NOTE
1 – ORGANIZATION AND FINANCIAL CONDITION
Organization
and Going Concern
Strategic
Environmental & Energy Resources, Inc. (“SEER,” or the “Company”), a Nevada corporation, is a provider
of next-generation clean-technologies, waste management innovations and related services. SEER has three wholly owned subsidiaries
in continuing operations, and three majority-owned subsidiaries; all of which together provide technology solutions and services
to companies primarily in the oil and gas, refining, landfill, food, beverage & agriculture and renewable fuel industries.
The three wholly-owned subsidiaries include: 1) REGS, LLC (d/b/a Resource Environmental Group Services (“REGS”)) provides
industrial and proprietary cleaning services to refineries, oil fields and other private and governmental entities; 2) MV, LLC
(d/b/a MV Technologies) (“MV”), designs and builds biogas conditioning solutions for the production of renewable natural
gas and odor control systems primarily for landfill operations, waste-water treatment facilities, oil and gas fields, refineries,
municipalities and food, beverage & agriculture operations throughout the U.S.; 3) SEER Environmental Materials, LLC,(“SEM”),
a materials technology company focused on development of cost-effective chemical absorbents.
The
three majority-owned subsidiaries are; 1) Paragon Waste Solutions, LLC (“PWS”); 2) ReaCH4Biogas (“Reach”)
and 3) PelleChar, LLC (“PelleChar”). PWS is currently owned 54% by SEER (see Note 7), Reach is owned 85% by SEER and
PelleChar is owned 51% by SEER.
PWS
is developing specific opportunities to deploy and commercialize patented technologies for a non-thermal plasma-assisted oxidation
process that makes possible the clean and efficient destruction of solid hazardous chemical and biological waste (i.e.,
regulated medical waste, chemicals, pharmaceuticals and refinery tank waste, etc.) without landfilling or traditional incineration
and without harmful emissions. Additionally, PWS’ technology “cleans” and conditions emissions and gaseous waste
streams (i.e., volatile organic compounds and other greenhouse gases) generated from diverse sources such as refineries,
oil fields, and many others.
Reach
(the trade name for BeneFuels, LLC) focuses specifically on developing renewable biomethane projects that convert raw biogas to
pipeline quality gas and/or compressed natural gas (“CNG”) for fleet vehicle fuel. Reach had no operations for the
quarters ended September 30, 2019 and 2018.
PelleChar
was formed in September 2018 and recently has secured third-party pellet manufacturing capabilities from one of the nation’s
premier pellet manufacturer. Working closely with Biochar Now, LLC, PelleChar commenced sales in 2019 of its proprietary pellets
containing the proven and superior Biochar Now product, starting with the landscaping and big agriculture markets. At this time,
PelleChar is the only company able to offer a soil amendment pellet containing the Biochar Now product that is produced using
the patented pyrolytic process. For the quarter ended September 30, 2019 PelleChar had minimal activity related to formation,
and the increasing sales effort.
Principals
of Consolidation
The
accompanying consolidated financial statements include the accounts of SEER, its wholly owned subsidiaries, REGS, MV and SEM and
its majority-owned subsidiaries PWS, Reach and PelleChar, since their respective acquisition or formation dates. All material
intercompany accounts, transactions, and profits have been eliminated in consolidation. The Company has non-controlling interest
in joint ventures, which are reported on the equity method.
Going
Concern
As
shown in the accompanying condensed consolidated financial statements, the Company has experienced recurring losses, and has accumulated
a deficit of approximately $26.4 million as of September 30, 2019, and $24.4 million as of December 31, 2018. For the nine months
ended September 30, 2019 and 2018 the Company had net losses from continuing operations before adjustment for losses attributable
to non-controlling interest of approximately $2.1 million and $2.9 million, respectively. As of September 30, 2019, and December
31, 2018 our current liabilities exceed our current assets by approximately $6.5 million and $5.4 million, respectively.
The primary reason for the increase in negative working capital from December 31, 2018 to September 30, 2019 is due to a net increase
in short term debt of approximately $1.0 million, and losses from operations. The Company has limited common shares available
for issue which may limit the ability to raise capital or settle debt through issuance of shares. These factors raise substantial
doubt about the ability of the Company to continue to operate as a going concern for a period of at least one year after the date
of the issuance of our audited financial statements for the period ended December 31, 2018.
Realization
of a major portion of our assets as of December 31, 2018, 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,
the Company has undertaken a number of specific steps to continue to operate as a going concern. The Company continues 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. The Company has 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.
Basis
of presentation Unaudited Interim Financial Information
The
accompanying interim condensed consolidated financial statements are unaudited. In the opinion of management, the accompanying
unaudited condensed consolidated financial statements contain all of the normal recurring adjustments necessary to present fairly
the financial position and results of operations as of and for the periods presented. The interim results are not necessarily
indicative of the results to be expected for the full year or any future period.
Certain
information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting
principles generally accepted in the United States have been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission (“SEC”). The Company believes that the disclosures are adequate to make the interim
information presented not misleading. These consolidated financial statements should be read in conjunction with the Company’s
audited consolidated financial statements and the notes thereto included in the Company’s Report on Form 10-K filed on April
16, 2019 for the years ended December 31, 2018 and 2017.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use
of Estimates
The
preparation of these consolidated financial statements in conformity with accounting principles generally accepted in the United
States (U.S. GAAP) requires management to make a number of estimates and assumptions related to the reported amount of assets
and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the period. Significant items subject to such estimates and assumptions include
the carrying amount of intangible assets; valuation allowances and reserves for receivables and inventory and deferred income
taxes; revenue recognition related to contracts accounted for under the percentage of completion method; share-based compensation;
and loss contingencies, including those related to litigation. Actual results could differ from those estimates.
Reclassifications
Certain
amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications
had no effect on reported consolidated net loss.
Revenue
Recognition
In
May 2014, the FASB issued guidance on revenue from contracts with customers that superseded most current revenue recognition guidance,
including industry-specific guidance. The underlying principle of the guidance is to recognize revenue to depict the transfer
of goods or services to customers at an amount to which the company expects to be entitled in exchange for those goods or services.
The new guidance requires an evaluation of revenue arrangements with customers following a five-step approach: (1) identify the
contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate
the transaction price to the performance obligations; and (5) recognize revenue when (or as) the company satisfies each performance
obligation. Revenues are recognized when control of the promised services are transferred to the customers in an amount that reflects
the expected consideration in exchange for those services. A customer obtains control when it has the ability to direct the use
of and obtain the benefits from the services. Other major provisions of the guidance include capitalization of certain contract
costs, consideration of the time value of money in the transaction price and allowing estimates of variable consideration to be
recognized before contingencies are resolved in certain circumstances. The guidance also requires enhanced disclosures regarding
the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted
the provisions of this guidance effective January 1, 2018 as required under the guidance. The adoption of this guidance did not
have any material impact on the Company’s consolidated condensed financial statements (see Note 3).
Research
and Development
Research
and development (“R&D”) costs are charged to expense as incurred. R&D expenses consist primarily of salaries,
project materials, contract labor and other costs associated with ongoing product development and enhancement efforts. R&D
expenses were $0 for both the three months ended September 30, 2019 and 2018. R&D expenses were $0 and $600 for the nine months
ended September 30, 2019 and 2018, respectively.
Income
Taxes
The
Company accounts for income taxes pursuant to Accounting Standards Codification (“ASC”) 740, Income Taxes,
which utilizes the asset and liability method of computing deferred income taxes. The objective of this method is to establish
deferred tax assets and liabilities for any temporary differences between the financial reporting basis and the tax basis of the
Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled.
ASC
740 also provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions
recognized in the financial statements. Tax positions must meet a “more-likely-than-not” recognition threshold at
the effective date to be recognized. During the three and nine months ended September 30, 2019 and 2018 the Company recognized
no adjustments for uncertain tax positions.
The
Company recognizes interest and penalties related to uncertain tax positions in income tax expense. No interest and penalties
related to uncertain tax positions were recognized at September 30, 2019 and December 31, 2018. The Company expects no material
changes to unrecognized tax positions within the next twelve months.
The
Company has filed federal and state tax returns through December 31, 2018. The tax periods for the years ending December 31, 2015
through 2018 are open to examination by federal and state authorities.
Recently
issued accounting pronouncements
Changes
to accounting principles generally accepted in the United States of America (U.S. GAAP) are established by the Financial Accounting
Standards Board (FASB) in the form of accounting standards updates (ASU’s) to the FASB’s Accounting Standards Codification.
The Company considers the applicability and impact of all new or revised ASU’s.
Leases
In
February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) in order to increase transparency and comparability among organizations
by recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under prior
GAAP. ASU 2016-02 requires that a lessee should recognize a liability to make lease payments (the lease liability) and a right-of-use
asset representing its right to use the underlying asset for the lease term on the balance sheet. The Company adopted ASU 2016-02
in the first quarter of 2019 utilizing the modified retrospective transition method. The Company has elected the package of practical
expedients, which allows the Company not to reassess (1) whether any expired or existing contracts as of the adoption date are
or contain a lease, (2) lease classification for any expired or existing leases as of the adoption date and (3) initial direct
costs for any existing leases as of the adoption date. The Company did not elect to apply the hindsight practical expedient when
determining lease term and assessing impairment of right-to-use assets. The adoption of ASU 2016-02 on January 1, 2019 resulted
in the recognition of right-of-use assets of approximately $225,300, lease liabilities of $246,100 on its Condensed Consolidated
Balance Sheets and a cumulative-effect adjustment on retained earnings of $20,800 on its Condensed Consolidated Balance Sheets
with no material impact to its Condensed Consolidated Statement of Operations.
NOTE
3 – REVENUE
The
Company adopted the provisions of the guidance in the new revenue standard under ASC 606 effective January 1, 2018 applying the
modified retrospective method to all contracts. Results for reporting periods beginning after January 1, 2018 are presented under
the new revenue recognition guidance, while prior period amounts are not adjusted and continue to be reported in accordance with
the historic accounting under previous revenue recognition guidance. The adoption of this guidance did not have any material impact
on the Company’s consolidated condensed financial statements. There was no impact to net revenue for the year ended December
31, 2018 as a result of applying the new revenue recognition guidance.
Products
Revenue
Product
revenue generated from contracts with customers, for the manufacture of products for the removal and treatment of hazardous vapor
and gasses. Total estimated revenue includes all of the following: (1) the basic contract price, (2) contract options, and (3)
change orders. Once contract performance is underway, the Company may experience changes in conditions, client requirements, specifications,
designs, materials and expectations regarding the period of performance. Such changes are “change orders” and may
be initiated by us or by our clients. In many cases, agreement with the client as to the terms of change orders is reached prior
to work commencing; however, sometimes circumstances require that work progress without obtaining client agreement. Revenue related
to change orders is recognized as costs are incurred if it is probable that costs will be recovered by changing the contract price.
The Company does not incur pre-contract costs. Under the new revenue recognition guidance, the Company found no change in the
manner product revenue is recognized. Provisions for estimated losses on uncompleted contracts are recorded in the period in which
the losses are identified and included as additional loss. Provisions for estimated losses on contracts are shown separately as
liabilities on the balance sheet, if significant, except in circumstances in which related costs are accumulated on the balance
sheet, in which case the provisions are deducted from the accumulated costs. A provision as a liability is reported as a current
liability.
The
Company includes in current assets and current liabilities amounts related to contracts realizable and payable. Costs and estimated
earnings in excess of billings on uncompleted contracts represent the excess of contract costs and profits recognized to date
over billings to date and are recognized as a current asset. Revenue contract liabilities represent the excess of billings to
date over the amount of contract costs and profits recognized to date and are recognized as a current liability.
Products
revenue also includes media sales which are recognized as the product is shipped to the customer for use.
Services
Revenue
Services
revenue is primarily comprised of services related to industrial cleaning and mobile railcar cleaning, which is recognized as
services are rendered.
Solid
Waste Revenue
The
Company’s revenues from waste destruction licensing agreements are recognized as a single accounting unit over the term
of the license. Revenue from joint venture operations of the Company’s CoronaLux™ units is recognized as the revenue
is earned by the joint venture. Revenue from management services is recognized as services are performed.
Disaggregation
of Revenue
|
|
Three months ended September 30, 2019
|
|
|
|
Industrial
Cleaning
|
|
|
Environmental
Solutions
|
|
|
Solid
Waste
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sources of Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial cleaning services
|
|
$
|
327,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
327,000
|
|
Product sales
|
|
|
-
|
|
|
|
679,200
|
|
|
|
-
|
|
|
|
679,200
|
|
Media sales
|
|
|
-
|
|
|
|
274,100
|
|
|
|
-
|
|
|
|
274,100
|
|
Licensing fees
|
|
|
-
|
|
|
|
-
|
|
|
|
8,200
|
|
|
|
8,200
|
|
Operating fees
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Management fees
|
|
|
-
|
|
|
|
-
|
|
|
|
50,000
|
|
|
|
50,000
|
|
Total Revenue
|
|
$
|
327,000
|
|
|
$
|
953,300
|
|
|
$
|
58,200
|
|
|
$
|
1,338,500
|
|
|
|
Three months ended September 30, 2018
|
|
|
|
Industrial
Cleaning
|
|
|
Environmental
Solutions
|
|
|
Solid
Waste
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sources of Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial cleaning services
|
|
$
|
717,100
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
717,100
|
|
Mobile rail car cleaning services
|
|
|
78,400
|
|
|
|
-
|
|
|
|
-
|
|
|
|
78,400
|
|
Product sales
|
|
|
-
|
|
|
|
495,100
|
|
|
|
-
|
|
|
|
495,100
|
|
Media sales
|
|
|
-
|
|
|
|
302,300
|
|
|
|
-
|
|
|
|
302,300
|
|
Licensing fees
|
|
|
-
|
|
|
|
-
|
|
|
|
33,600
|
|
|
|
33,600
|
|
Operating fees
|
|
|
-
|
|
|
|
-
|
|
|
|
10,000
|
|
|
|
10,000
|
|
Management fees
|
|
|
-
|
|
|
|
-
|
|
|
|
50,000
|
|
|
|
50,000
|
|
Total Revenue
|
|
$
|
795,500
|
|
|
$
|
797,400
|
|
|
$
|
93,600
|
|
|
$
|
1,686,500
|
|
|
|
Nine months ended September 30, 2019
|
|
|
|
Industrial
Cleaning
|
|
|
Environmental
Solutions
|
|
|
Solid
Waste
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sources of Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial cleaning services
|
|
$
|
1,052,400
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,052,400
|
|
Product sales
|
|
|
-
|
|
|
|
2,327,600
|
|
|
|
-
|
|
|
|
2,327,600
|
|
Media sales
|
|
|
-
|
|
|
|
606,400
|
|
|
|
-
|
|
|
|
606,400
|
|
Licensing fees
|
|
|
-
|
|
|
|
-
|
|
|
|
41,700
|
|
|
|
41,700
|
|
Operating fees
|
|
|
-
|
|
|
|
-
|
|
|
|
13,900
|
|
|
|
13,900
|
|
Management fees
|
|
|
-
|
|
|
|
-
|
|
|
|
150,000
|
|
|
|
150,000
|
|
Total Revenue
|
|
$
|
1,052,400
|
|
|
$
|
2,934,000
|
|
|
$
|
205,600
|
|
|
$
|
4,192,000
|
|
|
|
Nine months ended September 30, 2018
|
|
|
|
Industrial
Cleaning
|
|
|
Environmental
Solutions
|
|
|
Solid
Waste
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sources of Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial cleaning services
|
|
$
|
1,466,300
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,466,300
|
|
Mobile rail car cleaning services
|
|
|
1,049,200
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,049,200
|
|
Product sales
|
|
|
-
|
|
|
|
1,593,400
|
|
|
|
-
|
|
|
|
1,593,400
|
|
Media sales
|
|
|
-
|
|
|
|
1,623,200
|
|
|
|
-
|
|
|
|
1,623,200
|
|
Licensing fees
|
|
|
-
|
|
|
|
-
|
|
|
|
101,000
|
|
|
|
101,000
|
|
Operating fees
|
|
|
-
|
|
|
|
-
|
|
|
|
28,000
|
|
|
|
28,000
|
|
Management fees
|
|
|
-
|
|
|
|
-
|
|
|
|
150,000
|
|
|
|
150,000
|
|
Total Revenue
|
|
$
|
2,515,500
|
|
|
$
|
3,216,600
|
|
|
$
|
279,000
|
|
|
$
|
6,011,100
|
|
Contract
Balances
Where
a performance obligation has been satisfied but not yet invoiced at the reporting date, a contract asset is recognized on the
balance sheet. Where a performance obligation has not yet been satisfied but an invoice has been raised at the reporting date,
a contract liability is recognized on the balance sheet.
The
opening and closing balances of the Company’s accounts receivables and contract liabilities (current and non-current) are
as follows:
|
|
|
|
|
Contract Liabilities
|
|
|
|
Accounts
|
|
|
Revenue
Contract
|
|
|
Deferred
Revenue
|
|
|
Deferred
Revenue
|
|
|
|
Receivable, net
|
|
|
Liabilities
|
|
|
(current)
|
|
|
(non-current)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of September 30, 2019
|
|
$
|
466,500
|
|
|
$
|
219,400
|
|
|
$
|
33,000
|
|
|
$
|
38,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2018
|
|
|
1,063,500
|
|
|
|
470,200
|
|
|
|
191,500
|
|
|
|
63,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease
|
|
$
|
(597,000
|
)
|
|
$
|
(250,800
|
)
|
|
$
|
(158,500
|
)
|
|
$
|
(24,800
|
)
|
The
majority of the Company’s revenue is generally invoiced on a weekly or monthly basis, and the payments are generally received
within approximately 30-60 days. Deferred revenue is recorded when cash payments are received or due in advance of the Company’s
performance, including amounts that are refundable.
Remaining
Performance Obligations
As
of September 30, 2019, the aggregate amount of the transaction price allocated to the remaining performance obligations was approximately
$1,041,700, of which the Company expects to recognize revenue of approximately 99% over the next 24 months, including 96% over
the next 12 months.
The
Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected term of
one year or less and (ii) contracts for which the Company recognizes revenue at the amounts to which it has the right to invoice
for services performed.
NOTE
4 – PROPERTY AND EQUIPMENT
Property
and equipment was comprised of the following:
|
|
September 30,
2019
|
|
|
December 31,
2018
|
|
Field and shop equipment
|
|
$
|
2,225,300
|
|
|
$
|
2,272,100
|
|
Vehicles
|
|
|
689,700
|
|
|
|
690,000
|
|
Waste destruction equipment, placed in service
|
|
|
557,100
|
|
|
|
557,100
|
|
Furniture and office equipment
|
|
|
356,400
|
|
|
|
312,400
|
|
Leasehold improvements
|
|
|
46,200
|
|
|
|
10,000
|
|
Building and improvements
|
|
|
21,200
|
|
|
|
21,200
|
|
Land
|
|
|
162,900
|
|
|
|
162,900
|
|
|
|
|
4,058,800
|
|
|
|
4,025,700
|
|
Less: accumulated depreciation and amortization
|
|
|
(3,407,100
|
)
|
|
|
(3,193,800
|
)
|
Property and equipment, net
|
|
$
|
651,700
|
|
|
$
|
831,900
|
|
Depreciation
expense for the three months ended September 30, 2019 and 2018 was $73,100 and $88,800, respectively. Depreciation expense for
the nine months ended September 30, 2019 and 2018 was $247,100 and $318,100, respectively. For the three months ended September
30, 2019 depreciation expense included in cost of goods sold was $51,200 and $70,700 respectively. For the three months ended
September 30, 2018 depreciation expense included in selling, general and administrative expenses was $22,000 and $18,100 respectively.
For the nine months ended September 30, 2019 depreciation expense included in cost of goods sold was $187,700 and $263,100 respectively.
For the nine months ended September 30, 2018 depreciation expense included in selling, general and administrative expenses was
$59,400 and $54,900 respectively.
Accumulated
depreciation on leased CoronaLux™ units included in accumulated depreciation and amortization above is $304,700 and $298,100
as of September 30, 2019 and 2018, respectively.
Property
and equipment included the following amounts for leases that have been capitalized at:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Vehicles, field and shop equipment
|
|
$
|
370,900
|
|
|
$
|
407,100
|
|
Less: accumulated amortization
|
|
|
(304,700
|
)
|
|
|
(298,100
|
)
|
|
|
$
|
66,200
|
|
|
$
|
109,000
|
|
NOTE
5 – INTANGIBLE ASSETS
Intangible
assets were comprised of the following:
|
|
September 30, 2019
|
|
|
|
Gross carrying amount
|
|
|
Accumulated amortization
|
|
|
Net carrying value
|
|
Goodwill
|
|
$
|
277,800
|
|
|
$
|
-
|
|
|
$
|
277,800
|
|
Customer list
|
|
|
42,500
|
|
|
|
(42,500
|
)
|
|
|
-
|
|
Technology
|
|
|
1,021,900
|
|
|
|
(811,400
|
)
|
|
|
210,500
|
|
Trade name
|
|
|
54,900
|
|
|
|
(54,900
|
)
|
|
|
-
|
|
|
|
$
|
1,397,100
|
|
|
$
|
(908,800
|
)
|
|
$
|
488,300
|
|
|
|
December 31, 2018
|
|
|
|
Gross carrying amount
|
|
|
Accumulated amortization
|
|
|
Net carrying value
|
|
Goodwill
|
|
$
|
277,800
|
|
|
$
|
-
|
|
|
$
|
277,800
|
|
Customer list
|
|
|
42,500
|
|
|
|
(42,500
|
)
|
|
|
-
|
|
Technology
|
|
|
1,021,900
|
|
|
|
(782,900
|
)
|
|
|
239,000
|
|
Trade name
|
|
|
54,900
|
|
|
|
(54,900
|
)
|
|
|
-
|
|
|
|
$
|
1,397,100
|
|
|
$
|
(880,300
|
)
|
|
$
|
516,800
|
|
The
estimated useful lives of the intangible assets range from seven to ten years. Amortization expense was $8,100 and $24,800 for
the three months ended September 30, 2019 and 2018, respectively. Amortization expense was $28,600 and $77,700 for the nine months
ended September 30, 2019 and 2018, respectively.
NOTE
6 – LEASES
The
Company has entered into operating leases primarily for real estate. These leases have terms which range from 4 year to 6 years,
and often include one or more options to renew. These renewal terms can extend the lease term from 1 year to month-to-month and
are included in the lease term when it is reasonably certain that the Company will exercise the option. These operating leases
are included in “Prepaid expenses and other current assets” and “Other assets” on the Company’s
September 30, 2019 Condensed Consolidated Balance Sheets and represent the Company’s right to use the underlying asset for
the lease term. The Company’s obligation to make lease payments are included in “Accrued liabilities” and “Other
non-current liabilities” on the Company’s September 30, 2019 Condensed Consolidated Balance Sheets. Based on the present
value of the lease payments for the remaining lease term of the Company’s existing leases, the Company recognized right-of-use
assets of approximately $225,300 and lease liabilities for operating leases of approximately $246,100 on January 1, 2019. Operating
lease right-of-use assets and liabilities commencing after January 1, 2019 are recognized at commencement date based on the present
value of lease payments over the lease term. As of September 30, 2019, total right-of-use assets and operating lease liabilities
were approximately $478,700. All operating lease expense is recognized on a straight-line basis over the lease term. In the three
months ended September 30, 2019, the Company recognized approximately $51,900 in operating lease costs for right-of-use assets.
In the nine months ended September 30, 2019, the Company recognized approximately $183,000 in operating lease costs for right-of-use
assets.
Because
the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the
present value of the lease payments. The Company has certain contracts for real estate which may contain lease and non-lease components
which it has elected to treat as a single lease component.
Information
related to the Company’s right-of-use assets and related lease liabilities were as follows:
|
|
Nine Months Ended
|
|
|
|
September 30, 2019
|
|
Cash paid for operating lease liabilities
|
|
$
|
166,500
|
|
Right-of-use assets obtained in exchange for new operating lease obligations (1)
|
|
|
75,600
|
|
Weighted-average remaining lease term
|
|
|
8.5 months
|
|
Weighted-average discount rate
|
|
|
10
|
%
|
(1) Includes $225,300 for operating leases existing on January 1, 2019.
|
|
|
|
|
Maturities of lease liabilities as of June 30, 2019 were as follows:
|
|
|
|
|
Due in the 12-month period ended September 30,
|
|
|
|
2020
|
|
$
|
158,500
|
|
2021
|
|
|
86,200
|
|
2022
|
|
|
85,100
|
|
2023
|
|
|
87,600
|
|
2024
|
|
|
90,300
|
|
Thereafter
|
|
|
180,600
|
|
|
|
|
688,300
|
|
Less imputed interest
|
|
|
(178,600
|
)
|
Total lease liabilities
|
|
|
509,700
|
|
Current operating lease liabilities
|
|
|
115,500
|
|
Non-current operating lease liabilities
|
|
|
394,200
|
|
Total lease liabilities
|
|
$
|
509,700
|
|
NOTE
7 – ACCRUED LIABILITIES
Accrued
liabilities were comprised of the following:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Accrued compensation and related taxes
|
|
$
|
568,600
|
|
|
$
|
565,800
|
|
Accrued interest
|
|
|
539,100
|
|
|
|
362,000
|
|
Accrued settlement/litigation claims
|
|
|
150,000
|
|
|
|
150,000
|
|
Warranty and defect claims
|
|
|
43,700
|
|
|
|
55,000
|
|
Lease liabilities
|
|
|
115,500
|
|
|
|
-
|
|
Other
|
|
|
189,800
|
|
|
|
313,700
|
|
Total Accrued Liabilities
|
|
$
|
1,606,700
|
|
|
$
|
1,446,500
|
|
NOTE
8 – UNCOMPLETED CONTRACTS
Costs,
estimated earnings and billings on uncompleted contracts are as follows:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Revenue Recognized
|
|
$
|
889,800
|
|
|
$
|
499,600
|
|
Less: Billings to date
|
|
|
(515,500
|
)
|
|
|
(185,300
|
)
|
Costs and estimated earnings in excess of
billings on uncompleted contracts
|
|
|
374,300
|
|
|
|
314,300
|
|
Billings to date
|
|
|
2,381,500
|
|
|
|
1,642,600
|
|
Revenue recognized
|
|
|
(2,162,100
|
)
|
|
|
(1,172,400
|
)
|
Revenue contract liabilities
|
|
$
|
219,400
|
|
|
$
|
470,200
|
|
NOTE
9 – INVESTMENT IN PARAGON WASTE SOLUTIONS LLC
Since
its inception through September 30, 2019, the Company has provided approximately $6.6 million in funding to PWS for working capital
and the further development and construction of various prototypes and commercial waste destruction units. No members of PWS have
made capital contributions or other funding to PWS other than SEER. The intent of the operating agreement is to provide the funding
as an advance against future earnings distributions made by PWS.
Payments
received for non-refundable licensing and placement fees have been recorded as deferred revenue in the accompanying consolidated
balance sheets at September 30, 2019 and December 31, 2018 and are recognized as revenue ratably over the term of the contract.
NOTE
10 – PAYROLL TAXES PAYABLE
In
2009 and 2010, REGS, a subsidiary of the Company, became delinquent for unpaid federal employer and employee payroll taxes, accrued
interest and penalties were incurred related to these unpaid payroll taxes.
As
of September 30, 2019, and December 31, 2018, the outstanding balance due to the IRS was $1,047,400, and $1,022,500, 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.
NOTE
11 – DEBT
Debt
as of September 30, 2019 and December 31, 2018, was comprised of the following:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
SHORT TERM NOTES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured short term note payable dated September 13, 2017 with principal and interest due 60 days from issuance. The note requires a one-time fee in the amount of $15,000 to compensate for the first two weeks of the term and each week thereafter (weeks 3-8) a fee of $1,500 shall be due and owing accruing on the first day of the week. The total one-time fee paid was $24,000. A fee of 100,000 shares of restricted common stock shall be issued as a penalty for each month or prorated for any two-week portion of any month the note is outstanding past the original maturity date for months 3 through 6, and a fee of 200,000 shares of restricted common stock shall be issued to lender for each month or prorated for each two-week portion of any month the note is outstanding past the original maturity date beginning in month 7 until paid in full. The note is secured by the future sale of CoronaLux units and a personal guarantee of an officer of the Company. The penalty period for shares to be issued has been reached. For the year ended December 31, 2018, the Company recorded 2,300,000 shares of its common stock as issuable under the terms of this agreement, valued at $667,800 and recorded as interest expense. For the quarter ended March 31, 2019, the Company recorded an additional 200,000 shares of its common stock under the terms of this agreement, valued at $19,000 and recorded as interest expense. This note was converted to minority investment in new subsidiary in February 2019.
|
|
$
|
-
|
|
|
$
|
300,000
|
|
|
|
|
|
|
|
|
|
|
Secured short term note payable dated October 13, 2017 with principal and interest due 60 days from issuance. The note requires a one-time fee in the amount of $4,000 to compensate for the first two weeks of the term and each week thereafter (weeks 3-8) a fee of $400 shall be due and owing accruing on the first day of the week. The total one-time fee paid was $6,400. A fee of 40,000 shares of restricted common stock shall be issued as a penalty for each month or prorated for any two-week portion of any month the note is outstanding past the original maturity date for months 3 through 6, and a fee of 80,000 shares of restricted common stock shall be issued to lender for each month or prorated for each two-week portion of any month the note is outstanding past the original maturity date beginning in month 7 until paid in full. The note is secured by the future sale of CoronaLux units and a personal guarantee of an officer of the Company. The penalty period for shares to be issued has been reached for the years ended December 31, 2018 and 2017, however, the debt holder agreed to a reduction and a fixed amount of penalty shares in 2018, and the Company recorded 310,000 shares and 40,000 shares of its common stock, respectively, as issuable under the terms of this agreement. The shares were valued at $137,500 and $30,000 for the years ended December 31, 2018 and 2017, respectively, and were recorded as interest expense in the applicable period. No additional shares will be issued by the Company. The reduction of penalty shares was accounted for as debt extinguishment and a gain was recorded in 2018.
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
Secured short term note payable dated November 6, 2017 with principal and interest due 60 days from issuance. The note requires a one-time fee in the amount of $5,000 to compensate for the first two weeks of the term and each week thereafter (weeks 3-8) a fee of $400 shall be due and owing accruing on the first day of the week. The total one-time fee paid was $7,400. A fee of 50,000 shares of restricted common stock shall be issued as a penalty for each month or prorated for any two-week portion of any month the note is outstanding past the original maturity date for months 3 through 6, and a fee of 100,000 shares of restricted common stock shall be issued to lender for each month or prorated for each two-week portion of any month the note is outstanding past the original maturity date beginning in month 7 until paid in full. The note is secured by the future sale of CoronaLux units and a personal guarantee of an officer of the Company. The penalty period for shares to be issued had not been reached as of December 31, 2017 but was reached as of December 31, 2018, however, the debt holder agreed to a reduced and fixed amount of penalty shares during 2018. During the year ended December 31, 2018, the Company recorded 350,000 shares of its common stock as issuable under the terms of this agreement. The shares were valued at $153,900 recorded as interest expense. No additional shares will be issued by the Company. The reduction of penalty shares was accounted for as debt extinguishment and a gain was recorded in 2018.
|
|
|
125,000
|
|
|
|
125,000
|
|
|
|
|
|
|
|
|
|
|
Note payable dated November 20, 2017, interest at 30% per annum, principal and accrued interest due on or before February 28, 2018. The note is unsecured. During 2018, a verbal agreement was made to allow month-to-month extension of the due date as long as interest payments were made monthly. The Company made interest payments totaling $84,100 of which $37,726 of interest and principal reduction of $1,900 was paid by the issuance of 140,000 shares of common stock during 2018 and the note holder has continued to extend the due date. Unpaid interest at September 30, 2019 is approximately $84,600.
|
|
|
298,100
|
|
|
|
298,100
|
|
|
|
|
|
|
|
|
|
|
Secured short term note payable dated January 26, 2018 with principal and interest due 60 days from issuance. The note required a one-time fee in the amount of $12,500 to compensate for the first two weeks of the term and each week thereafter (weeks 3-8) a fee of $1,250 accrued on the first day of the week. The total one-time fee of $17,500 remains unpaid and accrues interest until paid. A fee of 100,000 shares of restricted common stock accrued as a penalty for each month or prorated for any two-week portion of any month the note was outstanding past the original maturity date for months 3 through 6, and a fee of 200,000 shares of restricted common stock accrued to the lender for each month or prorated for each two-week portion of any month the note was outstanding past the original maturity date beginning in month 7 until paid in full. The note was secured by the future sale of CoronaLux™ units and a personal guarantee of an officer of the Company. This note was paid in full during September 2018 and 700,000 of penalty shares were issued, valued at $200,000 recorded as interest. Unpaid interest at June 30, 2019 is approximately $19,000.
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Note payable dated February 27, 2018 due on or before May 31, 2018 requiring a one-time fee in the amount of $25,000 to be paid as interest along with the principal on the due date. Because the note and interest were not paid on or before June 1, 2018, a fee of $5,000 accrued on the first day of each month commencing June 1, 2018. The note was secured by all of the proceeds from the sale of SEM’s BioActive Media paid to or received by SEM or MV. This note principal was paid in full in September 2018. Unpaid interest at June 30, 2019 is approximately $44,400.
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Secured short term note payable dated February 1, 2019 with principal and interest due 90 days
from issuance. The note requires a one-time fee in the amount of $15,000 to compensate for the first two weeks of the term
and each week thereafter (weeks 3-12) a fee of $1,500 shall be due and owing accruing on the first day of the week. The total
one-time fee paid was $30,000. A fee of 50,000 shares of restricted common stock shall be issued as a penalty for each month
or prorated for any two-week portion of any month the note is outstanding past the original maturity date for months 4 through
6, and a fee of 100,000 shares of restricted common stock shall be issued to lender for each month or prorated for each two-week
portion of any month the note is outstanding past the original maturity date beginning in month 7 until paid in full. The
note is secured by the future sale of any and all PelleChar products and a personal guarantee of an officer of the Company.
The penalty period for shares to be issued has been reached. For the period ended September 30, 2019, the Company
recorded 350,000 shares of its common stock as issuable under the terms of this agreement value at $31,200 and
recorded as interest expense. Unpaid interest at September 30, 2019 is approximately $30,000.
|
|
|
500,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Note payable insurance premium financing, interest at 2.12% per annum, payable in 10 installments of $33,000, due November 1, 2019.
|
|
|
63,900
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Secured short term note payable dated July 2, 2019 with principal and interest due 60 days from issuance. The note requires a one-time issuance of 500,000 options, which the company recorded the fair value of $37,300 as debt discount, amortized over the life of the note. The note accrues interest at 12% annually. For the quarter ended September 30, 2019, the Company recorded interest expense of $3,000, and $37,300 of interest related to debt discount. Unpaid interest at September 30, 2019 is approximately $3,000.
|
|
|
100,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Secured short term note payable dated July 18, 2019 with principal and interest due 60 days from issuance. The note requires a one-time fee in the amount of $5,000 to compensate for the first two weeks of the term and each week thereafter (weeks 3-12) a fee of $500 shall be due and owing accruing on the first day of the week. A fee of 15,000 shares of restricted common stock shall be issued as a penalty for each month or prorated for any two-week portion of any month the note is outstanding past the original maturity date for months 3 through 6, and a fee of 30,000 shares of restricted common stock shall be issued to lender for each month or prorated for each two-week portion of any month the note is outstanding past the original maturity date beginning in month 7 until paid in full. The note is secured by the future sale of any and all MV Technolofy, LLC products. For the quarter ended September 30, 2019, the Company recorded interest expense of $9,000, which included the $5,000 up front fee. Unpaid interest at September 30, 2019 is approximately $9,000.
|
|
|
150,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Secured short term note payable dated September 18, 2019 with no stated maturity date. The note accrues interest at 6% annually for the first 18 months, and 12% thereafter if not paid in full. Payments will be offset by SEER building and delivering 20 kilns for BIOCHAR to the debtor. For the quarter ended September 30, 2019, the Company recorded interest expense of $600. Unpaid interest at September 30, 2019 is approximately $600.
|
|
|
300,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total short-term notes
|
|
|
1,637,000
|
|
|
|
823,100
|
|
|
|
|
|
|
|
|
|
|
Secured short term note payable dated August 21, 2019 with principal and interest due 60 days
from issuance. The note requires a one-time fee in the amount of $500 to compensate for the first two weeks of the term and
each week thereafter (weeks 3-8) a fee of $50 shall be due and owing accruing on the first day of the week, after which the
fee is $75 per week. The note is from the CEO, and thus classified as a related party note. For the quarter ended September
30, 2019, the Company recorded interest expense of $700, which included the $500 upfront fee. Unpaid interest at September
30, 2019 is approximately $700.
|
|
|
15,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Secured short term note payable dated August 21, 2019 with principal and interest due 60 days from issuance. The note requires a one-time fee in the amount of $4,150 to compensate for the first two weeks of the term and each week thereafter (weeks 3-8) a fee of $415 shall be due and owing accruing on the first day of the week, after which the fee is $600 per week. The note is from a family member of the CEO, and thus classified as a related party note. For the quarter ended September 30, 2019, the Company recorded interest expense of $5,800, which included the $4,150 up front fee. Unpaid interest at September 30, 2019 is approximately $5,800.
|
|
|
125,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total Short-term notes – related party
|
|
$
|
140,000
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Convertible notes payable, interest at 8% per annum, unpaid principal and interest maturing 3
years from note date between August 2018 and October 2019, convertible into common stock at the option of the lenders at a
rate of $0.70 per share; one convertible note for $250,000 has a personal guarantee of an officer of the Company. The notes
that matured in August 2018, were subsequently extended by one year to August 2019, all other terms remained the same. The
note that matured November 2018 was subsequently extended to May 2019 and the interest rate increased to 13% per annum. No
default notice has been received from the noteholders. Unpaid interest at September 30, 2019 is approximately $226,900.
|
|
$
|
1,605,000
|
|
|
$
|
1,605,000
|
|
|
|
|
|
|
|
|
|
|
Debt discount
|
|
|
-
|
|
|
|
(1,400
|
)
|
Total convertible notes
|
|
|
1,605,000
|
|
|
|
1,603,600
|
|
Less: current portion
|
|
|
(1,605,000
|
)
|
|
|
(1,603,600
|
)
|
Long term convertible notes, including debt discount
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
LONG TERM NOTES AND CAPITAL LEASE OBLIGATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note payable dated July 13, 2018, interest at 20% per annum, payable July 13, 2021. No monthly
payments are due for the first six months, commencing in month seven, principal and accrued interest will be amortized and
payable over the remaining 30 months. The note is secured by all assets of SEM and personally guaranteed by an officer of
the Company. A fee of 200,000 shares of restricted common stock was issuable at the time of funding. During the year ended
December 31, 2018, the Company recorded 200,000 shares of its common stock as issuable under the terms of this agreement.
The shares were valued at $44,000 recorded as debt discount. Unpaid interest at September 30, 2019 was approximately $126,500.
The scheduled monthly payments have not commenced at September 30, 2019.
|
|
$
|
500,000
|
|
|
$
|
500,000
|
|
|
|
|
|
|
|
|
|
|
Debt discount
|
|
|
(26,900
|
)
|
|
|
(37,900
|
)
|
|
|
|
|
|
|
|
|
|
Note payable dated October 13, 2015, interest at 8% per annum, payable in 60 monthly installments of principal and interest $4,562, due October 1, 2020. Secured by real estate and other assets of SEM and guaranteed by SEER and MV.
|
|
|
56,400
|
|
|
|
92,000
|
|
|
|
|
|
|
|
|
|
|
Capital lease obligations, secured by certain assets, maturing through Nov 2020
|
|
|
36,600
|
|
|
|
57,900
|
|
Total long-term notes and capital lease obligations
|
|
|
566,100
|
|
|
|
612,000
|
|
Less: current portion
|
|
|
(195,100
|
)
|
|
|
(71,200
|
)
|
Long term notes and capital lease obligations, long-term, including debt discount
|
|
$
|
371,000
|
|
|
$
|
540,800
|
|
NOTE
12 – RELATED PARTY TRANSACTIONS
Notes
payable, related parties
Related
parties accrued interest due to certain related parties are as follows:
|
|
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
Accrued interest
|
|
$
|
18,300
|
|
|
$
|
11,800
|
|
|
|
$
|
18,300
|
|
|
$
|
11,800
|
|
The
Company believes the stated interest rates on the related party notes payable represent reasonable market rates based on the note
payable arrangements executed with third parties.
In
March 2012, the Company entered into an Irrevocable License & Royalty Agreement with PWS that grants PWS an irrevocable world-wide
license to the IP in exchange for a 5% royalty on all revenues from PWS and its affiliates. The term commenced as of the date
of the Agreement and shall continue for a period not to exceed the life of the patent or patents filed by the Company. PWS may
sub license the IP and any revenue derived from sub licensing shall be included in the calculation of Gross Revenue for purposes
of determining royalty payments due the Company. Royalty payments are due 30 days after the end of each calendar quarter. PWS
generated licensing and unit sales revenues of approximately $8,200 and $41,700 for the three and nine months ended September
30, 2019 and $134,800 for the years ended December 31, 2018, as such, royalties of $122,400 and $30,300 were due at September
30, 2019 and December 31, 2018, respectively.
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. In November 2017 a full permit was issued, and the unit is now fully operating. Operations
to date have included the destruction of medical waste. For the nine months ended September 30, 2019 and the year ended December
31, 2018, PWS has recorded $13,900 and $34,400 in income which represents their 50% interest in the net income of the joint venture,
respectively. PWS did not incur any costs incurred on behalf of the joint venture for the nine months ended September 30, 2019
nor the year ended December 31, 2018.
NOTE
13 – EQUITY TRANSACTIONS
2019
During
the nine months ended September 30, 2019, the Company issued 550,000 shares of $0.001 par value common stock to short-term
note holders as required under their respective agreements. (See Note 11)
During
the nine months ended September 30, 2019, the Company issued options to purchase 1,000,000 shares of $0.001 par value common stock
to an officer of the Company, at $0.70 per share. The Company valued the options using the Black-Sholes model, using a volatility
of 461%, a risk-free rate of 1.39%, and an expected term, using the simplified method, of 4.5 years. The fair value at grant date
of $100,000 will be amortized over the vesting period and recorded as stock-based compensation.
During
the nine months ended September 30, 2019, the Company issued options to purchase 500,000 shares of $0.001 par value common stock
to a short-term note holder of the Company, at $0.70 per share. The options were in connection with a new short-term note, and
therefore recorded as debt discount. The Company valued the options using the Black-Sholes model, using a volatility of 258%,
a risk-free rate of 1.71%, and an expected term, using the simplified method, of 3.0 years. The fair value at grant date of $37,300
will be amortized over the vesting period and recorded as interest expense.
2018
During
the nine months ended September 30, 2018, the Company sold 1,000,000 shares of $.001 par value common stock at $.30 per share
in a private placement, receiving proceeds of $300,000.
During
the nine months ended September 30, 2018, the Company issued 140,000 shares of $.001 par value common stock at $.28 per share
as a non-cash payment of accrued interest on a note payable valued at approximately $39,600.
During
the nine months ended September 30, 2018, the Company issued 200,000 shares of $.001 par value common stock at $.22 per share
as a one-time fee for debt valued at approximately $44,000.
During
the nine months ended September 30, 2018, the Company recorded 2,910,000 shares of $.001 par value common stock as issuable to
short-term note holders as required under their respective agreements.
During
the nine months ended September 30, 2018, the Company sold 250,000 shares of $.001 par value common stock at $.48 per share in
a private placement, receiving proceeds of $120,000.
During
the nine months ended September 30, 2018, the Company issued 75,000 shares of $.001 par value common stock at $.77 per share for
services valued at approximately $58,000.
Non-controlling
Interest
The
non-controlling interest presented in our condensed consolidated financial statements reflects a 46% non-controlling equity interest
in PWS and 49% non-controlling equity interest in PelleChar. Net losses attributable to non-controlling interest, as reported
on our condensed consolidated statements of operations, represents the net loss of each entity attributable to the non-controlling
equity interest. The non-controlling interest is reflected within stockholders’ equity on the condensed consolidated balance
sheet.
NOTE
14 – CUSTOMER CONCENTRATIONS
The
Company had sales from operations to three customers for the nine months ended September 30, 2019 and one customer for the nine
months ended September 30, 2018, that surpassed the 10% threshold of total revenue. In total, these customers represented approximately
31% and 20% of our total sales, respectively. The concentration of the Company’s business with a relatively small number
of customers may expose us to a material adverse effect if one or more of these large customers were to experience financial difficulty
or were to cease being customers for non-financial related issues.
NOTE
15 – NET LOSS PER SHARE
Basic
net loss per share is computed by dividing net loss attributable to common shareholders by the weighted average number of common
shares outstanding. Diluted net loss per share is computed by dividing net loss attributable to common shareholders by the weighted
average number of common shares outstanding plus the number of common shares that would be issued assuming exercise or conversion
of all potentially dilutive common shares. Potentially dilutive securities are excluded from the calculation when their effect
would be anti-dilutive. For all years presented in the consolidated financial statements, all potentially dilutive securities
have been excluded from the diluted share calculations as they were anti-dilutive as a result of the net losses incurred for the
respective years. Accordingly, basic shares equal diluted shares for all years presented.
Potentially
dilutive securities were comprised of the following:
|
|
Nine Months Ended September 30,
|
|
|
|
2019
|
|
|
2018
|
|
Warrants
|
|
|
1,753,900
|
|
|
|
8,861,400
|
|
Options
|
|
|
1,625,000
|
|
|
|
2,155,000
|
|
Convertible notes payable, including accrued interest
|
|
|
3,167,000
|
|
|
|
2,339,100
|
|
|
|
|
6,545,900
|
|
|
|
13,355,500
|
|
NOTE
16 – 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”).
Pursuant
to the EPA’s authorization of the RCRA equivalent programs, a number of states have regulatory programs governing the operations
and permitting 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. The Company believes
it is in substantial compliance with all federal, state and local laws regulating our business.
NOTE
17 – SEGMENT INFORMATION AND MAJOR CUSTOMERS
The
Company currently has identified three segments as follows:
|
REGS
|
Industrial
Cleaning
|
|
MV,
SEM, PelleChar
|
Environmental
Solutions
|
|
PWS
|
Solid
Waste
|
Reach
has had no operations through September 30, 2019.
The
composition of our reportable segments is consistent with that used by our Chief Operating Decision Maker (“CODM”)
to evaluate performance and allocate resources. All of our operations are located in the U.S. The Company has not allocated corporate
selling, general and administrative expenses, and stock-based compensation to the segments. All intercompany transactions have
been eliminated.
Segment
information for the three and nine months ended September 30, 2019 and 2018 is as follows:
Three Months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial
|
|
|
Environmental
|
|
|
Solid
|
|
|
|
|
|
|
|
2019
|
|
Cleaning
|
|
|
Solutions
|
|
|
Waste
|
|
|
Corporate
|
|
|
Total
|
|
Revenue
|
|
$
|
327,000
|
|
|
$
|
953,300
|
|
|
$
|
58,200
|
|
|
$
|
-
|
|
|
$
|
1,338,500
|
|
Depreciation and amortization (1)
|
|
|
35,700
|
|
|
|
9,900
|
|
|
|
10,800
|
|
|
|
24,900
|
|
|
|
81,300
|
|
Interest expense
|
|
|
10,600
|
|
|
|
1,200
|
|
|
|
-
|
|
|
|
173,800
|
|
|
|
185,600
|
|
Stock-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,300
|
|
|
|
4,300
|
|
Net income (loss)
|
|
|
(480,300
|
)
|
|
|
225,400
|
|
|
|
(78,500
|
)
|
|
|
(146,600
|
)
|
|
|
(480,000
|
)
|
Capital expenditures (cash and noncash)
|
|
|
-
|
|
|
|
3,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,000
|
|
Total assets
|
|
$
|
528,000
|
|
|
$
|
1,351,100
|
|
|
$
|
333,500
|
|
|
$
|
825,300
|
|
|
$
|
3,037,900
|
|
|
|
Industrial
|
|
|
Environmental
|
|
|
Solid
|
|
|
|
|
|
|
|
2018
|
|
Cleaning
|
|
|
Solutions
|
|
|
Waste
|
|
|
Corporate
|
|
|
Total
|
|
Revenue
|
|
$
|
795,500
|
|
|
$
|
797,400
|
|
|
$
|
93,600
|
|
|
$
|
-
|
|
|
$
|
1,686,500
|
|
Depreciation and amortization (1)
|
|
|
55,500
|
|
|
|
32,400
|
|
|
|
5,200
|
|
|
|
20,500
|
|
|
|
113,600
|
|
Interest expense
|
|
|
11,500
|
|
|
|
2,400
|
|
|
|
-
|
|
|
|
439,100
|
|
|
|
453,000
|
|
Stock-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
29,700
|
|
|
|
29,700
|
|
Net income (loss)
|
|
|
(259,000
|
)
|
|
|
(163,100
|
)
|
|
|
(53,000
|
)
|
|
|
(621,700
|
)
|
|
|
(1,096,800
|
)
|
Capital expenditures (cash and noncash)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total assets
|
|
$
|
1,114,400
|
|
|
$
|
1,373,000
|
|
|
$
|
574,300
|
|
|
$
|
833,700
|
|
|
$
|
3,895,400
|
|
Nine Months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial
|
|
|
Environmental
|
|
|
Solid
|
|
|
|
|
|
|
|
2019
|
|
Cleaning
|
|
|
Solutions
|
|
|
Waste
|
|
|
Corporate
|
|
|
Total
|
|
Revenue
|
|
$
|
1,052,400
|
|
|
$
|
2,934,000
|
|
|
$
|
205,600
|
|
|
$
|
-
|
|
|
$
|
4,192,000
|
|
Depreciation and amortization (1)
|
|
|
124,400
|
|
|
|
33,800
|
|
|
|
49,400
|
|
|
|
68,100
|
|
|
|
275,700
|
|
Interest expense
|
|
|
30,800
|
|
|
|
4,900
|
|
|
|
1,600
|
|
|
|
410,500
|
|
|
|
447,800
|
|
Stock-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,200
|
|
|
|
5,200
|
|
Net income (loss)
|
|
|
(1,271,700
|
)
|
|
|
584,500
|
|
|
|
(224,900
|
)
|
|
|
(1,070,300
|
)
|
|
|
(1,982,400
|
)
|
Capital expenditures (cash and noncash)
|
|
|
6,900
|
|
|
|
3,000
|
|
|
|
-
|
|
|
|
57,600
|
|
|
|
67,500
|
|
Total assets
|
|
$
|
528,000
|
|
|
$
|
1,351,100
|
|
|
$
|
333,500
|
|
|
$
|
825,300
|
|
|
$
|
3,037,900
|
|
|
|
Industrial
|
|
|
Environmental
|
|
|
Solid
|
|
|
|
|
|
|
|
2018
|
|
Cleaning
|
|
|
Solutions
|
|
|
Waste
|
|
|
Corporate
|
|
|
Total
|
|
Revenue
|
|
$
|
2,515,500
|
|
|
$
|
3,216,600
|
|
|
$
|
279,000
|
|
|
$
|
-
|
|
|
$
|
6,011,100
|
|
Depreciation and amortization (1)
|
|
|
189,700
|
|
|
|
109,500
|
|
|
|
34,300
|
|
|
|
61,800
|
|
|
|
395,300
|
|
Interest expense
|
|
|
38,600
|
|
|
|
7,400
|
|
|
|
-
|
|
|
|
1,386,600
|
|
|
|
1,432,600
|
|
Stock-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
100,700
|
|
|
|
100,700
|
|
Net income (loss)
|
|
|
(568,800
|
)
|
|
|
294,400
|
|
|
|
(98,200
|
)
|
|
|
(2,543,600
|
)
|
|
|
(2,916,200
|
)
|
Capital expenditures (cash and noncash)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total assets
|
|
$
|
1,114,400
|
|
|
$
|
1,373,000
|
|
|
$
|
574,300
|
|
|
$
|
833,700
|
|
|
$
|
3,895,400
|
|
(1)
Includes depreciation of property, equipment and leasehold improvement and amortization of intangibles
NOTE
18 – LITIGATION
In
January 2016, an employee of SEM was involved in a vehicle accident while on Company business. Various actions were filed by the
claimants in both state and federal courts. In August 2016, an involuntary proceeding was commenced by one of the claimants against
SEM under Chapter 7 of the Bankruptcy code. In September 2016, the case was converted to a Chapter 11 under the Bankruptcy code.
During the pendency of all actions, SEM continued to manage its affairs and operate normally. In the fourth quarter of 2016, the
parties reached a settlement concerning the distribution of insurance proceeds and all issues of liability. On March 27, 2017
the Bankruptcy Courts confirmed the dismissal of the SEM Chapter 11 case. As part of the bankruptcy proceedings, the Company reached
a settlement with claimants and recorded an accrued litigation expense of $212,500 at December 31, 2016. It was agreed among the
parties that all pending state and/or federal claims will be dismissed with prejudice. The accrued litigation outstanding at September
30, 2019 and December 31, 2018 was $150,000 and $150,000, respectively.
In
October 2018, a complaint was filed by a contractor company of a mutual customer of MV, a subsidiary of the Company. The complaint
claimed that in 2016 MV delivered defective and poorly manufactured treatment vessels to the project and that due to such delivery,
the contractor company sustained $251,160 in damages in the effort to repair the error. At the same time, the mutual customer
had an outstanding balance due MV of $224,000 and MV had an outstanding balance due the vessel manufacturer of $82,600. In the
first quarter of 2019, the parties reached a settlement whereby MV paid the contractor company a total of $160,000, the joint
customer paid the outstanding invoice amounts of $224,000 and the vessel manufacturer waived the $82,600 due from MV for the faultily
manufactured vessel. The case was dismissed with prejudiced and the matter is closed.
NOTE
19 – SUBSEQUENT EVENTS
On
October 17, 2019, the Company borrowed $300,000 under a short-term note, secured by future sales of SEM media, and by the CEO
of the Company. The note bears annual simple interest, at a rate of 15%, and matures on April 16, 2020. The Lender receives a
one time grant of 200,000 shares of the Company’s common stock, on the maturity date, with payment of principal and interest.