Item 1.
|
Financial Statements
|
BioHiTech Global, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive
Loss (Unaudited)
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
HEBioT (related party)
|
|
$
|
892,899
|
|
|
$
|
277,041
|
|
|
$
|
1,383,031
|
|
|
$
|
277,041
|
|
Rental, service and maintenance
|
|
|
356,033
|
|
|
|
448,937
|
|
|
|
827,126
|
|
|
|
936,638
|
|
Equipment sales
|
|
|
-
|
|
|
|
75,234
|
|
|
|
323,116
|
|
|
|
75,234
|
|
Management advisory and other fees (related party)
|
|
|
25,000
|
|
|
|
250,000
|
|
|
|
100,000
|
|
|
|
500,000
|
|
Total revenue
|
|
|
1,273,932
|
|
|
|
1,051,212
|
|
|
|
2,633,273
|
|
|
|
1,788,913
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HEBioT processing
|
|
|
1,020,277
|
|
|
|
493,546
|
|
|
|
1,832,704
|
|
|
|
493,546
|
|
Rental, service and maintenance
|
|
|
151,695
|
|
|
|
128,311
|
|
|
|
412,530
|
|
|
|
331,514
|
|
Equipment sales
|
|
|
-
|
|
|
|
38,726
|
|
|
|
146,404
|
|
|
|
38,726
|
|
Selling, general and administrative
|
|
|
1,897,442
|
|
|
|
1,706,324
|
|
|
|
3,815,865
|
|
|
|
4,032,686
|
|
Depreciation and amortization
|
|
|
569,764
|
|
|
|
609,973
|
|
|
|
1,184,966
|
|
|
|
739,412
|
|
Total operating expenses
|
|
|
3,639,178
|
|
|
|
2,976,880
|
|
|
|
7,392,469
|
|
|
|
5,635,884
|
|
Loss from operations
|
|
|
(2,365,246
|
)
|
|
|
(1,925,668
|
)
|
|
|
(4,759,196
|
)
|
|
|
(3,846,971
|
)
|
Other expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest (income)
|
|
|
(5,355
|
)
|
|
|
-
|
|
|
|
(17,622
|
)
|
|
|
-
|
|
Interest expense
|
|
|
1,025,319
|
|
|
|
962,004
|
|
|
|
2,037,610
|
|
|
|
1,301,868
|
|
Total other expenses
|
|
|
1,019,964
|
|
|
|
962,004
|
|
|
|
2,019,988
|
|
|
|
1,301,868
|
|
Net loss
|
|
|
(3,385,210
|
)
|
|
|
(2,887,672
|
)
|
|
|
(6,779,184
|
)
|
|
|
(5,148,839
|
)
|
Net loss attributable to non-controlling interests
|
|
|
(720,329
|
)
|
|
|
(819,031
|
)
|
|
|
(1,543,006
|
)
|
|
|
(1,130,732
|
)
|
Net loss attributable to Parent
|
|
|
(2,664,881
|
)
|
|
|
(2,068,641
|
)
|
|
|
(5,236,178
|
)
|
|
|
(4,018,107
|
)
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
(1,437
|
)
|
|
|
3,944
|
|
|
|
(30,136
|
)
|
|
|
5,197
|
|
Comprehensive loss
|
|
$
|
(2,666,318
|
)
|
|
$
|
(2,064,697
|
)
|
|
$
|
(5,266,314
|
)
|
|
$
|
(4,012,910
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Parent
|
|
$
|
(2,664,881
|
)
|
|
$
|
(2,068,641
|
)
|
|
$
|
(5,236,178
|
)
|
|
$
|
(4,018,107
|
)
|
Less – preferred stock dividends
|
|
|
(204,941
|
)
|
|
|
(164,308
|
)
|
|
|
(382,313
|
)
|
|
|
(292,227
|
)
|
Net loss – common shareholders
|
|
|
(2,869,822
|
)
|
|
|
(2,232,949
|
)
|
|
|
(5,618,491
|
)
|
|
|
(4,310,334
|
)
|
Net loss per common share - basic and diluted
|
|
$
|
(0.16
|
)
|
|
$
|
(0.15
|
)
|
|
$
|
(0.32
|
)
|
|
$
|
(0.29
|
)
|
Weighted average number of common shares outstanding - basic and diluted
|
|
|
17,437,068
|
|
|
|
14,927,846
|
|
|
|
17,406,788
|
|
|
|
14,872,597
|
|
See accompanying notes to unaudited interim condensed consolidated
financial statements.
BioHiTech Global, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
|
|
June 30,
2020
|
|
|
December 31,
2019
|
|
|
|
(Unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
342,182
|
|
|
$
|
1,847,526
|
|
Restricted cash
|
|
|
1,237,097
|
|
|
|
1,133,581
|
|
Accounts receivable, net of allowance for doubtful accounts of $128,321 and $170,038 as of June 30, 2020 and December 31, 2019, respectively (related entity $2,102,095 and $1,370,867 as of June 30, 2020 and December 31, 2019, respectively)
|
|
|
2,807,521
|
|
|
|
2,155,921
|
|
Inventory
|
|
|
352,467
|
|
|
|
467,784
|
|
Prepaid expenses and other current assets
|
|
|
179,906
|
|
|
|
126,357
|
|
Total Current Assets
|
|
|
4,919,173
|
|
|
|
5,731,169
|
|
Restricted cash
|
|
|
2,646,381
|
|
|
|
2,555,845
|
|
Equipment on operating leases, net
|
|
|
1,537,142
|
|
|
|
1,724,998
|
|
HEBioT facility, equipment, fixtures and vehicles, net
|
|
|
36,592,281
|
|
|
|
37,421,333
|
|
Operating lease right of use assets
|
|
|
1,304,142
|
|
|
|
945,047
|
|
License and capitalized MBT facility development costs
|
|
|
8,023,925
|
|
|
|
8,049,929
|
|
Goodwill
|
|
|
58,000
|
|
|
|
58,000
|
|
Other assets
|
|
|
38,799
|
|
|
|
53,726
|
|
Total Assets
|
|
$
|
55,119,843
|
|
|
$
|
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:
|
|
June 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 June 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 $3,727,095 and $2,531,034 as of June 30, 2020 and December 31, 2019, respectively)
|
|
|
6,036,103
|
|
|
|
4,688,339
|
|
Accrued interest payable
|
|
|
1,255,389
|
|
|
|
1,148,570
|
|
Accrued expenses and liabilities
|
|
|
1,832,068
|
|
|
|
1,926,965
|
|
Deferred revenue
|
|
|
99,563
|
|
|
|
89,736
|
|
Customer deposits
|
|
|
4,890
|
|
|
|
44,792
|
|
Note payable
|
|
|
-
|
|
|
|
100,000
|
|
Senior Secured Note, net of financing costs of $88,508 and unamortized discounts of $587,249 as of June 30, 2020
|
|
|
4,324,243
|
|
|
|
-
|
|
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
|
|
|
168,111
|
|
|
|
4,605
|
|
Total Current Liabilities
|
|
|
19,013,317
|
|
|
|
11,082,855
|
|
Junior note due to related party, net of unamortized discounts of $84,110 and $95,043 as of June 30, 2020 and December 31, 2019, respectively
|
|
|
960,367
|
|
|
|
949,434
|
|
Accrued interest (related party)
|
|
|
1,651,079
|
|
|
|
1,510,193
|
|
WV EDA Senior Secured Bonds payable, net of current portion, and financing costs of $1,719,392 and $1,792,574 as of June 30, 2020 and December 31, 2019, respectively
|
|
|
28,420,608
|
|
|
|
29,817,426
|
|
Payroll Protection Program Loan
|
|
|
257,461
|
|
|
|
-
|
|
Senior Secured Note, 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
|
|
|
1,220,780
|
|
|
|
915,170
|
|
Long-term debt, net of current portion
|
|
|
6,038
|
|
|
|
8,201
|
|
Total Liabilities
|
|
|
51,629,650
|
|
|
|
48,443,769
|
|
Series A redeemable convertible preferred stock, 333,401 shares designated and issued, and 145,312 outstanding as of June 30, 2020 and December 31, 2019
|
|
|
726,553
|
|
|
|
726,553
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
Stockholders' Equity (Deficit)
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; 3,209,210 and 3,179,120 designated as of June 30, 2020 and December 31, 2019; 1,936,214 and 1,922,603 issued as of June 30, 2020 and December 31, 2019; 869,792 and 856,181 outstanding as of June 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 June 30, 2020 and December 31, 2019
|
|
|
-
|
|
|
|
-
|
|
Series C Convertible preferred stock, 1,000,000 shares designated, 427,500 shares issued and outstanding as of June 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 and outstanding as of June 30, 2020 and December 31, 2019
|
|
|
1,505,262
|
|
|
|
1,505,262
|
|
Series E Convertible preferred stock, 714,519 shares designated: 714,519 shares issued, 264,519 outstanding as of June 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 June 30, 2020
|
|
|
1,507,408
|
|
|
|
-
|
|
Common stock, $0.0001 par value, 50,000,000 shares authorized, 17,809,592 and 17,300,899 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively
|
|
|
1,780
|
|
|
|
1,730
|
|
Additional paid in capital
|
|
|
50,267,673
|
|
|
|
49,597,059
|
|
Accumulated deficit
|
|
|
(58,056,529
|
)
|
|
|
(52,785,242
|
)
|
Accumulated other comprehensive (loss)
|
|
|
(13,002
|
)
|
|
|
(43,138
|
)
|
Stockholders’ (deficit) equity attributable to Parent
|
|
|
(1,038,936
|
)
|
|
|
2,024,143
|
|
Stockholders’ equity attributable to non-controlling interests
|
|
|
3,802,576
|
|
|
|
5,345,582
|
|
Total Stockholders’ Equity
|
|
|
2,763,640
|
|
|
|
7,369,725
|
|
Total Liabilities and Stockholders’ Equity
|
|
$
|
55,119,843
|
|
|
$
|
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)
|
|
Six Months Ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(6,779,184
|
)
|
|
|
(5,148,839
|
)
|
Adjustments to reconcile net loss to net cash used in operations:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,184,966
|
|
|
|
739,412
|
|
Amortization of operating lease right of use assets
|
|
|
53,552
|
|
|
|
-
|
|
Provision for bad debts
|
|
|
61,119
|
|
|
|
30,000
|
|
Share based employee compensation
|
|
|
707,653
|
|
|
|
531,603
|
|
Interest resulting from amortization of financing costs and discounts
|
|
|
265,776
|
|
|
|
221,078
|
|
Loss resulting from write-off of proposed MBT site
|
|
|
-
|
|
|
|
346,654
|
|
Changes in operating assets and liabilities
|
|
|
593,507
|
|
|
|
1,261,037
|
|
Net cash used in operating activities
|
|
|
(3,912,611
|
)
|
|
|
(2,019,055
|
)
|
|
|
|
|
|
|
|
|
|
Cash flow from investing activities:
|
|
|
|
|
|
|
|
|
Purchases of construction in-progress, equipment, fixtures and vehicles
|
|
|
(50,731
|
)
|
|
|
(4,164,592
|
)
|
Refund of deposit
|
|
|
5,000
|
|
|
|
-
|
|
MBT facility development costs incurred
|
|
|
(36,996
|
)
|
|
|
(26,269
|
)
|
MBT facility development costs refunded
|
|
|
-
|
|
|
|
66,000
|
|
Net cash used in investing activities
|
|
|
(82,727
|
)
|
|
|
(4,124,861
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
1,787,500
|
|
Affiliate investment in subsidiary
|
|
|
|
|
|
|
1,400,000
|
|
Deferred financing costs incurred
|
|
|
|
|
|
|
(43,941
|
)
|
Repayments of long-term debt
|
|
|
(2,496
|
)
|
|
|
(4,549
|
)
|
Related party advances, net
|
|
|
725,000
|
|
|
|
210,000
|
|
Net cash provided by financing activities
|
|
|
2,704,254
|
|
|
|
3,349,010
|
|
Effect of exchange rate on cash (restricted and unrestricted)
|
|
|
(20,208
|
)
|
|
|
17,398
|
|
Net change in cash (restricted and unrestricted)
|
|
|
(1,311,292
|
)
|
|
|
(2,777,508
|
)
|
Cash - beginning of period (restricted and unrestricted)
|
|
|
5,536,952
|
|
|
|
9,126,380
|
|
Cash - end of period (restricted and unrestricted)
|
|
$
|
4,225,660
|
|
|
|
6,348,872
|
|
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 Six Months Ended June 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
|
|
Series F preferred stock issuance
|
|
|
13,611
|
|
|
|
1,507,408
|
|
|
|
-
|
|
|
|
-
|
|
|
|
53,042
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,560,450
|
|
Share-based employee and director compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
122,500
|
|
|
|
12
|
|
|
|
592,610
|
|
|
|
-
|
|
|
|
-
|
|
|
|
592,622
|
|
Preferred stock dividends paid in common stock
|
|
|
-
|
|
|
|
-
|
|
|
|
13,889
|
|
|
|
1
|
|
|
|
24,999
|
|
|
|
-
|
|
|
|
-
|
|
|
|
25,000
|
|
Warrants exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
372,304
|
|
|
|
37
|
|
|
|
(37
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Preferred stock dividends
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(35,109
|
)
|
|
|
(35,109
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,236,178
|
)
|
|
|
(5,236,178
|
)
|
Foreign currency translation
adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30,136
|
|
|
|
-
|
|
|
|
30,136
|
|
Balance at June 30, 2020
|
|
|
724,480
|
|
|
$
|
6,761,142
|
|
|
|
17,809,592
|
|
|
$
|
1,780
|
|
|
$
|
50,267,673
|
|
|
$
|
(13,002
|
)
|
|
$
|
(58,056,529
|
)
|
|
$
|
(1,038,936
|
)
|
Statement
of Stockholders’ Equity Attributable to Non-Controlling Interests in Consolidated Subsidiaries for the Six Months Ended
June 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
|
|
|
-
|
|
|
|
(1,543,006
|
)
|
|
|
(1,543,006
|
)
|
Balance at June 30, 2020
|
|
$
|
8,079,585
|
|
|
$
|
(4,277,009
|
)
|
|
$
|
3,802,576
|
|
Statement
of Stockholders’ Equity Attributable to Parent for the Three Months Ended June 30, 2020:
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Additional
Paid in
|
|
|
Accumulated
Comprehensive
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Other Loss
|
|
|
Deficit
|
|
|
Total
|
|
Balance at April 1, 2020
|
|
|
723,914
|
|
|
$
|
6,698,348
|
|
|
|
17,417,288
|
|
|
$
|
1,741
|
|
|
$
|
49,953,089
|
|
|
$
|
(14,439
|
)
|
|
$
|
(55,374,103
|
)
|
|
$
|
1,264,636
|
|
Series F preferred stock issuance
|
|
|
566
|
|
|
|
62,794
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,206
|
|
|
|
-
|
|
|
|
-
|
|
|
|
65,000
|
|
Share-based employee and director compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
20,000
|
|
|
|
2
|
|
|
|
312,415
|
|
|
|
-
|
|
|
|
-
|
|
|
|
312,417
|
|
Warrants exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
372,304
|
|
|
|
37
|
|
|
|
(37
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Preferred stock dividends
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(17,545
|
)
|
|
|
(17,545
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,664,881
|
)
|
|
|
(2,664,881
|
)
|
Foreign currency translation
adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,437
|
|
|
|
-
|
|
|
|
1,437
|
|
Balance at June 30, 2020
|
|
|
724,480
|
|
|
$
|
6,761,142
|
|
|
|
17,809,592
|
|
|
$
|
1,780
|
|
|
$
|
50,267,673
|
|
|
$
|
(13,002
|
)
|
|
$
|
(58,056,529
|
)
|
|
$
|
(1,038,936
|
)
|
Statement
of Stockholders’ Equity Attributable to Non-Controlling Interests in Consolidated Subsidiaries for the Three Months
Ended June 30, 2020:
|
|
|
Non-
Controlling
|
|
|
Accumulated
|
|
|
|
|
|
|
Equity
Interest
|
|
|
Deficit
|
|
|
Total
|
|
Balance at April 1, 2020
|
|
$
|
8,079,585
|
|
|
$
|
(3,556,680
|
)
|
|
$
|
4,522,905
|
|
Net loss
|
|
|
-
|
|
|
|
(720,329
|
)
|
|
|
(720,329
|
)
|
Balance at June 30, 2020
|
|
$
|
8,079,585
|
|
|
$
|
(4,277,009
|
)
|
|
$
|
3,802,576
|
|
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 Six Months Ended June 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
|
|
Series D preferred stock issuance
|
|
|
18,850
|
|
|
|
1,520,262
|
|
|
|
-
|
|
|
|
-
|
|
|
|
267,238
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,787,500
|
|
Series E preferred stock conversion
|
|
|
(300,000
|
)
|
|
|
(792,000
|
)
|
|
|
300,000
|
|
|
|
30
|
|
|
|
791,970
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Share-based employee and director compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
531,603
|
|
|
|
-
|
|
|
|
-
|
|
|
|
531,603
|
|
Issuance of restricted stock
|
|
|
-
|
|
|
|
-
|
|
|
|
105,000
|
|
|
|
11
|
|
|
|
205,489
|
|
|
|
-
|
|
|
|
-
|
|
|
|
205,500
|
|
Preferred stock dividends
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(36,744
|
)
|
|
|
(36,744
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,018,107
|
)
|
|
|
(4,018,107
|
)
|
Foreign currency translation
adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,197
|
|
|
|
-
|
|
|
|
5,197
|
|
Balance at June 30, 2019
|
|
|
710,869
|
|
|
$
|
5,268,734
|
|
|
|
15,207,956
|
|
|
$
|
1,521
|
|
|
$
|
45,249,263
|
|
|
$
|
10,218
|
|
|
$
|
(48,649,236
|
)
|
|
$
|
1,880,500
|
|
Statement
of Stockholders’ Equity Attributable to Non-Controlling Interests in Consolidated Subsidiaries for the Six Months Ended
June 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
|
|
|
-
|
|
|
|
(1,130,732
|
)
|
|
|
(1,130,732
|
)
|
Balance at June 30, 2019
|
|
$
|
8,079,585
|
|
|
$
|
(1,207,622
|
)
|
|
$
|
6,871,963
|
|
Statement
of Stockholders’ Equity Attributable to Parent for the Three Months Ended June 30, 2019:
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Additional
Paid in
|
|
|
Accumulated
Comprehensive
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Other Loss
|
|
|
Deficit
|
|
|
Total
|
|
Balance at April 1, 2019
|
|
|
999,519
|
|
|
$
|
5,290,472
|
|
|
|
14,822,956
|
|
|
$
|
1,482
|
|
|
$
|
43,750,710
|
|
|
$
|
6,274
|
|
|
$
|
(46,562,223
|
)
|
|
$
|
2,486,715
|
|
Series D preferred stock issuance
|
|
|
11,350
|
|
|
|
770,262
|
|
|
|
-
|
|
|
|
-
|
|
|
|
267,238
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,037,500
|
|
Series E preferred stock conversion
|
|
|
(300,000
|
)
|
|
|
(792,000
|
)
|
|
|
300,000
|
|
|
|
30
|
|
|
|
791,970
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Share-based employee and director compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
233,854
|
|
|
|
-
|
|
|
|
-
|
|
|
|
233,854
|
|
Issuance of restricted stock
|
|
|
-
|
|
|
|
-
|
|
|
|
85,000
|
|
|
|
9
|
|
|
|
205,491
|
|
|
|
-
|
|
|
|
-
|
|
|
|
205,500
|
|
Preferred stock dividends
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(18,372
|
)
|
|
|
(18,372
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,068,641
|
)
|
|
|
(2,068,641
|
)
|
Foreign currency translation
adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,944
|
|
|
|
-
|
|
|
|
3,944
|
|
Balance at June 30, 2019
|
|
|
710,869
|
|
|
$
|
5,268,734
|
|
|
|
15,207,956
|
|
|
$
|
1,521
|
|
|
$
|
45,249,263
|
|
|
$
|
10,218
|
|
|
$
|
(48,649,236
|
)
|
|
$
|
1,880,500
|
|
Statement
of Stockholders’ Equity Attributable to Non-Controlling Interests in Consolidated Subsidiaries for the Three Months
Ended June 30, 2019:
|
|
|
Non-
Controlling
|
|
|
Accumulated
|
|
|
|
|
|
|
Equity
Interest
|
|
|
Deficit
|
|
|
Total
|
|
Balance at April 1, 2019
|
|
$
|
6,679,585
|
|
|
$
|
(388,591
|
)
|
|
$
|
6,290,994
|
|
Investment by non-controlling interest
|
|
|
1,400,000
|
|
|
|
-
|
|
|
|
1,400,000
|
|
Net loss
|
|
|
-
|
|
|
|
(819,031
|
)
|
|
|
(819,031
|
)
|
Balance at June 30, 2019
|
|
$
|
8,079,585
|
|
|
$
|
(1,207,622
|
)
|
|
$
|
6,871,963
|
|
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 Six Months Ended June 30, 2020 and 2019 and as of June 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 its 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. 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 had been delayed, although subsequent to June 30, 2020 Carnival recommenced
purchasing activity, and 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 have placed a strain on the Company’s cash flows 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.
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 six months ended June 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 June 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%, 88.7% and 86.1% as of June 30, 2020, December 31,
2019 and June 30, 2019, respectively). As each of these subsidiaries operate as environmental-based service companies, we did
not deem segment reporting necessary.
Reclassifications to certain prior period
amounts have been made to conform to current period presentation. These reclassifications have no effect on previously reported
net loss.
BioHiTech
Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Six Months Ended June 30, 2020 and 2019 and as of June 30, 2020 and December 31, 2019
Going Concern and Liquidity
- For the six months June 30, 2020, the Company had a consolidated net loss of $6,779,184, incurred a consolidated loss from operations
of $4,759,196 and used net cash in consolidated operating activities of $3,912,611. At June 30, 2020, consolidated total stockholders’
equity amounted to $2,763,640, consolidated stockholders’ deficit attributable to parent amounted to $1,038,936 and the Company
had a consolidated working capital deficit of $14,094,144. While the Company had not met certain of its senior secured note’s
financial covenants as of June 30, 2020 (Note 6), the Company has favorably renegotiated those covenants and has received a waiver
for such non-compliance through June 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 $4,324,243 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. 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. 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 six months ended June 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.
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:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Leased equipment
|
|
$
|
3,174,799
|
|
|
$
|
3,138,951
|
|
Less: accumulated depreciation
|
|
|
(1,637,657
|
)
|
|
|
(1,413,953
|
)
|
Total Equipment on Operating Leases, net
|
|
$
|
1,537,142
|
|
|
$
|
1,724,998
|
|
BioHiTech Global, Inc. and
Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Six Months Ended June 30, 2020 and 2019 and as of June 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 June 30,
2020 and 2019, revenue under the agreements, which is included in rental, service and maintenance revenue, amounted to $312,278
and $350,187, respectively. During the six months ended June 30, 2020 and 2019, revenue under the agreements, which is included
in rental, service and maintenance revenue, amounted to $698,532 and $691,852, respectively. During the three months ended June
30, 2020 and 2019, depreciation expense included in rental, service and maintenance expense, amounted to $116,272 and $103,764,
respectively. During the six months ended June 30, 2020 and 2019, depreciation expense included in rental, service and maintenance
expense, amounted to $232,138 and $205,266, respectively.
The minimum future estimated contractual
payments to be received under these leases as of June 30, 2020 is as follows:
Year ending December 31,
|
|
|
|
2020, remaining period
|
|
$
|
641,557
|
|
2021
|
|
|
943,555
|
|
2022
|
|
|
689,795
|
|
2023
|
|
|
411,264
|
|
2024 and thereafter
|
|
|
185,130
|
|
|
|
$
|
2,871,301
|
|
Note 4. HEBioT facility, equipment,
fixtures and vehicles, net
HEBioT facility, equipment, fixtures and
vehicles, net consist of the following:
|
|
June 30,
2020
|
|
|
December 31,
2019
|
|
HEBioT facility
|
|
$
|
31,172,856
|
|
|
$
|
31,142,974
|
|
HEBioT equipment
|
|
|
7,407,096
|
|
|
|
7,388,896
|
|
Computer software and hardware
|
|
|
115,068
|
|
|
|
112,629
|
|
Furniture and fixtures
|
|
|
48,196
|
|
|
|
48,196
|
|
Vehicles
|
|
|
50,319
|
|
|
|
50,319
|
|
|
|
|
38,793,535
|
|
|
|
38,743,014
|
|
Less: accumulated depreciation and amortization
|
|
|
(2,201,254
|
)
|
|
|
(1,321,681
|
)
|
Total HEBioT facility, equipment, fixtures and vehicles, net
|
|
$
|
36,592,281
|
|
|
$
|
37,421,333
|
|
Note 5. MBT Facility Development and
License Costs
MBT Facility Development and License Costs
consist of the following:
|
|
June 30,
2020
|
|
|
December 31,
2019
|
|
MBT Projects
|
|
|
|
|
|
|
|
|
Survey and engineering
|
|
$
|
272,225
|
|
|
$
|
235,229
|
|
|
|
|
|
|
|
|
|
|
Technology Licenses
|
|
|
|
|
|
|
|
|
Future site
|
|
|
6,019,200
|
|
|
|
6,019,200
|
|
Martinsburg, West Virginia, net of $157,500 and $94,500 of amortization as of June 30, 2020 and December 31, 2019
|
|
|
1,732,500
|
|
|
|
1,795,500
|
|
Total Technology Licenses
|
|
|
7,751,700
|
|
|
|
7,814,700
|
|
Total MBT Facility Development and License Costs
|
|
$
|
8,023,925
|
|
|
$
|
8,049,929
|
|
BioHiTech
Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Six Months Ended June 30, 2020 and 2019 and as of June 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 six months ending June 30, 2020 amortization
amounted to $31,500 and $63,000, respectively. During the three and six months ending June 30, 2019 amortization amounted to $31,500.
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:
|
|
June 30, 2020
|
|
|
December 31,
2019
|
|
|
|
Total
|
|
|
Related
Party
|
|
|
Total
|
|
|
Related
Party
|
|
Line of credit
|
|
$
|
1,497,950
|
|
|
$
|
-
|
|
|
$
|
1,479,848
|
|
|
$
|
-
|
|
Senior secured promissory note
|
|
|
4,324,243
|
|
|
|
-
|
|
|
|
4,160,490
|
|
|
|
-
|
|
Junior promissory note
|
|
|
960,367
|
|
|
|
960,367
|
|
|
|
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
|
|
|
10,310
|
|
|
|
-
|
|
|
|
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% as of June 30, 2020 and December 31, 2019, respectively) and
matured on January 1, 2020, which was subsequently extended to March 31, 2020 and further 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 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. The Note provides for certain financial covenants that were not met as of June 30, 2020. While the Company had
not met certain of its senior secured note’s financial covenants as of June 30, 2020, the Company has favorably renegotiated
those covenants and has received a waiver for such non-compliance through June 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 $4,324,243 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 prior to June 30,
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 June 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 Six Months Ended June 30, 2020 and 2019 and as of June 30, 2020 and
December 31, 2019
Note Payable — As of
June 30, 2020 and December 31, 2019, the note, with interest at 10%, had a remaining balance outstanding of $100,000 and matured
on January 1, 2020, which has been amended to mature on January 1, 2022.
Contractual Maturities of Senior
Secured, Junior Promissory, Notes Payable and Long Term Debt — As of June 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)
|
|
$
|
2,109
|
|
|
$
|
23,406
|
|
|
$
|
25,515
|
|
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
|
|
$
|
10,310
|
|
|
$
|
6,565,777
|
|
|
$
|
6,576,087
|
|
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 June 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 June 30, 2020 and December 31, 2019, less associated amortization of $488,367 and $415,185 as of June
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 June 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 July 2, 2021.
The future sinking fund payments by the Borrower as of June
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
|
|
BioHiTech
Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Six Months Ended June 30, 2020 and 2019 and as of June 30, 2020 and December 31, 2019
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 June 30, 2020
and December 31, 2019, 17,809,592 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 $1,397,560 in accumulated,
but undeclared preferential dividends as of June 30, 2020, as follows:
|
|
Designated
|
|
|
Par
|
|
|
Stated
|
|
|
Shares
Outstanding
|
|
Designation
|
|
Shares
|
|
|
Value
|
|
|
Value
|
|
|
June
30, 2020
|
|
|
December 31,
2019
|
|
Series A Convertible Preferred
Stock
|
|
|
333,401
|
|
|
$
|
0.0001
|
|
|
$
|
5.00
|
|
|
|
145,312
|
|
|
|
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
|
|
|
|
18,850
|
|
|
|
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
|
|
|
|
-
|
|
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.
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, 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 4,207,695 shares of the Company’s common stock outstanding as of June 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
|
|
|
242,677
|
|
|
|
$2.25 - $2.30
|
|
|
$
|
2.29
|
|
The following table summarizes the outstanding
warrant activity for the six months ended June 30, 2020:
BioHiTech
Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Six Months Ended June 30, 2020 and 2019 and as of June 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
|
|
Exercised
|
|
|
(630,053
|
)
|
Expired
|
|
|
(22,860
|
)
|
Outstanding, June 30, 2020
|
|
|
4,207,695
|
|
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.
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.
Compensation expense related to stock
options and restricted stock was:
|
|
Three months ended June 30,
|
|
|
Six months ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Stock options
|
|
$
|
41,318
|
|
|
$
|
14,363
|
|
|
$
|
89,778
|
|
|
$
|
72,751
|
|
Restricted stock
|
|
|
271,099
|
|
|
|
219,492
|
|
|
|
502,844
|
|
|
|
458,852
|
|
Total
|
|
$
|
312,417
|
|
|
$
|
233,855
|
|
|
$
|
592,622
|
|
|
$
|
531,603
|
|
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 June 30,
|
|
|
Six months ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Rental, service and maintenance
|
|
$
|
3,003
|
|
|
$
|
3,317
|
|
|
$
|
6,320
|
|
|
$
|
9,072
|
|
Selling, general and administrative
|
|
|
309,414
|
|
|
|
230,538
|
|
|
|
586,302
|
|
|
|
522,531
|
|
Total
|
|
$
|
312,417
|
|
|
$
|
233,855
|
|
|
$
|
592,622
|
|
|
$
|
531,603
|
|
The following summarizes the Company’s
stock option activity for the six months ended June 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
|
|
|
(10,000
|
)
|
|
|
3.68
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding – June 30, 2020
|
|
|
509,276
|
|
|
|
3.19
|
|
|
|
7.66
|
|
|
|
-
|
|
Exercisable – June 30, 2020
|
|
|
327,611
|
|
|
|
3.61
|
|
|
|
6.82
|
|
|
|
-
|
|
BioHiTech Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the
Three and Six Months Ended June 30, 2020 and 2019 and as of June 30, 2020 and December 31, 2019
The following summarizes the Company’s
restricted stock unit activity for the six months ended June 30, 2020:
Balance, January 1, 2020
|
|
|
291,730
|
|
Grants
|
|
|
269,060
|
|
Forfeited
|
|
|
-
|
|
Vested
|
|
|
(122,561
|
)
|
Balance, June 30, 2020
|
|
|
438,229
|
|
As of June 30, 2020, 533,449 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, as of June 30, 2020 80,690 shares have been calculated.
As these shares have not been issued or granted through the shareholder approved plans and there are other features, the shares
have been established as a liability that is revalued at each balance sheet date. As of June 30, 2020 the program liability, included
in accrued liabilities, amounts to $202,532 and expense under the program for the three and six months ended June 30, 2020 amounted
to $202,532.
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 June 30,
|
|
|
|
Six months ended June 30,
|
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
2020
|
|
|
|
2019
|
|
Revenue Type:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental of digesters
|
|
$
|
312,279
|
|
|
$
|
350,187
|
|
|
$
|
698,533
|
|
|
$
|
691,852
|
|
Services
|
|
|
576,405
|
|
|
|
599,052
|
|
|
|
1,177,838
|
|
|
|
972,027
|
|
Product sales
|
|
|
385,248
|
|
|
|
101,973
|
|
|
|
756,902
|
|
|
|
125,034
|
|
Total
|
|
$
|
1,273,932
|
|
|
$
|
1,051,212
|
|
|
$
|
2,633,273
|
|
|
$
|
1,788,913
|
|
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 six months ended June 30, 2020
|
|
$
|
2,447,633
|
|
|
$
|
185,640
|
|
|
$
|
2,633,273
|
|
Revenue, for the three months ended June 30, 2020
|
|
|
1,221,723
|
|
|
|
52,209
|
|
|
|
1,273,932
|
|
Non-current tangible assets, as of June 30, 2020
|
|
|
37,838,232
|
|
|
|
299,691
|
|
|
|
38,137,923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue, for the six months ended June 30, 2019
|
|
$
|
1,546,278
|
|
|
$
|
242,635
|
|
|
$
|
1,788,913
|
|
Revenue, for the three months ended June 30, 2019
|
|
|
904,632
|
|
|
|
146,580
|
|
|
|
1,051,212
|
|
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 Six Months Ended June 30, 2020 and 2019 and as of June 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 June 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 June 30, 2020, two customers represented at least 10% of revenues, accounting for 37.7% (Gold Medal Group,
LLC, an affiliated entity, “GMG”) and 23.2% of revenues. During the three months ended June 30, 2019, one customer
represented at least 10% of revenues, accounting for 50.6% (GMG) of revenues. During the six months ended June 30, 2020, two customers
represented at least 10% of revenues, 36.8% (GMG) and 11.8% of revenues. During the six months ended June 30, 2019, one customer
represented at least 10% of revenues, 28.6% (GMG) of revenues.
As of June 30, 2020, two customers represented
at least 10% of accounts receivable, accounting for 74.9% (GMG) and 11.1% 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 June 30, 2020, one vendor represented at least 10% of costs of revenue, accounting for 40.6% (GMG).
During the three months ended June 30, 2019, one vendor represented at least 10% of costs of revenue, accounting for 24.5% (GMG).
During the six months ended June 30, 2020, one vendor represented at least 10% of costs of revenue, accounting for 32.4%
(GMG). During the six months ended June 30, 2019, one vendor represented at least 10% of costs of revenue, accounting for 18.8%
(GMG).
As of June 30, 2020, excluding construction
payables and other professional fees, one vendor represented at least 10% of accounts payable accounting for 57.7% (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 six months ended June 30, 2020
the Company was involved in the following legal matters.
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 this known claim 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 Six Months Ended June 30, 2020 and 2019 and as of June 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 $207,133 is included in accrued expenses and liabilities. Total lease costs under operating
leases amounted to $55,356 and $61,881 for the three months, and $110,712 and $129,413 for the six months ended June 30, 2020 and
2019, respectively. Maturities of lease liabilities under these leases, which have a weighted average remaining term of 20.3 years,
as of June 30, 2020 is:
Year Ending December 31,
|
|
|
|
|
2020 (remaining)
|
|
$
|
112,077
|
|
2021
|
|
|
212,026
|
|
2022
|
|
|
217,571
|
|
2023
|
|
|
219,140
|
|
2024 and thereafter
|
|
|
3,133,649
|
|
Total lease payments
|
|
|
3,894,463
|
|
Less imputed interest
|
|
|
(2,466,550
|
)
|
|
Present value of lease liabilities
|
|
$
|
1,427,913
|
|
|
During the six months ended June 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 $43,020 and $46,044 for the three months, and $89,054 and $118,809 for the six months ended June 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.
|
|
|
|
June 30,
2020
|
|
|
December 31,
2019
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
(a) (b)
|
|
$
|
2,102,095
|
|
|
$
|
1,370,867
|
|
Intangible assets, net, included in other assets
|
|
(c)
|
|
|
30,299
|
|
|
|
40,399
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
(c) (d) (e) (f)
|
|
|
3,727,095
|
|
|
|
2,531,034
|
|
Accrued interest payable
|
|
|
|
|
134,758
|
|
|
|
46,796
|
|
Long term accrued interest
|
|
(g)
|
|
|
1,584,084
|
|
|
|
1,510,193
|
|
Advance from related party
|
|
(h)
|
|
|
935,000
|
|
|
|
210,000
|
|
Junior promissory note
|
|
(g)
|
|
|
960,367
|
|
|
|
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 Six Months Ended June 30, 2020 and 2019 and as of June 30, 2020 and December 31, 2019
The table below presents direct related
party expenses or transactions for the three and six months ended June 30, 2020 and 2019. Compensation and related costs for employees
of the Company are excluded from the table below.
|
|
|
|
Three months ended June 30,
|
|
|
Six months ended June 30,
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Management advisory and other fees
|
|
(a)
|
|
$
|
25,000
|
|
|
$
|
250,000
|
|
|
$
|
100,000
|
|
|
$
|
500,000
|
|
HEBioT revenue
|
|
(b)
|
|
|
448,079
|
|
|
|
275,142
|
|
|
|
855,770
|
|
|
|
275,142
|
|
Operating expenses - HEBioT
|
|
(d)
|
|
|
475,583
|
|
|
|
144,025
|
|
|
|
774,386
|
|
|
|
144,025
|
|
Operating expenses – Selling, general and administrative
|
|
(e)
|
|
|
16,358
|
|
|
|
11,041
|
|
|
|
41,514
|
|
|
|
22,033
|
|
Operating expenses - Selling, general and administrative
|
|
(c) (f)
|
|
|
110,683
|
|
|
|
124,229
|
|
|
|
221,366
|
|
|
|
174,524
|
|
Interest expense
|
|
|
|
|
99,073
|
|
|
|
59,767
|
|
|
|
197,021
|
|
|
|
118,087
|
|
Debt guarantee fees
|
|
(i)
|
|
|
16,875
|
|
|
|
16,875
|
|
|
|
33,750
|
|
|
|
33,750
|
|
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. During the three and six months ended
June 30, 2020 the Officer advanced $0 and $1,000,000, respectively to the Company. During the three and six months ended June 30,
2020 the repayments amounted to $275,000. 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.
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.
|
|
Six Months Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$
|
(673,108
|
)
|
|
$
|
(557,238
|
)
|
Inventory
|
|
|
45,932
|
|
|
|
(93,088
|
)
|
Prepaid expenses and other assets
|
|
|
(33,247
|
)
|
|
|
28,943
|
|
Accounts payable
|
|
|
892,677
|
|
|
|
4,009,255
|
|
Accrued interest payable
|
|
|
237,596
|
|
|
|
280,391
|
|
Accrued expenses
|
|
|
149,877
|
|
|
|
(2,425,948
|
)
|
Deferred revenue
|
|
|
13,682
|
|
|
|
6,583
|
|
Customer deposits
|
|
|
(39,902
|
)
|
|
|
12,139
|
|
Net change in operating assets and liabilities
|
|
$
|
593,507
|
|
|
$
|
1,261,037
|
|
|
|
|
|
|
|
|
|
|
Supplementary cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid during the periods for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
1,491,867
|
|
|
$
|
1,235,366
|
|
Income taxes
|
|
|
-
|
|
|
|
-
|
|
BioHiTech Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the
Three and Six Months Ended June 30, 2020 and 2019 and as of June 30, 2020 and December 31, 2019
|
|
2020
|
|
|
2019
|
|
Supplementary Disclosure of Non-Cash Investing and Financing Activities:
|
|
|
|
|
|
|
|
|
Transfer of inventory to leased equipment
|
|
$
|
67,604
|
|
|
$
|
95,398
|
|
Common stock issued in settlement of accounts payable
|
|
|
-
|
|
|
|
205,500
|
|
Accrual of Series A preferred stock dividends
|
|
|
35,109
|
|
|
|
36,744
|
|
Payment of Series A preferred stock dividends in common stock
|
|
|
25,000
|
|
|
|
-
|
|
Acquisition of right of use leased asset and creation of lease liability
|
|
|
412,647
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Cash and Restricted Cash:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
342,182
|
|
|
$
|
1,654,672
|
|
Restricted cash (current)
|
|
|
1,237,097
|
|
|
|
2,148,163
|
|
Restricted cash (non-current)
|
|
|
2,646,381
|
|
|
|
2,546,037
|
|
Total cash and restricted cash at the end of the period
|
|
$
|
4,225,660
|
|
|
$
|
6,348,872
|
|
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.
Underwritten Public Offering
- On July 27, 2020, BioHiTech Global, Inc. (the “Company”) 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, we 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, we also granted the underwriter an option to purchase up to an additional 682,500 shares of our
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 final prospectus for the offering was filed with the U.S. Securities and Exchange
Commission pursuant to Rule 424(b)(1) of the Securities Act of 1933, as amended, on July 29, 2020 as Amendment No. 1 to Prospectus
Supplement.
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, we agreed to issue warrants to purchase 318,500 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 will be 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.
The net proceeds to the Company after underwriter's
commission and agreed upon customary fees and expenses were $7,429,305, before deducting the Company's legal and accounting expenses
related to the Offering. The Company intends to use the net proceeds to fund general corporate purposes and to fund ongoing operations.
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.
BioHiTech Global, Inc. and
Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Six Months Ended June 30, 2020 and 2019 and as of June 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 June 30, 2020 and December 31, 2019, the condensed consolidating statements
of operations for the three and six months ended June 30, 2020 and 2019, and condensed consolidating cash flows for the six months
ended June 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 June 30, 2020
|
|
Parent
and other
Subsidiaries
|
|
|
Entsorga
West
Virginia LLC
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
342,182
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
342,182
|
|
Restricted cash
|
|
|
-
|
|
|
|
1,237,097
|
|
|
|
-
|
|
|
|
1,237,097
|
|
Other current assets
|
|
|
1,300,760
|
|
|
|
2,179,946
|
|
|
|
(140,812
|
)
|
|
|
3,339,894
|
|
Current assets
|
|
|
1,642,942
|
|
|
|
3,417,043
|
|
|
|
(140,812
|
)
|
|
|
4,919,173
|
|
Restricted cash
|
|
|
-
|
|
|
|
2,646,381
|
|
|
|
-
|
|
|
|
2,646,381
|
|
HEBioT facility and other fixed assets
|
|
|
1,561,360
|
|
|
|
36,568,063
|
|
|
|
-
|
|
|
|
38,129,423
|
|
Operating lease right of use assets
|
|
|
412,647
|
|
|
|
891,495
|
|
|
|
-
|
|
|
|
1,304,142
|
|
MBT facility development and license costs
|
|
|
6,291,425
|
|
|
|
1,732,500
|
|
|
|
-
|
|
|
|
8,023,925
|
|
Investment in subsidiaries and intercompany accounts
|
|
|
13,827,026
|
|
|
|
-
|
|
|
|
(13,827,026
|
)
|
|
|
-
|
|
Goodwill
|
|
|
-
|
|
|
|
58,000
|
|
|
|
-
|
|
|
|
58,000
|
|
Other assets
|
|
|
38,799
|
|
|
|
-
|
|
|
|
-
|
|
|
|
38,799
|
|
Total assets
|
|
$
|
23,774,199
|
|
|
$
|
45,313,482
|
|
|
$
|
(13,967,838
|
)
|
|
$
|
55,119,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Line of credit
|
|
$
|
1,497,950
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,497,950
|
|
Current portion of Debts and Bonds
|
|
|
5,427,354
|
|
|
|
2,860,000
|
|
|
|
-
|
|
|
|
8,287,354
|
|
Other current liabilities
|
|
|
2,726,691
|
|
|
|
9,973,657
|
|
|
|
(3,472,335
|
)
|
|
|
9,228,013
|
|
Current liabilities
|
|
|
9,651,995
|
|
|
|
12,833,657
|
|
|
|
(3,472,335
|
)
|
|
|
19,013,317
|
|
Notes payable and other debts
|
|
|
1,323,866
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,323,866
|
|
Accrued interest
|
|
|
1,651,079
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,651,079
|
|
Non-current lease liabilities
|
|
|
302,003
|
|
|
|
918,777
|
|
|
|
-
|
|
|
|
1,220,780
|
|
WV EDA bonds
|
|
|
-
|
|
|
|
28,420,608
|
|
|
|
-
|
|
|
|
28,420,608
|
|
Total liabilities
|
|
|
12,928,943
|
|
|
|
42,173,042
|
|
|
|
(3,472,335
|
)
|
|
|
51,629,650
|
|
Redeemable preferred stock
|
|
|
726,553
|
|
|
|
-
|
|
|
|
-
|
|
|
|
726,553
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to parent
|
|
|
(1,038,936
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,038,936
|
)
|
Attributable to non-controlling interests
|
|
|
11,157,639
|
|
|
|
3,140,440
|
|
|
|
(10,495,503
|
)
|
|
|
3,802,576
|
|
Stockholders’ equity
|
|
|
10,118,703
|
|
|
|
3,140,440
|
|
|
|
(10,495,503
|
)
|
|
|
2,763,640
|
|
Total liabilities and stockholders’ equity
|
|
$
|
23,774,199
|
|
|
$
|
45,313,482
|
|
|
$
|
(13,967,838
|
)
|
|
$
|
55,119,843
|
|
BioHiTech Global, Inc. and
Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Six Months Ended June 30, 2020 and 2019 and as of June 30, 2020 and December 31, 2019
Condensed Consolidating Statement of
Operations for the three months ended June 30, 2020
|
|
Parent
and other
Subsidiaries
|
|
|
Entsorga
West
Virginia LLC
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Revenue
|
|
$
|
381,033
|
|
|
$
|
892,899
|
|
|
$
|
-
|
|
|
$
|
1,273,932
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HEBioT
|
|
|
-
|
|
|
|
1,020,277
|
|
|
|
-
|
|
|
|
1,020,277
|
|
Rental, service and maintenance expense
|
|
|
151,695
|
|
|
|
-
|
|
|
|
-
|
|
|
|
151,695
|
|
Equipment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Selling, general and administrative
|
|
|
1,615,049
|
|
|
|
282,393
|
|
|
|
-
|
|
|
|
1,897,442
|
|
Depreciation and amortization
|
|
|
124,612
|
|
|
|
445,152
|
|
|
|
-
|
|
|
|
569,764
|
|
Total operating expenses
|
|
|
1,891,356
|
|
|
|
1,747,822
|
|
|
|
-
|
|
|
|
3,639,178
|
|
Loss from operations
|
|
|
(1,510,323
|
)
|
|
|
(854,923
|
)
|
|
|
-
|
|
|
|
(2,365,246
|
)
|
Other (income) expenses, net
|
|
|
378,737
|
|
|
|
641,227
|
|
|
|
-
|
|
|
|
1,019,964
|
|
Net loss
|
|
$
|
(1,889,060
|
)
|
|
$
|
(1,496,150
|
)
|
|
$
|
-
|
|
|
$
|
(3,385,210
|
)
|
Condensed Consolidating Statement of
Operations for the six months ended June 30, 2020
|
|
Parent
and other
Subsidiaries
|
|
|
Entsorga
West
Virginia LLC
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Revenue
|
|
$
|
1,250,242
|
|
|
$
|
1,383,031
|
|
|
$
|
-
|
|
|
$
|
2,633,273
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HEBioT
|
|
|
-
|
|
|
|
1,832,704
|
|
|
|
-
|
|
|
|
1,832,704
|
|
Rental, service and maintenance expense
|
|
|
412,530
|
|
|
|
-
|
|
|
|
-
|
|
|
|
412,530
|
|
Equipment
|
|
|
146,404
|
|
|
|
-
|
|
|
|
-
|
|
|
|
146,404
|
|
Selling, general and administrative
|
|
|
3,283,828
|
|
|
|
532,037
|
|
|
|
-
|
|
|
|
3,815,865
|
|
Depreciation and amortization
|
|
|
249,346
|
|
|
|
935,620
|
|
|
|
-
|
|
|
|
1,184,966
|
|
Total operating expenses
|
|
|
4,092,108
|
|
|
|
3,300,361
|
|
|
|
-
|
|
|
|
7,392,469
|
|
Loss from operations
|
|
|
(2,841,866
|
)
|
|
|
(1,917,330
|
)
|
|
|
-
|
|
|
|
(4,759,196
|
)
|
Other (income) expenses, net
|
|
|
726,965
|
|
|
|
1,293,023
|
|
|
|
-
|
|
|
|
2,019,988
|
|
Net loss
|
|
$
|
(3,568,831
|
)
|
|
$
|
(3,210,353
|
)
|
|
$
|
-
|
|
|
$
|
(6,779,184
|
)
|
Condensed Consolidating Statement of Cash Flows for the
six months ended June 30, 2020
|
|
Parent
and other
Subsidiaries
|
|
|
Entsorga
West
Virginia LLC
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Cash flows used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(3,568,831
|
)
|
|
$
|
(3,210,353
|
)
|
|
$
|
-
|
|
|
$
|
(6,779,184
|
)
|
Non-cash adjustments to reconcile net loss to net cash used in operations
|
|
|
1,259,695
|
|
|
|
1,013,371
|
|
|
|
-
|
|
|
|
2,273,066
|
|
Changes in operating assets and liabilities
|
|
|
(1,845,609
|
)
|
|
|
2,439,116
|
|
|
|
-
|
|
|
|
593,507
|
|
Net cash used in operations
|
|
|
(4,154,745
|
)
|
|
|
242,134
|
|
|
|
-
|
|
|
|
(3,912,611
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow used in investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of construction in-progress, equipment, fixtures and vehicles
|
|
|
(2,649
|
)
|
|
|
(48,082
|
)
|
|
|
-
|
|
|
|
(50,731
|
)
|
Other investing activities
|
|
|
(31,996
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(31,996
|
)
|
Net cash used in investing activities
|
|
|
(34,645
|
)
|
|
|
(48,082
|
)
|
|
|
-
|
|
|
|
(82,727
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuances of debt and equity
|
|
|
2,706,750
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,706,750
|
|
Repayments of debt
|
|
|
(2,496
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,496
|
)
|
Net cash provided by financing activities
|
|
|
2,704,254
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,704,254
|
|
Effect of exchange rate on cash
|
|
|
(20,208
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(20,208
|
)
|
Cash – beginning of period (restricted and unrestricted)
|
|
|
1,847,526
|
|
|
|
3,689,426
|
|
|
|
-
|
|
|
|
5,536,952
|
|
Cash – end of period (restricted and unrestricted)
|
|
$
|
342,182
|
|
|
$
|
3,883,478
|
|
|
$
|
-
|
|
|
$
|
4,225,660
|
|
BioHiTech Global, Inc. and
Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Six Months Ended June 30, 2020 and 2019 and as of June 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 June 30, 2019
|
|
Parent
and
other
Subsidiaries
|
|
|
Entsorga
West
Virginia
LLC
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Revenue
|
|
$
|
774,171
|
|
|
$
|
277,041
|
|
|
$
|
-
|
|
|
$
|
1,051,212
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HEBioT
|
|
|
-
|
|
|
|
493,546
|
|
|
|
-
|
|
|
|
493,546
|
|
Rental, service and maintenance expense
|
|
|
128,311
|
|
|
|
-
|
|
|
|
-
|
|
|
|
128,311
|
|
Equipment sales
|
|
|
38,726
|
|
|
|
-
|
|
|
|
-
|
|
|
|
38,726
|
|
Selling, general and administrative
|
|
|
1,420,649
|
|
|
|
285,675
|
|
|
|
-
|
|
|
|
1,706,324
|
|
Depreciation and amortization
|
|
|
119,504
|
|
|
|
490,469
|
|
|
|
-
|
|
|
|
609,973
|
|
Total operating expenses
|
|
|
1,707,190
|
|
|
|
1,269,690
|
|
|
|
-
|
|
|
|
2,976,880
|
|
Loss from operations
|
|
|
(933,019
|
)
|
|
|
(992,649
|
)
|
|
|
-
|
|
|
|
(1,925,668
|
)
|
Other expenses, net
|
|
|
142,699
|
|
|
|
732,943
|
|
|
|
86,362
|
|
|
|
962,004
|
|
Net loss
|
|
$
|
(1,075,718
|
)
|
|
$
|
(1,725,592
|
)
|
|
$
|
(86,362
|
)
|
|
$
|
(2,887,672
|
)
|
BioHiTech Global, Inc. and
Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Six Months Ended June 30, 2020 and 2019 and as of June 30, 2020 and December 31, 2019
Condensed Consolidating Statement of
Operations for the six months ended June 30, 2019
|
|
Parent
and other
Subsidiaries
|
|
|
Entsorga
West
Virginia LLC
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Revenue
|
|
$
|
1,511,872
|
|
|
$
|
277,041
|
|
|
$
|
-
|
|
|
$
|
1,788,913
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
HEBioT
|
|
|
-
|
|
|
|
493,546
|
|
|
|
-
|
|
|
|
493,546
|
|
Rental, service and maintenance expense
|
|
|
331,514
|
|
|
|
-
|
|
|
|
-
|
|
|
|
331,514
|
|
Equipment sales
|
|
|
38,726
|
|
|
|
-
|
|
|
|
-
|
|
|
|
38,726
|
|
Selling, general and administrative
|
|
|
3,477,896
|
|
|
|
554,790
|
|
|
|
-
|
|
|
|
4,032,686
|
|
Depreciation and amortization
|
|
|
248,943
|
|
|
|
490,469
|
|
|
|
-
|
|
|
|
739,412
|
|
Total operating expenses
|
|
|
4,097,079
|
|
|
|
1,538,805
|
|
|
|
-
|
|
|
|
5,635,884
|
|
Loss from operations
|
|
|
(2,585,207
|
)
|
|
|
(1,261,764
|
)
|
|
|
-
|
|
|
|
(3,846,971
|
)
|
Other expenses
|
|
|
454,686
|
|
|
|
760,820
|
|
|
|
86,362
|
|
|
|
1,301,868
|
|
Net loss
|
|
$
|
(3,039,893
|
)
|
|
$
|
(2,022,584
|
)
|
|
$
|
(86,362
|
)
|
|
$
|
(5,148,839
|
)
|
Condensed Consolidating Statement of
Cash Flows for the six months ended June 30, 2019
|
|
Parent
and other
Subsidiaries
|
|
|
Entsorga
West
Virginia LLC
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Cash flows used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(3,039,893
|
)
|
|
$
|
(2,022,584
|
)
|
|
$
|
(86,362
|
)
|
|
$
|
(5,148,839
|
)
|
Adjustments to reconcile net loss to net cash used in operations
|
|
|
1,232,948
|
|
|
|
549,437
|
|
|
|
86,362
|
|
|
|
1,868,747
|
|
Changes in operating assets and liabilities
|
|
|
17,817
|
|
|
|
1,243,220
|
|
|
|
-
|
|
|
|
1,261,037
|
|
Net cash used in operations
|
|
|
(1,789,128
|
)
|
|
|
(229,927
|
)
|
|
|
-
|
|
|
|
(2,019,055
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow used in investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction in process and acquisitions of property and equipment
|
|
|
-
|
|
|
|
(4,164,691
|
)
|
|
|
-
|
|
|
|
(4,164,691
|
)
|
Capital contribution to Entsorga West Virginia, LLC
|
|
|
(2,486,362
|
)
|
|
|
-
|
|
|
|
2,486,362
|
|
|
|
-
|
|
Other investing activities
|
|
|
39,830
|
|
|
|
-
|
|
|
|
-
|
|
|
|
39,830
|
|
Net cash used in investing activities
|
|
|
(2,446,532
|
)
|
|
|
(4,164,691
|
)
|
|
|
2,486,362
|
|
|
|
(4,124,861
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuances of debt and equity
|
|
|
3,397,500
|
|
|
|
2,486,362
|
|
|
|
(2,486,362
|
)
|
|
|
3,397,500
|
|
Repayments of debt
|
|
|
(4,549
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,549
|
)
|
Deferred financing costs incurred
|
|
|
-
|
|
|
|
(43,941
|
)
|
|
|
-
|
|
|
|
(43,941
|
)
|
Net cash provided by financing activities
|
|
|
3,392,951
|
|
|
|
2,442,421
|
|
|
|
(2,486,362
|
)
|
|
|
3,349,010
|
|
Effect of exchange rate on cash
|
|
|
17,398
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,398
|
|
Cash – beginning of period (restricted and unrestricted)
|
|
|
2,410,708
|
|
|
|
6,715,672
|
|
|
|
-
|
|
|
|
9,126,380
|
|
Cash – end of period (restricted and unrestricted)
|
|
$
|
1,585,397
|
|
|
$
|
4,763,475
|
|
|
$
|
-
|
|
|
$
|
6,348,872
|
|
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. 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.
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 had been delayed, although subsequent to June 2020
Carnival recommenced digester purchasing activity by issuing purchase orders totaling approximately $1 million that the Company
expects commencing shipments on late in the third quarter of 2020, and 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 have placed a strain on the Company’s cash flows 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.
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 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 kill 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.
Results of operations for the three months
ended June 30, 2020
compared to the three months ended June
30, 2019
Overview
|
|
Three Months Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
1,273,932
|
|
|
$
|
1,051,212
|
|
Operating expenses
|
|
|
3,639,178
|
|
|
|
2,976,880
|
|
Loss from operations
|
|
|
(2,365,246
|
)
|
|
|
(1,925,668
|
)
|
Other expenses
|
|
|
1,019,964
|
|
|
|
962,004
|
|
Net loss
|
|
$
|
(3,385,210
|
)
|
|
$
|
(2,887,672
|
)
|
Revenue increased $222,720
(21.2%) due to the HEBioT facility coming on-line in the second quarter of 2019 offset by decreases in rental, service and maintenance
resulting from lower service and maintenance revenue, equipment sales and 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 $662,298 (22.2%) to $3,639,178 for the second quarter of 2020 as compared to the second quarter of 2019 due primarily
to a $526,731 (106.7%) increase in HEBioT processing costs related to the increase in activities at the facility. Professional
fees also increased by $117,790 (43.2%) to $390,663 for the second quarter of 2020 as compared to the second quarter of 2019 primarily
related to fund raising and strategic activities.
The loss from operations
increased by $439,578 (22.8%) as a result of increased operating expenses increasing greater than the increase in revenues.
Other expenses increased
by $57,960 (6.0%) primarily due to interest related to the advances from related parties.
Net loss increased
by $497,538 (17.2%) due to the increase in operating loss and the increase in other expenses.
Revenue and Related Expenses
|
|
Three Months Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
HEBioT (related entity)
|
|
$
|
892,899
|
|
|
$
|
277,041
|
|
Rental, service and maintenance
|
|
|
356,033
|
|
|
|
448,937
|
|
Equipment sales
|
|
|
-
|
|
|
|
75,234
|
|
Management advisory and other fees (related entity)
|
|
|
25,000
|
|
|
|
250,000
|
|
Total revenue
|
|
|
1,273,932
|
|
|
|
1,051,212
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
HEBioT processing (related entity)
|
|
|
1,020,277
|
|
|
|
493,546
|
|
Rental, service and maintenance
|
|
|
151,693
|
|
|
|
128,311
|
|
Equipment sales
|
|
|
-
|
|
|
|
38,726
|
|
Total related expenses
|
|
|
1,171,972
|
|
|
|
660,583
|
|
Contribution
|
|
|
101,960
|
|
|
|
390,629
|
|
Contribution margins
|
|
|
|
|
|
|
|
|
HEBioT (related entity)
|
|
|
(14.3
|
)%
|
|
|
(78.1
|
)%
|
Rental, service and maintenance
|
|
|
57.4
|
|
|
|
71.4
|
|
Equipment sales
|
|
|
n.a.
|
|
|
|
48.5
|
|
HEBioT –
The HEBioT facility commenced operations in the second quarter of 2019. During the all of 2019 the facility was ramping up in-take
volumes of waste, however the primary customer for the facility’s solid recovered fuel (“SRF”) had not yet completed
its construction of their fuel intake system that would allow for the delivery of SRF. Toward the end of the first quarter in 2020
the customer was finalizing safety and building inspections that would allow for acceptance of the SRF. During the second quarter
of 2020, incoming waste disposal fees (commonly referred to as “TIP” fees) increased by $241,832 (87.8%) to $517,166
due to greater volume and SRF fees amounted to $375,734 as compared to none in the second quarter of 2019. While the HEBioT processing
expenses increased by $526,731 (106.7%), the HEBioT contribution margin improved from the second quarter of 2019 from negative
78.1% to negative 14.3% in the second quarter of 2020 due to increasing volumes and the sale of SRF.
Rental, service
and maintenance – Rental, service and maintenance revenue decreased by $92,904 (20.7%) to $356,033 in the second
quarter of 2020, as compared to $448,937 in the second quarter of 2019. This decrease was primarily due to a $37,909 (10.8%) decrease
in rental income as a result of the Company deferring certain customer rental payments that were impacted by COVID-19 and a $21,535
(33.0) decrease in parts, consumables and other digester related sales and services (also impacted by COVID-19) and a $33,460 (100.0%)
decrease resulting from non-recurring consulting that occurred in 2019. Rental, service and maintenance expenses increased by $23,384
(18.2%) primarily due to increased third party servicer costs offset in part by decreases in freight and personnel costs.
Equipment sales
– There were no equipment sales during the second quarter of 2020 primarily due to negative commercial conditions arising
from the COVID-19 pandemic.
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 the Management Advisory agreement. 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 $250,000
in the second 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 June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Staffing
|
|
$
|
1,055,123
|
|
|
$
|
1,022,795
|
|
Professional fees
|
|
|
390,663
|
|
|
|
272,873
|
|
Other costs
|
|
|
404,079
|
|
|
|
405,289
|
|
Other expenses
|
|
|
47,577
|
|
|
|
5,367
|
|
Total selling, general and administrative expenses
|
|
$
|
1,897,442
|
|
|
$
|
1,706,324
|
|
Staffing –
Staffing expense increased by $32,328 (3.2%) to $1,055,123 in the second quarter of 2020, as compared to $1,022,795 in the second
quarter of 2019. This increase was the result of a decrease in general staffing offset by an increase of $193,908 in stock based
compensation from the second quarter of 2019 to $424,446 in the second quarter of 2020 related to new 2020 awards and a compensation
deferment plan initiated in the second quarter that provided for stock compensation in place of cash compensation.
Professional fees
– Professional fees increased by $117,790 (43.2%) to $390,663 in the second quarter of 2020, as compared to $272,873
in the second quarter of 2019. This increase was primarily the result of an increase in investment banking expenses of $105,890
(230.2%) to $151,890 in the second quarter of 2020, as compared to $46,000 in the second quarter of 2019, an increase in accounting
expenses of $14,550 (14.9%) to $112,034 in the second quarter of 2020, as compared to $97,484 in the second quarter of 2019, decrease
in legal expenses of $54,189 (32.4%) to $112,821 in the second quarter of 2020, as compared to $167,010 in the second quarter of
2019. The increase in investment baking was primarily the result of capital and debt fund raising as well as consulting on several
strategic initiatives. Overall professional fees increased as a result of the second quarter of 2019 including a $44,500 offset
from the favorable outcome of litigation relating to a prior strategic consultant.
Depreciation and Amortization
Depreciation and amortization
decreased by $40,209 (6.6%) to $569,764 in the second quarter of 2020, as compared to $609,973 in the second 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 during
the second quarter of 2020 and 2019 were comprised of interest income and expense. Other expense increased by $57,960 (6.0%) to
$1,019,964 in the second quarter of 2020, as compared to $962,004 in the second quarter of 2019. This increase was primarily the
result of an increase in the Company’s borrowings between the periods.
Results of operations for the six months
ended June 30, 2020
compared to the six months ended June
30, 2019
Overview
|
|
Six Months Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
2,633,273
|
|
|
$
|
1,788,913
|
|
Operating expenses
|
|
|
7,392,469
|
|
|
|
5,635,884
|
|
Loss from operations
|
|
|
(4,759,196
|
)
|
|
|
(3,846,971
|
)
|
Other expenses
|
|
|
2,019,988
|
|
|
|
1,301,868
|
|
Net loss
|
|
$
|
(6,779,184
|
)
|
|
$
|
(5,148,839
|
)
|
Revenue increased $844,360
(47.2%) due to a $1,105,990 increase in HEBioT revenues and an increase of $247,882 (329.5%) in digester equipment sales, which
is the result of a strategic focus on sales as compared to rentals. These increases were offset by decreases in rental, service
and maintenance resulting from lower service and maintenance revenue and 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 $1,756,585 (31.2%) due to HEBioT related costs, including depreciation, as well as increased costs associated with
digester equipment sales resulting from the increase in sales and increased costs relating to digester rental, service and maintenance.
The increases were offset in part by a decrease in selling, general and administrative expenses primarily due to a decrease in
staffing costs and a first quarter non-recurring 2019 write-off of a HEBioT site that was discontinued in favor of a larger more
suitable site.
The loss from operations
increased by $912,225 (23.7%) as a result of increased operating expenses increasing greater than the increase in revenues.
Other expenses increased
by $718,120 (55.2%) primarily due to interest related to the non-recourse municipal bond financing the HEBioT facility which was
under construction in the first quarter of 2019 and increased borrowing in the second quarter of 2020.
Net loss increased
by $1,630,345 (31.7%) due to the increase in operating loss and the increase in other expenses.
Revenue and Related Expenses
|
|
Six Months Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
HEBioT (related entity)
|
|
$
|
1,383,031
|
|
|
$
|
277,041
|
|
Rental, service and maintenance
|
|
|
827,126
|
|
|
|
936,638
|
|
Equipment sales
|
|
|
323,116
|
|
|
|
75,234
|
|
Management advisory and other fees (related entity)
|
|
|
100,000
|
|
|
|
500,000
|
|
Total revenue
|
|
|
2,633,273
|
|
|
|
1,788,913
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
HEBioT processing (related entity)
|
|
|
1,832,704
|
|
|
|
493,546
|
|
Rental, service and maintenance
|
|
|
412,530
|
|
|
|
331,514
|
|
Equipment sales
|
|
|
146,404
|
|
|
|
38,726
|
|
Total related expenses
|
|
|
2,391,638
|
|
|
|
863,786
|
|
Contribution
|
|
|
241,635
|
|
|
|
925,127
|
|
Contribution margins
|
|
|
|
|
|
|
|
|
HEBioT (related entity)
|
|
|
(32.5
|
)%
|
|
|
(78.1
|
)%
|
Rental, service and maintenance
|
|
|
50.1
|
|
|
|
64.6
|
|
Equipment sales
|
|
|
54.7
|
|
|
|
48.5
|
|
HEBioT –
The HEBioT facility commenced operations in the second quarter of 2019. During the six months ended June 30, 2020, incoming waste
disposal fees TIP fees increased by $698,501 (252.1%) to $975,542 from $277,041 during the six months ended June 30, 2019. SRF
fees amounted to $406,390 for the six months ended June 30, 2020 as compared to none during the six months ended June 30, 2019.
While the HEBioT processing expenses increased by $1,339,158 (271.3%) due to increased volumes, the HEBioT contribution margin
improved from the six months ended June 30, 2019 negative 78.1% to negative 32.5% in six months ended June 30, 2020.
Rental, service
and maintenance – Rental, service and maintenance revenue decreased by only $109,512 (11.7%) to $827,126 during
the six months ended June 30, 2020, as compared $936,638 during the six months ended June 30, 2019. Rental contract revenue decreased
by only $6,681 (1.0%) to $698,532 during the six months ended June 30, 2020, as compared $691,851 during the six months ended June
30, 2019. Service and maintenance revenue decreased by $68,907 (49.2%) to $71,118 during the six months ended June 30, 2020, as
compared $140,024 during the six months ended June 30, 2019. These decreases are primarily driven by COVID-19 restrictions on many
of our customers during the second quarter of 2020. Also contributing to the decrease is a $33,460 (100.0%) decrease resulting
from non-recurring consulting that occurred in 2019. Rental, service and maintenance expenses increased by $81,016 (24.4%) primarily
due to increased third party servicer costs and first quarter 2020 increased personnel costs in anticipation of staffing up for
the Carnival Cruise contract that were reversed in the second quarter of 2020, offset in part by decreases in freight and parts
expenses.
Equipment sales
– During the six months ended June 30, 2020 equipment sales revenue increased by $247,882 (329.5%) to $323,116 as compared
to $75,234 during the six months ended June 30, 2019. Sales expense, like wise increased by $107,678 (278.1%) as compared to 38,726
during the six months ended June 30, 2019. The contribution margin of 54.7% is in-line with historical rates. The Company began
a shift in its deployment model to be more heavily weighted to sales versus rentals in the first quarter of 2020 and believes this
trend will continue.
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 the Management Advisory agreement. As a result,
management advisory and other fees decreased by $400,000 (80.0%) to $100,000 in the six months ended June 30, 2020, as compared
to $500,000 in the six months ended June 30, 2019. Effective April 1, 2020, the fee was further 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
|
|
Six Months Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Staffing
|
|
$
|
2,133,658
|
|
|
$
|
2,262,758
|
|
Professional fees
|
|
|
659,058
|
|
|
|
652,829
|
|
Other expenses
|
|
|
798,909
|
|
|
|
667,105
|
|
Other costs
|
|
|
224,240
|
|
|
|
449,994
|
|
Total selling, general and administrative expenses
|
|
$
|
3,815,865
|
|
|
$
|
4,032,686
|
|
Staffing –
Staffing expense decreased by $129,100 (5.7%) to $2,133,658 during the six months ended June 30, 2020, as compared to $2,262,758
during the six months ended June 30, 2019, primarily due to a reduction in cash compensation of $334,349 through layoffs and stock
based deferments to $1,086,820 during the six months ended June 30, 2020, as compared to $1,421,169 during the six months ended
June 30, 2019 offset in part by an increase in stock based compensation of $176,050 (33.1%) to $707,653 during the six months ended
June 30, 2020, as compared to $531,603 during the six months ended June 30, 2019.
Professional fees
– Professional fees increased by $6,229 (1.0%) to $659,058 during the six months ended June 30, 2020, as compared to
$652,829 during the six months ended June 30, 2019. This increase was primarily the result of an increase in investment banking
expenses of $84,615 (84.6%) to $184,690 during the six months ended June 30, 2020, as compared to $100,075 during the six months
ended June 30, 2019, an increase in marketing and public relations (occurring primarily before the onset of COVID-19) of $64,549
(713.6%), as compared to $9,046 during the six months ended June 30, 2019, offset by decreases of legal expenses of $138,025 (43.1%)
during the six months ended June 30, 2020, as compared to $320,452 during the six months ended June 30, 2019, and a decrease of
accounting expenses of $49,410 (18.5%) to $218,346 during the six months ended June 30, 2020, as compared to $267,756 during the
six months ended June 30, 2019. Overall professional fees increased as a result of the second quarter of 2019 including a $44,500
offset from the favorable outcome of litigation relating to a prior strategic consultant.
Other expenses –
Other expenses, which include marketing and other fees and services increased by $131,804 (19.8%) to $798,909 during the six months
ended June 30, 2020, as compared to $667,105 during the six months ended June 30, 2019. This increase was primarily due to an increase
of $73,961 (60.2%) increase in HEBioT facility related fees and services and a non-cash fee of $60,000 paid to the Company’s
senior lender.
Other costs –
Other costs decreased by $225,754 (50.2%) to $224,240 during the six months ended June 30, 2020, as compared to $449,994 during
the six months ended June 30, 2019. This decrease was the result of a non-recurring loss on the write-off of a HEBioT facility
site amounting to $346,654 in the first quarter of 2019 that was discontinued in favor of a larger more suitable site, offset primarily
by increases of $73,288 (184.0%) in foreign currency fluctuations in the UK that are not hedged to $113,122 during the six months
ended June 30, 2020, as compared to $39,834 during the six months ended June 30, 2019 and an increase of $31,116 (103.7%) in bad
debt expense to $61,116 during the six months ended June 30, 2020, as compared to $30,000 during the six months ended June 30,
2019 relating to increased credit risks resulting from COVID-19.
Depreciation and Amortization
Depreciation and amortization
increased by $445,554 (60.3%) to $1,184,966 during the six months ended June 30, 2020, as compared to $739,412 in the six months
ended June 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. For the first quarter of 2020,
depreciation and amortization related to the HEBioT facility was $490,469.
Other Expenses
Other expenses during
the six months ended June 30, 2020 and 2019 were comprised of interest income and expense. Other expense increased by $718,120
(55.2%) to $2,019,988 in the six months ended June 30, 2020, as compared to $1,301,868 the six months ended June 30, 2019. This
increase was primarily the result of the HEBioT facility becoming operational with interest being expensed, rather than capitalized
into the facility, which was the case during the first quarter of 2019. HEBioT related interest increased by $532,203 to $1,293,023
in the six months ended June 30, 2020, as compared to $760,820 in the six months ended June 30, 2019.
Liquidity and Capital Resources
For the six months
June 30, 2020, the Company had a consolidated net loss of $6,779,184, incurred a consolidated loss from operations of $4,759,196
and used net cash in consolidated operating activities of $3,912,611. At June 30, 2020, consolidated total stockholders’
equity amounted to $2,763,640, consolidated stockholders’ deficit attributable to parent amounted to $1,038,936 and the Company
had a consolidated working capital deficit of $14,094,144. While the Company had not met certain of its senior secured note’s
financial covenants as of June 30, 2020 (Note 6), the Company has favorably renegotiated those covenants and has received a waiver
for such non-compliance through June 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 $4,324,243 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. 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. 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
As a result of COVID-19
the implementation of the Company’s contract with Carnival Corporation has been delayed and 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 have placed a strain on the Company’s
cash flows resulting in the Company executing on cost controls and cash preservation practices that have included reducing executive
cash compensation, laying off non-essential employees, limiting expenses and disbursements, as well as extending vendor payments.
Cash
As of June 30, 2020
and December 31, 2019, the Company had unrestricted cash balances of $342,182 and $1,847,526, and restricted cash balances of $3,883,478
and 3,689,426, respectively.
Borrowings and Debt
Contractual Maturities
of Senior Secured, Junior Promissory, Notes Payable and Long Term Debt — As of June 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)
|
|
$
|
2,109
|
|
|
$
|
23,406
|
|
|
$
|
25,515
|
|
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
|
|
$
|
10,310
|
|
|
$
|
6,565,777
|
|
|
$
|
6,576,087
|
|
Entsorga West
Virginia, LLC WVEDA Solid Waste Disposal Revenue Bonds — As of June 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 $3,912,611
of cash in operating activities during the six months ended June 30, 2020 as compared to a use of $2,019,055 during the six months
ended June 30, 2019. Our net loss during the six months ended June 30, 2020 of $6,779,184 was reduced by non-cash expenses of $2,273,066.
Cash Flows from
Investing Activities
Net cash used in investing
activities for the six months ended June 30, 2020 amounted to $82,727, as compared to $4,124,861 in net cash used in investing
activities for the six months ended June 30, which was primarily related to the construction of the HEBiot facility.
Cash Flows from
Financing Activities
Cash provided by
financing activities for the six months ended June 30, 2020 amounted to $2,704,254 and is primarily the result 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 proceeds of $1,787,500 from a
preferred stock issuance and $210,000 in advances from a related party.
Subsequent Common Stock Offering
On July 27, 2020, the
Company 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, we 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, we also granted the underwriter
an option to purchase up to an additional 682,500 shares of our 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 final prospectus for the offering
was filed with the U.S. Securities and Exchange Commission pursuant to Rule 424(b)(1) of the Securities Act of 1933, as amended,
on July 29, 2020 as Amendment No. 1 to Prospectus Supplement.
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, we agreed to issue warrants to purchase 318,500 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 will be 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.
The net proceeds to
the Company after underwriter's commission and agreed upon customary fees and expenses were $7,429,305, before deducting the Company's
legal and accounting expenses related to the Offering. The Company intends to use the net proceeds to fund general corporate purposes
and to fund ongoing operations.
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.
Off Balance Sheet Arrangements
We have not entered
into any off-balance sheet arrangements during the three months ended June 30, 2020.