The information contained
in this Annual Report may contain certain statements about SEER that are or may be “forward-looking statements” that
is, statements related to future, not past, events, including forward-looking statements within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995. These statements are based on the current expectations of the management of SEER and
are subject to uncertainty and changes in circumstances and involve risks and uncertainties that could cause actual results to
differ materially from those expressed or implied in such forward-looking statements. Factors that could cause our results to differ
materially from current expectations include, but are not limited to factors detailed in our reports filed with the U.S. Securities
and Exchange Commission (“SEC”), including but not limited to those under the caption “Risk Factors” contained
herein. In addition, these statements are based on a number of assumptions that are subject to change. The forward-looking statements
contained in the information in this Annual Report may include all other statements in this document other than historical facts.
Without limitation, any statements preceded or followed by, or that include the words “targets”, “plans”,
“believes”, “expects”, “aims”, “intends”, “will”, “may”,
“anticipates”, “estimates”, “approximates”, “projects”, “seeks”, “sees”,
“should,” “would,” “expect,” “positioned,” “strategy,” or words or
terms of similar substance or derivative variation or the negative thereof, are forward-looking statements. Forward-looking statements
include statements relating to the following: (i) future capital expenditures, expenses, revenues, earnings, synergies, economic
performance, indebtedness, financial condition, losses and future prospects; (ii) business and management strategies and the expansion
and growth of SEER; (iii) the effects of government regulation on SEER’s business, and (iv) our plans, objectives, expectations
and intentions generally.
There are a number
of factors that could cause actual results and developments to differ materially from those expressed or implied by such forward-looking
statements. Additional particular uncertainties that could cause our actual results to be materially different than those expressed
in forward-looking statements include: risks associated with our international operations; significant movements in foreign currency
exchange rates; changes in the general economy, as well as the cyclical nature of our markets; availability and cost of raw materials,
parts and components used in our products; the competitive environment in the areas of our planned industrial activities; our ability
to identify, finance, acquire and successfully integrate attractive acquisition targets, expected earnings of SEER; the amount
of and our ability to estimate known and unknown liabilities; material disruption at any of our significant manufacturing facilities;
the solvency of our insurers and the likelihood of their payment for losses; our ability to manage and grow our business and execution
of our business and growth strategies; our ability and the ability our customers to access required capital at a reasonable costs;
our ability to expand our business in our targeted markets; the level of capital investment and expenditures by our customers in
our strategic markets; our financial performance; our ability to identify, address and remediate any material weakness in our internal
control over financial reporting; our ability to achieve or maintain credit ratings and the impact on our funding costs and competitive
position if we do not do so; and other risk factors as disclosed herein under the caption “Risk Factors”. Other unknown
or unpredictable factors could also cause actual results to differ materially from those in any forward-looking statement.
Due to such uncertainties
and risks, readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date
hereof. SEER undertakes no obligation to publicly update or revise forward-looking statements, whether as a result of new information,
future events or otherwise, except to the extent legally required. Nothing contained herein shall be deemed to be a forecast, projection
or estimate of the future financial performance of SEER unless otherwise expressly stated.
ITEM 1. BUSINESS
Overview
Strategic Environmental
& Energy Resources, Inc. (“the Company” or “SEER”) was originally organized under the laws of the State
of Nevada on February 13, 2002 for the purpose of acquiring one or more businesses, under the name of Satellite Organizing Solutions,
Inc (“SOZG”). In January 2008, SOZG changed its name to Strategic Environmental & Energy Resources, Inc., reduced
its number of outstanding shares through a reverse stock split and consummated the acquisition of both, REGS, LLC and Tactical
Cleaning Company, LLC. SEER is dedicated to assembling complementary service and environmental, clean-technology businesses that
provide safe, innovative, cost effective, and profitable solutions in the oil & gas, environmental, waste management and renewable
energy industries. SEER currently operates five companies with four offices in the western and mid-western U.S. Through these operating
companies, SEER provides products and services throughout the U.S. and has licensed technologies with many customer installations
throughout the U.S. Each of the five operating companies is discussed in more detail below. The Company also has non-controlling
interests in joint ventures, some of which have no or minimal operations.
The Company’s
domestic strategy is to grow internally through SEER’s subsidiaries that have well established revenue streams and, simultaneously,
establish long-term alliances with and/or acquire complementary domestic businesses in rapidly growing markets for renewable energy,
waste and water treatment and oil & gas services. The focus of the SEER family of companies, however is to increase margins
by securing or developing proprietary patented and patent-pending technologies and then leveraging its 20 plus-year service experience
to place these innovations and solutions into the growing markets of emission capture and control, renewable “green gas”
capture and sale, compressed natural gas (“CNG”) fuel generation, as well as general solid waste and medical/pharmaceutical
waste destruction. Many of SEER’s current operating companies share customer bases and each provides truly synergistic services,
technologies and products as well as annuity type revenue streams.
The company now owns
and manages four operating entities and one entity that has no significant operations to date.
Subsidiaries
REGS, LLC
d/b/a Resource
Environmental Group Services (“REGS”):
(operating since 1994)
provides general industrial cleaning services
and waste management to many industry sectors focusing primarily on oil & gas production (upstream) and refineries (downstream).
MV, LLC (d/b/a MV Technologies),
(“MV”)
:
(operating since 2003)
MV designs and sells patented and/or proprietary, dry scrubber solutions
for management of Hydrogen Sulfide (H
2
S) in biogas, landfill gas, and petroleum processing operations. These system
solutions are marketed under the product names H2SPlus™ and OdorFilter™. The markets for these products include land
fill operations, agricultural and food product processors, wastewater treatment facilities, and petroleum product refiners. MV
also develops and designs proprietary technologies and systems used to condition biogas for use as renewable natural gas (“RNG”),
for a number of applications, such as transportation fuel and natural gas pipeline injection.
Paragon Waste Solutions,
LLC (“PWS”): (formed late 2010)
PWS is an operating company that has developed a patented waste destruction technology
using a pyrolytic heating process combined with “non-thermal plasma” assisted oxidation. This technique involves gasification
of solid waste by heating the waste in a low-oxygen environment, followed by complete oxidation at higher temperatures in the presence
of plasma. The term “non-thermal plasma” refers to a low energy ionized gas that is generated by electrical discharges
between two electrodes. This technology, commercially referred to as CoronaLux™, is designed and intended for the “clean”
destruction of hazardous chemical and biological waste
(i.e
., hospital “red bag” waste) thereby eliminating
the need for costly segregation, transportation, incineration or landfill (with their associated legacy liabilities). PWS is a
54% owned subsidiary.
ReaCH4BioGas (“Reach”)
(trade name for Benefuels, LLC): (formed February 2013)
owned 85% by SEER. Reach develops renewable natural gas projects that
convert raw biogas into pipeline quality gas and/or Renewable, “RNG”, for fleet vehicles. Reach has had minimal operations
as of December 31, 2017.
SEER Environmental Materials,
LLC (“SEM”): (formed September 2015)
is a wholly owned subsidiary established as a materials technology business
with the purpose of developing advanced chemical absorbents and catalysts that enhance the capability of biogas produced from,
landfill, wastewater treatment operations and agricultural digester operations.
Joint Ventures
MV RCM Joint Venture
:
In April 2013, MV Technologies, Inc (“MV”) and RCM International, LLC (“RCM”) entered into an Agreement
to develop hybrid scrubber systems that employ elements of RCM Technology and MV Technology (the “Joint Venture”).
RCM and MV Technologies will independently market the hybrid scrubber systems. The contractual Joint Venture has an initial term
of five years and will automatically renew for successive one-year periods unless either Party gives the other Party one hundred
and eighty (180) days’ notice prior to the applicable renewal date. Operations to date of the Joint Venture have been limited
to formation activities.
Paragon Waste (UK) Ltd
:
In June 2014, PWS and PCI Consulting Ltd (“PCI”) formed Paragon Waste (UK) Ltd (“Paragon UK Joint Venture”)
to develop, permit and exploit the PWS waste destruction technology within the territory of Ireland and the United Kingdom. PWS
and PCI each own 50% of the voting shares of Paragon UK Joint Venture. Operations to date of the Paragon UK Joint Venture have
been limited to formation, the delivery of a CoronaLux™ unit with a third party in the United Kingdom and application and
permitting efforts with regulatory entities.
P&P Company
: In
February 2015, PWS and Particle Science Tech of Environmental Protection, Inc. (“Particle Science”) formed a joint
venture, Particle & Paragon Environmental Solutions, Inc (“P&P”) to exploit the PWS technology in China, including
Hong Kong, Macao and Taiwan. PWS and Particle Science each own 50% of P&P. Operations to date have been limited to formation
of P&P and the sale and delivery of a CoronaLux™ unit to Particle Science in China.
PWS MWS Joint Venture
:
In October 2014, PWS and Medical Waste Services, LLC (“MWS”) formed a contractual joint venture to exploit the PWS
medical waste destruction technology. In 2015, MWS licensed and installed a CoronaLux™ unit at an MWS facility, and subsequently
received a limited permit to operate from the South Coast Air Quality Management District (“SCAQMD”) and the California
Department of Public Health. In November 2017, PWS received final air quality permit approval from SCAQMD allowing for full operations
of the CoronaLux™ unit at the MWS facility.
Paragon Southwest Joint
Venture
:
In December 2017, PWS and GulfWest Waste Solutions, LLC ("GWWS") formed Paragon Southwest Medical Waste, LLC (“PSMW”)
to exploit the PWS medical waste destruction technology. PSMW will have an exclusive license to the CoronaLux™ technology
in a six-state area of the Southern United States. In addition to the equity position, PWS will be the operating partner for the
business and sell a number of additional systems to the joint venture over the next five years. In 2017, PSMW purchased
and installed three CoronaLux™ units at an PSMW facility. Operations in the form of medical waste destruction began in the
first quarter of 2018.
Segment Information
The Company currently has identified
three segments as follows:
|
|
|
|
% of Annual Revenues
|
|
|
|
|
2017
|
2016
|
REGS
|
|
Industrial Cleaning
|
|
27%
|
38%
|
MV, SEM
|
|
Environmental Solutions
|
|
62%
|
59%
|
PWS
|
|
Solid Waste
|
|
11%
|
3%
|
Reach is not
currently operating but should operations commence it will be part of the Environmental Solutions segment. The MV RCM Joint
Venture is not currently operating but should operations commence it will be part of the Environmental Solutions segment.
As of December 31,
2017 we had no one customer with sales in excess of 10% of our revenues. As of December 31, 2016, we had one customer with sales
in excess of 10% of our revenue and they represented approximately 17% of total revenues for the year ended December 31, 2016. In early 2016 we were notified by this significant customer that effective April
1, 2016 we would no longer be providing routine maintenance services but still be eligible to provide other industrial cleaning
services. During 2016, the loss of revenue from this customer was approximately $2.5 million. See Notes 2 and 17 to the consolidated
financial statements and Item 1A Risk Factors.
Financial Condition
As shown in the accompanying
consolidated financial statements, the Company has experienced recurring losses, and has an accumulated deficit of approximately
$21.5 million as of December 31, 2017 and for the years ended December 31, 2017, and 2016, we incurred net losses, from continuing
operations, of approximately $6.1 million and $5.0 million, respectively. As of December 31, 2017 and 2016 our current liabilities
exceed our current assets by approximately $5.2 million and $3.8 million, respectively. Our total liabilities exceed total assets
at December 31, 2017 by approximately $3.3 million and at December 31, 2016 our total liabilities exceeded our total assets by
approximately $2.3 million. The primary reason for the increase in negative working capital and the reduction in total assets
over total liabilities from 2016 to 2017 is due to the impairment of Paragon CoronaLux™ waste destruction units, the interest
expense incurred during 2017, and the net loss incurred in 2017 as noted above, offset by a gain on sale of rail operations during
2017. Also see Notes 2, 7 and 13 to the consolidated financial statements. In early 2016 REGS, a wholly owned subsidiary, was
notified that effective April 1, 2016 it would no longer be providing routine maintenance services to its largest customer but
would still be eligible to provide other industrial cleaning services. The loss of revenue from this customer was approximately
$2.5 million for the year ended December 31, 2016.
Realization of a major portion of our assets as of December 31, 2017, is dependent
upon our continued operations. The Company is dependent on generating additional revenue or obtaining adequate capital to fund
operating losses until it becomes profitable. In addition, we have undertaken a number of specific steps to continue to operate
as a going concern. We continue to focus on developing organic growth in our operating companies, diversifying our service customer
base and market concentrations and improving gross and net margins through increased attention to pricing, aggressive cost management
and overhead reductions. Critical to achieving profitability will be our ability to license and or sell, permit and operate through
our joint ventures and licensees our CoronaLux™ waste destruction units. We have increased our business development efforts
to address opportunities identified in expanding domestic markets attributable to increased federal and state emission control
regulations (particularly in the nation’s oil and gas fields) and a growing demand for energy conservation and renewable
energies. In addition, the Company is evaluating various forms of financing that may be available to it. There can be no assurance
that the Company will secure additional financing for working capital, increase revenues and achieve the desired result of net
income and positive cash flow from operations in future years. These financial statements do not give any effect to any adjustments
that would be necessary should the Company be unable to report on a going concern basis.
Industry
SEER, with its diverse
services, technologies, and environmental solution offerings, participates in the worldwide markets of industrial cleaning, environmental
compliance, renewable energy and waste minimization/management. There are ever-increasing emissions and solid waste regulations
and statutory programs at the local, state, federal and international levels that create and mandate the need for renewable energies
and waste minimization, proper handling, storage, treatment and disposal of virtually all types of waste.
The industrial waste
management industry in North America was shaped first by the Resource Conservation and Recovery Act of 1976 (“RCRA”),
which requires waste generators to, among other things, store and dispose of hazardous waste in accordance with specific regulations.
Subsequent to RCRA, growing national awareness of environmental issues, coupled with corporate and institutional awareness of environmental
liabilities, have contributed to the growth of the industry and associated governing legislation on the state and federal levels.
Today, collection
and disposal of solid and hazardous wastes are subject to local, state, and federal requirements and controls that regulate health,
safety, the environment, zoning and land-use. Included in these regulations is the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 (“CERCLA”), of the United States. CERCLA holds generators and transporters of hazardous substances,
as well as past and present owners and operators of sites where there has been a hazardous release, strictly, jointly and severally
liable for environmental cleanup costs resulting from the release or threatened release of hazardous materials.
The enactment of the
federal
Clean Air Act of 1970
(CAA) resulted in a major shift in the federal government’s role in air pollution control.
This legislation authorized the development of comprehensive federal and state regulations to limit emissions from both stationary
(industrial) sources and mobile sources. The Act has been amended and expanded in scope many times since its enactment and remains
a major consideration for safely and responsibly conducting business in the U.S.
These and countless
other similar regulatory programs mandate the need for environmental and industrial cleaning services and technologies such as
those offered by SEER and its companies.
There are substantial
barriers to entry in the waste management industry, including the high degree of expertise and training required, regulatory compliance,
insurance, and licensing costs and procedures, strict federal, state, provincial and local permitting and oversight processes,
and significant capital costs of equipment and qualified personnel.
Business Strategy
SEER’s growth
to date has been fueled by a combination of synergistic and vertical integration, acquisitions, strategic alliances and organic
growth. SEER acquired REGS, and MV as wholly-owned subsidiaries. In 2015 SEM was created to provide recurring and high-margin revenue
to the Company by offering an internal source of diverse media solutions that are required for the treatment of various waste and
off gas streams. This also enables greater pricing flexibility by the technology solutions affiliates that, in turn, should result
in increased sales of systems that leads to greater demand of media. The increased installation and demand for media change outs
also creates service opportunities for the Company’s service sector. We intend to continue pursuing an aggressive strategy
of both acquisitions and organic growth while expanding our geographic footprint into other regions of the United States and foreign
markets. Potential acquisitions may include businesses that secure supply chain and vendor logistics or are complementary to our
core businesses or companies that provide a similar set of services in regions where the Company does not currently have operations.
Upon full development
of certain of our patented and patent-pending technologies, we intend to explore licensing relationships with larger, established
companies to generate sustainable revenue streams from both domestic and international applications.
Intellectual Property
MV was issued a patent
in 2012 related to “Oil-Gas Vapor Collection, Storage, and Recovery System, etc.” Patent No. US 8,206,124 B1. MV was
issued a second patent in 2014 titled “Fugitive Gas Capture”, US Patent No. 8,708,663 B1, that expanded claims in the
earlier patent. The patents will expire in 2029 and 2031, respectively, unless otherwise extended. MV is in the process of expanding
the scope and number of claims of this issued patent.
In 2013, PWS filed
provisional and non-provisional patent applications in the name and for the benefit of SEER arising out of and related to its waste
disposal technology involving a pyrolitic first phase and a “cold plasma” second phase system referred to as “plasma
light,” or CoronaLux™ technology. In October 2014 SEER was issued patent No. 8,870,735 for this CoronaLux™ technology.
In 2014, PWS filed a provisional patent related to destruction of volatile organic compounds. A pyrolytic process is basically
the decomposition of any material at elevated temperatures in a very low oxygen-containing atmosphere, as compared to conventional
incineration or pyrolysis processes. In July 2016 SEER was issued patent No. 9,393,519 for this CoronaLux™ technology. The
patents will expire in 2033.
Competition
The industrial services
industry is highly competitive. Our competitors vary in size, geographical coverage and by the mix of services they offer. Our
larger competitors include Philip Services, Clean Harbors, and Veolia Environmental Services. Additionally, we compete with a number
of small and medium size companies. In the face of this competition we have been effective in growing our revenue due to the wide
range of services we offer, a competitive pricing structure, our innovative and proprietary/patent pending technologies, and a
reputation for reliability, built over the nearly 20 years of business operations as well as the care we take in performing and
completing each customer project.
In all its businesses,
the Company currently holds very small parts of very large and growing markets. MV competes by providing superior hydrogen sulfide
(“H
2
S”) “scrubbing” solutions that result in more cost effective removal of H
2
S from
process gas streams. H
2
S is highly corrosive, and is a precursor to sulfur dioxide, a highly regulated air pollutant.
Therefore removing H
2
S from industrial process waste streams is important in order to enhance the safety of personnel,
extend the life of industrial equipment, and to minimize resulting air pollution. In the markets served by MV there are a number
of competing technologies employed such as: biological scrubbing, chemical scrubbing, and dry scrubbing with activated carbon.
REGS competes by offering superior customer response and lower total cost of service. PWS competes by offering a unique on-site,
on-demand waste destruction solution, eliminating the need for waste segregation, transportation, incineration, autoclaving and/or
landfilling; in turn, eliminating all of the associated costs and legacy liabilities associated with current options for medical
waste handling. We believe that the patented CoronaLux™ technology results in a radically superior option in the medical
waste management sector and in ultimate emissions cleaner than other solutions available in the market.
Environmental Matters and Regulation
Significant federal
environmental laws affecting us are the Resource Conservation and Recovery Act (“RCRA”), the Comprehensive Environmental
Response, Compensation and Liability Act (“CERCLA”), also known as the “Superfund Act”, the Clean Air Act,
the Clean Water Act, and the Toxic Substances Control Act (“TSCA”).
RCRA.
RCRA
is the principal federal statute governing hazardous waste generation, treatment, transportation, storage and disposal. Pursuant
to RCRA, the U.S. Environmental Protection Agency (the “EPA”) has established a comprehensive “cradle-to-grave”
system for the management of a wide range of materials identified as hazardous or solid waste. States that have adopted hazardous
waste management programs with standards at least as stringent as those promulgated by the EPA have been delegated authority by
the EPA to administer their facility permitting programs in lieu of the EPA’s program. Every facility that treats, stores
or disposes of hazardous waste must obtain a RCRA permit from the EPA or an authorized state agency, unless a specific exemption
exists, and must comply with certain operating requirements
.
The
Superfund Act.
The Superfund Act is the primary federal statute regulating the cleanup of inactive hazardous substance
sites and imposing liability for cleanup on the responsible parties. It also provides for immediate response and removal actions
coordinated by the EPA, of the release of hazardous substances into the environment, and authorizes the government to respond to
the release or threatened release of hazardous substances or to order responsible persons to perform any necessary cleanup. The
statute provides for strict, and in certain cases, joint and several liability for these responses and other related costs, and
for liability for the cost of damages to natural resources, to the parties involved in the generation, transportation and disposal
of such hazardous substances. Under the statute, we may be deemed liable as a generator or transporter of a hazardous substance
which is released into the environment, or as the owner or operator of a facility from which there is a release of a hazardous
substance into the environment.
The
Clean Air Act.
The Clean Air Act was passed by Congress to control the emissions of pollutants into the air and requires
permits to be obtained for certain sources of toxic air pollutants such as vinyl chloride, or criteria pollutants, such as carbon
monoxide. In 1990, Congress amended the Clean Air Act to require further reductions of air pollutants with specific targets for
non-attainment areas in order to meet certain ambient air quality standards. These amendments also require the EPA to promulgate
regulations, which (i) control emissions of 189 hazardous air pollutants; (ii) create uniform operating permits for major industrial
facilities similar to RCRA operating permits; (iii) mandate the phase-out of ozone depleting chemicals; and (iv) provide for enhanced
enforcement.
Clean
Water Act.
This legislation prohibits discharges into the waters of the United States without governmental authorization
and regulates the discharge of pollutants into surface waters and sewers from a variety of sources, including disposal sites and
treatment facilities
.
Toxic
Substances Control Act.
TSCA established a national program for the management of substances classified as PCBs, which
include waste PCBs as well as RCRA wastes contaminated with PCBs. We conduct field services (remediation) activities that are regulated
under provisions of the TSCA.
Other
Federal Laws.
In addition to regulations specifically directed at the transportation, storage, and disposal facilities,
there are a number of regulations that may “pass-through” to the facilities based on the acceptance of regulated waste
from affected client facilities. Each facility that accepts affected waste must comply with the regulations for that waste, facility
or industry. In our transportation operations, we are regulated by the U.S. Department of Transportation, the Federal Railroad
Administration, the Federal Aviation Administration and the U.S. Coast Guard, as well as by the regulatory agencies of each state
in which we operate or through which our vehicles pass. Health and safety standards under the Occupational Safety and Health Act,
or “OSHA”, are applicable to all of our operations.
Pursuant to the EPA’s
authorization of their RCRA equivalent programs, a number of states have regulatory programs governing the permitting and operation
of hazardous waste facilities. Our facilities are regulated pursuant to state statutes, including those addressing clean water
and clean air. Our facilities are also subject to local siting, zoning and land use restrictions. Although our facilities occasionally
have been cited for regulatory violations, we believe we are in substantial compliance with all federal, state and local laws regulating
our business
.
Income/Payroll Taxes
In 2009 and 2010,
REGS, a subsidiary of the Company, became delinquent for unpaid federal employer and employee payroll taxes and accrued interest
and penalties related to the unpaid payroll taxes.
In or around 2010,
REGS retained Washington D.C.-based legal counsel specializing in resolving federal tax matters. REGS has been represented by this
firm throughout all phases of this tax matter and related proceedings. In September 2011, REGS received approval from the Internal
Revenue Service (“IRS”) to begin paying the outstanding federal payroll tax liability plus related interest and penalties
totaling approximately $971,000, in installments (the “Installment Plan”). Under the Installment Plan, we were required
to pay minimum monthly installments of $12,500 commencing September 2011, which increased to $25,000 per month in September 2012,
until the liability was paid in full. Through the duration of the Installment Plan, the IRS continued to charge penalties and interest
at statutory rates. If the conditions of the Installment Plan were not met, the IRS could cancel it and could demand the outstanding
liability to be repaid through traditional enforcement proceedings available to the IRS. Additionally, the IRS has filed a notice
of federal tax lien against certain of REGS assets in order to secure the obligation. The IRS is to release this lien if and when
we pay the full amount due. Two of the officers of REGS also have liability exposure for a portion of the taxes if REGS does not
pay them.
In May 2013, REGS
filed an Offer in Compromise (“OIC”) with the IRS. While the OIC was under review by the IRS, the requirement to pay
$25,000 a month under the Installment Plan was suspended. REGS was informed by its legal counsel that the IRS had accepted REGS’
OIC. However by a letter dated March 27, 2014 REGS was notified that the OIC had been rejected. REGS appealed that rejection decision.
However that appeal has been denied. As a result, the Installment Plan is terminated. In June 2014, REGS received notices of intent
to levy property or rights to property from the IRS for the amounts owed for the past due payroll taxes, penalty and interest.
The IRS has not taken any current action against REGS and REGS continues to be represented by its legal counsel.
As of December 31,
2017 and December 31, 2016, the outstanding balance due to the IRS was $997,700, and $993,300, respectively.
Other than this outstanding
payroll tax matter arising in 2009 and 2010, all state and federal taxes have been paid by REGS in a timely manner.
Insurance
To cover potential
risks associated with the variety of services that the operating companies provide, we maintain adequate insurance coverages, including:
1) Casualty Insurance providing coverage for Commercial General Liability, Automotive Liability, Professional Liability Insurance
and Employee Benefits Liability in the amounts of $1 million each, respectively, per year; 2) Contractor’s Pollution Liability
Insurance, which has limits of $1 million per occurrence and $1 million in the aggregate; 3) Transportation Liability Insurance
with a $1 million per occurrence; and 4) An Excess Umbrella Liability Policy of $5 million per occurrence and $5 million aggregate
limit overall.
Health, Safety and Compliance
Preserving the health
and safety of our employees and the communities in which we operate, as well as remaining in compliance with local, state and federal
rules and regulations are the highest priorities for us and our companies. We strive to maintain the highest professional standards
in our compliance and health and safety activities. To achieve this objective, we have an in-house, full-time, health & safety
officer and emphasize comprehensive training programs for new employees as well as ongoing mandatory refresher programs, and safety
bonus programs for existing employees. These programs are administered at both the corporate and field levels on a daily basis.
Our efforts to ensure the health and safety of employees have been formally recognized by our customers as well as by the Colorado
Department of Labor and Employment.
Research and Development
Research and Development
(“R&D”) costs are charged to operations when incurred and are included in operating expenses. R&D expenses
consist primarily of salaries, project materials, contract labor and other costs associated with ongoing product development and
enhancement efforts. We spent approximately $5,600 and $192,500 on R&D for the years ended December 31, 2017 and 2016, respectively.
Employees
As of December 31,
2017, we employed approximately 40 full time non-union hourly and salaried employees. There is some seasonality to our business
which requires us to use day laborers.
Public Information
Persons interested
in obtaining information on the Company may read and copy any materials that we file with the Commission at the SEC’s Public
Reference Room at 100 F Street, NE., Washington, DC 20549, on official business days during the hours of 10 a.m. to 3 p.m. The
public may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The Commission
maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that
file electronically with the Commission at
http://www.sec.gov.