboard recycling services. The Company’s primary operations are in Kingston, NY. The operations of this acquisition were tucked in to WRE operations and extend the service offerings of WRE to Kingston, NY. WRE will also begin to offer document and hard-drive destruction services in the Kingston area.

See the table below summarizing the purchase price paid to the related party owner and the second, non-related party entity:

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

UNAUDITED CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

Note 10 – Acquisitions (Continued)

Related Party Acquisitions - Fiscal Year Ended December 31, 2016 (Continued)

Northeast Data Destruction and Recycling, LLC (Northeast Data) (Continued)

Operations on and after December 31, 2016 are included in the accompanying consolidated financial statements. The acquisition has been accounted for using the purchase method of accounting. The purchase price of $209,725 was allocated as follows:

The following pro-forma financial results reflect the historical operating results of acquired entities from the period from January 1, 2016 presenting the three months ended March 31, 2017. No adjustments have been made for synergies that may result from the acquisition. These combined results are not necessarily indicative of the results that may have been achieved had the companies been combined as of such dates or periods, or of the Company’s future operations.