Item 1.
|
Financial Statements
|
BioHiTech Global, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive
Loss (Unaudited)
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
HEBioT (related party)
|
|
$
|
625
|
|
|
$
|
609,905
|
|
|
$
|
1,383,656
|
|
|
$
|
886,947
|
|
Rental, service and maintenance
|
|
|
423,996
|
|
|
|
489,555
|
|
|
|
1,251,122
|
|
|
|
1,426,193
|
|
Equipment sales
|
|
|
293,876
|
|
|
|
62,565
|
|
|
|
616,992
|
|
|
|
137,799
|
|
Management advisory and other fees (related party)
|
|
|
24,380
|
|
|
|
264,750
|
|
|
|
124,380
|
|
|
|
761,750
|
|
Total revenue
|
|
|
742,877
|
|
|
|
1,426,775
|
|
|
|
3,376,150
|
|
|
|
3,212,689
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HEBioT processing
|
|
|
945,810
|
|
|
|
786,680
|
|
|
|
2,778,514
|
|
|
|
1,309,176
|
|
Rental, service and maintenance
|
|
|
139,665
|
|
|
|
176,651
|
|
|
|
552,195
|
|
|
|
508,164
|
|
Equipment sales
|
|
|
171,002
|
|
|
|
17,776
|
|
|
|
317,406
|
|
|
|
56,502
|
|
Selling, general and administrative
|
|
|
1,924,293
|
|
|
|
1,449,545
|
|
|
|
5,740,158
|
|
|
|
5,450,282
|
|
Impairment expense
|
|
|
917,420
|
|
|
|
-
|
|
|
|
917,420
|
|
|
|
-
|
|
Depreciation and amortization
|
|
|
562,143
|
|
|
|
611,368
|
|
|
|
1,747,109
|
|
|
|
1,350,780
|
|
Total operating expenses
|
|
|
4,660,333
|
|
|
|
3,042,020
|
|
|
|
12,052,802
|
|
|
|
8,674,904
|
|
Loss from operations
|
|
|
(3,917,456
|
)
|
|
|
(1,615,245
|
)
|
|
|
(8,676,652
|
)
|
|
|
(5,462,215
|
)
|
Other (income) expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of affiliate investment
|
|
|
-
|
|
|
|
(562,617
|
)
|
|
|
-
|
|
|
|
(562,617
|
)
|
Interest (income)
|
|
|
(108
|
)
|
|
|
(46,180
|
)
|
|
|
(17,730
|
)
|
|
|
(46,180
|
)
|
Interest expense
|
|
|
1,023,165
|
|
|
|
979,202
|
|
|
|
3,060,775
|
|
|
|
2,281,071
|
|
Expense incurred in warrant valuation and conversions
|
|
|
-
|
|
|
|
49,160
|
|
|
|
-
|
|
|
|
49,160
|
|
Total other (income) expenses
|
|
|
1,023,057
|
|
|
|
419,565
|
|
|
|
3,043,045
|
|
|
|
1,721,434
|
|
Net loss
|
|
|
(4,940,513
|
)
|
|
|
(2,034,810
|
)
|
|
|
(11,719,697
|
)
|
|
|
(7,183,649
|
)
|
Net loss attributable to non-controlling interests
|
|
|
(1,647,782
|
)
|
|
|
(728,337
|
)
|
|
|
(3,190,788
|
)
|
|
|
(1,859,069
|
)
|
Net loss attributable to Parent
|
|
|
(3,292,731
|
)
|
|
|
(1,306,473
|
)
|
|
|
(8,528,909
|
)
|
|
|
(5,324,580
|
)
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
71,067
|
|
|
|
(32,676
|
)
|
|
|
40,931
|
|
|
|
(37,873
|
)
|
Comprehensive loss
|
|
$
|
(3,221,664
|
)
|
|
$
|
(1,339,149
|
)
|
|
$
|
(8,487,978
|
)
|
|
$
|
(5,362,453
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Parent
|
|
$
|
(3,292,731
|
)
|
|
$
|
(1,306,473
|
)
|
|
$
|
(8,528,909
|
)
|
|
$
|
(5,324,580
|
)
|
Preferred stock dividends
|
|
|
(205,115
|
)
|
|
|
(255,847
|
)
|
|
|
(587,428
|
)
|
|
|
(548,075
|
)
|
Deemed dividend on down round feature
|
|
|
(21,738
|
)
|
|
|
(405,324
|
)
|
|
|
(21,738
|
)
|
|
|
(405,324
|
)
|
Net loss – common shareholders
|
|
|
(3,519,584
|
)
|
|
|
(1,967,644
|
)
|
|
|
(9,138,075
|
)
|
|
|
(6,277,979
|
)
|
Net loss per common share - basic and diluted
|
|
$
|
(0.16
|
)
|
|
$
|
(0.13
|
)
|
|
$
|
(0.49
|
)
|
|
$
|
(0.41
|
)
|
Weighted average number of common shares outstanding - basic and diluted
|
|
|
22,044,540
|
|
|
|
15,649,174
|
|
|
|
18,787,566
|
|
|
|
15,134,301
|
|
See accompanying notes to unaudited interim condensed consolidated
financial statements.
BioHiTech Global, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
|
|
(Unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
4,950,112
|
|
|
$
|
1,847,526
|
|
Restricted cash
|
|
|
1,287,138
|
|
|
|
1,133,581
|
|
Accounts receivable, net of allowance for doubtful accounts
of $194,066 and $170,038 as of September 30, 2020 and December 31, 2019, respectively (related entity $2,227,224 and $1,370,867
as of September 30, 2020 and December 31, 2019, respectively)
|
|
|
3,311,519
|
|
|
|
2,155,921
|
|
Inventory
|
|
|
627,261
|
|
|
|
467,784
|
|
Prepaid expenses and other current assets
|
|
|
240,939
|
|
|
|
126,357
|
|
Total Current Assets
|
|
|
10,416,969
|
|
|
|
5,731,169
|
|
Restricted cash
|
|
|
2,646,448
|
|
|
|
2,555,845
|
|
Equipment on operating leases, net
|
|
|
1,417,260
|
|
|
|
1,724,998
|
|
HEBioT facility, equipment, fixtures and vehicles, net
|
|
|
36,338,727
|
|
|
|
37,421,333
|
|
Operating lease right of use assets
|
|
|
1,285,292
|
|
|
|
945,047
|
|
License and capitalized MBT facility development costs
|
|
|
8,018,853
|
|
|
|
8,049,929
|
|
Goodwill
|
|
|
58,000
|
|
|
|
58,000
|
|
Other assets
|
|
|
33,749
|
|
|
|
53,726
|
|
Total Assets
|
|
$
|
60,215,298
|
|
|
$
|
56,540,047
|
|
Continued on following page.
See accompanying notes to unaudited interim condensed consolidated
financial statements.
BioHiTech Global, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets, continued:
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
|
|
(Unaudited)
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Line of credit, net of financing costs of $2,050 and $20,152 as of September 30, 2020 and December 31, 2019, respectively
|
|
$
|
1,497,950
|
|
|
$
|
1,479,848
|
|
Advances from related parties
|
|
|
935,000
|
|
|
|
210,000
|
|
Accounts payable (related entity $2,021,940 and $2,531,034 as of September 30, 2020 and
December 31, 2019, respectively)
|
|
|
6,363,168
|
|
|
|
4,688,339
|
|
Accrued interest payable
|
|
|
627,112
|
|
|
|
1,148,570
|
|
Accrued expenses and liabilities
|
|
|
2,075,576
|
|
|
|
1,926,965
|
|
Deferred revenue
|
|
|
95,331
|
|
|
|
89,736
|
|
Customer deposits
|
|
|
753,046
|
|
|
|
44,792
|
|
Note payable
|
|
|
-
|
|
|
|
100,000
|
|
Senior Secured Note, net of financing costs of $75,767 and unamortized discounts of $515,719 as of September 30, 2020
|
|
|
4,408,514
|
|
|
|
-
|
|
Current portion of WV EDA Senior Secured Bonds payable
|
|
|
2,860,000
|
|
|
|
1,390,000
|
|
Current portion of long term debt and Payroll Protection Program Loan
|
|
|
261,787
|
|
|
|
4,605
|
|
Total Current Liabilities
|
|
|
19,877,484
|
|
|
|
11,082,855
|
|
Junior note due to related party, net of unamortized discounts of $78,596 and $95,043 as of September 30, 2020 and December 31, 2019, respectively
|
|
|
965,881
|
|
|
|
949,434
|
|
Accrued interest (related party)
|
|
|
1,729,605
|
|
|
|
1,510,193
|
|
WV EDA Senior Secured Bonds payable, net of current portion, and financing costs of $1,691,516 and $1,792,574 as of September 30, 2020 and December 31, 2019, respectively
|
|
|
28,448,484
|
|
|
|
29,817,426
|
|
Payroll Protection Program Loan, net of current portion
|
|
|
163,839
|
|
|
|
-
|
|
Senior Secured Note, net of current portion, net of financing
costs of $113,268, and unamortized discounts of $726,242, as of December 31, 2019
|
|
|
-
|
|
|
|
4,160,490
|
|
Note Payable
|
|
|
100,000
|
|
|
|
-
|
|
Non-current lease liabilities
|
|
|
1,231,144
|
|
|
|
915,170
|
|
Long-term debt, net of current portion
|
|
|
4,936
|
|
|
|
8,201
|
|
Total Liabilities
|
|
|
52,521,373
|
|
|
|
48,443,769
|
|
Series A redeemable convertible preferred stock, 333,401 shares designated and issued, and 125,312 and 145,312 outstanding as of September 30, 2020 and December 31, 2019, respectively
|
|
|
626,553
|
|
|
|
726,553
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
Stockholders' Equity
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; 3,209,210 and 3,179,120 designated as of September 30, 2020 and December 31, 2019; 1,936,214 and 1,922,603 issued as of September 30, 2020 and December 31, 2019; 848,292 and 856,181 outstanding as of September 30, 2020 and December 31, 2019:
|
|
|
|
|
|
|
|
|
Series B Convertible preferred stock, 1,111,200 shares designated: 428,333 shares issued, no shares outstanding as of September 30, 2020 and December 31, 2019
|
|
|
-
|
|
|
|
-
|
|
Series C Convertible preferred stock, 1,000,000 shares designated, 427,500 shares issued and outstanding as of September 30, 2020 and December 31, 2019
|
|
|
3,050,142
|
|
|
|
3,050,142
|
|
Series D Convertible preferred stock, 20,000 shares designated: 18,850 shares issued; 17,350 and 18,850 outstanding as of September 30, 2020 and December 31, 2019
|
|
|
1,365,696
|
|
|
|
1,505,262
|
|
Series E Convertible preferred stock, 714,519 shares designated: 714,519 shares issued, 264,519 outstanding as of September 30, 2020 and December 31, 2019
|
|
|
698,330
|
|
|
|
698,330
|
|
Series F Convertible preferred stock, 30,090 shares designated, and 13,611 shares issued and outstanding as of September 30, 2020
|
|
|
1,507,408
|
|
|
|
-
|
|
Common stock, $0.0001 par value, 50,000,000 shares authorized, 23,354,130 and 17,300,899 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively
|
|
|
2,334
|
|
|
|
1,730
|
|
Additional paid in capital
|
|
|
59,775,963
|
|
|
|
49,597,059
|
|
Accumulated deficit
|
|
|
(61,403,226
|
)
|
|
|
(52,785,242
|
)
|
Accumulated other comprehensive (loss)
|
|
|
(84,069
|
)
|
|
|
(43,138
|
)
|
Stockholders’ equity attributable to Parent
|
|
|
4,912,578
|
|
|
|
2,024,143
|
|
Stockholders’ equity attributable to non-controlling interests
|
|
|
2,154,794
|
|
|
|
5,345,582
|
|
Total Stockholders’ Equity
|
|
|
7,067,372
|
|
|
|
7,369,725
|
|
Total Liabilities and Stockholders’ Equity
|
|
$
|
60,215,298
|
|
|
$
|
56,540,047
|
|
See accompanying notes to unaudited interim condensed consolidated
financial statements.
BioHiTech Global, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
|
|
Nine Months Ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(11,719,697
|
)
|
|
|
(7,183,649
|
)
|
Adjustments to reconcile net loss to net cash used in operations:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,747,109
|
|
|
|
1,350,780
|
|
Impairment expense
|
|
|
917,420
|
|
|
|
-
|
|
Amortization of operating lease right of use assets
|
|
|
72,402
|
|
|
|
-
|
|
Provision for bad debts
|
|
|
126,119
|
|
|
|
45,000
|
|
Share based employee compensation
|
|
|
1,537,915
|
|
|
|
741,188
|
|
Interest resulting from amortization of financing costs and discounts
|
|
|
419,715
|
|
|
|
333,782
|
|
Share based vendor compensation
|
|
|
297,835
|
|
|
|
-
|
|
Gain on sale of affiliate investment
|
|
|
-
|
|
|
|
(562,617
|
)
|
Loss resulting from write-off of proposed MBT site
|
|
|
-
|
|
|
|
346,654
|
|
Warrant modifications
|
|
|
-
|
|
|
|
49,160
|
|
Changes in operating assets and liabilities
|
|
|
(909,507
|
)
|
|
|
(1,137,810
|
)
|
Net cash used in operating activities
|
|
|
(7,510,689
|
)
|
|
|
(6,017,512
|
)
|
|
|
|
|
|
|
|
|
|
Cash flow from investing activities:
|
|
|
|
|
|
|
|
|
Purchases of construction in-progress, equipment, fixtures and vehicles
|
|
|
(207,173
|
)
|
|
|
(4,619,883
|
)
|
Proceeds from sale of investment in affiliate
|
|
|
-
|
|
|
|
2,250,000
|
|
Refund of deposit
|
|
|
5,000
|
|
|
|
-
|
|
MBT facility development costs incurred
|
|
|
(62,949
|
)
|
|
|
(59,013
|
)
|
MBT facility development costs refunded
|
|
|
-
|
|
|
|
66,000
|
|
Net cash used in investing activities
|
|
|
(265,122
|
)
|
|
|
(2,362,896
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from common stock issuance, net of offering costs
|
|
|
8,437,480
|
|
|
|
3,035,557
|
|
Proceeds from the sale of Series F convertible preferred stock units
|
|
|
1,560,450
|
|
|
|
-
|
|
Proceeds from Payroll Protection Program Loan
|
|
|
421,300
|
|
|
|
-
|
|
Proceeds from the sale of Series D convertible preferred stock units
|
|
|
-
|
|
|
|
1,772,500
|
|
Affiliate investment in subsidiary
|
|
|
-
|
|
|
|
1,400,000
|
|
Deferred financing costs incurred
|
|
|
-
|
|
|
|
(62,151
|
)
|
Repayments of long-term debt
|
|
|
(3,544
|
)
|
|
|
(6,846
|
)
|
Related party advances, net
|
|
|
725,000
|
|
|
|
210,000
|
|
Net cash provided by financing activities
|
|
|
11,140,686
|
|
|
|
6,349,060
|
|
Effect of exchange rate on cash (restricted and unrestricted)
|
|
|
(18,129
|
)
|
|
|
12,721
|
|
Net change in cash (restricted and unrestricted)
|
|
|
3,346,746
|
|
|
|
(2,018,627
|
)
|
Cash - beginning of period (restricted and unrestricted)
|
|
|
5,536,952
|
|
|
|
9,126,380
|
|
Cash - end of period (restricted and unrestricted)
|
|
$
|
8,883,698
|
|
|
|
7,107,753
|
|
Note 15 includes supplemental cash flow information,
non-cash investing and financing activities and changes in operating assets and liabilities.
See accompanying notes to unaudited interim condensed consolidated
financial statements.
BioHiTech Global, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders’
Equity (Unaudited)
Statement of Stockholders’ Equity
Attributable to Parent for the Nine Months Ended September 30, 2020:
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Additional
Paid in
|
|
|
Accumulated
Comprehensive
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Other Loss
|
|
|
Deficit
|
|
|
Total
|
|
Balance at January 1, 2020
|
|
|
710,869
|
|
|
$
|
5,253,734
|
|
|
|
17,300,899
|
|
|
$
|
1,730
|
|
|
$
|
49,597,059
|
|
|
$
|
(43,138
|
)
|
|
$
|
(52,785,242
|
)
|
|
$
|
2,024,143
|
|
Underwritten issuance of common stock, net of costs
|
|
|
-
|
|
|
|
|
|
|
|
5,232,500
|
|
|
|
523
|
|
|
|
8,436,957
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,437,480
|
|
Conversion of Series A preferred stock, and payment of accrued dividends in common stock
|
|
|
|
|
|
|
|
|
|
|
59,639
|
|
|
|
6
|
|
|
|
107,344
|
|
|
|
-
|
|
|
|
-
|
|
|
|
107,350
|
|
Conversion of Series D preferred stock, and payment of unaccrued dividends in common stock
|
|
|
(1,500
|
)
|
|
|
(139,566
|
)
|
|
|
91,328
|
|
|
|
9
|
|
|
|
153,945
|
|
|
|
-
|
|
|
|
(14,388
|
)
|
|
|
-
|
|
Series F preferred stock issuance
|
|
|
13,611
|
|
|
|
1,507,408
|
|
|
|
-
|
|
|
|
-
|
|
|
|
53,042
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,560,450
|
|
Share-based employee and director compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
132,400
|
|
|
|
13
|
|
|
|
1,065,256
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,065,269
|
|
Payments in common stock and warrants to vendors and creditors
|
|
|
-
|
|
|
|
-
|
|
|
|
141,259
|
|
|
|
14
|
|
|
|
297,821
|
|
|
|
-
|
|
|
|
-
|
|
|
|
297,835
|
|
Preferred stock dividends paid in common stock
|
|
|
-
|
|
|
|
-
|
|
|
|
23,801
|
|
|
|
2
|
|
|
|
42,838
|
|
|
|
-
|
|
|
|
-
|
|
|
|
42,840
|
|
Deemed dividend on down round feature
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
21,738
|
|
|
|
-
|
|
|
|
(21,738
|
)
|
|
|
-
|
|
Warrants exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
372,304
|
|
|
|
37
|
|
|
|
(37
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Preferred stock dividends
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(52,949
|
)
|
|
|
(52,949
|
)
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(40,931
|
)
|
|
|
-
|
|
|
|
(40,931
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(8,528,909
|
)
|
|
|
(8,528,909
|
)
|
Balance at September 30, 2020
|
|
|
722,980
|
|
|
$
|
6,621,576
|
|
|
|
23,354,130
|
|
|
$
|
2,334
|
|
|
$
|
59,775,963
|
|
|
$
|
(84,069
|
)
|
|
$
|
(61,403,226
|
)
|
|
$
|
4,912,578
|
|
Statement of Stockholders’ Equity
Attributable to Non-Controlling Interests in Consolidated Subsidiaries for the Nine Months Ended September 30, 2020:
|
|
|
Non-Controlling
|
|
|
Accumulated
|
|
|
|
|
|
|
Equity Interest
|
|
|
Deficit
|
|
|
Total
|
|
Balance at January 1, 2020
|
|
$
|
8,079,585
|
|
|
$
|
(2,734,003
|
)
|
|
$
|
5,345,582
|
|
Net loss
|
|
|
-
|
|
|
|
(3,190,788
|
)
|
|
|
(3,190,788
|
)
|
Balance at September 30, 2020
|
|
$
|
8,079,585
|
|
|
$
|
(5,924,791
|
)
|
|
$
|
2,154,794
|
|
Statement of Stockholders’ Equity
Attributable to Parent for the Three Months Ended September 30, 2020:
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Additional
Paid in
|
|
|
Accumulated
Comprehensive
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Other Loss
|
|
|
Deficit
|
|
|
Total
|
|
Balance at July 1, 2020
|
|
|
724,480
|
|
|
$
|
6,761,142
|
|
|
|
17,809,592
|
|
|
$
|
1,780
|
|
|
$
|
50,267,673
|
|
|
$
|
(13,002
|
)
|
|
$
|
(58,056,529
|
)
|
|
$
|
(1,038,936
|
)
|
Underwritten issuance of common stock, net of costs
|
|
|
-
|
|
|
|
-
|
|
|
|
5,232,500
|
|
|
|
523
|
|
|
|
8,436,957
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,437,480
|
|
Conversion of Series A preferred stock, and payment of accrued dividends in common stock
|
|
|
|
|
|
|
|
|
|
|
59,639
|
|
|
|
6
|
|
|
|
107,344
|
|
|
|
-
|
|
|
|
-
|
|
|
|
107,350
|
|
Conversion of Series D preferred stock, and payment of unaccrued dividends in common stock
|
|
|
(1,500
|
)
|
|
|
(139,566
|
)
|
|
|
91,328
|
|
|
|
9
|
|
|
|
153,945
|
|
|
|
-
|
|
|
|
(14,388
|
)
|
|
|
-
|
|
Series F preferred stock issuance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based employee and director compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
9,900
|
|
|
|
1
|
|
|
|
472,646
|
|
|
|
-
|
|
|
|
-
|
|
|
|
472,647
|
|
Payments in common stock and warrants to vendors and creditors
|
|
|
-
|
|
|
|
-
|
|
|
|
141,259
|
|
|
|
14
|
|
|
|
297,821
|
|
|
|
-
|
|
|
|
-
|
|
|
|
297,835
|
|
Preferred stock dividends paid in common stock
|
|
|
-
|
|
|
|
-
|
|
|
|
9,912
|
|
|
|
1
|
|
|
|
17,839
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,840
|
|
Deemed dividend on down round feature
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
21,738
|
|
|
|
-
|
|
|
|
(21,738
|
)
|
|
|
-
|
|
Preferred stock dividends
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(17,840
|
)
|
|
|
(17,840
|
)
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(71,067
|
)
|
|
|
-
|
|
|
|
(71,067
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,292,731
|
)
|
|
|
(3,292,731
|
)
|
Balance at September 30, 2020
|
|
|
722,980
|
|
|
$
|
6,621,576
|
|
|
|
23,354,130
|
|
|
$
|
2,334
|
|
|
$
|
59,775,963
|
|
|
$
|
(84,069
|
)
|
|
$
|
(61,403,226
|
)
|
|
$
|
4,912,578
|
|
Statement of Stockholders’ Equity
Attributable to Non-Controlling Interests in Consolidated Subsidiaries for the Three Months Ended September 30, 2020:
|
|
|
Non-
Controlling
|
|
|
Accumulated
|
|
|
|
|
|
|
Equity Interest
|
|
|
Deficit
|
|
|
Total
|
|
Balance at July 1, 2020
|
|
$
|
8,079,585
|
|
|
$
|
(4,277,009
|
)
|
|
$
|
3,802,576
|
|
Net loss
|
|
|
-
|
|
|
|
(1,647,782
|
)
|
|
|
(1,647,782
|
)
|
Balance at September 30, 2020
|
|
$
|
8,079,585
|
|
|
$
|
(5,924,791
|
)
|
|
$
|
2,154,794
|
|
Continued on following page.
See accompanying notes to unaudited interim condensed consolidated
financial statements.
BioHiTech Global, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders’
Equity (Unaudited), continued:
Statement
of Stockholders’ Equity Attributable to Parent for the Nine Months Ended September 30, 2019:
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Additional
Paid in
|
|
|
Accumulated
Comprehensive
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Other Loss
|
|
|
Deficit
|
|
|
Total
|
|
Balance at January 1, 2019
|
|
|
992,019
|
|
|
$
|
4,540,472
|
|
|
|
14,802,956
|
|
|
$
|
1,480
|
|
|
$
|
43,452,963
|
|
|
$
|
5,021
|
|
|
$
|
(44,594,385
|
)
|
|
$
|
3,405,551
|
|
Issuance of registered common shares, net of
offering costs
|
|
|
-
|
|
|
|
-
|
|
|
|
1,877,666
|
|
|
|
188
|
|
|
|
3,035,369
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,035,557
|
|
Series D preferred stock issuance
|
|
|
18,850
|
|
|
|
1,505,262
|
|
|
|
-
|
|
|
|
-
|
|
|
|
267,238
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,772,500
|
|
Series E preferred stock conversion
|
|
|
(300,000
|
)
|
|
|
(792,000
|
)
|
|
|
300,000
|
|
|
|
30
|
|
|
|
791,970
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Share-based employee and director compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
741,188
|
|
|
|
-
|
|
|
|
-
|
|
|
|
741,188
|
|
Issuance of restricted stock
|
|
|
-
|
|
|
|
-
|
|
|
|
105,000
|
|
|
|
11
|
|
|
|
205,489
|
|
|
|
-
|
|
|
|
-
|
|
|
|
205,500
|
|
Series A preferred stock conversion into common
shares
|
|
|
-
|
|
|
|
-
|
|
|
|
50,000
|
|
|
|
5
|
|
|
|
89,995
|
|
|
|
-
|
|
|
|
-
|
|
|
|
90,000
|
|
Warrant modification
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
49,160
|
|
|
|
-
|
|
|
|
-
|
|
|
|
49,160
|
|
Deemed dividend on down round feature
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
405,324
|
|
|
|
-
|
|
|
|
(405,324
|
)
|
|
|
-
|
|
Preferred stock dividends
|
|
|
-
|
|
|
|
-
|
|
|
|
27,778
|
|
|
|
3
|
|
|
|
49,997
|
|
|
|
-
|
|
|
|
(140,631
|
)
|
|
|
(90,631
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,324,580
|
)
|
|
|
(5,324,580
|
)
|
Foreign currency
translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
37,873
|
|
|
|
-
|
|
|
|
37,873
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September
30, 2019
|
|
|
710,869
|
|
|
$
|
5,253,734
|
|
|
|
17,163,400
|
|
|
$
|
1,717
|
|
|
$
|
49,088,693
|
|
|
$
|
42,894
|
|
|
$
|
(50,464,920
|
)
|
|
$
|
3,922,118
|
|
Statement
of Stockholders’ Equity Attributable to Non-Controlling Interests in Consolidated Subsidiaries for the Nine Months Ended
September 30, 2019:
|
|
Non-
Controlling
|
|
|
Accumulated
|
|
|
|
|
|
|
Equity
Interest
|
|
|
Deficit
|
|
|
Total
|
|
Balance at January 1, 2019
|
|
$
|
6,679,585
|
|
|
$
|
(76,890
|
)
|
|
$
|
6,602,695
|
|
Investment by non-controlling interest
|
|
|
1,400,000
|
|
|
|
-
|
|
|
|
1,400,000
|
|
Net loss
|
|
|
-
|
|
|
|
(1,859,069
|
)
|
|
|
(1,859,069
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September
30, 2019
|
|
$
|
8,079,585
|
|
|
$
|
(1,935,959
|
)
|
|
$
|
6,143,626
|
|
Statement of Stockholders’
Equity Attributable to Parent for the Three Months Ended September 30, 2019:
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Additional
Paid in
|
|
|
Accumulated
Comprehensive
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Other Loss
|
|
|
Deficit
|
|
|
Total
|
|
Balance at July 1, 2019
|
|
|
710,869
|
|
|
$
|
5,268,734
|
|
|
|
15,207,956
|
|
|
$
|
1,521
|
|
|
$
|
45,249,263
|
|
|
$
|
10,218
|
|
|
$
|
(48,649,236
|
)
|
|
$
|
1,880,500
|
|
Issuance of registered common shares, net of
offering costs
|
|
|
-
|
|
|
|
-
|
|
|
|
1,877,666
|
|
|
|
188
|
|
|
|
3,035,369
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,035,557
|
|
Series D preferred stock issuance costs
|
|
|
-
|
|
|
|
(15,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(15,000
|
)
|
Share-based employee and director compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
209,585
|
|
|
|
-
|
|
|
|
-
|
|
|
|
209,585
|
|
Series A preferred stock conversion into common
shares
|
|
|
-
|
|
|
|
-
|
|
|
|
50,000
|
|
|
|
5
|
|
|
|
89,995
|
|
|
|
-
|
|
|
|
-
|
|
|
|
90,000
|
|
Preferred stock dividends
|
|
|
-
|
|
|
|
-
|
|
|
|
27,778
|
|
|
|
3
|
|
|
|
49,997
|
|
|
|
-
|
|
|
|
(103,887
|
)
|
|
|
(53,887
|
)
|
Warrant modification
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
49,160
|
|
|
|
-
|
|
|
|
-
|
|
|
|
49,160
|
|
Deemed dividend on down round feature
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
405,324
|
|
|
|
-
|
|
|
|
(405,324
|
)
|
|
|
-
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,306,473
|
)
|
|
|
(1,306,473
|
)
|
Foreign currency
translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
32,676
|
|
|
|
-
|
|
|
|
32,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September
30, 2019
|
|
|
710,869
|
|
|
$
|
5,253,734
|
|
|
|
17,163,400
|
|
|
$
|
1,717
|
|
|
$
|
49,088,693
|
|
|
$
|
42,894
|
|
|
$
|
(50,464,920
|
)
|
|
$
|
3,922,118
|
|
Statement
of Stockholders’ Equity Attributable to Non-Controlling Interests in Consolidated Subsidiaries for the Three Months Ended
September 30, 2019:
|
|
Non-
Controlling
|
|
|
Accumulated
|
|
|
|
|
|
|
Equity
Interest
|
|
|
Deficit
|
|
|
Total
|
|
Balance at July 1, 2019
|
|
$
|
8,079,585
|
|
|
$
|
(1,207,622
|
)
|
|
$
|
6,871,963
|
|
Net loss
|
|
|
-
|
|
|
|
(728,337
|
)
|
|
|
(728,337
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September
30, 2019
|
|
$
|
8,079,585
|
|
|
$
|
(1,935,959
|
)
|
|
$
|
6,143,626
|
|
See accompanying notes to unaudited interim condensed consolidated
financial statements.
BioHiTech Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2020 and 2019 and as of September 30, 2020 and December 31, 2019
Note 1. Basis of Presentation and Going
Concern
Nature
of Operations - BioHiTech Global, Inc. (the “Company” or “BioHiTech”) through its wholly-owned
and controlled subsidiaries, provides cost-effective and sustainable environmental management solutions.
Our cost-effective technology solutions
include the patented processing of municipal solid waste into a valuable renewable fuel, biological disposal of food waste on-site,
and proprietary real-time data analytics tools to reduce food waste generation. Our solutions enable businesses and municipalities
of all sizes to lower disposal costs while having a positive impact on the environment. When used individually or in combination,
our solutions lower the carbon footprint associated with waste transportation and can reduce or virtually eliminate landfill usage.
In March 2020, the World Health Organization
declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread throughout the United States and
globally and more recently in the United States there has been an increase in cases reported. During October and November 2020
a resurgence in cases and hospitalizations has occurred. The Company is monitoring the near term and longer term impacts of COVID-19
and the related business and travel restrictions and changes to behavior intended to reduce its spread, and its impact on operations,
financial position, cash flows, inventory, supply chains, purchasing trends, customer payments, and the industry in general, in
addition to the impact on its employees. Due to the development and fluidity of this situation, the magnitude and duration of the
pandemic and its impact on the Company’s operations, liquidity and financial performance will depend on certain developments,
including duration, spread and reemergence of the outbreak, its impact on our customers, supply chain partners and employees, and
the range of governmental and community reactions to the pandemic, which are uncertain and cannot be fully predicted at this time.
As a result of COVID-19,
the implementation of the Company’s contract with Carnival Corporation (“Carnival”) had been delayed, although
during the third quarter of 2020 Carnival recommenced purchasing activity with the Company making initial deliveries at the end
of September 2020. As of October 31,2020, the Company has unfulfilled equipment purchase orders from Carnival amounting to approximately
$2,100,000 (in addition to approximately $600,000 of shipments during October 2020). It is anticipated that many of these orders
will be fulfilled during the fourth quarter of 2020. Additionally, the operations of some customers in the restaurant and hospitality
industries have been temporarily interrupted due to governmental actions. For certain existing restaurant and hospitality customers,
the Company has provided a deferral of recurring rental payments for a short time and have modified the rental agreements to extend
the term by the period deferred. These actions placed a strain on the Company’s cash flows during the initial wave of COVID-19,
resulting in the Company executing on cost controls and cash preservation practices that included reducing executive cash compensation,
laying off non-essential employees, limiting expenses and disbursements, as well as extending vendor payments. It is unclear how
the second wave that started in October 2020 will impact the Company.
During the third quarter of 2020 the Company
raised $8,437,480 through an underwritten common stock offering and has subsequently concluded the executive deferred compensation
plan and has rehired some of its employees that had been laid off.
Basis of Presentation -
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned
and controlled subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States
of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8
of Regulation S-X. Certain information or footnote disclosures normally included in financial statements prepared in accordance
with GAAP have been condensed or omitted. Accordingly, they do not include all the information and footnotes necessary for a comprehensive
presentation of financial position, results of operations, or cash flows. It is management’s opinion, however, that the
accompanying condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, and
the elimination of intercompany accounts and transactions which are necessary for a fair presentation of the financial position,
operating results and cash flows for the periods presented.
The accompanying condensed consolidated
financial statements should be read in conjunction with the Company’s financial statements for the year ended December 31,
2019, which contains the audited financial statements and notes thereto, for the years ended December 31, 2019 and 2018 included
within the Company’s Form 10-K filed with the Securities and Exchange Commission (“SEC”) on May 22,
2020. The financial information as of December 31, 2019 presented hereto is derived from the audited consolidated financial
statements presented in the Company’s audited consolidated financial statements for the year ended December 31, 2019.
The interim results for the three and nine months ended September 30, 2020 is not necessarily indicative of the results to be expected
for the year ending December 31, 2020 or for any future interim periods.
As of September 30, 2020 and December 31,
2019, the Company’s active wholly-owned subsidiaries were BioHiTech America, LLC, BioHiTech Europe Limited, BHT Financial,
LLC and E.N.A. Renewables LLC, and its controlled subsidiary was Refuel America LLC (60%) and its wholly-owned subsidiaries Apple
Valley Waste Technologies Buyer, Inc., Apple Valley Waste Technologies, LLC, New Windsor Resource Recovery LLC and Rensselaer
Resource Recovery LLC and its controlled subsidiary Entsorga West Virginia LLC (88.7%). As each of these subsidiaries operate as
environmental-based service companies, we did not deem segment reporting necessary.
BioHiTech
Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months
Ended September 30, 2020 and 2019 and as of September 30, 2020 and December 31, 2019
Going Concern and
Liquidity - For the nine months ended September 30, 2020, the Company had a consolidated net loss of $(11,719,697),
incurred a consolidated loss from operations of $8,676,652 and used net cash in consolidated operating activities of
$7,510,689. At September 30, 2020, consolidated total stockholders’ equity amounted to $7,067,372, consolidated
stockholders’ equity attributable to parent amounted to $4,912,578, and the Company had a consolidated working capital
deficit of $9,460,515. While the Company had not met certain of its senior secured note’s financial covenants as of
September 30, 2020, the Company has favorably renegotiated those covenants and has received a waiver for such non-compliance
through September 30, 2020. Despite its current compliance under the waiver, until such time as the Company regains
compliance or receives a waiver of such covenants for a year beyond the balance sheet date, under current GAAP accounting
rules the senior secured notes amounting to $4,408,514 have been classified as current debt. The Company does not yet have a
history of financial profitability. In March and April of 2020 the Company raised $1,560,450 through a private convertible
preferred stock offering and on May 13, 2020 one of the Company’s subsidiaries was funded $421,300 through the Paycheck
Protection Program. On July 27, 2020 the Company used its Shelf Registration on Form S-3 to raise gross proceeds of
$8,235,500 through an underwritten public offering of 4,550,000 common shares at $1.81 per share. On August 11, 2020 the
underwriter provided notice that they would be exercising their over-allotment provision of the Underwriting Agreement to
purchase an additional 682,500 shares of the Company’s common stock at $1.81 per share for a gross purchase price of
$1,235,325. The net proceeds to the Company of the July 27, 2020 and August 11, 2020 offerings, after underwriter’s
commission and other costs amounted to $8,437,480. There is no assurance that the Company will continue to raise sufficient
capital or debt to sustain operations or to pursue other strategic initiatives or that such financing will be on terms that
are favorable to the Company. These factors raise substantial doubt about the Company’s ability to continue as a going
concern.
The accompanying consolidated financial
statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. These consolidated financial statements do not include any adjustments relating to the recovery
of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue
as a going concern. The ability of the Company to continue as a going concern is dependent on management’s further implementation
of the Company’s on-going and strategic plans, which include continuing to raise funds through equity and/or debt raises.
Should the Company be unable to raise adequate funds, certain aspects of the on-going and strategic plans may require modification.
Note 2. Summary of Significant Accounting
Policies
The condensed consolidated financial statements
have been prepared by the Company in accordance with the rules and regulations of the SEC on a consistent basis with and should
be read in conjunction with our audited financial statements for the year ended December 31, 2019. Certain information and
footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted
as permitted by the SEC, although we believe the disclosures that are made are adequate to make the information presented herein
not misleading.
Recent Accounting Pronouncements:
The Company has not implemented any recent
accounting pronouncements during the nine months ended September 30, 2020.
The Company has not implemented the following
accounting standard:
In June 2016, the FASB issued ASU
2016-13, Measurement of Credit Losses on Financial Instruments. This standard requires an allowance to be recorded for
all expected credit losses for certain financial assets. The new standard introduces an approach, based on expected losses, to
estimate credit losses on certain types of financial instruments. ASU 2016-13 is effective for public companies for interim and
annual period beginning December 15, 2020. Entities are required to apply the standard’s provisions as a cumulative-effect
adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company
has not yet adopted this update and is currently evaluating the effect this new standard will have on its financial condition
and results of operations.
In March 2020, the FASB issued ASU No.
2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.”
The amendments in this update provide optional guidance for a limited period of time to ease the potential burden in accounting
for (or recognizing the effects of) reference rate reform on financial reporting as the market transitions from the London Interbank
Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. The amendments in this update were effective
upon issuance for all entities through December 31, 2022. The Company is currently evaluating the effect the updated standard will
have on its financial position, results of operations or financial statement disclosure.
In August 2020, the FASB issued ASU No.
2020-06, Debt with Conversion and other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own
Equity (Subtopic 815-40). The new guidance eliminates the beneficial conversion and cash conversion accounting models for convertible
instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for
as derivatives because of specific settlement provisions. In addition, the new guidance modifies how particular convertible instruments
and certain contracts that may be settled in cash or shares impact the diluted EPS computation. This guidance is effective as of
January 1, 2022 (Early adoption is permitted effective January 1, 2021). The Company is currently evaluating the effect the updated
standard will have on its financial position, results of operations or financial statement disclosure.
There have been no other recent accounting
pronouncements or changes in accounting pronouncements that have been issued but not yet adopted that are of significance, or
potential significance, to the Company.
Note 3. Equipment on Operating Leases,
net
Equipment on operating leases consist
of the following:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Leased equipment
|
|
$
|
3,126,761
|
|
|
$
|
3,138,951
|
|
Less: accumulated depreciation
|
|
|
(1,709,501
|
)
|
|
|
(1,413,953
|
)
|
Total Equipment on Operating Leases, net
|
|
$
|
1,417,260
|
|
|
$
|
1,724,998
|
|
BioHiTech Global, Inc. and
Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2020 and 2019
and as of September 30, 2020 and December 31, 2019
The Company is a lessor of digester units
under non-cancellable operating lease agreements expiring through June 2025. These leases generally have terms of three to five
years and do not contain stated extension periods or options for the lessee to purchase the underlying assets. At the end of the
leases, the lessee may enter into a new lease or return the asset, which would be available to the Company for releasing.
During the three months ended September
30, 2020 and 2019, revenue under the agreements, which is included in rental, service and maintenance revenue, amounted to $356,002
and $369,437, respectively. During the nine months ended September 30, 2020 and 2019, revenue under the agreements, which
is included in rental, service and maintenance revenue, amounted to $1,054,534 and $1,061,289, respectively. During the three months
ended September 30, 2020 and 2019, depreciation expense amounted to $116,461 and $110,795, respectively. During the nine months
ended September 30, 2020 and 2019, depreciation expense amounted to $348,599 and $316,061, respectively.
The minimum future estimated contractual
payments to be received under these leases as of September 30, 2020 is as follows:
Year ending December 31,
|
|
|
|
2020, remaining period
|
|
$
|
328,885
|
|
2021
|
|
|
971,888
|
|
2022
|
|
|
705,948
|
|
2023
|
|
|
534,345
|
|
2024 and thereafter
|
|
|
164,572
|
|
|
|
$
|
2,705,638
|
|
Note 4. HEBioT facility, equipment,
fixtures and vehicles, net
HEBioT facility, equipment, fixtures and
vehicles, net consist of the following:
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
HEBioT facility
|
|
$
|
31,172,855
|
|
|
$
|
31,142,974
|
|
HEBioT equipment
|
|
|
7,562,649
|
|
|
|
7,388,896
|
|
Computer software and hardware
|
|
|
115,194
|
|
|
|
112,629
|
|
Furniture and fixtures
|
|
|
48,196
|
|
|
|
48,196
|
|
Vehicles
|
|
|
50,319
|
|
|
|
50,319
|
|
|
|
|
38,949,213
|
|
|
|
38,743,014
|
|
Less: accumulated depreciation and amortization
|
|
|
(2,610,486
|
)
|
|
|
(1,321,681
|
)
|
Total HEBioT facility, equipment, fixtures and vehicles, net
|
|
$
|
36,338,727
|
|
|
$
|
37,421,333
|
|
Note 5. MBT Facility Development and
License Costs
MBT Facility Development and License Costs
consist of the following:
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
MBT Projects
|
|
|
|
|
|
|
|
|
Survey and engineering
|
|
$
|
298,653
|
|
|
$
|
235,229
|
|
|
|
|
|
|
|
|
|
|
Technology Licenses
|
|
|
|
|
|
|
|
|
Future site
|
|
|
6,019,200
|
|
|
|
6,019,200
|
|
Martinsburg, West Virginia, net of $189,000 and $94,500 of amortization as of September 30, 2020 and December 31, 2019
|
|
|
1,701,000
|
|
|
|
1,795,500
|
|
Total Technology Licenses
|
|
|
7,720,200
|
|
|
|
7,814,700
|
|
Total MBT Facility Development and License Costs
|
|
$
|
8,018,853
|
|
|
$
|
8,049,929
|
|
BioHiTech
Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2020 and 2019
and as of September 30, 2020 and December 31, 2019
MBT Facility Development Costs -
During 2018, the Company commenced initial development of a project in Rensselaer, NY. As of June 30, 2020, the Company
has received local permits and has filed the required state permit applications, which are undergoing review by the New York State
Department of Environmental Conservation (“NYSDEC”). On August 10, 2020 the NYSDEC, by letter, informed the Company
that the application had been initially denied. The Company disagrees with this decision, and as is part of the process, has exercised
its right to appeal the NYSDEC findings.
Technology License Agreement –
Future Facility - The royalty payment for the license amounted to $6,019,200. This Technology License Agreement can be
utilized at a future project and will be amortized once the facility is in operation.
Technology
License Agreement – Martinsburg, West Virginia - In connection with the 2018 acquisition accounting
applied to Entsorga West Virginia acquisition, the License Agreement was valued at $1,890,000. During the three and nine months
ending September 30, 2020 amortization amounted to $31,500 and $94,500, respectively. During the three and nine months ending September
30, 2019 amortization amounted to $31,500 and $63,000, respectively. Amortization of the License Agreement commenced with the facility
becoming operational on March 31, 2019 and there was no amortization for the three months ended March 31, 2019.
Note 6. Line of Credit, Promissory
Notes Payable, Notes Payable, Advances, and Long-Term Debts
Line of Credit, Promissory Notes Payable,
Notes Payable, Advances, and Long-Term Debts consist of the following:
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
|
|
Total
|
|
|
Related
Party
|
|
|
Total
|
|
|
Related
Party
|
|
Line of credit
|
|
$
|
1,497,950
|
|
|
$
|
-
|
|
|
$
|
1,479,848
|
|
|
$
|
-
|
|
Senior secured promissory note
|
|
|
4,408,514
|
|
|
|
-
|
|
|
|
4,160,490
|
|
|
|
-
|
|
Junior promissory note
|
|
|
965,881
|
|
|
|
965,881
|
|
|
|
949,434
|
|
|
|
949,434
|
|
Note payable under Payroll Protection Program
|
|
|
421,300
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Note payable
|
|
|
100,000
|
|
|
|
-
|
|
|
|
100,000
|
|
|
|
-
|
|
Advances from related parties (See Note 14 Related Parties)
|
|
|
935,000
|
|
|
|
935,000
|
|
|
|
210,000
|
|
|
|
210,000
|
|
Long term debt - current and long-term portion
|
|
|
9,262
|
|
|
|
-
|
|
|
|
12,806
|
|
|
|
-
|
|
Line
of Credit — The Credit Agreement and Note with Comerica does not have any financial covenants, carries interest
at the rate of 3%, plus either the Comerica prime rate or a LIBOR-based rate, (5.00% and 5.71% (total interest rate) as of September
30, 2020 and December 31, 2019, respectively) which was amended on June 30, 2020 as a demand note with an interest rate of
3%, plus a LIBOR-based rate (with a floor of 1%). The line of credit is secured by the assets of BHT Financial, LLC and is personally
guaranteed by the Company’s Chairman of the Board and former Chief Executive Officer, Frank E. Celli, and James D. Chambers,
a director.
Michaelson
Senior Secured Term Promissory Financing — Company and several of the Company’s wholly-owned subsidiaries
have a Note Purchase and Security Agreement with Michaelson Capital Special Finance Fund II, L.P. (“ MCSFF ”) for a
senior secured term promissory note in the principal amount of $5,000,000 (the “Note”). The Note is not convertible
and accrues interest at the rate of 10.25% per annum. While the Company had not met certain of its senior secured note’s
financial covenants as of September 30, 2020, the Company has received a waiver for such non-compliance through September 30, 2020.
Despite its current compliance under the waiver, until such time as the Company regains compliance or receives a waiver of such
covenants for a year beyond the balance sheet date, under current GAAP accounting rules the senior secured notes amounting to $4,408,514
have been classified as current debt. As of December 31, 2019 those certain financial covenants were not met and a waiver
of such was granted by MCSFF through January 1, 2021 with the condition that the parties negotiate new financial covenants, which
were concluded on June 29, 2020. As of December 31, 2019, the Note has been classified based on the contractual repayment schedule.
For purposes of the following maturity schedule, as the Company believes that it will achieve compliance with the revised financial
covenants and MCSFF has a history of waiving non-compliance with financial covenants, the maturities have been presented based
upon the contractual repayment terms in effect as of September 30, 2020. The Note is contractually scheduled to be repaid in eight,
equal, quarterly installments of $625,000 commencing on May 15, 2021 and ending February 2, 2023 (the “Maturity
Date”).
Note Payable under Payroll Protection
Program — On May 13, 2020 BioHiTech America, LLC, a subsidiary of the Company, was funded $421,300 under the Payroll
Protection Program (“PPP”) through Comerica Bank. The PPP was established as part of the Coronavirus Aid, Relief and
Economic Security Act (the “CARES Act”) and is administered by the U.S. Small Business Administration. The PPP Loan
is non-collateralized and has no guarantees, has a two-year term and bears interest at an annual interest rate of 1%. Monthly principal
and interest payments are deferred for six months, and the maturity date is May 13, 2022. Under the terms of the CARES Act, PPP
loan recipients can apply for and be granted forgiveness for all or a portion of the loan granted under the PPP. Such forgiveness
will be determined, subject to limitations, based on the use of loan proceeds for payment of payroll costs and any payments of
mortgage interest, rent, and utilities. However, no assurance is provided that forgiveness for any portion of the PPP Loan will
be obtained.
BioHiTech
Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2020 and 2019
and as of September 30, 2020 and December 31, 2019
Note
Payable — As of September 30, 2020 and December 31, 2019, the $100,000 note, which was amended on July
27, 2020, carries interest at 10% and matures on January 1, 2022.
Contractual
Maturities of Senior Secured, Junior Promissory, Notes Payable and Long Term Debt — As of September 30, 2020,
excluding discounts and deferred finance costs, which are being amortized as interest expense, are as follow:
Year Ending December 31,
|
|
Amortizing
|
|
|
Non-
Amortizing
|
|
|
Total
|
|
2020 (Remaining)
|
|
$
|
1,061
|
|
|
$
|
23,406
|
|
|
$
|
24,467
|
|
2021
|
|
|
4,380
|
|
|
|
2,155,866
|
|
|
|
2,160,246
|
|
2022
|
|
|
3,821
|
|
|
|
2,717,028
|
|
|
|
2,720,849
|
|
2023
|
|
|
-
|
|
|
|
625,000
|
|
|
|
625,000
|
|
2024 and thereafter
|
|
|
-
|
|
|
|
1,044,477
|
|
|
|
1,044,477
|
|
Total
|
|
$
|
9,262
|
|
|
$
|
6,565,777
|
|
|
$
|
6,575,039
|
|
Note 7. Entsorga West Virginia, LLC WVEDA Solid Waste Disposal
Revenue Bonds
During 2016, Entsorga West Virginia LLC
(the “Borrower”) was issued $25,000,000 in Non-Recourse Solid Waste Revenue Bonds from the West Virginia Economic
Development Authority (the “WVEDA Bonds”). The WVEDA Bonds were issued in two series with one for $7,535,000 bearing
interest at 6.75% per annum with a maturity date of February 1, 2026 and the second for $17,465,000 bearing interest at 7.25%
per annum with a maturity of February 1, 2036. Both series were issued at par. The 2026 series was payable with interest-only
payments through February 1, 2019 then annual payments of principal and semi-annual payments of interest through maturity.
The 2036 series is payable with interest-only payments through February 1, 2019 then annual payments of principal and semi-annual
payments of interest through maturity. Repayment of principal is by way of sinking fund.
During 2018, the 2016 Indenture Trust
and Loan Agreement were amended and restated effective November 1, 2018. These amendments provided for a third series of
bonds amounting to $8,000,000 bearing interest at 8.75% per annum with a maturity date of February 1, 2036, with special
event triggered pre-payment requirements. This series was issued at par. The 2036 series is payable with interest-only payments
through February 1, 2020 then annual payments of principal and semi-annual payments of interest through maturity. Repayment
is by way of sinking fund.
The outstanding balance of the WVEDA Bonds
as of September 30, 2020 and December 31, 2019 is $33,000,000, which is presented net of unamortized debt issuance costs amounting
to $2,207,759 as of September 30, 2020 and December 31, 2019, less associated amortization of $516,243 and $415,185 as of
September 30, 2020 and December 31, 2019, respectively, which includes amortization prior to the Company’s control acquisition
in 2018. Amortization is calculated on the effective interest method, which is included in interest expense in the accompanying
consolidated statements of operations and comprehensive loss.
The loan agreement and indenture of trust
place restrictions on the Borrower and its members regarding additional encumbrances on the property, disposition of the property,
and limitations on equity distributions. The loan agreement also provides for financial covenants, which became effective on September 30,
2019. As of September 30, 2020 and December 31, 2019 the Company was not in compliance with all of the financial covenants
and subsequently was in default on a principal repayment due in February 2020 and has entered into a forbearance agreement
with the bond trustee that provides, they will not accelerate the repayment of the bonds due to the defaults through October 2,
2021.
The future sinking fund payments by the Borrower as of September
30, 2020 are as follow:
Year Ending December 31,
|
|
2016 Issue
2026 Series
|
|
|
2016 Issue
2036 Series
|
|
|
2018 Issue
2036 Series
|
|
|
Total
|
|
2020 (remaining)
|
|
$
|
1,160,000
|
|
|
$
|
-
|
|
|
$
|
230,000
|
|
|
$
|
1,390,000
|
|
2021
|
|
|
1,215,000
|
|
|
|
-
|
|
|
|
255,000
|
|
|
|
1,470,000
|
|
2022
|
|
|
900,000
|
|
|
|
-
|
|
|
|
275,000
|
|
|
|
1,175,000
|
|
2023
|
|
|
965,000
|
|
|
|
-
|
|
|
|
300,000
|
|
|
|
1,265,000
|
|
2024 and thereafter
|
|
|
3,295,000
|
|
|
|
17,465,000
|
|
|
|
6,940,000
|
|
|
|
27,700,000
|
|
Total
|
|
$
|
7,535,000
|
|
|
$
|
17,465,000
|
|
|
$
|
8,000,000
|
|
|
$
|
33,000,000
|
|
Note 8. Equity and Equity Transactions
The Company has 50,000,000 shares of its
$0.0001 par common stock and 10,000,000 shares of blank check preferred stock authorized by its shareholders. As of September 30,
2020 and December 31, 2019, 23,354,130 and 17,300,899 shares of common stock have been issued; and 3,209,210 and 3,179,120
shares, respectively, of preferred stock have been designated in five series of shares, which have a total of $1,602,675 in accumulated,
but undeclared preferential dividends as of September 30, 2020, as follows:
|
|
Designated
|
|
|
Par
|
|
|
Stated
|
|
|
Shares Outstanding
|
|
Designation
|
|
Shares
|
|
|
Value
|
|
|
Value
|
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
Series A Convertible Preferred Stock
|
|
|
333,401
|
|
|
$
|
0.0001
|
|
|
$
|
5.00
|
|
|
|
125,312
|
|
|
|
145,312
|
|
Series B Convertible Preferred Stock
|
|
|
1,111,200
|
|
|
|
0.0001
|
|
|
$
|
5.00
|
|
|
|
-
|
|
|
|
-
|
|
Series C Convertible Preferred Stock
|
|
|
1,000,000
|
|
|
|
0.0001
|
|
|
$
|
10.00
|
|
|
|
427,500
|
|
|
|
427,500
|
|
Series D Convertible Preferred Stock
|
|
|
20,000
|
|
|
|
0.0001
|
|
|
$
|
100.00
|
|
|
|
17,350
|
|
|
|
18,850
|
|
Series E Convertible Preferred Stock
|
|
|
714,519
|
|
|
|
0.0001
|
|
|
$
|
2.64
|
|
|
|
264,519
|
|
|
|
264,519
|
|
Series F Convertible Preferred Stock
|
|
|
30,090
|
|
|
|
0.0001
|
|
|
$
|
115.00
|
|
|
|
13,611
|
|
|
|
-
|
|
BioHiTech
Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2020 and 2019
and as of September 30, 2020 and December 31, 2019
Under the terms of the Company’s
senior lender agreements, the Company is restricted from paying dividends in cash, but is allowed to pay dividends in common stock.
The Company, since its merger in 2015, has not paid any cash or stock dividends on common stock.
The consolidated financial statements
include less than 100% owned and controlled subsidiaries and include equity attributable to non-controlling interests that take
the form of the underlying legal structures of the less than 100% owned subsidiaries. Entsorga West Virginia LLC through its limited
liability agreement and the agreements related to its WVEDA Bonds have restrictions on distributions to and loans to owners while
the WVEDA Bonds are outstanding.
Common
Stock Underwritten Offering — On July 27, 2020, BioHiTech Global, Inc. entered into an underwriting agreement
(the “Underwriting Agreement”) with Maxim Group LLC (“Maxim”), as representative of certain underwriters
(the “Underwriters”). Pursuant to the terms and conditions of the Underwriting Agreement, The Company agreed to issue
and sell 4,550,000 shares of our common stock, par value $0.0001 per share (the “Underwritten Shares”), at a price
to the public of $1.81 per share. Pursuant to the Underwriting Agreement, the Company also granted the underwriter an option to
purchase up to an additional 682,500 shares of the Company’s common stock (together with the Underwritten Shares, the “Shares”)
within 45 days after the date of the Underwriting Agreement to cover over-allotments, if any.
The offering was consummated on July 29,
2020. The Underwriters received underwriting commissions of 9% for $741,195, plus reimbursement of counsel fees in the amount of
$65,000. Maxim acted as the lead book-running manager for the offering and Spartan Capital Securities, LLC acted as co-book-runner
for the offering. In addition, the Company agreed to issue warrants to purchase 318,666 shares of our Common Stock to the Underwriters
(the “Underwriters’ Warrants”), as a portion of the underwriting compensation payable to the underwriters in
connection with this offering. The Underwriters’ Warrants are exercisable for a period commencing 180 days following the
closing of the offering and ending on the fifth anniversary of the closing date at an exercise price equal to $1.991 per share,
or 110% of the offering price of the common stock. The Company agreed to grant the Underwriters piggy-back registration rights
for five (5) years in the event we file certain registration statements for the registration of other shares of Common Stock.
On August 11, 2020 the underwriter provided
notice that they would be exercising their over-allotment provision of the Underwriting Agreement to purchase an additional 682,500
shares of the Company’s common stock at $1.81 per share for a gross purchase price of $1,235,325. The net proceeds to the
Company, after underwriter’s commission and before other costs amount $1,124,146. This transaction was consummated on August
13, 2020.
The net proceeds to the Company from the
offering were:
Gross proceeds at $1.81 per share
|
|
$
|
9,470,825
|
|
Less:
|
|
|
|
|
Underwriters’ fees
|
|
|
(852,374
|
)
|
Legal fees
|
|
|
(139,033
|
)
|
Accounting fees
|
|
|
(30,900
|
)
|
Filing and other fees
|
|
|
(11,038
|
)
|
Net proceeds to the Company
|
|
$
|
8,437,480
|
|
Other
Common Stock Activity — Other than conversions of preferred stock and preferred stock dividends and the drawdown
of vested restricted stock units, during the third quarter of 2020, the Company issued 141,259 shares of common stock, at market,
to vendors and creditors in place of cash payments as part of its cash conservation practices resulting from the COVID-19 outbreak.
Series
A Redeemable Convertible Preferred Stock — On July 30, 2020 a Series A Redeemable Convertible Preferred Stock
(“Sr. A PS”) holder converted, in accordance with the terms of the Sr. A PS, 20,000 shares of Sr. A PS into 55,556
shares of the Company’s common stock. In connection with the conversion, the holder was also paid accrued dividends on the
Sr. A PS through the conversion date amounting to $7,350 through the issuance of 4,083 shares of the Company’s common stock.
Series D Convertible Preferred Stock
— On July 13, 2020, a Series D Convertible Preferred Stock (“Sr. D PS”) holder converted, in accordance
with the terms of the Sr. D PS, 1,500 shares of Sr D PS into 83,334 shares of the Company’s common stock. In connection with
the conversion, the holder was also paid accumulated dividends on the Sr. D PS through the conversion date amounting to $14,388
through the issuance of 7,994 shares of the Company’s common stock.
In July 2020, two separate holders of the
Sr D PS requested, in accordance with the terms of the Sr D PS, that accumulated dividends amounting to $17,840 be paid in 9,912
shares of the Company’s common stock, which was issued on July 21, 2020.
Series F Convertible Preferred
Stock — On March 9, 2020 the Company designated a new series of preferred stock and subsequently on March 18,
2020 had an initial closing of $1,500,000 on 13,045 shares of the new series of preferred stock and 178,597 five-year common stock
warrants at $2.30 per share and are presented net of $50,836 in warrant valuations and $4,550 in issuance costs. On April 6, 2020
had an additional closing of $65,000 on 566 shares of the new series of preferred stock and 7,750 five-year common stock warrants
at $2.30 per share and are presented net of $2,205 in warrant valuations. The newly designated series, the Series F Redeemable,
Convertible Preferred Stock (the “Sr. F Preferred Stock”) is comprised of 30,090 shares with a par value of $0.0001
per share and a stated value per share of $115.00 that has a dividend rate of 9%. The Sr. F Preferred Stock is convertible by the
holder at any time at a conversion rate of $2.10 as of the issuance of the Sr. F Preferred Stock, $1.81 as of July 27, 2020 as
the result of the common stock offering, subject to certain antidilution adjustments and is redeemable by the Company after 24
months at its stated value, plus any outstanding accrued or accumulated dividends for cash, or if the Company’s common stock
is trading over $3.00 per share and has daily trading volume of over 50,000 shares, for the Company’s common stock at the
conversion rate in effect at the time.
Warrants
— In connection with the issuance of convertible debt, preferred and common stock and in connection with services
provided, the Company has warrants to acquire 4,676,361 shares of the Company’s common stock outstanding as of September
30, 2020, as follows:
Expiring During the Year
Ending December 31,
|
|
Warrant
Shares
|
|
|
Exercise Price
per Share
|
|
|
Weighted Average
Exercises Price
per Share
|
|
2021
|
|
|
1,701,827
|
|
|
|
$3.30 - $3.75
|
|
|
$
|
3.30
|
|
2022
|
|
|
1,253,149
|
|
|
|
$1.80 - $5.00
|
|
|
$
|
2.89
|
|
2023
|
|
|
740,749
|
|
|
|
$1.80
|
|
|
$
|
1.80
|
|
2024
|
|
|
269,293
|
|
|
|
$1.80
|
|
|
$
|
1.80
|
|
2025
|
|
|
711,343
|
|
|
|
$1.80 - $2.25
|
|
|
$
|
1.92
|
|
The following table summarizes the outstanding
warrant activity for the nine months ended September 30, 2020:
BioHiTech
Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2020 and 2019
and as of September 30, 2020 and December 31, 2019
Outstanding, January 1, 2020
|
|
|
4,674,261
|
|
Issued as a result of Series F Convertible Preferred Stock offering
|
|
|
186,347
|
|
Issued to common stock offering underwriters
|
|
|
318,666
|
|
Issued to professional services providers
|
|
|
150,000
|
|
Exercised
|
|
|
(630,053
|
)
|
Expired
|
|
|
(22,860
|
)
|
Outstanding, September 30, 2020
|
|
|
4,676,361
|
|
On June 30, 2020, one holder of 630,053
warrants with an exercise price of $1.80 per share exercised in a cashless exercise all of their warrants in exchange for 372,304
shares of the Company’s common stock.
On July 13, 2020 the Company issued a
total of 150,000 warrants to several professional service providers. The warrants have an exercise price of $1.80 per share
and expire in five years. The warrants were valued utilizing the Black-Scholes option pricing model with the following
assumptions: risk-free interest rate of 0.3%, expected dividend yield of 0%, expected volatility of 55.6% and term of 5
years
On July 27, 2020 as a result of the underwritten
offering of common stock at $1.81 per share, the warrant exercise price of the warrants issued in connection with the Sr. F Preferred
Stock was reduced from $2.30 to $1.81. As a result of the down deal feature the revaluation of the warrants, which amounted to
$21,738, has been reflected as a deemed dividend.
Note 9. Equity Incentive Plans
The Company has two shareholder approved
equity incentive plans:
2015 Equity Incentive Plan —
During 2015, the Company established the BioHiTech Global, Inc. 2015 Equity Incentive Plan, which is available to eligible
employees, directors, consultants and advisors of the Company and its affiliates. The plan allows for the granting of incentive
stock options, nonqualified stock options, reload options, stock appreciation rights, and restricted stock representing up to 750,000
shares. The Plan is administered by the Compensation Committee of the Board of Directors. On July 23, 2020 the shareholders of
the Company approved a 500,000 increase in the plan’s shares, increasing the plan’s shares to 1,250,000.
2017 Executive Incentive Plan —
During 2017, the shareholders approved the 2017 Executive Incentive Plan, which is available to eligible employees, directors,
consultants and advisors of the Company and its affiliates. The plan allows for the granting of incentive stock options, nonqualified
stock options, reload options, stock appreciation rights, and restricted stock representing up to 1,000,000 shares. The Plan is
administered by the Compensation Committee of the Board of Directors. On July 23, 2020 the shareholders of the Company approved
a 500,000 increase in the plan’s shares, increasing the plan’s shares to 1,500,000.
Effective January 30, 2020, the Company
granted nonqualified options for 155,450 shares and 269,060 restricted stock units. The options granted had a fair value of $162,959
using the Black-Scholes option pricing model with the following assumptions: risk-free interest rate of 1.44%, expected dividend
yield of 0%, expected volatility of 49.24% and expected term in years of from 1.00 to 2.92 years. The restricted stock units had
a value of $538,120 based on the market value on the date of the grants and a weighted average vesting period of 0.75 years.
Effective September 19, 2020, the Company
granted 136,145 restricted stock units under the Interim Executive Plan. The restricted stock units had a value of $174,266 based
on the market value on the date of the grants and immediately vested.
Compensation expense related to stock
options and restricted stock was:
|
|
Three months ended
September 30,
|
|
|
Nine months ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Stock options
|
|
$
|
34,605
|
|
|
$
|
31,323
|
|
|
$
|
124,383
|
|
|
$
|
104,075
|
|
Restricted stock
|
|
|
438,042
|
|
|
|
178,262
|
|
|
|
940,886
|
|
|
|
637,113
|
|
Total
|
|
$
|
472,647
|
|
|
$
|
209,585
|
|
|
$
|
1,065,269
|
|
|
$
|
741,188
|
|
Compensation expense related to stock
options and restricted stock for are reflected in the following captions within operating expenses in the condensed consolidated
statements of operations and comprehensive loss:
|
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Rental, service and maintenance
|
|
$
|
2,097
|
|
|
$
|
3,353
|
|
|
$
|
8,416
|
|
|
$
|
12,426
|
|
Selling, general and administrative
|
|
|
470,550
|
|
|
|
206,232
|
|
|
|
1,056,853
|
|
|
|
728,762
|
|
Total
|
|
$
|
472,647
|
|
|
$
|
209,585
|
|
|
$
|
1,065,269
|
|
|
$
|
741,188
|
|
The following summarizes the Company’s
stock option activity for the nine months ended September 30, 2020:
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted Average
Remaining
Contractual Life
(in Years)
|
|
|
Aggregate
Intrinsic Value
|
|
Outstanding – January 1, 2020
|
|
|
363,826
|
|
|
$
|
3.71
|
|
|
|
7.34
|
|
|
|
-
|
|
Granted
|
|
|
155,450
|
|
|
|
2.00
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited, Canceled or Expired
|
|
|
(58,417
|
)
|
|
|
3.57
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding – September 30, 2020
|
|
|
460,859
|
|
|
|
3.16
|
|
|
|
7.52
|
|
|
|
-
|
|
Exercisable – September 30, 2020
|
|
|
307,021
|
|
|
|
3.49
|
|
|
|
6.86
|
|
|
|
-
|
|
BioHiTech Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2020 and 2019
and as of September 30, 2020 and December 31, 2019
The following summarizes the Company’s
restricted stock unit activity for the nine months ended September 30, 2020:
Balance, January 1, 2020
|
|
|
291,730
|
|
Grants
|
|
|
405,205
|
|
Forfeited
|
|
|
-
|
|
Vested
|
|
|
(403,233
|
)
|
Balance, September 30, 2020
|
|
|
293,702
|
|
As of September 30, 2020, 804,221 restricted
stock units have been vested but not yet drawn down by the grantees.
Interim Executive Plan — During the second
quarter of 2020, the Company established a payroll cash deferment program in order to improve cash resources during the COVID-19
pandemic. Under the program, certain executives reduced their cash compensation and would be provided restricted common stock units
under the shareholder approved plans as the shares were available or may be issued restricted common stock shares or cash. The
shares under the individual agreements were based on a cash amount of deferral each month divided by the lower of the average or
last trading day common share price. Under the program that has been concluded, all of the participants elected to receive restricted
stock units resulting in 136,145 restricted stock units being issued at a cost of $174,266 that has been reflected as restricted
stock compensation expense above.
Note 10. Revenue
The Company recognizes revenue as services
are performed or products are delivered and generally recognize revenue for the gross amount of consideration received as we are
generally the primary obligor (or principal) in our contracts with customers as we hold complete responsibility to the customer
for contract fulfillment. We record amounts collected from customers for sales tax on a net basis.
Disaggregation of Revenue —
The disaggregation of revenue is as follows:
|
|
|
Three months ended September 30,
|
|
|
|
Nine months ended September 30,
|
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
2020
|
|
|
|
2019
|
|
Revenue Type:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental of digesters
|
|
$
|
356,001
|
|
|
$
|
369,438
|
|
|
$
|
1,054,534
|
|
|
$
|
1,061,289
|
|
Services
|
|
|
250,177
|
|
|
|
960,146
|
|
|
|
1,428,017
|
|
|
|
1,929,174
|
|
Product sales
|
|
|
136,699
|
|
|
|
97,191
|
|
|
|
893,599
|
|
|
|
222,226
|
|
Total
|
|
$
|
742,877
|
|
|
$
|
1,426,775
|
|
|
$
|
3,376,150
|
|
|
$
|
3,212,689
|
|
Note 11. Risk Concentrations
The Company operates as a single segment
on a worldwide basis through its subsidiaries, resellers and independent sales agents. Gross revenues and net non-current tangible
assets on a domestic and international basis are as follows:
|
|
United
States
|
|
|
International
|
|
|
Total
|
|
2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue, for the nine months ended September 30, 2020
|
|
$
|
3,079,083
|
|
|
$
|
297,067
|
|
|
$
|
3,376,150
|
|
Revenue, for the three months ended September 30, 2020
|
|
|
631,450
|
|
|
|
111,427
|
|
|
|
742,877
|
|
Non-current tangible assets, as of September 30, 2020
|
|
|
37,469,194
|
|
|
|
295,293
|
|
|
|
37,764,487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue, for the nine months ended September 30, 2019
|
|
$
|
2,877,157
|
|
|
$
|
335,532
|
|
|
$
|
3,212,689
|
|
Revenue, for the three months ended September 30, 2019
|
|
|
1,333,878
|
|
|
|
92,897
|
|
|
|
1,426,775
|
|
Non-current tangible assets, as of December 31, 2019
|
|
|
38,803,833
|
|
|
|
355,825
|
|
|
|
39,159,658
|
|
BioHiTech Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2020 and 2019
and as of September 30, 2020 and December 31, 2019
Credit risk — Financial
instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable.
The Company minimizes credit risk associated
with cash by periodically evaluating the credit quality of its primary financial institutions. At times, the Company’s cash
may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance Corporation (“FDIC”) in the USA and
the Financial Conduct Authority (“FCA”) in the UK insurance limits. Through September 30, 2020, the Company had not
experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Major customers — During
the three months ended September 30, 2020, two customers represented at least 10% of revenues, accounting for 18.9% (Gold Medal
Group, LLC, an affiliated entity, “GMG” or “Gold Medal”) and 45.1% of revenues. During the three
months ended September 30, 2019, one customer represented at least 10% of revenues, accounting for 58.9% (Gold Medal Group, LLC,
an affiliated entity, “GMG”) of revenues. During the nine months ended September 30, 2020, two customers represented
at least 10% of revenues, 32.5% (GMG) and 11.4% of revenues. During the nine months ended September 30, 2019, one customer
represented at least 10% of revenues, 49.2% (GMG) of revenues.
As of September 30, 2020, three customers
represented at least 10% of accounts receivable, accounting for 63.4% (GMG), 18.6% and 11.5% of accounts receivable. As of December 31,
2019 one customer represented at least 10% of accounts receivable, accounting for 58.9% (GMG) of accounts receivable.
Vendor concentration —
During the three months ended September 30, 2020, one vendor represented at least 10% of costs of revenue, accounting for 14.2%
(GMG). During the three months ended September 30, 2019, two vendors represented at least 10% of costs of revenue, accounting for
21.5% (GMG) and 18.9% (a 1.2% shareholder). During the nine months ended September 30, 2020, one vendor represented at least 10%
of costs of revenue, accounting for 26.1% (GMG). During the nine months ended September 30, 2019, two vendors represented at least
10% of costs of revenue, accounting for 11.9% (GMG) and 16.3% (a 1.2% shareholder).
As of September 30, 2020, excluding construction
payables and other professional fees, one vendor represented at least 10% of accounts payable accounting for 31.8% (GMG) of accounts
payable. As of December 31, 2019, one vendor represented at least 10% of accounts payable accounting for 54.4% (GMG) of accounts
payable.
Affiliate relationship —
GMG owns a 40% interest in Refuel America, LLC, a consolidated subsidiary of the Company. GMG’s subsidiaries, which are
not consolidated in the Company’s financial statements have several business relationships with the Company and its subsidiaries
that result in revenues and expenses noted above. See Note 14. Related Party Transactions.
Note 12. Commitments and Contingencies
During the nine months ended September
30, 2020 the Company was involved in the following legal matters.
During September 2020, the Company’s Entsorga West Virginia
subsidiary received notice that an affiliate of a minority owner of the facility, who also provided intellectual property, equipment
and engineering services relating to the set-up and initial operation of the facility, was claiming it was owed $917,420 related
to services contracted as part of the facility’s construction and initial start-up and operation. The Company incurred offsetting
costs and expenses greater than the claim correcting or replacing the services that were contracted but that were either not performed
or performed correctly. No action has been commenced related to this claim and the Company disputes the claim and intends to defend
this matter vigorously.
As a result of this claim and the related costs incurred by
the Company to cure the deficiencies in the services that were contracted, the Company has reflected an impairment charge amounting
to $917,420 during the three and nine months ended September 30, 2020.
On February 7, 2018, Lemartec Corporation
(“Lemartec”) filed a complaint against the Company in the United States District Court for the Northern District of
West Virginia arising out of the construction of the Company’s resource recovery facility in Martinsburg, West Virginia
alleging breach of contract and unjust enrichment. The Company has filed its answer and counterclaims for damages against Lemartec
and cross claims against Lemartec’s performance bond surety, Philadelphia Indemnity Insurance Company. The trial was scheduled
to begin in August 2020. Prior to the start of the trial, on March 12, 2020 the Company entered into a settlement agreement
that detailed the full and final mutual release. The settlement agreement provides that the Company pay Lemartec $775,000 in installments
of $475,000 within 60 days of the execution of the settlement agreement and $25,000 each month thereafter for 12 months. The Company’s
consolidated financial statements as of December 31, 2019 reflects this liability given the nature of the subsequent event.
It is management’s opinion that
the resolution of these matters will not materially affect the Company’s future financial position, results
of operations, or cash flows.
From time to time, the Company may be
involved in other legal matters arising in the ordinary course of business. While the Company believes that such matters are currently
not material, there can be no assurance that matters arising in the ordinary course of business for which the Company is, or could
be, involved in litigation, will not have a material adverse effect on its business, financial condition or results of operations
BioHiTech Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2020 and 2019
and as of September 30, 2020 and December 31, 2019
Note 13. Leases
The Company rented its headquarters and
attached warehousing space from a related party through May 31, 2020 (see Note 14), effective June 1, 2020 the property housing
the Company’s headquarters and attached warehousing space was sold to an unrelated party, and has a land lease relating to
the Martinsburg, WV HEBioT facility under operating leases. The HEBioT facility land lease has an initial term of 30 years, plus
four 5-year extensions. For purposes of our determination of lease liabilities, extensions were not included. As the leases do
not provide an implicit rate, the Company used incremental borrowing rates in determining the present value of lease payments.
For the HEBioT facility land lease a rate of 11% was utilized and a rate of 10.25% has been used on the other leases. The current
portion of the lease liabilities of $207,515 is included in accrued expenses and liabilities. Total lease costs under operating
leases amounted to $57,129 and $55,356 for the three months, and $167,841 and $166,067 for the nine months ended September 30,
2020 and 2019, respectively. Maturities of lease liabilities under these leases, which have a weighted average remaining term of
19.7 years, as of September 30, 2020 is:
Year Ending December 31,
|
|
|
|
|
2020 (remaining)
|
|
$
|
51,783
|
|
2021
|
|
|
212,026
|
|
2022
|
|
|
217,571
|
|
2023
|
|
|
219,140
|
|
2024 and thereafter
|
|
|
3,133,649
|
|
Total lease payments
|
|
|
3,834,169
|
|
Less imputed interest
|
|
|
(2,419,658
|
)
|
|
Present value of lease liabilities
|
|
$
|
1,414,511
|
|
|
During the nine months ended September
30, 2020, the Company recognized operating lease right of use assets in exchange for lease liabilities amounting to $412,647 and
had operating cash flows of $51,783 and $51,406 for the three months, and $140,837 and $143,597 for the nine months ended September
30, 2020 and 2019, respectively.
Note 14. Related Party Transactions
Related parties include Directors, Senior
Management Officers, and shareholders, plus their immediate family, who own a 5% or greater ownership interest at the time of
a transaction. Related parties also include GMG and its subsidiaries as a result of its 40% interest in Refuel America, LLC (“Refuel”),
a consolidated entity of the Company.
During 2018 GMG acquired as regional waste
management entity, Apple Valley Waste (“AVW”), with operations located in West Virginia, Maryland and Pennsylvania.
As part of this acquisition, GMG also acquired AVW’s interests in EWV that were contributed to Refuel. Prior to GMG’s
acquisition of AVW and the Company’s investments and control acquisition of EWV, in order for EWV to receive the proceeds
from the Entsorga West Virginia, LLC WVEDA Non-Recourse Solid Waste Disposal Revenue Bonds, EWV and AWV had entered into several
agreements relating to business services, solid waste delivery and disposal.
The table below presents the face amount
of direct related party assets and liabilities and other transactions or conditions as of or during the periods indicated.
|
|
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
(a) (b)
|
|
$
|
2,227.224
|
|
|
$
|
1,370,867
|
|
Intangible assets, net, included in other assets
|
|
(c)
|
|
|
25,249
|
|
|
|
40,399
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
(c) (d) (e) (f)
|
|
|
3,851,722
|
|
|
|
2,531,034
|
|
Accrued interest payable
|
|
|
|
|
165,396
|
|
|
|
46,796
|
|
Long term accrued interest
|
|
(g)
|
|
|
1,729,605
|
|
|
|
1,510,193
|
|
Advance from related party
|
|
(h)
|
|
|
935,000
|
|
|
|
210,000
|
|
Junior promissory note
|
|
(g)
|
|
|
965,881
|
|
|
|
949,434
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
Line of credit guarantee
|
|
(i)
|
|
|
1,497,950
|
|
|
|
1,479,848
|
|
BioHiTech Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2020 and 2019
and as of September 30, 2020 and December 31, 2019
The table below presents direct related
party expenses or transactions for the three and nine months ended September 30, 2020 and 2019. Compensation and related costs
for employees of the Company are excluded from the table below.
|
|
|
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Management advisory and other fees
|
|
(a)
|
|
$
|
25,000
|
|
|
$
|
250,000
|
|
|
$
|
125,000
|
|
|
$
|
750,000
|
|
HEBioT revenue
|
|
(b)
|
|
|
115,173
|
|
|
|
590,262
|
|
|
|
970,943
|
|
|
|
831,274
|
|
Operating expenses - HEBioT
|
|
(d)
|
|
|
178,545
|
|
|
|
210,709
|
|
|
|
952,931
|
|
|
|
354,733
|
|
Operating expenses – Selling, general and administrative
|
|
(e)
|
|
|
-
|
|
|
|
24,537
|
|
|
|
41,514
|
|
|
|
73,611
|
|
Operating expenses - Selling, general and administrative
|
|
(c) (f)
|
|
|
110,650
|
|
|
|
110,650
|
|
|
|
332,016
|
|
|
|
258,050
|
|
Interest expense
|
|
|
|
|
98,571
|
|
|
|
76,611
|
|
|
|
295,592
|
|
|
|
194,266
|
|
Debt guarantee fees
|
|
(i)
|
|
|
16,875
|
|
|
|
16,875
|
|
|
|
50,625
|
|
|
|
50,625
|
|
Summary notes:
a -
|
Management
Advisory Fees
|
|
f -
|
Business
Services Fees
|
|
b -
|
HEBioT Disposal Revenues
|
|
g -
|
Junior Promissory
Note
|
|
c -
|
Distribution Agreement
|
|
h -
|
Advances from Related
Parties
|
|
d -
|
Disposal costs
|
|
i -
|
Line of Credit
|
|
e -
|
Facility Lease
|
|
|
|
|
Advances
from Related Parties - The Company’s Chief Executive Officer (the “Officer”) on occasion advances
the Company funds for operating and capital purposes. The advances bear interest at 13% and are unsecured and due on demand. There
are no financial covenants related to this advance and there are no formal commitments to extend any further advances. In addition,
during the three months ended March 31, 2020 another officer advanced $200,000 to the Company which was repaid during the
three months ended June 30, 2020.
Claims
by Related Party - During September 2020, the Company’s Entsorga West Virginia subsidiary received
notice that a minority owner of the facility, who also provided intellectual property, equipment and engineering services relating
to the set-up and initial operation of the facility, was claiming $917,420 related to services contracted as part of the facility’s
construction and initial start-up and operation. The Company incurred offsetting costs and expenses greater than the claim correcting
or replacing the services that were contracted but that were either not performed or performed correctly and intends to defend
this matter vigorously.
As a result of this claim and the related
costs incurred by the Company to cure the deficiencies in the services that were contracted, the Company has reflected an impairment
charge amounting to $917,420 during the third quarter of 2020.
Note 15. Supplemental Consolidated Statement of Cash Flows
Information
Changes in non-cash operating assets and
liabilities, as well as other supplemental cash flow disclosures, are as follows.
|
|
Nine Months Ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$
|
(1,302,729
|
)
|
|
$
|
(1,335,024
|
)
|
Inventory
|
|
|
(210,886
|
)
|
|
|
(181,979
|
)
|
Prepaid expenses and other assets
|
|
|
(94,156
|
)
|
|
|
(3,300
|
)
|
Accounts payable
|
|
|
1,149,030
|
|
|
|
3,111,285
|
|
Accrued interest payable
|
|
|
(322,753
|
)
|
|
|
(260,046
|
)
|
Accrued expenses
|
|
|
(843,188
|
)
|
|
|
(2,504,724
|
)
|
Deferred revenue
|
|
|
6,921
|
|
|
|
(1,131
|
)
|
Customer deposits
|
|
|
708,254
|
|
|
|
37,109
|
|
Net change in operating assets and liabilities
|
|
$
|
(909,507)
|
|
|
$
|
(1,137,810
|
)
|
|
|
|
|
|
|
|
|
|
Supplementary cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid during the periods for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
1,596,332
|
|
|
$
|
2,625,018
|
|
Income taxes
|
|
|
-
|
|
|
|
-
|
|
BioHiTech Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2020 and 2019
and as of September 30, 2020 and December 31, 2019
|
|
2020
|
|
|
2019
|
|
Supplementary Disclosure of Non-Cash Investing and Financing Activities:
|
|
|
|
|
|
|
|
|
Transfer of inventory to leased equipment
|
|
$
|
84,501
|
|
|
$
|
259,449
|
|
Accrual of Series A preferred stock dividends
|
|
|
52,654
|
|
|
|
140,631
|
|
Conversion of preferred stock into common
|
|
|
239,566
|
|
|
|
90,000
|
|
Payment of preferred stock dividends in common stock
|
|
|
21,732
|
|
|
|
50,000
|
|
Acquisition of right of use leased asset and creation of lease liability
|
|
|
412,647
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Cash and Restricted Cash:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
4,950,112
|
|
|
$
|
3,434,089
|
|
Restricted cash (current)
|
|
|
1,287,138
|
|
|
|
1,128,716
|
|
Restricted cash (non-current)
|
|
|
2,646,448
|
|
|
|
2,544,948
|
|
Total cash and restricted cash at the end of the period
|
|
$
|
8,883,698
|
|
|
$
|
7,107,753
|
|
Note 16. Subsequent Events
The Company evaluates subsequent events
and transactions that occur after the balance sheet date up to the date that the financial statements are available to be issued.
Any material events that occur between the balance sheet date and the date that the financial statements were available for issuance
are disclosed as subsequent events, while the financial statements are adjusted to reflect any conditions that existed at the
balance sheet date. Based upon this review, except as disclosed within the footnotes or as discussed below, the Company did not
identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial
statements.
On
October 19, 2020, the Company entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”)
to purchase 49% of newly-issued membership interests (the “Interests”) of East Shore Port Ventures, LLC, a New York
limited liability company (“East Shore”). Pursuant to the Purchase Agreement, the Company purchased the Interests in
consideration for $650,000 to East Shore and warrants (the “Warrants”) to purchase an aggregate of 100,000 shares of
the Company’s common stock, par value $0.0001 per share issued to East Shore’s existing members. The Purchase Agreement
contains customary provisions, including representations, warranties, and indemnities, and closed upon the satisfaction of customary
closing conditions.
BioHiTech Global, Inc. and
Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2020 and 2019
and as of September 30, 2020 and December 31, 2019
Note 17. Condensed Consolidating Financial Information
The WVEDA Solid Waste Disposal Revenue
Bond obligations of Entsorga West Virginia LLC are not guaranteed by its members, including the Company, however the membership
interests of Entsorga West Virginia LLC are pledged, and the debt agreements provide restrictions prohibiting distributions to
the members, including equity distributions or providing loans or advances to the members.
The following pages present the Company’s
condensed consolidating balance sheet as of September 30, 2020 and December 31, 2019, the condensed consolidating statements
of operations for the three and nine months ended September 30, 2020 and 2019, and condensed consolidating cash flows for the nine
months ended September 30, 2020 and 2019 of Entsorga West Virginia LLC and the Parent consolidated with other Company subsidiaries
not subject to the WVEDA Solid Waste Disposal Revenue Bond restrictions and the elimination entries necessary to present the Company’s
financial statements on a consolidated basis. The following condensed consolidating financial information should be read in conjunction
with the Company's consolidated financial statements.
Condensed Consolidating Balance Sheet
as of September 30, 2020
|
|
Parent
and other
Subsidiaries
|
|
|
Entsorga
West
Virginia LLC
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
4,948,342
|
|
|
$
|
1,770
|
|
|
$
|
-
|
|
|
$
|
4,950,112
|
|
Restricted cash
|
|
|
-
|
|
|
|
1,287,138
|
|
|
|
-
|
|
|
|
1,287,138
|
|
Other current assets
|
|
|
2,085,508
|
|
|
|
2,094,211
|
|
|
|
-
|
|
|
|
4,179,719
|
|
Current assets
|
|
|
7,033,850
|
|
|
|
3,383,119
|
|
|
|
-
|
|
|
|
10,416,969
|
|
Restricted cash
|
|
|
-
|
|
|
|
2,646,448
|
|
|
|
-
|
|
|
|
2,646,448
|
|
HEBioT facility and other fixed assets
|
|
|
1,438,255
|
|
|
|
36,317,732
|
|
|
|
-
|
|
|
|
37,755,987
|
|
Operating lease right of use assets
|
|
|
396,562
|
|
|
|
888,730
|
|
|
|
-
|
|
|
|
1,285,292
|
|
MBT facility development and license costs
|
|
|
6,317,853
|
|
|
|
1,701,000
|
|
|
|
-
|
|
|
|
8,018,853
|
|
Investment in subsidiaries and intercompany accounts
|
|
|
16,444,214
|
|
|
|
-
|
|
|
|
(16,444,214
|
)
|
|
|
-
|
|
Goodwill
|
|
|
-
|
|
|
|
58,000
|
|
|
|
-
|
|
|
|
58,000
|
|
Other assets
|
|
|
33,749
|
|
|
|
-
|
|
|
|
-
|
|
|
|
33,749
|
|
Total assets
|
|
$
|
31,664,483
|
|
|
$
|
44,995,029
|
|
|
$
|
(16,442,214
|
)
|
|
$
|
60,215,298
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Line of credit
|
|
$
|
1,497,950
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,497,950
|
|
Current portion of Debts and Bonds
|
|
|
4,670,301
|
|
|
|
2,860,000
|
|
|
|
-
|
|
|
|
7,530,301
|
|
Other current liabilities
|
|
|
3,716,174
|
|
|
|
13,081,770
|
|
|
|
(5,948,711
|
)
|
|
|
10,849,233
|
|
Current liabilities
|
|
|
9,884,425
|
|
|
|
15,941,770
|
|
|
|
(5,948,711
|
)
|
|
|
19,877,484
|
|
Notes payable and other debts
|
|
|
1,234,656
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,234,656
|
|
Accrued interest
|
|
|
1,729,605
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,729,605
|
|
Non-current lease liabilities
|
|
|
286,314
|
|
|
|
944,830
|
|
|
|
-
|
|
|
|
1,231,144
|
|
WV EDA bonds
|
|
|
-
|
|
|
|
28,448,484
|
|
|
|
-
|
|
|
|
28,448,484
|
|
Total liabilities
|
|
|
13,135,000
|
|
|
|
45,335,084
|
|
|
|
(5,948,711
|
)
|
|
|
52,521,373
|
|
Redeemable preferred stock
|
|
|
626,553
|
|
|
|
-
|
|
|
|
-
|
|
|
|
626,553
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to parent
|
|
|
15,748,136
|
|
|
|
(340,055
|
)
|
|
|
(10,495,503
|
)
|
|
|
4,912,578
|
|
Attributable to non-controlling interests
|
|
|
2,154,794
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,154,794
|
|
Stockholders’ equity
|
|
|
17,902,930
|
|
|
|
(340,055
|
)
|
|
|
(10,495,503
|
)
|
|
|
7,067,372
|
|
Total liabilities and stockholders’ equity
|
|
$
|
31,664,483
|
|
|
$
|
44,995,029
|
|
|
$
|
(16,444,214
|
)
|
|
$
|
60,215,298
|
|
BioHiTech Global, Inc. and
Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2020 and 2019
and as of September 30, 2020 and December 31, 2019
Condensed Consolidating Statement of
Operations for the three months ended September 30, 2020
|
|
Parent
and other
Subsidiaries
|
|
|
Entsorga
West
Virginia LLC
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Revenue
|
|
$
|
742,252
|
|
|
$
|
625
|
|
|
$
|
-
|
|
|
$
|
742,877
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HEBioT
|
|
|
-
|
|
|
|
945,810
|
|
|
|
-
|
|
|
|
945,810
|
|
Rental, service and maintenance expense
|
|
|
139,665
|
|
|
|
-
|
|
|
|
-
|
|
|
|
139,665
|
|
Equipment
|
|
|
171,002
|
|
|
|
-
|
|
|
|
-
|
|
|
|
171,002
|
|
Selling, general and administrative
|
|
|
1,430,095
|
|
|
|
494,198
|
|
|
|
-
|
|
|
|
1,924,293
|
|
Impairment expense
|
|
|
-
|
|
|
|
917,420
|
|
|
|
-
|
|
|
|
917,420
|
|
Depreciation and amortization
|
|
|
124,759
|
|
|
|
437,384
|
|
|
|
-
|
|
|
|
562,143
|
|
Total operating expenses
|
|
|
1,865,521
|
|
|
|
2,794,812
|
|
|
|
-
|
|
|
|
4,660,333
|
|
Loss from operations
|
|
|
(1,123,269
|
)
|
|
|
(2,794,187
|
)
|
|
|
-
|
|
|
|
(3,917,456
|
)
|
Other (income) expenses, net
|
|
|
336,749
|
|
|
|
686,308
|
|
|
|
-
|
|
|
|
1,023,057
|
|
Net loss
|
|
$
|
(1,460,018
|
)
|
|
$
|
(3,480,495
|
)
|
|
$
|
-
|
|
|
$
|
(4,940,513
|
)
|
Condensed Consolidating Statement of
Operations for the nine months ended September 30, 2020
|
|
Parent
and other
Subsidiaries
|
|
|
Entsorga
West
Virginia LLC
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Revenue
|
|
$
|
1,992,494
|
|
|
$
|
1,383,656
|
|
|
$
|
-
|
|
|
$
|
3,376,150
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HEBioT
|
|
|
-
|
|
|
|
2,778,514
|
|
|
|
-
|
|
|
|
2,778,514
|
|
Rental, service and maintenance expense
|
|
|
552,195
|
|
|
|
-
|
|
|
|
-
|
|
|
|
552,195
|
|
Equipment
|
|
|
317,406
|
|
|
|
-
|
|
|
|
-
|
|
|
|
317,406
|
|
Selling, general and administrative
|
|
|
4,713,923
|
|
|
|
1,026,235
|
|
|
|
-
|
|
|
|
5,740,158
|
|
Impairment expense
|
|
|
-
|
|
|
|
917,420
|
|
|
|
-
|
|
|
|
917,420
|
|
Depreciation and amortization
|
|
|
374,105
|
|
|
|
1,373,004
|
|
|
|
-
|
|
|
|
1,747,109
|
|
Total operating expenses
|
|
|
5,957,629
|
|
|
|
6,095,173
|
|
|
|
-
|
|
|
|
12,052,802
|
|
Loss from operations
|
|
|
(3,965,135
|
)
|
|
|
(4,711,517
|
)
|
|
|
-
|
|
|
|
(8,676,652
|
)
|
Other (income) expenses, net
|
|
|
1,063,714
|
|
|
|
1,979,331
|
|
|
|
-
|
|
|
|
3,043,045
|
|
Net loss
|
|
$
|
(5,028,849
|
)
|
|
$
|
(6,690,848
|
)
|
|
$
|
-
|
|
|
$
|
(11,719,697
|
)
|
Condensed Consolidating Statement of Cash Flows for the nine
months ended September 30, 2020
|
|
Parent
and other
Subsidiaries
|
|
|
Entsorga
West
Virginia LLC
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Cash flows used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(5,028,849
|
)
|
|
$
|
(6,690,848
|
)
|
|
$
|
-
|
|
|
$
|
(11,719,697
|
)
|
Non-cash adjustments to reconcile net loss to net cash used in operations
|
|
|
2,693,646
|
|
|
|
2,424,869
|
|
|
|
-
|
|
|
|
5,118,515
|
|
Changes in operating assets and liabilities
|
|
|
(5,625,051
|
)
|
|
|
4,715,544
|
|
|
|
-
|
|
|
|
(909,507
|
)
|
Net cash used in operations
|
|
|
(7,960,254
|
)
|
|
|
449,565
|
|
|
|
-
|
|
|
|
(7,510,689
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow used in investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of construction in-progress, equipment, fixtures and vehicles
|
|
|
(3,538
|
)
|
|
|
(203,635
|
)
|
|
|
-
|
|
|
|
(207,173
|
)
|
Other investing activities
|
|
|
(57,949
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(57,949
|
)
|
Net cash used in investing activities
|
|
|
(61,487
|
)
|
|
|
(203,635
|
)
|
|
|
-
|
|
|
|
(265,122
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuances of debt and equity
|
|
|
11,144,230
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,144,230
|
|
Repayments of debt
|
|
|
(3,544
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,544
|
)
|
Net cash provided by financing activities
|
|
|
11,140,686
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,140,686
|
|
Effect of exchange rate on cash
|
|
|
(18,129
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(18,129
|
)
|
Cash – beginning of period (restricted and unrestricted)
|
|
|
1,847,526
|
|
|
|
3,689,426
|
|
|
|
-
|
|
|
|
5,536,952
|
|
Cash – end of period (restricted and unrestricted)
|
|
$
|
4,948,342
|
|
|
$
|
3,935,356
|
|
|
$
|
-
|
|
|
$
|
8,883,698
|
|
BioHiTech Global, Inc. and
Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2020 and 2019
and as of September 30, 2020 and December 31, 2019
Condensed Consolidating Balance Sheet
as of December 31, 2019
|
|
Parent
and other
Subsidiaries
|
|
|
Entsorga
West
Virginia LLC
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
1,847,526
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,847,526
|
|
Restricted cash
|
|
|
-
|
|
|
|
1,133,581
|
|
|
|
-
|
|
|
|
1,133,581
|
|
Other current assets
|
|
|
1,697,910
|
|
|
|
1,116,821
|
|
|
|
(64,669
|
)
|
|
|
2,750,062
|
|
Current assets
|
|
|
3,545,436
|
|
|
|
2,250,402
|
|
|
|
(64,669
|
)
|
|
|
5,731,169
|
|
Restricted cash
|
|
|
-
|
|
|
|
2,555,845
|
|
|
|
-
|
|
|
|
2,555,845
|
|
HEBioT facility and other fixed assets
|
|
|
1,753,730
|
|
|
|
37,392,601
|
|
|
|
-
|
|
|
|
39,146,331
|
|
Operating lease right of use assets
|
|
|
48,021
|
|
|
|
897,026
|
|
|
|
-
|
|
|
|
945,047
|
|
MBT facility development and license costs
|
|
|
6,254,429
|
|
|
|
1,795,500
|
|
|
|
-
|
|
|
|
8,049,929
|
|
Investment in subsidiaries
|
|
|
10,864,783
|
|
|
|
-
|
|
|
|
(10,864,783
|
)
|
|
|
-
|
|
Goodwill
|
|
|
-
|
|
|
|
58,000
|
|
|
|
-
|
|
|
|
58,000
|
|
Other assets
|
|
|
53,726
|
|
|
|
-
|
|
|
|
-
|
|
|
|
53,726
|
|
Total assets
|
|
$
|
22,520,125
|
|
|
$
|
44,949,374
|
|
|
$
|
(10,929,452
|
)
|
|
$
|
56,540,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Line of credit
|
|
$
|
1,479,848
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,479,848
|
|
Current portion of WV EDA Bonds
|
|
|
-
|
|
|
|
1,390,000
|
|
|
|
-
|
|
|
|
1,390,000
|
|
Other current liabilities
|
|
|
2,387,916
|
|
|
|
6,475,985
|
|
|
|
(650,894
|
)
|
|
|
8,213,007
|
|
Current liabilities
|
|
|
3,867,764
|
|
|
|
7,865,985
|
|
|
|
(650,894
|
)
|
|
|
11,082,855
|
|
Notes payable and other debts
|
|
|
5,118,125
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,118,125
|
|
Accrued interest
|
|
|
1,510,193
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,510,193
|
|
Non-current lease liabilities
|
|
|
-
|
|
|
|
915,170
|
|
|
|
-
|
|
|
|
915,170
|
|
WV EDA bonds
|
|
|
-
|
|
|
|
29,817,426
|
|
|
|
-
|
|
|
|
29,817,426
|
|
Total liabilities
|
|
|
10,496,082
|
|
|
|
38,598,581
|
|
|
|
(650,894
|
)
|
|
|
48,443,769
|
|
Redeemable preferred stock
|
|
|
726,553
|
|
|
|
-
|
|
|
|
-
|
|
|
|
726,553
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to parent
|
|
|
2,024,143
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,024,143
|
|
Attributable to non-controlling interests
|
|
|
9,273,347
|
|
|
|
6,350,793
|
|
|
|
(10,278,558
|
)
|
|
|
5,345,582
|
|
Stockholders’ equity
|
|
|
11,297,490
|
|
|
|
6,350,793
|
|
|
|
(10,278,558
|
)
|
|
|
7,369,725
|
|
Total liabilities and stockholders’ equity
|
|
$
|
22,520,125
|
|
|
$
|
44,949,374
|
|
|
$
|
(10,929,452
|
)
|
|
$
|
56,540,047
|
|
Condensed Consolidating Statement of
Operations for the three months ended September 30, 2019
|
|
Parent
and other
Subsidiaries
|
|
|
Entsorga
West
Virginia LLC
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Revenue
|
|
$
|
816,870
|
|
|
$
|
609,905
|
|
|
$
|
-
|
|
|
$
|
1,426,775
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HEBioT
|
|
|
-
|
|
|
|
786,680
|
|
|
|
-
|
|
|
|
786,680
|
|
Rental, service and maintenance expense
|
|
|
176,651
|
|
|
|
-
|
|
|
|
-
|
|
|
|
176,651
|
|
Equipment sales
|
|
|
17,776
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,776
|
|
Selling, general and administrative
|
|
|
1,203,519
|
|
|
|
246,026
|
|
|
|
-
|
|
|
|
1,449,545
|
|
Depreciation and amortization
|
|
|
120,899
|
|
|
|
490,469
|
|
|
|
-
|
|
|
|
611,368
|
|
Total operating expenses
|
|
|
1,518,845
|
|
|
|
1,523,175
|
|
|
|
-
|
|
|
|
3,042,020
|
|
Loss from operations
|
|
|
(701,975
|
)
|
|
|
(913,270
|
)
|
|
|
-
|
|
|
|
(1,615,245
|
)
|
Other (income) expenses, net
|
|
|
(180,837
|
)
|
|
|
600,402
|
|
|
|
-
|
|
|
|
419,565
|
|
Net loss
|
|
$
|
(521,138
|
)
|
|
$
|
(1,513,672
|
)
|
|
$
|
-
|
|
|
$
|
(2,034,810
|
)
|
BioHiTech Global, Inc. and
Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2020 and 2019
and as of September 30, 2020 and December 31, 2019
Condensed Consolidating Statement of
Operations for the nine months ended September 30, 2019
|
|
Parent
and other
Subsidiaries
|
|
|
Entsorga
West
Virginia LLC
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Revenue
|
|
$
|
2,325,742
|
|
|
$
|
886,947
|
|
|
$
|
-
|
|
|
$
|
3,212,689
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HEBioT
|
|
|
-
|
|
|
|
1,309,176
|
|
|
|
-
|
|
|
|
1,309,176
|
|
Rental, service and maintenance expense
|
|
|
508,164
|
|
|
|
-
|
|
|
|
-
|
|
|
|
508,164
|
|
Equipment sales
|
|
|
56,502
|
|
|
|
-
|
|
|
|
-
|
|
|
|
56,502
|
|
Selling, general and administrative
|
|
|
4,678,415
|
|
|
|
771,867
|
|
|
|
-
|
|
|
|
5,450,282
|
|
Depreciation and amortization
|
|
|
369,843
|
|
|
|
980,937
|
|
|
|
-
|
|
|
|
1,350,780
|
|
Total operating expenses
|
|
|
5,612,924
|
|
|
|
3,061,980
|
|
|
|
-
|
|
|
|
8,674,904
|
|
Loss from operations
|
|
|
(3,287,182
|
)
|
|
|
(2,175,033
|
)
|
|
|
-
|
|
|
|
(5,462,215
|
)
|
Other expenses
|
|
|
273,851
|
|
|
|
1,361,221
|
|
|
|
86,362
|
|
|
|
1,721,434
|
|
Net loss
|
|
$
|
(3,561,033
|
)
|
|
$
|
(3,536,254
|
)
|
|
$
|
(86,362
|
)
|
|
$
|
(7,183,649
|
)
|
Condensed Consolidating Statement of Cash Flows for the nine
months ended September 30, 2019
|
|
Parent
and other
Subsidiaries
|
|
|
Entsorga
West
Virginia LLC
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Cash flows used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(3,561,033
|
)
|
|
$
|
(3,536,254
|
)
|
|
$
|
(86,362
|
)
|
|
$
|
(7,183,649
|
)
|
Non-cash adjustments to reconcile net loss to net cash used in operations
|
|
|
1,153,022
|
|
|
|
1,064,563
|
|
|
|
86,362
|
|
|
|
2,303,947
|
|
Changes in operating assets and liabilities
|
|
|
(697,598
|
)
|
|
|
(440,212
|
)
|
|
|
-
|
|
|
|
(1,137,810
|
)
|
Net cash used in operations
|
|
|
(3,105,609
|
)
|
|
|
(2,911,903
|
)
|
|
|
-
|
|
|
|
(6,017,512
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow used in investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction of HEBioT facility and acquisitions of equipment
|
|
|
98
|
|
|
|
(4,619,981
|
)
|
|
|
-
|
|
|
|
(4,619,883
|
)
|
Capital contribution to Entsorga West Virginia, LLC
|
|
|
(4,586,362
|
)
|
|
|
-
|
|
|
|
4,586,362
|
|
|
|
-
|
|
Other investing activities
|
|
|
2,256,987
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,256,987
|
|
Net cash used in investing activities
|
|
|
(2,329,277
|
)
|
|
|
(4,619,981
|
)
|
|
|
4,586,362
|
|
|
|
(2,362,896
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuances of debt and equity
|
|
|
6,418,057
|
|
|
|
4,586,362
|
|
|
|
(4,586,362
|
)
|
|
|
6,418,057
|
|
Repayments of debt
|
|
|
(6,846
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,846
|
)
|
Deferred financing costs incurred
|
|
|
-
|
|
|
|
(62,151
|
)
|
|
|
-
|
|
|
|
(62,151
|
)
|
Net cash provided by financing activities
|
|
|
6,411,211
|
|
|
|
4,524,211
|
|
|
|
(4,586,362
|
)
|
|
|
6,349,060
|
|
Effect of exchange rate on cash
|
|
|
12,721
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,721
|
|
Cash – beginning of period (restricted and unrestricted)
|
|
|
2,410,708
|
|
|
|
6,715,672
|
|
|
|
-
|
|
|
|
9,126,380
|
|
Cash – end of period (restricted and unrestricted)
|
|
$
|
3,399,754
|
|
|
$
|
3,707,999
|
|
|
$
|
-
|
|
|
$
|
7,107,753
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
The following discussion
and analysis should be read in conjunction with our unaudited interim condensed consolidated financial statements and related notes
appearing elsewhere in this report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking
statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated
in these forward-looking statements as a result of certain factors, including but not limited to those set forth under “Risk
Factors” in our Form 10-K, as filed with the United States Securities and Exchange Commission, or the SEC, on May 22, 2020.
Cautionary Note Regarding Forward-Looking Statements
The information in
this report contains forward-looking statements. All statements other than statements of historical fact made in this report are
forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial
position are forward-looking statements. These forward-looking statements can be identified by the use of words such as “believes,”
“estimates,” “intends”, “plans”, “could,” “possibly,” “probably,”
anticipates,” “projects,” “expects,” “may,” “will,” or “should,”
“designed to,” “designed for,” or other variations or similar words or language. No assurances can be given
that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management’s
current expectations and are inherently uncertain. Our actual results may differ significantly from management’s expectations.
Although these forward-looking
statements reflect the good faith judgment of our management, such statements can only be based upon facts and factors currently
known to us. Forward-looking statements are inherently subject to risks and uncertainties, many of which are beyond our control.
As a result, our actual results could differ materially from those anticipated in these forward-looking statements as a result
of various factors, including those set forth below under the caption “Risk Factors.” For these statements, we claim
the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
You should not unduly rely on these forward-looking statements, which speak only as of the date on which they were made. They give
our expectations regarding the future but are not guarantees. We undertake no obligation to update publicly or revise any forward-looking
statements, whether as a result of new information, future events or otherwise, unless required by law.
Impact of COVID-19
In March 2020,
the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread throughout
the United States and globally and more recently in the United States there has been an increase in cases reported. During October
and November 2020 a resurgence in cases and hospitalizations has occurred. The Company is monitoring the near term and longer term
impacts of COVID-19 and the related business and travel restrictions and changes to behavior intended to reduce its spread, and
its impact on operations, financial position, cash flows, inventory, supply chains, purchasing trends, customer payments, and the
industry in general, in addition to the impact on its employees. Due to the development and fluidity of this situation, the magnitude
and duration of the pandemic and its impact on the Company’s operations, liquidity and financial performance will depend
on certain developments, including duration, spread and reemergence of the outbreak, its impact on our customers, supply chain
partners and employees, and the range of governmental and community reactions to the pandemic, which are uncertain and cannot be
fully predicted at this time.
As a result of COVID-19,
the implementation of the Company’s contract with Carnival Corporation (“Carnival”) had been delayed, although
during the third quarter of 2020 Carnival recommenced purchasing activity with the Company making initial deliveries at the end
of September 2020. As of October 31,2020, the Company has unfulfilled equipment purchase orders from Carnival amounting to approximately
$2,100,000 (in addition to approximately $600,000 of shipments during October 2020). It is anticipated that many of these orders
will be fulfilled during the fourth quarter of 2020. Additionally, the operations of some customers in the restaurant and hospitality
industries have been temporarily interrupted due to governmental actions. For certain existing restaurant and hospitality customers,
the Company has provided a deferral of recurring rental payments for a short time and have modified the rental agreements to extend
the term by the period deferred. These actions placed a strain on the Company’s cash flows during the initial wave of COVID-19,
resulting in the Company executing on cost controls and cash preservation practices that included reducing executive cash compensation,
laying off non-essential employees, limiting expenses and disbursements, as well as extending vendor payments. It is unclear how
the second wave that started in October 2020 will impact the Company.
During the third quarter
of 2020 the Company raised $8,437,480 through an underwritten common stock offering and has subsequently concluded the executive
deferred compensation plan and has rehired some of its employees that had been laid off.
Company Overview
The Company’s
mission is to reduce the environmental impact of the waste management industry through the development and deployment of cost-effective
technology solutions. The Company’s suite of technologies includes on-site biological processing equipment for food waste,
patented processing facilities for the conversion of municipal solid waste into an E.P.A. recognized renewable fuel, and proprietary
real-time data analytics tools to reduce food waste generation. These unique proprietary solutions may enable certain businesses
and municipalities of all sizes to lower disposal costs while having a positive impact on the environment. When used individually
or in combination, the Company’s solutions can reduce the carbon footprint associated with waste transportation, repurpose
non-recyclable plastics, and significantly reduce landfill usage.
Revolution Series™ Digesters
The Company currently
markets an aerobic digestion technology solution for the disposal of food waste at the point of generation. Its line of Revolution
Series Digesters has been described as self-contained, robotic digestive systems that are as easy to install as a standard dishwasher
with no special electrical or plumbing requirements. Units range in size depending upon capacity, with the smallest unit approximately
the size of a residential washing machine. The digesters utilize a biological process to convert food waste into a liquid that
is safe to discharge down an ordinary drain. This process can result in a substantial reduction in costs for customers including
restaurants, grocery stores, cruise lines and hotel/hospitality companies by eliminating the transportation and logistics costs
associated with food waste disposal. The process also reduces the greenhouse gases associated with food-waste transportation and
decomposition in landfills that have been linked to climate change. The Company offers its Revolution Series Digesters in several
sizes targeting small to mid-sized food waste generators with both sale and rental options that are often more economical than
traditional disposal methods. The Revolution Series Digesters are manufactured and assembled in the United States.
In an effort to expand
the capabilities of its digesters, the Company developed a sophisticated IoT technology platform to provide its customers with
transparency into their waste generation and operational practices. This patented process collects weight related data from the
digesters to deliver real-time data that provides valuable information that when analyzed, can improve efficiency and validate
corporate sustainability efforts. The Company provides its IoT platform through a SaaS (“Software as a Service”) model
that is either bundled in its rental agreements or sold through a separate annual software license. Prior to the launch of its
Revolution Series Digesters, the Company marketed earlier generations of its digesters under the Eco-Safe brand. These units were
larger sized and typically marketed to mid- and large-sized food waste generators, including the Federal Government. The Company
continues to add new capacity sizes to its line of Revolution Series Digesters to meet customer needs.
As a result of COVID-19,
the implementation of the Company’s contract with Carnival Corporation (“Carnival”) had been delayed, although
during the third quarter of 2020 Carnival recommenced purchasing activity with the Company making initial deliveries at the end
of September 2020. As of October 31,2020, the Company has unfulfilled equipment purchase orders from Carnival amounting to approximately
$2,100,000 (in addition to approximately $600,000 of shipments during October 2020). It is anticipated that many of these orders
will be fulfilled during the fourth quarter of 2020. Additionally, the operations of some customers in the restaurant and hospitality
industries have been temporarily interrupted due to governmental actions. For certain existing restaurant and hospitality customers,
the Company has provided a deferral of recurring rental payments for a short time and have modified the rental agreements to extend
the term by the period deferred.
HEBioT Resource Recovery Technology
The Company expanded
its technology business in 2016 through the acquisition of certain development rights to a patented Mechanical Biological Treatment
(“MBT”) technology developed by a European engineering firm that relies upon High Efficiency Biological Treatment (“HEBioT”)
to process waste at the municipal or enterprise level. The technology results in a substantial reduction in landfill usage by converting
a significant portion of intake, including organic waste and non-recyclable plastics, into a United States EPA recognized alternative
fuel that can be used as a partial replacement for coal. The Company is currently exploring additional uses for its solid recovered
fuel (“SRF”) such as fuel for cogeneration and as a feedstock for bio-plastics.
The Company also, through
a series of transactions in 2017 and 2018, acquired a controlling interest in the Nation’s first municipal waste processing
facility utilizing the HEBioT technology located in Martinsburg, West Virginia (the “Martinsburg Facility”). The Martinsburg
Facility, which commenced operations in 2019, is capable of processing up to 110,000 tons of mixed municipal waste annually. At
full capacity, the Martinsburg Facility can achieve an annual savings of over 2.3 million cubic feet of landfill space and eliminate
many of the greenhouse gases associated with landfilling that waste. The Company plans to build additional HEBioT facilities in
the coming years and is currently in the permitting process to build a second facility in New York State.
Combined Offering
The Company’s
suite of products and services positions it as a leading provider of cost-effective, technology-based alternatives to traditional
waste disposal in the United States. The use of the Company’s technology solutions independently or in combination, can help
its customers meet sustainability goals by achieving a significant reduction in greenhouse gases associated with waste transportation
and landfilling. In addition, the repurposing of municipal waste into a cleaner burning, EPA recognized, renewable fuel can further
reduce potentially harmful emissions associated with traditional means of disposal. The overall reduction in carbon and other greenhouse
gases that are linked to climate change that could be achieved through the utilization of the Company’s technology can serve
as a model for the future of waste disposal in the United States.
New Product Offering
In addition to the
Company’s products focused on reducing the environmental impact of the waste management industry through the development
and deployment of cost-effective technology solutions, as a result of symmetry with our customers and prospects and a new demand
for post COVID-19 environmental technologies, on May 12, 2020, the Company entered into an agreement with Altapure, LLC (“Altapure”).
Altapure is a technology developer and manufacturer of ultrasonic based disinfecting products, to distribute its patented line
of environmentally-friendly, high-level disinfecting products, including its newest product, the AP-4™, an enhanced, automated
and touchless high-level disinfection sub-micron aerosol system providing a safe process and rapid elimination of spores, viruses,
and vegetative bacteria, such as but not limited to: COVID-19, Acinetobacter baumannii, Pseudomonas aeruginosa, VRE, MRSA, Bacillus
atrophaeus, Geobacillus stearothermophilus, Polio virus, C. auris and Clostridium difficile (C. difficile); and commenced live
product demonstrations in June 2020 and sold its first unit in October 2020.
Results of operations for the three months
ended September 30, 2020
compared to the three months ended September
30, 2019
Overview
|
|
Three Months Ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
742,877
|
|
|
$
|
1,426,775
|
|
Operating expenses
|
|
|
4,660,333
|
|
|
|
3,042,020
|
|
Loss from operations
|
|
|
(3,917,456
|
)
|
|
|
(1,615,245
|
)
|
Other expenses
|
|
|
1,023,057
|
|
|
|
419,565
|
|
Net loss
|
|
$
|
(4,940,513
|
)
|
|
$
|
(2,034,810
|
)
|
Revenue decreased $683,898
(47.9%) due to a reconfiguration process conducted at the HEBioT facility during the quarter by its new management team that temporarily
reduced production causing its revenue to decrease by 59.3% prior to a $247,649 negative adjustment in previously estimated take
or pay contract revenue, offset in-part by a 30.0% increase in overall digester sales, rentals and service, while recognizing lower
(90.0%) management advisory fees as the Company reduces the level of support provided under the agreement in order to maintain
adequate focus on the Company’s core services.
Operating expenses increased by $1,618,313 (53.2%) to $4,660,333
for the third quarter as compared to the quarter of 2019 due primarily to an impairment expense of $917,420 relating to costs associated
with the construction of the HEBioT facility, a $159,130 (20.2%) increase in HEBioT production costs and a $474,748 (32.8%) increase
in selling general and administrative expenses. Equipment sales costs within operating costs increased $153,226 due to the increased
level of sales.
The loss from operations
increased by $2,302,211 (142,5%) as a result of the $683,898 decrease in revenues and by increased operating expenses.
Net other expenses
increased by $603,492 (143.8%) primarily due a non-recurring gain in 2019. Excluding the 2019 gain, net other operating expenses
increased by $40,875 (4.2%).
Net loss increased
by $2,905,703 (142.8%) ($1,988,283 (97.7%), excluding the impairment charge) due to the increase in operating loss and the increase
in other expenses.
Revenue and Related Expenses
|
|
Three Months Ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
HEBioT (related entity)
|
|
$
|
625
|
|
|
$
|
609,905
|
|
Rental, service and maintenance
|
|
|
423,996
|
|
|
|
489,555
|
|
Equipment sales
|
|
|
293,876
|
|
|
|
62,565
|
|
Management advisory and other fees (related entity)
|
|
|
24,380
|
|
|
|
264,750
|
|
Total revenue
|
|
|
742,877
|
|
|
|
1,426,775
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
HEBioT processing (related entity)
|
|
|
945,810
|
|
|
|
786,680
|
|
Rental, service and maintenance
|
|
|
139,665
|
|
|
|
176,651
|
|
Equipment sales
|
|
|
171,002
|
|
|
|
17,776
|
|
Total related expenses
|
|
|
1,256,477
|
|
|
|
981,107
|
|
Contribution
|
|
|
(513,600
|
)
|
|
|
445,668
|
|
Contribution margins
|
|
|
|
|
|
|
|
|
HEBioT (related entity)
|
|
|
n.m.
|
|
|
|
(29.0
|
)%
|
Rental, service and maintenance
|
|
|
67.1
|
%
|
|
|
63.9
|
|
Equipment sales
|
|
|
41.8
|
|
|
|
71.6
|
|
HEBioT
– During the third quarter of 2020, a new management team was put in place at the HEBioT facility. This new
team conducted a full analysis of the operation to determine ways to improve efficiencies, streamline operations and achieve planned
capacity. During this process, certain mechanical and electrical processes and components were reconfigured to improve processing,
capacity and to allow for potential additional revenue streams to be introduced As such, production was significantly reduced while
this reconfiguration process took place during the quarter and through October 2020. With that reconfiguration process having been
completed in the fourth quarter, the facility is returning to normal operations. As a result of the reduced production during the
reconfiguration process, revenue decreased by $361,631 (59.3%) during the third quarter of 2020 to $248,274 (prior to a $247,649
negative adjustment in previously estimated take or pay contract revenue) as compared with $609,905 during the third quarter of
2019. As the nature of the operating costs associated with the plant include a significant level of fixed costs, during the third
quarter of 2020, HEBioT processing cost totaled $945,810, an increase of $159,130 (20%) over the third quarter of 2019.
Rental, service
and maintenance – Rental, service and maintenance revenue decreased by $65,559 (13.4%) to $423,996 in the third quarter of 2020, as compared to $489,555 in the third quarter of 2019. This decrease was primarily
due to a decrease of $13,435 (3.6%) in rental income during the third quarter of 2020 as compared to the third quarter of 2019
as a result of customers that were impacted by COVID-19 and a decrease of $12,380 (15.4%) in the third quarter of 2020 in parts,
consumables and other digester related sales and services (also impacted by COVID-19) as compared to the third quarter of 2019
and a $39,744 (100.0%) decrease resulting from non-recurring consulting that occurred in 2019. Rental, service and maintenance
expenses decreased by $36,986 (20.9%) primarily due to decreased third party servicer costs and in other service and related areas.
Equipment sales
– Equipment sales increased by $231,311 (369.7%) to $293,876 in the third quarter of 2020, as compared to $62,565 in
the third quarter of 2019. All of the equipment sales in the third quarter of 2020 were to Carnival Cruise Lines under their master
purchase contract.
Management advisory
and other fees – In order to maintain adequate focus on the Company’s core services as demand continues to grow
for the Company’s products, it has reduced the level of support provided under a management advisory agreement with Gold
Medal. As a result, management advisory and other fees decreased by $225,000 (90.0%) to $25,000 in the second quarter of 2020,
as compared to $240,370 in the third quarter of 2020. Effective April 1, 2020, the annual fee was reduced to $100,000 per year.
As the services are provided by the executive management of the Company, no incremental expenses are incurred or allocated as expenses
of the services.
Selling, General and Administrative
Expenses
|
|
Three Months Ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Staffing
|
|
$
|
947,197
|
|
|
$
|
900,358
|
|
Professional fees
|
|
|
270,713
|
|
|
|
156,878
|
|
Other expenses
|
|
|
686,212
|
|
|
|
361,145
|
|
Other costs
|
|
|
20,171
|
|
|
|
31,164
|
|
Total selling, general and administrative expenses
|
|
$
|
1,924,293
|
|
|
$
|
1,449,545
|
|
Staffing –
Staffing expense increased by $46,839 (5.2%) to $947,197 in the third quarter of 2020 as compared to $900,358 in the third quarter
of 2019 and decreased by $107,926 as compared to $1,055,123 in the second quarter of 2020. The increase from 2019 to 2020 was the
result of a $149,286 increase in stock based compensation, offset in part by a $102,447 decrease in cash based payroll, fringe
and taxes, while the decrease between the third and second quarter was the result of a $68,928 decrease in stock based compensation
and a decrease of $38,998 in cash based payroll, fringe and taxes.
Professional fees
– Professional fees increased by $113,835 (72.6%) to $270,713 in the third quarter of 2020, as compared to $156,878 in
the third quarter of 2019. The increase from 2019 was primarily the result of an increase in legal expenses of $85,390 (223.6%)
to $123,578 in the third quarter of 2020, as compared to $38,188 in the third quarter of 2019 relating to several strategic initiatives
and increase in social media consulting of $25,500 in the third quarter of 2020, an increase of 100%.
Other expenses –
Other expenses increased by $325,067 (90.0%) to $686,212 in the third quarter of 2020, as compared to $361,145 in the third quarter
of 2019. The majority of the increase ($188,894) was the result of increased insurance costs at the HEBioT facility and the Company’s
Directors and Officers insurance. In addition, during the third quarter of 2020, the Company initiated transitioning a new management
team into the HEBioT facility that resulted in a $62,085 increase in consulting and management fees.
Impairment
Expense
During the third quarter
of 2020, the Company recognized an impairment expense of $917,420 relating to services that were initially contracted for in connection
with the constructions, equipping and initial operation set up of the HEBioT facility. These services were not provided as contracted
and the Company incurred costs in completing the required services. The impairment expense is the result of further claims made
by the contractor that, if successful against the Company’s counterclaims, would not result in an increase in the HEBioT
facility cost basis as the Company has already mitigated for those services that were not provided.
Depreciation and Amortization
Depreciation and amortization
decreased by $49,225 (8.1%) to $562,143 in the third quarter of 2020, as compared to $611,368 in the third quarter of 2019. This
decrease was primarily the result of finalizing the allocation of costs of the HEBioT facility between the plant and equipment,
which resulted in a reduction in depreciation expense.
Other Expenses
Other expenses of $1,023,057
during the third quarter of 2020 was comprised of net interest expense, as compared to net interest expense of $933,022 for the
third quarter of 2019, an increase of $90,035, of which $46,072 is the result of a decrease in interest income relating to trust
funds associated with the HEBioT facility bonds. Interest expense has also increased as a result of increases in amortization of
deferred financing costs and accretion of debt discounts that are calculated on an effective interest method, as well as increases
resulting from compounding of interest on an increased balance of non-current accrued interest. Other expense in the third quarter
of 2019 also included a $562,617 gain on the sale of an affiliate investment and a $49,160 expense relating to warrant valuations.
Results of operations for the nine months
ended September 30, 2020
compared to the nine months ended September
30, 2019
Overview
|
|
Nine Months Ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
3,376,150
|
|
|
$
|
3,212,689
|
|
Operating expenses
|
|
|
12,052,802
|
|
|
|
8,674,904
|
|
Loss from operations
|
|
|
(8,676,652
|
)
|
|
|
(5,462,215
|
)
|
Other expenses
|
|
|
3,043,045
|
|
|
|
1,721,434
|
|
Net loss
|
|
$
|
(11,719,697
|
)
|
|
$
|
(7,183,649
|
)
|
Revenue increased $163,461
(5.1%) due to a $304,122 increase in the combined digester equipment sales and rental, service and maintenance revenues and an
increase in HEBioT revenues of $496,709 (56.0%) primarily driven by the first half of 2020 as HEBioT revenue decreased during a
reconfiguration process conducted at the HEBioT facility during the third quarter the by its new management team that temporarily
reduced production causing its revenue to decrease, as well as by a $247,649 negative adjustment in previously estimated take or
pay contract revenue during the third quarter of 2020, offset by a decrease in management advisory fees of $637,370 (83.7%). The
overall contribution of HEBioT and digesters decreased $1,610,812 (120.3%) primarily due to the decrease in HEBioT during the third
quarter and HEBioT costs during the third quarter reconfiguration process, while the digester contribution was flat.
Operating expenses
increased by $3,377,898 (38.9%) in total, including an impairment expense of $917,420, with revenue related costs increasing $1,774,273
(94.7%), selling general and administrative increasing $289,876 (5.3%) and depreciation and amortization increasing by $396,329
(29.3%).
The loss from operations
increased by $3,214,437 (58.8%) as a result of the decrease in third quarter revenue without offsetting reductions in costs at
the HEBioT facility during recommissioning, a decrease in management advisory fees and an increase in other operating expenses,
including the $917,420 impairment expense.
Other expenses increased
by $1,321,611 (76.8%) primarily due to an increase in interest related to the non-recourse municipal bond financing the HEBioT
facility of $618,110 which was under construction in the first quarter of 2019 and a $562,617 gain on the sale of an affiliate
investment during 2019.
Net loss increased
by $4,536,048 (63.1%) due to the increase in operating loss and the increase in other expenses.
Revenue and Related Expenses
|
|
Nine Months Ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
HEBioT (related entity)
|
|
$
|
1,383,656
|
|
|
$
|
886,947
|
|
Rental, service and maintenance
|
|
|
1,251,122
|
|
|
|
1,426,193
|
|
Equipment sales
|
|
|
616,992
|
|
|
|
137,799
|
|
Management advisory and other fees (related entity)
|
|
|
124,380
|
|
|
|
761,750
|
|
Total revenue
|
|
|
3,376,150
|
|
|
|
3,212,689
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
HEBioT processing (related entity)
|
|
|
2,778,514
|
|
|
|
1,309,176
|
|
Rental, service and maintenance
|
|
|
552,195
|
|
|
|
508,164
|
|
Equipment sales
|
|
|
317,406
|
|
|
|
56,502
|
|
Total related expenses
|
|
|
3,648,115
|
|
|
|
1,873,842
|
|
Contribution
|
|
|
(271,965
|
)
|
|
|
1,338,847
|
|
Contribution margins
|
|
|
|
|
|
|
|
|
HEBioT (related entity)
|
|
|
(100.8
|
)%
|
|
|
(47.6
|
)%
|
Rental, service and maintenance
|
|
|
55.9
|
|
|
|
64.4
|
|
Equipment sales
|
|
|
48.6
|
|
|
|
59.0
|
|
HEBioT
– The HEBioT facility commenced initial operations in the second quarter of 2019. Through the six months ended
June 30, 2020 total revenue amounted to $1,383,031 and related costs amounted to $1,832,704, resulting in a negative contribution
of $449,673. During the third quarter of 2020, a new management team was put in place at the HEBioT facility. This new
team conducted a full analysis of the operation to determine ways to improve efficiencies, streamline operations and achieve planned
capacity. During this process, certain mechanical and electrical processes and components were reconfigured to improve processing,
capacity and to allow for potential additional revenue streams to be introduced As such, production was significantly reduced while
this reconfiguration process took place during the quarter and through October 2020. With that reconfiguration process having been
completed in the fourth quarter, the facility is returning to normal operations. As a result of the reduced production during the
reconfiguration process, revenue decreased by $361,631 (59.3%) (prior to a $247,649 negative adjustment in previously estimated
take or pay contract revenue) during the third quarter of 2020 to $248,274 as compared with $609,905 during the third quarter of
2019. As the nature of the operating costs associated with the plant include a significant level of fixed costs, during the third
quarter of 2020, HEBioT processing cost totaled $945,810, an increase of $159,130 (20%) over the third quarter of 2019.
Rental, service
and maintenance – Rental, service and maintenance revenue decreased by $175,071 (12.3%) to $1,251,122 during the
nine months ended September 30, 2020, as compared $1,426,193 during the nine months ended September 30, 2019. Rental contract revenue
decreased by $6,755 (0.6%) to $1,054,534 during the nine months ended September 30, 2020, as compared $1,061,289 during the nine
months ended September 30, 2019, representing 84.3% and 74.4% of the category for the nine months ended September 30, 2020 and
2019, respectively. The remainder of the category, service and maintenance related revenue decreased by $168,316 (46.1%) to $196,588
during the nine months ended September 30, 2020, as compared $364,904 during the nine months ended September 30, 2019. These decreases
are primarily driven by COVID-19 restrictions on many of our customers during 2020. Rental, service and maintenance expenses increased
by $44,031 (8.7%) primarily due to increased personnel costs in anticipation of staffing up for the Carnival Cruise contract that
were reversed in the second quarter of 2020 but reinitiated during the third quarter of 2020.
Equipment sales
– During the nine months ended September 30, 2020 equipment sales revenue increased by $479,193 (347.7%) to $616,992
as compared to $137,799 during the nine months ended September 30, 2019. This increase was primarily driven by the re-initiation
of sales under our contract with Carnival Corporation during the third quarter. Sales expense, like wise increased by $260,904
(461.8%) to $317,406 during the nine months ended September 30, 2020, as compared to $56,502 during the nine months ended September
30, 2019. The contribution margin of 48.6% is in-line with historical rates for new equipment sales.
Management advisory
and other fees – In order to maintain adequate focus on the Company’s core services as demand continues to grow
for the Company’s products, it has reduced the level of support provided under a management advisory agreement with Gold
Medal. As a result, management advisory and other fees decreased by $637,370 (83.7%) to $124,380 during the nine months ended September
30, 2020, as compared to $761,750 during the nine months ended September 30, 2019. Effective April 1, 2020, the annual fee was
reduced to $100,000 per year. As the services are provided by the executive management of the Company, no incremental expenses
are incurred or allocated as expenses of the services.
Selling, General and Administrative
Expenses
|
|
Nine Months Ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Staffing
|
|
$
|
3,080,856
|
|
|
$
|
3,233,617
|
|
Professional fees
|
|
|
929,771
|
|
|
|
809,706
|
|
Other expenses
|
|
|
1,485,121
|
|
|
|
925,800
|
|
Other costs
|
|
|
244,410
|
|
|
|
481,159
|
|
Total selling, general and administrative expenses
|
|
$
|
5,740,158
|
|
|
$
|
5,450,282
|
|
Staffing –
Staffing expense decreased by $152,761 (4.7%) to $3,080,856 during the nine months ended September 30, 2020, as compared to $3,233,617
during the nine months ended September 30, 2019. The decrease from 2019 to 2020 was the result of a $328,090 (45.0%) increase in
stock based compensation, offset by a $480,851 (19.2%) decrease in cash based payroll, fringe and taxes.
Professional fees
– Professional fees increased by $120,065 (14.8%) to $929,771 during the nine months ended September 30, 2020, as compared
to $809,706 during the nine months ended September 30, 2019. This increase was primarily the result of an increase in investor
relations, public relations, strategy and social media of $149,735 to $119,684 during the nine months ended September 30, 2020,
as compared to a negative $(30,051) during the nine months ended September 30, 2019 (2019 included a $45,000 favorable decrease
resulting from the settlement of a litigation matter), an increase in investment banking of $76,148 (52.7%) to $220,565 during
the nine months ended September 30, 2020 driven by strategic initiatives, as compared to $144,418 during the nine months ended
September 30, 2019, and an increase in legal expenses of $61,804 (25.3%) to $306,004 during the nine months ended September 30,
2020 driven by strategic initiatives and other general matters, as compared to $244,200 during the nine months ended September
30, 2019. These increases were offset in-part by a $167,622 (37.2%) decrease in accounting fees due to reduced acquisition activity
during the nine months ended September 30, 2020, as compared to $451,139 during the nine months ended September 30, 2019.
Other expenses –
Other expenses increased by $559,321 (60.4%) to 1,485,121 during the nine months ended September 30, 2020, as compared to $925,800
during the nine months ended September 30, 2019. The majority of the increase ($271,658) was the result of increased insurance
costs at the HEBioT facility and the Company’s Directors and Officers insurance. In addition, transitioning a new management
team into the HEBioT facility was the primary factor that resulted in a $135,493 increase in consulting and management fees.
Other costs –
Other costs decreased by $236,749 (49.2%) to $244,410 during the nine months ended September 30, 2020, as compared to $481,159
during the nine months ended September 30, 2019. This increase was primarily the result of an increase of $81,155 in provisions
for bad debts during the nine months ended September 30, 2020 offset by a non-recurring loss on the write-off of a HEBioT facility
site amounting to $346,654 during the nine months ended September 30, 2019.
Impairment
Expense
During the third quarter
of 2020, the Company recognized an impairment expense of $917,420 relating to services that were initially contracted for in connection
with the constructions, equipping and initial operation set up of the HEBioT facility. These services were not provided as contracted
and the Company incurred costs in completing the required services. The impairment expense is the result of further claims made
by the contractor that, if successful against the Company’s counterclaims, would not result in an increase in the HEBioT
facility cost basis as the Company has already mitigated for those services that were not provided.
Depreciation and Amortization
Depreciation and amortization
increased by $396,329 (29.3%) to $1,747,109 during the nine months ended September 30, 2020, as compared to $1,350,780 during the
nine months ended September 30, 2019. This increase was primarily the result of the HEBioT facility becoming operational in the
second quarter of 2019, as no depreciation and amortization was expensed while the facility was under construction. Total depreciation
and amortization relating to the HEBioT facility increased by $392,067 to $1,373,004 during the nine months ended September 30,
2020, as compared to $980,937 during the nine months ended September 30, 2019.
Other Expenses
Other expenses of $3,043,045
during the nine months ended September 30, 2020 was comprised of net interest and expense, as compared to net interest expense
of $2,234,891 for the nine months ended September 30, 2019, an increase of $808,154, of which $618,110 is the result of an increase
in interest expense relating to the HEBioT facility, which in 2019 had capitalized the first quarter of interest as the facility
was under construction at that time. Interest expense has also increased as a result of increases in amortization of deferred financing
costs and accretion of debt discounts that are calculated on an effective interest method, as wells as increases resulting from
compounding of interest on an increased balance of non-current interest. Other expense in 2019 also included a $562,617 gain on
the sale of an affiliate investment and a $49,160 expense relating to warrant valuations.
Liquidity and Capital Resources
For the nine
months ended September 30, 2020, the Company had a consolidated net loss of $(11,719,697), incurred a consolidated loss from
operations of $8,676,652 and used net cash in consolidated operating activities of $7,510,689. At September 30, 2020,
consolidated total stockholders’ equity amounted to $7,067,372, consolidated stockholders’ equity attributable to
parent amounted to $4,912,578, and the Company had a consolidated working capital deficit of $9,460,515. While the Company
had not met certain of its senior secured note’s financial covenants as of September 30, 2020, the Company has
favorably renegotiated those covenants and has received a waiver for such non-compliance through September 30, 2020. Despite
its current compliance under the waiver, until such time as the Company regains compliance or receives a waiver of such
covenants for a year beyond the balance sheet date, under current GAAP accounting rules the senior secured notes amounting to
$4,408,514 have been classified as current debt. The Company does not yet have a history of financial profitability. In March
and April of 2020 the Company raised $1,560,450 through a private convertible preferred stock offering and on May 13, 2020
one of the Company’s subsidiaries was funded $421,300 through the Paycheck Protection Program. On July 27, 2020 the
Company used its Shelf Registration on Form S-3 to raise gross proceeds of $8,235,500 through an underwritten public
offering of 4,550,000 common shares at $1.81 per share. On August 11, 2020 the underwriter provided notice that they would be
exercising their over-allotment provision of the Underwriting Agreement to purchase an additional 682,500 shares of the
Company’s common stock at $1.81 per share for a gross purchase price of $1,235,325. The net proceeds to the Company of
the July 27, 2020 and August 11, 2020 offerings, after underwriter’s commission and other costs amounted to $8,437,480.
There is no assurance that the Company will continue to raise sufficient capital or debt to sustain operations or to pursue
other strategic initiatives or that such financing will be on terms that are favorable to the Company. These factors raise
substantial doubt about the Company’s ability to continue as a going concern.
Impact of COVID-19 on Liquidity and
Capital Resources
In March 2020,
the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread throughout
the United States and globally and more recently in the United States there has been an increase in cases reported. During October
and November 2020 a resurgence in cases and hospitalizations has occurred. The Company is monitoring the near term and longer term
impacts of COVID-19 and the related business and travel restrictions and changes to behavior intended to reduce its spread, and
its impact on operations, financial position, cash flows, inventory, supply chains, purchasing trends, customer payments, and the
industry in general, in addition to the impact on its employees. Due to the development and fluidity of this situation, the magnitude
and duration of the pandemic and its impact on the Company’s operations, liquidity and financial performance will depend
on certain developments, including duration, spread and reemergence of the outbreak, its impact on our customers, supply chain
partners and employees, and the range of governmental and community reactions to the pandemic, which are uncertain and cannot be
fully predicted at this time.
As a result of COVID-19,
the implementation of the Company’s contract with Carnival Corporation (“Carnival”) had been delayed, although
during the third quarter of 2020 Carnival recommenced purchasing activity with the Company making initial deliveries at the end
of September 2020. As of October 31,2020, the Company has unfulfilled equipment purchase orders from Carnival amounting to approximately
$2,100,000 (in addition to approximately $600,000 of shipments during October 2020). It is anticipated that many of these orders
will be fulfilled during the fourth quarter of 2020. Additionally, the operations of some customers in the restaurant and hospitality
industries have been temporarily interrupted due to governmental actions. For certain existing restaurant and hospitality customers,
the Company has provided a deferral of recurring rental payments for a short time and have modified the rental agreements to extend
the term by the period deferred. These actions placed a strain on the Company’s cash flows during the initial wave of COVID-19,
resulting in the Company executing on cost controls and cash preservation practices that included reducing executive cash compensation,
laying off non-essential employees, limiting expenses and disbursements, as well as extending vendor payments. It is unclear how
the second wave that started in October 2020 will impact the Company.
Cash
As of September 30,
2020 and December 31, 2019, the Company had unrestricted cash balances of $4,950,112 and $1,847,526, and restricted cash balances
of $3,933,586 and $3,689,426, respectively.
Borrowings and Debt
Contractual
Maturities of Senior Secured, Junior Promissory, Notes Payable and Long Term Debt — As of September 30, 2020,
excluding discounts and deferred finance costs, which are being amortized as interest expense, are as follow:
Year Ending December 31,
|
|
Amortizing
|
|
|
Non-
Amortizing
|
|
|
Total
|
|
2020 (Remaining)
|
|
$
|
1,061
|
|
|
$
|
23,406
|
|
|
$
|
24,467
|
|
2021
|
|
|
4,380
|
|
|
|
2,155,866
|
|
|
|
2,160,246
|
|
2022
|
|
|
3,821
|
|
|
|
2,717,028
|
|
|
|
2,720,849
|
|
2023
|
|
|
-
|
|
|
|
625,000
|
|
|
|
625,000
|
|
2024 and thereafter
|
|
|
-
|
|
|
|
1,044,477
|
|
|
|
1,044,477
|
|
Total
|
|
$
|
9,262
|
|
|
$
|
6,565,777
|
|
|
$
|
6,575,039
|
|
Entsorga
West Virginia, LLC WVEDA Solid Waste Disposal Revenue Bonds — As of September 30, 2020 the future sinking
fund payments are as follow:
Year Ending December 31,
|
|
2016 Issue
2026 Series
|
|
|
2016 Issue
2036 Series
|
|
|
2018 Issue
2036 Series
|
|
|
Total
|
|
2020 (remaining)
|
|
$
|
1,160,000
|
|
|
$
|
-
|
|
|
$
|
230,000
|
|
|
$
|
1,390,000
|
|
2021
|
|
|
1,215,000
|
|
|
|
-
|
|
|
|
255,000
|
|
|
|
1,470,000
|
|
2022
|
|
|
900,000
|
|
|
|
-
|
|
|
|
275,000
|
|
|
|
1,175,000
|
|
2023
|
|
|
965,000
|
|
|
|
-
|
|
|
|
300,000
|
|
|
|
1,265,000
|
|
2024 and thereafter
|
|
|
3,295,000
|
|
|
|
17,465,000
|
|
|
|
6,940,000
|
|
|
|
27,700,000
|
|
Total
|
|
$
|
7,535,000
|
|
|
$
|
17,465,000
|
|
|
$
|
8,000,000
|
|
|
$
|
33,000,000
|
|
Cash
Flows
Cash
Flows from Operating Activities
We
used $7,510,689 of cash in operating activities during the nine months ended September 30, 2020 as compared to a use of $6,017,512
during the nine months ended September 30, 2019. Our net loss during the nine months ended September 30, 2020 of $11,719,697 was
reduced by non-cash expenses of $5,118,515.
Cash
Flows from Investing Activities
Net cash used in investing
activities for the nine months ended September 30, 2020 amounted to $265,122, as compared to $2,362,896 in net cash used in investing
activities for the nine months ended September 30, 2019 which was primarily related to the construction of the HEBiot facility
and other HEBioT projects totaling $4,619,981, offset in part by proceeds of $2,250,000 from the sale of an investment in an affiliate.
Cash
Flows from Financing Activities
Cash
provided by financing activities for the nine months ended September 30, 2020 amounted to $11,140,686 and is primarily the result
net proceeds of $8,437,480 from an underwritten offering of common stock, net proceeds of $1,560,450 from a preferred stock issuance,
$421,300 in proceeds under the Payroll Protection Act and net advances amounting to $725,000 from related parties. During the comparable
2019 period, the Company received net proceeds of $3,035,557 from a registered common stock offering, $1,772,500 from a preferred
stock issuance, $1,400,000 investment by an affiliate in a consolidated subsidiary and $210,000 in advances from a related party.
Off Balance Sheet Arrangements
We have not entered
into any off-balance sheet arrangements during the three months ended September 30, 2020.