UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
| ☒ | QUARTERLY | REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2017
| ☐ | TRANSITION | REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________________________
000-54987
(Commission File Number)
Strategic Environmental & Energy Resources, Inc.
(Exact name of registrant as specified in its charter)
| Nevada | 02-0565834 |
| (State or other jurisdiction of incorporation) | (IRS Employer Identification Number) |
751 Pine Ridge Road, Golden, CO 80403
(Address of principal executive offices including zip code)
303-277-1625
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| Non-accelerated filer | ☐ | Smaller reporting company | ☒ | |
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of July 31, 2017 the Registrant had 55,038,575 shares outstanding of its $.001 par value common stock.
Strategic Environmental & Energy Resources, Inc.
Quarterly Report on FORM 10-Q For The Period Ended
June 30, 2017
PART I. FINANCIAL INFORMATION
| 2 |
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
STRATEGIC ENVIRONMENTAL & ENERGY
RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, 2017 | December 31, 2016 | |||||||
| ASSETS | Unaudited | * | ||||||
| Current assets: | ||||||||
| Cash | $ | 287,300 | $ | 233,200 | ||||
| Accounts receivable, net of allowance for doubtful accounts of $235,500 and $235,500, respectively | 742,000 | 1,188,100 | ||||||
| Costs and estimated earnings in excess billings on uncompleted contracts | 112,300 | 13,600 | ||||||
| Assets held for sale | 1,108,900 | 1,024,600 | ||||||
| Prepaid expenses and other current assets | 631,800 | 518,500 | ||||||
| Total current assets | 2,882,300 | 2,978,000 | ||||||
| Property and equipment, net | 2,558,100 | 2,805,100 | ||||||
| Intangible assets, net | 650,600 | 738,000 | ||||||
| Other assets | 60,000 | 16,400 | ||||||
| TOTAL ASSETS | $ | 6,151,000 | $ | 6,537,500 | ||||
| LIABILITIES & STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 2,016,300 | $ | 1,643,500 | ||||
| Accrued liabilities | 1,652,800 | 1,381,000 | ||||||
| Billings in excess of costs and estimated earnings on uncompleted contracts | 250,400 | 1,090,800 | ||||||
| Deferred revenue | 188,300 | 188,300 | ||||||
| Payroll taxes payable | 986,300 | 993,300 | ||||||
| Customer deposits | 330,000 | 330,000 | ||||||
| Liabilities held for sale | 835,800 | 603,100 | ||||||
| Current portion of notes payable and capital lease obligations | 929,200 | 571,800 | ||||||
| Notes payable - related parties, including accrued interest | 11,800 | 11,800 | ||||||
| Total current liabilities | 7,200,900 | 6,813,600 | ||||||
| Deferred revenue, non-current | 189,400 | 283,600 | ||||||
| Notes payable and capital lease obligations, net of current portion | 1,729,400 | 1,751,500 | ||||||
| Total liabilities | 9,119,700 | 8,848,700 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ Equity: | ||||||||
| Preferred stock; $.001 par value; 5,000,000 shares authorized; -0- shares issued | ||||||||
| Common stock; $.001 par value; 70,000,000 shares authorized; 55,738,575 and | ||||||||
| 54,525,079 shares issued, issuable** and outstanding 2017 and 2016, respectively | 55,500 | 54,500 | ||||||
| Common stock subscribed | 25,000 | 25,000 | ||||||
| Additional paid-in capital | 20,175,600 | 19,077,600 | ||||||
| Stock subscription receivable | (25,000 | ) | (25,000 | ) | ||||
| Accumulated deficit | (20,938,800 | ) | (19,273,500 | ) | ||||
| Total stockholders’ equity | (707,700 | ) | (141,400 | ) | ||||
| Non-controlling interest | (2,261,000 | ) | (2,169,800 | ) | ||||
| Total equity | (2,968,700 | ) | (2,311,200 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 6,151,000 | $ | 6,537,500 | ||||
*These numbers were derived from the audited financial statements for the year ended December 31, 2016. See accompanying notes.
**Includes 700,000 shares issuable at June 30, 2017 per terms of short-term note agreements.
| 3 |
STRATEGIC ENVIRONMENTAL & ENERGY
RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| Revenue: | 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Products | $ | 1,862,500 | $ | 1,132,600 | $ | 3,551,500 | $ | 1,705,400 | ||||||||
| Services | 555,500 | 271,400 | 1,390,000 | 2,256,200 | ||||||||||||
| Licensing | 74,500 | 56,500 | 143,900 | 128,100 | ||||||||||||
| Total revenue | 2,492,500 | 1,460,500 | 5,085,400 | 4,089,700 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Products costs | 1,227,700 | 697,400 | 2,406,100 | 1,065,500 | ||||||||||||
| Services costs | 857,100 | 534,500 | 1,508,500 | 1,631,300 | ||||||||||||
| Solid waste costs | 53,000 | 61,700 | 110,300 | 165,600 | ||||||||||||
| General and administrative expenses | 750,200 | 471,600 | 1,293,700 | 968,100 | ||||||||||||
| Salaries and related expenses | 534,400 | 591,900 | 1,039,200 | 1,250,300 | ||||||||||||
| Total operating expenses | 3,422,400 | 2,357,100 | 6,357,800 | 5,080,800 | ||||||||||||
| Income (Loss) from operations | (929,900 | ) | (896,600 | ) | (1,272,400 | ) | (991,100 | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | (529,600 | ) | (154,600 | ) | (956,500 | ) | (199,500 | ) | ||||||||
| Other | (600 | ) | 15,800 | (5,900 | ) | 28,500 | ||||||||||
| Total non-operating expense, net | (530,200 | ) | (138,800 | ) | (962,400 | ) | (171,000 | ) | ||||||||
| Net loss from continuing operations | (1,460,100 | ) | (1,035,400 | ) | (2,234,800 | ) | (1,162,100 | ) | ||||||||
| Discontinued operations, net of tax | 123,600 | 166,900 | 478,300 | 340,400 | ||||||||||||
| Net loss before earnings from equity method joint ventures | (1,336,500 | ) | (868,500 | ) | (1,756,500 | ) | (821,700 | ) | ||||||||
| Income from equity method joint ventures | — | 15,700 | — | 15,700 | ||||||||||||
| Net loss | (1,336,500 | ) | (852,800 | ) | (1,756,500) | (806,000) | ||||||||||
| Less: Net loss attributable to non-controlling interest | (40,000 | ) | (56,900 | ) | (91,200 | ) | (139,500 | ) | ||||||||
| Net loss attributable to SEER common stockholders | $ | (1,296,500 | ) | $ | (795,900 | ) | $ | (1,665,300 | ) | $ | (666,500 | ) | ||||
| Net loss per share from continuing operations | $ | (.03 | ) | $ | (.03 | ) | $ | (.04 | ) | $ | (.02 | ) | ||||
| Discontinued operations | $ | .01 | $ | .01 | $ | .01 | $ | .01 | ||||||||
| Net income (loss) per share, basic and diluted | $ | (.02 | ) | $ | (.02 | ) | $ | (.03 | ) | $ | (.01 | ) | ||||
| Weighted average shares outstanding – basic and diluted | 54,708,905 | 54,470,134 | 54,621,302 | 54,131,672 | ||||||||||||
See accompanying notes.
| 4 |
STRATEGIC ENVIRONMENTAL & ENERGY
RESOURCES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
| For the Six Months Ended June 30, | ||||||||
| Cash flows from operating activities: | 2017 | 2016 | ||||||
| Net loss | $ | (1,756,500 | ) | $ | (806,000 | ) | ||
| Income from discontinued operations | 478,300 | 340,400 | ||||||
| Net loss from continuing operations | (2,234,800 | ) | (1,146,400 | ) | ||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Provision for doubtful accounts receivable | — | 65,300 | ||||||
| Depreciation and amortization | 408,700 | 359,400 | ||||||
| Stock-based compensation expense | 56,800 | 72,500 | ||||||
| Non-cash expense for interest, common stock issued for debt penalty | 820,000 | — | ||||||
| Non-cash expense for interest, warrants – accretion of debt discount | 4,000 | 99,500 | ||||||
| Non-cash expense for extension of warrants | 83,600 | — | ||||||
| Gain on disposition of assets | — | (25,600 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 446,100 | 148,200 | ||||||
| Costs in Excess of billings on uncompleted contracts | (98,700 | ) | 114,700 | |||||
| Prepaid expenses and other assets | 281,400 | (95,900 | ) | |||||
| Accounts payable and accrued liabilities | 644,600 | (361,400 | ) | |||||
| Billings in excess of revenue on uncompleted contracts | (840,400 | ) | 362,900 | |||||
| Deferred revenue | (94,200 | ) | (22,200 | ) | ||||
| Payroll taxes payable | (7,000 | ) | 11,400 | |||||
| Net cash provided by operating activities | (529,900 | ) | (417,600 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Insurance proceeds from property damage | — | 59,000 | ||||||
| Purchase of property and equipment | (61,700 | ) | (156,100 | ) | ||||
| Proceeds (purchases) of intangibles | 2,400 | (28,100 | ) | |||||
| Net cash used in investing activities | (59,300 | ) | (125,200 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Payments of notes and capital lease obligations | (557,000 | ) | (455,200 | ) | ||||
| Payments of related party notes payable and accrued interest | — | (20,000 | ) | |||||
| Proceeds from short-term notes | 450,000 | 200,000 | ||||||
| Proceeds from exercise of warrants | — | 25,000 | ||||||
| Proceeds from warrant extensions | 138,600 | 29,900 | ||||||
| Proceeds from the sale of common stock and warrants, net of expenses | — | 400,000 | ||||||
| Net cash provided by (used in) financing activities | 31,600 | 179,700 | ||||||
| Net cash flows from discontinued operations | 611,700 | 361,100 | ||||||
| Net increase in cash | 54,100 | (2,000 | ) | |||||
| Cash at the beginning of period | 233,200 | 257,100 | ||||||
| Cash at the end of period | $ | 287,300 | $ | 255,100 | ||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | 53,300 | $ | 98,000 | ||||
| Financing of prepaid insurance premiums | $ | 175,300 | $ | 278,600 | ||||
| Issuance of common stock for other assets | $ | — | $ | 720,000 | ||||
See accompanying notes.
| 5 |
STRATEGIC ENVIRONMENTAL & ENERGY RESOURCES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 1 – ORGANIZATION AND FINANCIAL CONDITION
Organization and Going Concern
Strategic Environmental & Energy Resources, Inc. (“SEER,” “we,” or the “Company”), a Nevada corporation, is a provider of next-generation clean-technologies, waste management innovations and related services. SEER has four wholly-owned subsidiaries, three in continuing operations and one classified as discontinued operations, and two 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 four 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 and the assets and liabilities of three locations of this subsidiary which provided fixed rail car cleaning were sold along with Tactical assets and liabilities in July 2017; 2) Tactical Cleaning Company, LLC (“Tactical”), provides proprietary cleaning services related to railcar tankers, tank trucks and frac tanks to customers from its sites in Colorado and Kansas and substantially all of the assets and liabilities of this subsidiary were sold in July 2017; 3) 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.; 4) SEER Environmental Materials, LLC,(“SEM”), a materials technology company focused on development of cost-effective chemical absorbents.
The two majority-owned subsidiaries are; 1) Paragon Waste Solutions, LLC (“PWS”) and 2) ReaCH4Biogas (“Reach”). PWS is currently owned 54% by SEER (see Note 7) and Reach is owned 85% 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), is currently owned 85% by SEER and 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 minimal operations for the quarter ended June 30, 2017 and 2016.
Principals of Consolidation
The accompanying consolidated financial statements include the accounts of SEER, its wholly-owned subsidiaries, REGS, TCC, MV and SEM and its majority-owned subsidiaries PWS and Reach, 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 consolidated financial statements, the Company has experienced recurring losses, and has accumulated a deficit of approximately $20.9 million as of June 30, 2017, and $19.3 million as of December 31, 2016. For the six months ended June 30, 2017 we had net loss before adjustment for losses attributable to non-controlling interest of approximately $1.8 million and for the year ended December 31, 2016, we incurred net losses before adjustment for losses attributable to non-controlling interest of approximately $4.7 million. The Company had a working capital deficit of approximately $4.3 million at June 30, 2017, an increase of approximately $300,000 in the working capital deficit of $4 million at December 31, 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 for the year ended December 31, 2016. 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, 2016.
| 6 |
STRATEGIC ENVIRONMENTAL & ENERGY RESOURCES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 1 – ORGANIZATION AND FINANCIAL CONDITION, continued
Going Concern, continued
Realization of a major portion of our assets as of June 30, 2017 and December 31, 2016, 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. The Company opened an additional rail car cleaning facility in the Midwest (Illinois) and East Coast (Maryland) during 2016 and in the Jersey Coast (Pennsylvania) in 2017 to offset some of the lost revenue previously derived from the refinery sector. Revenue from the new rail car cleaning facilities began in mid-2016 (Illinois), fourth quarter of 2016 (Maryland) and second quarter 2017 (Pennsylvania) and both Illinois and Maryland locations are experiencing monthly revenue growth for the six months ending June 30, 2017. These three rail car cleaning facilities are included with the Tactical rail car cleaning facilities in assets and liabilities held for sale at June 30, 2017 and 2016, and as discontinued operations for the three and six months ended June 30, 2017 and 2016. In addition, we have undertaken a number of specific steps to improve operating efficiencies, revenues and income to continue to operate as a going concern. We continue to focus on developing organic growth in our operating companies and improving gross and net margins through increased attention to pricing, cost management and overhead reductions. Critical to achieving profitability will be our ability to license and or sell, permit and operate our CoronaLux™ waste destruction units either through our joint ventures and/or licensees. We have increased our business development efforts to address opportunities identified in expanding markets attributable to increased interest in energy conservation and emission control regulations, particularly the landfill gas and oil field emissions sectors. In addition, the Company is evaluating various forms of financing which may be available to it, i.e., debt and/or equity financing while carefully evaluating the impact on share dilution. 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 14, 2017 for the years ended December 31, 2016 and 2015.
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.
| 7 |
STRATEGIC ENVIRONMENTAL & ENERGY RESOURCES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
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 income (loss).
Revenue Recognition
We recognize revenue related to contract projects and services when all of the following criteria are met: (i) persuasive evidence of an agreement exists, (ii) delivery has occurred or services have been rendered, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. Our revenue is primarily comprised of services related to industrial cleaning and railcar cleaning, which we recognize as services are rendered.
Product revenue generated from projects, which include the manufacturing of products, for removal and treatment of hazardous vapor and gasses is accounted for under the percentage-of-completion method for projects with durations in excess of three months and the completed-contract method for all other projects. 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, we 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 percentage-of-completion method, we recognize revenue primarily based on the ratio of costs incurred to date to total estimated contract costs. 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.
For contracts accounted for under the percentage-of-completion method, we include in current assets and current liabilities amounts related to construction 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. Billings in excess of costs and estimated earnings on uncompleted contracts represents the excess of billings to date over the amount of contract costs and profits recognized to date, and are recognized as a current liability.
The Company’s revenues from waste destruction licensing agreements are recognized as a single accounting unit over the term of the license. In accordance with Accounting Standards Codification (“ASC”) 605, for revenues which contain multiple deliverables, the Company separates the deliverables into separate accounting units if they meet the following criteria: (i) the delivered items have a stand-alone value to the customer; (ii) the fair value of any undelivered items can be reliably determined; and (iii) if the arrangement includes a general right of return, delivery of the undelivered items is probable and substantially controlled by the seller. Deliverables that do not meet these criteria are combined with one or more other deliverables into one accounting unit. Revenue from each accounting unit is recognized based on the applicable accounting literature, primarily ASC 605.
| 8 |
STRATEGIC ENVIRONMENTAL & ENERGY RESOURCES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
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 $3,900 and $100,000 for the six months ended June 30, 2017 and 2016, 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 six months ended June 30, 2017 and 2016 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 June 30, 2017 and December 31, 2016. 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, 2015. The tax periods for the years ending December 31, 2009 through 2015 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.
NOTE 3 – PROPERTY AND EQUIPMENT
Property and equipment was comprised of the following:
| June 30, 2017 | December 31, 2016 | |||||||
| Field and shop equipment | $ | 1,966,600 | $ | 1,907,500 | ||||
| Vehicles | 689,700 | 690,000 | ||||||
| Waste destruction equipment, placed in service | 1,355,400 | 1,299,500 | ||||||
| Waste destruction equipment, not placed in service | 656,200 | 712,100 | ||||||
| Furniture and office equipment | 322,600 | 319,700 | ||||||
| Leasehold improvements | 10,000 | 10,000 | ||||||
| Building and improvements | 21,200 | 21,200 | ||||||
| Land | 162,900 | 162,900 | ||||||
| 5,184,600 | 5,122,900 | |||||||
| Less: accumulated depreciation and amortization | (2,626,500 | ) | (2,317,800 | ) | ||||
| Property and equipment, net | $ | 2,558,100 | $ | 2,805,100 | ||||
| 9 |
STRATEGIC ENVIRONMENTAL & ENERGY RESOURCES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 3 – PROPERTY AND EQUIPMENT, continued
Depreciation expense for the three months ended June 30, 2017 and 2016 was $167,300 and $155,500, respectively and for the six months ended June 30, 2017 and 2016 was $323,700 and $316,400, respectively. For the three months ended June 30, 2017 depreciation expense included in cost of goods sold and selling, general and administrative expenses was $142,600 and $24,700 respectively. For the six months ended June 30, 2017 depreciation expense included in cost of goods sold and selling, general and administrative expenses was $274,700 and $49,000, respectively. For the three months ended June 30, 2016 depreciation expense included in cost of goods sold and selling, general and administrative expenses was $131,400 and $24,100 respectively. For the six months ended June 30, 2016 depreciation expense included in cost of goods sold and selling, general and administrative expenses was $268,100 and $48,300, respectively.
Accumulated depreciation on leased CoronaLux™ units included in accumulated depreciation and amortization above is $381,900 and $238,800 as of June 30, 2017 and 2016, respectively.
Property and equipment included the following amounts for leases that have been capitalized at:
| June 30, | December 31 | |||||||
| 2017 | 2016 | |||||||
| Vehicles, field and shop equipment | $ | 462,700 | $ | 462,700 | ||||
| Less: accumulated amortization | (269,700 | ) | (222,800 | ) | ||||
| $ | 193,000 | $ | 239,900 | |||||
NOTE 4 – INTANGIBLE ASSETS
Intangible assets were comprised of the following:
| June 30, 2017 | ||||||||||||
| Gross carrying amount | Accumulated amortization | Net carrying value | ||||||||||
| Goodwill | $ | 277,800 | — | $ | 277,800 | |||||||
| Customer list | 42,500 | (42,500 | ) | — | ||||||||
| Technology | 1,069,500 | (696,700 | ) | 372,800 | ||||||||
| Trade name | 54,900 | (54,900 | ) | — | ||||||||
| $ | 1,444,700 | $ | (794,100 | ) | $ | 650,600 | ||||||
| December 31, 2016 | ||||||||||||
| Gross carrying amount | Accumulated amortization | Net carrying value | ||||||||||
| Goodwill | $ | 277,800 | — | $ | 277,800 | |||||||
| Customer list | 42,500 | (42,500 | ) | — | ||||||||
| Technology | 1,069,500 | (609,300 | ) | 460,200 | ||||||||
| Trade name | 57,300 | (57,300 | ) | — | ||||||||
| $ | 1,447,100 | $ | (709,100 | ) | $ | 738,000 | ||||||
The estimated useful lives of the intangible assets range from seven to ten years. Amortization expense was $62,300 and $22,800 for the three months ended June 30, 2017 and 2016, respectively and $85,000 and $43,000 for the six months ended June 30, 2017 and 2016, respectively.
| 10 |
STRATEGIC ENVIRONMENTAL & ENERGY RESOURCES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 5 – ACCRUED LIABILITIES
Accrued liabilities were comprised of the following:
| June 30, 2017 | December 31, 2016 | |||||||
| Accrued compensation and related taxes | $ | 666,300 | $ | 644,800 | ||||
| Accrued interest | 128,400 | 58,900 | ||||||
| Accrued litigation claims | 183,300 | 277,500 | ||||||
| Other | 674,800 | 399,800 | ||||||
| Total Accrued Liabilities | $ | 1,652,800 | $ | 1,381,000 | ||||
NOTE 6 – UNCOMPLETED CONTRACTS
Costs, estimated earnings and billings on uncompleted contracts are as follows:
| June 30, | December 31, | |||||||
| 2017 | 2016 | |||||||
| Revenue Recognized | $ | 316,000 | $ | 324,500 | ||||
| Less: Billings to date | (203,700 | ) | (310,900 | ) | ||||
| Costs and estimated earnings in excess of billings on uncompleted contracts | $ | 112,300 | $ | 13,600 | ||||
| Billings to date | $ | 2,092,100 | $ | 3,063,500 | ||||
| Revenue recognized | (1,841,700 | ) | (1,972,700 | ) | ||||
| Billings in excess of costs and estimated earnings on uncompleted contracts | $ | 250,400 | $ | 1,090,800 | ||||
NOTE 7 – INVESTMENT IN PARAGON WASTE SOLUTIONS LLC
In 2010, the Company and Black Stone Management Services, LLC (“Black Stone”) formed PWS, whereby a total of 1,000,000 membership units were issued, 600,000 membership units to the Company and 400,000 membership units to Black Stone. Fortunato Villamagna, who serves as President of our PWS subsidiary, is a managing member and Chairman of Black Stone. In June 2012, the Company and Blackstone each allocated 10% of their respective membership units in PWS to Mr. J John Combs III, an officer and shareholder of the Company and Mr. Michael Cardillo, a shareholder of the Company and an officer of a subsidiary. There was no value attributable to the units at the time of the allocation. At June 30, 2017 and December 31, 2016 the Company owned 54% of the membership units, Black Stone owned 26% of the membership units, an outside third party 10% of the membership units and two related parties (as noted above), each owned 5% of the membership units.
In August, 2011, we acquired certain intellectual property in regards to waste destruction technology (the “IP”) from Black Stone in exchange for 1,000,000 shares of our common stock valued at $100,000. We estimated the useful life of the IP at ten years, which was consistent with the useful life of other technology included in our intangible assets, and management’s initial assessment of the potential marketability of the IP.
Since its inception through June 30, 2017, we have provided approximately $5.8 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 that we will provide the funding as an advance against future earnings distributions made by PWS.
| 11 |
STRATEGIC ENVIRONMENTAL & ENERGY RESOURCES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 7 – INVESTMENT IN PARAGON WASTE SOLUTIONS LLC, continued
Licensing Agreements
In 2014, Sterall ordered a total of six CoronaLux™ units, of which one unit was delivered during the year ending December 31, 2014, and five units are pending delivery at June 30, 2017. Sterall paid a non-refundable placement fee of $236,300 for the unit delivered in 2014. The fee is being recognized over the term of the agreement. Sterall also has paid a deposit of $330,000 for the five units ordered and a balance of $851,500 is still owed and has been fully reserved by the Company.
On February 22, 2014, SEER and PWS entered into an Agreement with Daniel McAteer & Associates (“DMA”) to develop, permit and exploit the PWS waste destruction technology in Ireland and United Kingdom (“Limited Territory”). The Agreement called for the formation of a Joint Venture to be owned 50% by SEER and 50% by DMA. In accordance with the agreement, DMA was to pay a one-time license fee of $350,000 for an exclusive license for the limited purpose of medical waste destruction in the Limited Territory. On June 10, 2014 Paragon Waste (UK) Ltd (“Paragon UK”, “UK Joint Venture”), was formed in accordance with the laws of Northern Ireland. A total of 300,100 shares were issued upon formation, 100 Ordinary A voting shares were issued, of which PWS received 50 Ordinary A shares and 300,000 Ordinary B non-voting shares were issued. In 2015, the Agreement with DMA was amended to where Paragon UK purchased the CoronaLux™ unit from PWS for $350,000. 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. As of June 30, 2017 a balance of $176,000 is still owed and has been fully reserved by the Company.
On March 4, 2014, PWS entered into a Licensing and Equipment Lease Agreement with eCycling International of South Carolina, LLC (“eCycling”). The License Agreement grants to eCycling the use of the PWS Technology and the CoronaLux™ waste destruction units for an initial term of five years and requires a payment of $176,875 as a non-refundable initial licensing fee and distributions of 50% of net operating profits, as defined in the agreement, in lieu of continuing royalty payments for the use of the licensed technology. eCycling originally paid the $176,875 placement fee to PWS and an additional $176,875 per the amended agreement during the year ended December 31, 2016 and the revenue is being recognized over the term of the Agreement. eCycling is still in the process of permitting the unit, and therefore, has not yet generated any NOP.
On November 17, 2014, PWS entered into an Exclusive Licensing and Equipment Lease Agreement, for a limited license territory, with Medical Waste Services, LLC (“MWS”). The License Agreement grants to MWS the use of the PWS Technology and the CoronaLux™ waste destruction units for an initial term of seven years and requires a payment of $225,000 as a non-refundable initial licensing fee and distributions of 50% of net operating profits, as defined in the agreement, in lieu of continuing royalty payments for the use of the licensed technology. PWS and Medical Waste Services, LLC (“MWS”) formed a contractual joint venture to exploit the PWS medical waste destruction technology. MWS has received approval from the California Department of Public Health and a restricted permit from the South Coast Air Quality Management District (“SCAQMD”) to operate the CoronaLux™ unit licensed by MWS at its facility in Southern California. Operations to date have included the destruction of medical waste under a temporary operating permit issued by SCAQMD since May 2015 and efforts to obtain a full operating permit from SCAQMD were successful and SCAQMD issued a ‘Notice of Intent to Issue Permit to Operate’ in March 2017.
In February 2015, PWS entered into a License Agreement with Particle Science Tech of Environmental Protection, Inc (“Particle”) a US subsidiary of Xinhua Energy Environmental Technology Co., Ltd (“Xinhua”), a large multi-national environmental company based in China. The agreement provides for the exclusive rights to distribute PWS’s patented technology in China, Hong Kong, Macau and the Taiwan territories (“Territory”). The grant was for both the medical waste, as well as the refinery vertical markets within the Territory. The Agreement calls for, among other things, the formation of a U.S. joint venture company, (“P&P Company”, to be owned 50/50 by PWS and Particle) and an obligation by Xinhua to fund all necessary and reasonable capital requirements to permit and roll out the PWS technology in the Territory as well as staff and manage the JV Entity’s operations. In 2015, PWS sold a CoronaLux™ unit to Xinhua for $430,500.
| 12 |
STRATEGIC ENVIRONMENTAL & ENERGY RESOURCES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 7 – INVESTMENT IN PARAGON WASTE SOLUTIONS LLC, continued
Upon the occurrence of certain events and timely performance by Xinhua, a second placement fee of $350,000 is required to be paid and, upon that second payment, it will then be granted exclusive manufacturing rights to produce the units to be deployed in the Territory.
Payments received for non-refundable licensing and placement fees have been recorded as deferred revenue in the accompanying consolidated balance sheets at June 30, 2017 and December 31, 2016 and are recognized as revenue ratably over the term of the contract.
NOTE 8 – 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.
Two of the officers of REGS also have personal 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 then appealed that rejections 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 June 30, 2017, and December 31, 2016, the outstanding balance due to the IRS was $986,300, 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.
NOTE 9 – DEBT
Debt as of June 30, 2017 and December 31, 2016, was comprised of the following:
| 2017 | 2016 | ||
| 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 |
1,605,000 |
1,605,000 | |
| Debt discount on convertible notes | (11,200) | (14,900) | |
| 13 |
STRATEGIC ENVIRONMENTAL & ENERGY RESOURCES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 9 – DEBT, continued
| Secured short term note payable dated October 24, 2016 with principal and interest due 60 days from issuance. The note requires a one-time fee in the amount of $10,000 to compensate for the first two weeks of the term and each week thereafter (weeks 3-8) a fee of $1,000 shall be due and owing accruing on the first day of the week. 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 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 beginning in month 7 until paid in full. The note is secured by specific customer accounts receivables and a personal guarantee of an officer of the Company. This note was paid in full in April 2017. The penalty period for shares to be issued was reached and the Company issued 350,000 shares of its common stock under the terms of this agreement. The shares were valued at $245,000 recorded as interest expense. |
— |
200,000 | |
| Secured short term note payable dated December 1, 2016 with principal and interest due 60 days from issuance. The note requires a one-time fee in the amount of $10,000 to compensate for the first two weeks of the term and each week thereafter (weeks 3-8) a fee of $1,000 shall be due and owing accruing on the first day of the week. 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 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 beginning in month 7 until paid in full. The note is secured by specific customer accounts receivables and a personal guarantee of an officer of the Company. This note was paid in full in August 2017. The penalty period for shares to be issued has been reached and for the six months ended June 30, 2017, the Company recorded 600,000 shares of its common stock as issuable under the terms of this agreement. The shares were valued at $405,000 recorded as interest expense. Additional shares will be issued by the Company under the terms of the agreement. |
200,000 |
200,000 | |
| Secured short term note payable dated January 23, 2017 with principal and interest due 60 days from issuance. The note requires a one-time fee in the amount of $10,000 to compensate for the first two weeks of the term and each week thereafter (weeks 3-8) a fee of $1,000 shall be due and owing accruing on the first day of the week. 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 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 beginning in month 7 until paid in full. The note is secured by specific customer accounts receivables and a personal guarantee of an officer of the Company. This note was paid in full in August 2017. The penalty period for shares to be issued was reached and the Company issued 150,000 shares of its common stock under revised terms of the agreement. The shares were valued at $105,000 recorded as interest expense. No additional shares will be issued by the Company. |
200,000 |
— | |
| Secured short term note payable dated March 30, 2017 with principal and interest due 60 days from issuance. The note requires a one-time fee in the amount of $10,000 to compensate for the first two weeks of the term and each week thereafter (weeks 3-8) a fee of $1,000 shall be due and owing accruing on the first day of the week. 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 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 beginning in month 7 until paid in full. The note is secured by specific customer accounts receivables and a personal guarantee of an officer of the Company. This note was paid in full in August 2017. The penalty period for shares to be issued has been reached and for the six months ended June 30, 2017, the Company recorded 100,000 shares of its common stock as issuable under the terms of this agreement. The shares were valued at $65,000 recorded as interest expense. Additional shares will be issued by the Company under the terms of the agreement. |
250,000 |
— | |
| 14 |
STRATEGIC ENVIRONMENTAL & ENERGY RESOURCES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 9 – DEBT, continued
| Note payable dated October 13, 2015, interest at 8% per annum, payable in 24 monthly installments of principal and interest $4,523, due October 1, 2017. Secured by certain assets of SEM and guaranteed by SEER and MV |
17,800 |
43,600 | |
| 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 |
159,400 |
180,000 | |
| Note payable insurance premium financing, interest at 4.25% per annum, payable in 10 installments of $44,706, due November 1, 2017 |
175,300 |
— | |
|
Capital lease obligations, secured by certain assets, maturing through March 2019 |
62,300 |
109,600 | |
| Total notes payable and capital lease obligations | 2,658,600 | 2,323,300 | |
| Less: current portion | (929,200) | (571,800) | |
| Notes payable and capital lease obligations, long-term, including debt discount | $ 1,729,400 | $ 1,751,500 |
NOTE 10 – RELATED PARTY TRANSACTIONS
Notes payable, related parties
Related parties accrued interest due to certain related parties as of June 30, 2017 and December 31, 2016 are as follows:
| 2017 | 2016 | |||||||
| Accrued interest | $ | 11,800 | $ | 11,800 | ||||
| $ | 11,800 | $ | 11,800 | |||||
We believe the stated interest rates on the related party notes payable represent reasonable market rates based on the note payable arrangements we have 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 shall commence as of the date of this 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 revenues of approximately $94,200 for the six months ended June 30, 2017 and $205,000 for the year ended December 31, 2016, as such, royalties of approximately $21,900 and $17,200 were due at June 30, 2017 and December 31, 2016, respectively.
In August 2014, the Company entered into a second Exchange and Acquisition Agreement (“New Technologies Agreement”) with Black Stone for the acquisition of additional intellectual property (“IP”) from Black Stone in exchange for 1,000,000 shares of common stock valued at $1,050,000. In 2015 the Company and Black Stone executed a rescission agreement of the New Technologies Agreement noted above that was effective December 31, 2014. The shares issued by the Company in accordance with the agreement were returned and all acquired IP returned to Black Stone.
| 15 |
STRATEGIC ENVIRONMENTAL & ENERGY RESOURCES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 10 – RELATED PARTY TRANSACTIONS, continued
In September 2014, the Company entered into an Equity Purchase Agreement (“Equity Agreement”) with a third party (“Seller”) whereby the Company issued 1,200,000 shares of the Company’s common stock, valued at $1,212,000, in exchange for 22.5 membership interest units, representing 15% ownership interest in Sterall, LLC, a Delaware corporation. In March 2015, the Company and the Seller entered into a revised agreement whereby the 1,200,000 shares issued by the Company would be held by the Seller until the completion of an independent third-party valuation. Based on the fair market value of the Purchased Units from the valuation obtained by the Company, an amount of Consideration Shares will be returned to the Company to the extent that the fair market value of the Consideration Shares issued (see below) are greater than the fair market value of the Purchased Units. In no event shall the Company be obligated to issue additional shares as consideration for the Purchased Units. For purposes of this amendment, the fair market value of each Consideration Share will be $0.83333. In the event the parties are unwilling to accept the fair market value of the Purchased Units, as determined by the independent valuation specialist, on or before the Closing Date this Agreement, the transaction covered by this Agreement (the “Contemplated Transaction”) may be rescinded by either Party in writing.
In December 2014, PWS, Sterall, Inc and Sterall LLC entered into a Successor-In-Interest Agreement. The Successor-In-Interest Agreement states that Sterall Inc and Sterall LLC are in the process of consolidating their business under Sterall LLC and all agreements between PWS and Sterall Inc shall be binding in all regards Sterall LLC.
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. Operations to date have included the destruction of medical waste. For the six months ended June 30, 2017 and the year ended December 31, 2016, PWS has recorded $13,100 and $15,700 in income which represents their 50% interest in the net income of the joint venture, respectively. In addition, for the six months ended June 30, 2017 and the year ended December 31, 2016, PWS billed the joint venture approximately $36,600 and $68,000 in costs incurred on behalf of the joint venture, respectively.
Due to the ability of the Company to rescind the shares issued at the commencement of the transaction the shares were considered contingently issuable shares and as such the 1,200,000 shares not considered issued and outstanding at December 31, 2015. The 15% ownership interest in Sterall was considered contingently held until the conclusion of this transaction.
As of December 31, 2015, an independent appraisal was not performed and the Amended Equity Agreement expired by its terms. The 1,200,000 shares subject to the original Equity Agreement and the Amended Equity Agreement became unrestricted in 2016 and are now considered issued and outstanding. The shares were valued at $720,000 and have been recorded as a long term other asset pending resolution of claims by the parties involved related to the Sterall licensing agreement from September 2013, Sterall equipment deposits of $330,000 from 2014 and the equity purchase agreement noted above. As of December 31, 2016, a settlement has not been reached by the parties however, they continue to negotiate an agreement and an impairment of the long term asset in the amount of $720,000 was recorded by the Company.
NOTE 11 – ASSETS AND LIABILITIES HELD FOR SALE AND DISCONTINUED OPERATIONS
During the second quarter of 2017, we committed to a plan to sell our fixed railcar cleaning division which includes substantially all assets and liabilities of Tactical (except for cash) as well as three locations in REGS including Illinois, Maryland and Pennsylvania for a sales price of $2.4 million of proceeds at the close on July 31, 2017, subject to an adjustment for working capital changes, and guaranteed payments of $1.1 million over the next three years. In addition, the Company is entitled to receive another $1.5 million based on the performance of the fixed railcar cleaning locations, also over the next three years. Accordingly, the carrying value of the assets and liabilities associated with the railcar cleaning locations are presented as “Assets held for sale” and “Liabilities held for sale” on our consolidated balance sheet as of June 30, 2017 and December 31, 2016, and “Discontinued operations” on our consolidated statement of operations for three and six months ending June 30, 2017 and June 30, 2016, and on our consolidated statement of cash flows for the six months ending June 30, 2017 and June 30, 2016. The letter of intent for the sale was signed on June 1, 2017 and the sale was completed on July 31, 2017. Based on the estimated net sale proceeds, we expect to record a gain upon completion of this sale in Q3 2017.
| 16 |
STRATEGIC ENVIRONMENTAL & ENERGY RESOURCES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 11 – ASSETS AND LIABILITIES HELD FOR SALE AND DISCONTINUED OPERATIONS, continued
Assets and liabilities held for sale were comprised of the following:
| June 30, 2017 | December 31, 2016 | |||||||
| Accounts receivable, net | $ | 944,300 | $ | 841,800 | ||||
| Property and equipment, net | 127,400 | 156,200 | ||||||
| Other | 37,200 | 26,600 | ||||||
| Total Assets held for sale | $ | 1,108,900 | $ | 1,024,600 | ||||
| Accounts payable | $ | 799,900 | $ | 513,500 | ||||
| Accrued expenses and other | 35,900 | 89,600 | ||||||
| Total Liabilities held for sale | $ | 835,800 | $ | 603,100 |
Major classes of line items constituting pretax loss on discontinued operations:
| For the three months ending June 30, | For the six months ending June 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Services revenue | $ | 1,723,600 | $ | 1,101,100 | $ | 3,325,100 | $ | 1,976,300 | ||||||||
| Services costs | 1,442,300 | 836,500 | 2,580,400 | 1,430,000 | ||||||||||||
| General and administrative expenses | 69,300 | 39,100 | 94,800 | 83,000 | ||||||||||||
| Salaries and related expenses | 98,200 | 60,000 | 181,200 | 121,900 | ||||||||||||
| Other (income) expense | (9,800 | ) | (1,400 | ) | (9,600 | ) | 1,000 | |||||||||
| Total expenses | 1,600,000 | 934,200 | 2,846,800 | 1,635,900 | ||||||||||||
| Operating income | 123,600 | 166,900 | 478,300 | 340,400 | ||||||||||||
| Income tax benefit | — | — | — | — | ||||||||||||
| Total income from discontinued operations | $ | 123,600 | $ | 166,900 | $ | 478,300 | $ | 340,400 | ||||||||
NOTE 12 – EQUITY TRANSACTIONS
| 2017 |
During the six months ended June 30, 2017, the Company issued 500,000 shares of $.001 par value common stock valued at $350,000 in connection with the late payment penalty due on short-term notes. (See Note 9)
During the six months ended June 30, 2017, the Company recorded 700,000 shares of $.001 par value common stock valued at $470,000 as issuable to short-term note holders as required under their respective agreements. (See Note 9)
During the six months ended June 30, 2017, the Company issued 13,496 shares of its $.001 par value common stock upon the cashless exercise of 166,666 common stock options.
| 17 |
STRATEGIC ENVIRONMENTAL & ENERGY RESOURCES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 12 – EQUITY TRANSACTIONS, continued
During the six months ended June 30, 2017, the Company issued an option to purchase 1,000,000 shares of its $.001 par value common stock at a strike price of $1.00 to Richard Robertson in connection with his employment agreement dated January 9, 2017. At the date of issuance 100,000 shares vested immediately and the remaining 900,000 options vest over a period of four years in a series of 16 successive equal quarterly installments of 56,250 commencing March 31, 2017 and ending December 31, 2020. The Company used the Black Scholes option pricing model to estimate the fair value of the options granted at $102,354. The assumptions used in calculating such value include a risk-free interest rate of 1.89%, expected volatility of 36.87%, an expected life of 5.5 years and a dividend rate of 0.
During the six months ended June 30, 2017, the Company issued an option to purchase 1,000,000 shares of its $.001 par value common stock at a strike price of $0.70 to Don Moorhead in connection with his agreement dated May 1, 2017. The options vest over a period of two years in a series of 8 successive equal quarterly installments of 125,000 commencing July 1, 2017 and ending April 1, 2019. The Company used the Black Scholes option pricing model to estimate the fair value of the options granted at $231,500. The assumptions used in calculating such value include a risk-free interest rate of 1.84%, expected volatility of 39.17%, an expected life of 4.5 years and a dividend rate of 0.
| 2016 |
During the six months ended June 30, 2016, the Company sold 800,000 shares of $.001 par value common stock at $.50 per share in a private placement, receiving proceeds of $400,000.
During the six months ended June 30, 2016, the Company issued 100,000 shares of $.001 par value common stock in connection with the payment of a common stock subscription of $25,000.
During the six months ended June 30, 2016, the Company issued 50,000 shares of its $.001 par value common stock upon exercise of common stock warrants receiving proceeds of $25,000.
During the six months ended June 30, 2016, the Company treated as issued 1,200,000 shares of its $.001 par value common stock valued at $720,000 in connection with the Sterall transaction (see Note 10)
Non-controlling Interest
The non-controlling interest presented in our condensed consolidated financial statements reflects a 46% non-controlling equity interest in PWS (see Note 7). Net loss attributable to non-controlling interest, as reported on our condensed consolidated statements of operations, represents the net loss of PWS attributable to the non-controlling equity interest. The non-controlling interest is reflected within stockholders’ equity on the condensed consolidated balance sheet.
NOTE 13 – CUSTOMER CONCENTRATIONS
For the three and six months ended June 30, 2017, the Company did not have sales representing more than 10% to any one customer. The Company had sales from operations to one customer for the three months ended June 30, 2016 that represented more than 10% of total sales, and had one customer for the six months ended June 30, 2016 that represented approximately 32% of our total sales. 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 customer for non-financial related issues.
| 18 |
STRATEGIC ENVIRONMENTAL & ENERGY RESOURCES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 14 – 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:
| Six Months Ended June 30, | ||||||||
| 2017 | 2016 | |||||||
| Warrants | 9,415,430 | 9,614,430 | ||||||
| Options | 2,155,000 | 930,000 | ||||||
| Convertible notes payable, including accrued interest | 2,409,820 | 1,136,400 | ||||||
| 13,980,250 | 11,680,830 | |||||||
NOTE 15 – 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. We believe we are in substantial compliance with all federal, state and local laws regulating our business.
NOTE 16 – SEGMENT INFORMATION AND MAJOR CUSTOMERS
The Company currently has identified three segments as follows:
REGS
Industrial Cleaning
MV and SEM
Environmental Solutions
PWS
Solid Waste
Reach has had minimal operations through June 30, 2017. Substantially all of the assets and liabilities of Tactical, the rail car cleaning segment, was sold July 31, 2017 (Note 11).
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. We have not allocated corporate selling, general and administrative expenses, and stock-based compensation to the segments. All intercompany transactions have been eliminated.
| 19 |
STRATEGIC ENVIRONMENTAL & ENERGY RESOURCES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 16 – SEGMENT INFORMATION AND MAJOR CUSTOMERS, continued
Segment information for the three months ended June 30, 2017 and 2016 is as follows:
| 2017 | Industrial | Environmental | Solid | |||||||||||||||||
| Cleaning (2) | Solutions | Waste | Corporate | Total (3) | ||||||||||||||||
| Revenue | $ | 555,500 | $ | 1,862,500 | $ | 74,500 | $ | — | $ | 2,492,500 | ||||||||||
| Depreciation and amortization (1) | 87,000 | 75,700 | 42,400 | 24,500 | 229,600 | |||||||||||||||
| Interest expense | 6,100 | 4,200 | — | 519,300 | 529,600 | |||||||||||||||
| Stock-based compensation | — | — | — | 39,800 | 39,800 | |||||||||||||||
| Net income (loss) | (445,900 | ) | 243,000 | (87,600 | ) | (1,169,600 | ) | (1,460,100 | ) | |||||||||||
| Capital expenditures (cash and noncash) | 60,400 | — | — | — | 60,400 | |||||||||||||||
| Total assets | $ | 1,046,600 | 1,678,400 | $ | 1,758,700 | $ | 558,400 | $ | 5,042,100 | |||||||||||
| 2016 | Industrial | Environmental | Solid | |||||||||||||||||
| Cleaning (2) | Solutions | Waste | Corporate | Total (3) | ||||||||||||||||
| Revenue | $ | 271,400 | $ | 1,132,600 | $ | 56,500 | $ | — | $ | 1,460,500 | ||||||||||
| Depreciation and amortization (1) | 81,700 | 42,700 | 31,500 | 19,900 | 175,800 | |||||||||||||||
| Interest expense | 9,900 | 5,700 | 100 | 138,900 | 154,600 | |||||||||||||||
| Stock-based compensation | — | — | — | 42,900 | 42,900 | |||||||||||||||
| Net income (loss) | (507,600 | ) | 188,300 | (134,700 | ) | (565,700 | ) | (1,019,700 | ) | |||||||||||
| Capital expenditures (cash and noncash) | 10,100 | 3,900 | 3,100 | — | 17,100 | |||||||||||||||
| Total assets | $ | 1,255,700 | $ | 1,993,700 | $ | 2,918,000 | $ | 992,300 | $ | 7,159,700 | ||||||||||
Segment information for the six months ended June 30, 2017 and 2016 is as follows:
| 2017 | Industrial | Environmental | Solid | |||||||||||||||||
| Cleaning (2) | Solutions | Waste | Corporate | Total (3) | ||||||||||||||||
| Revenue | $ | 1,390,000 | $ | 3,551,500 | $ | 143,900 | $ | — | $ | 5,085,400 | ||||||||||
| Depreciation and amortization (1) | 169,900 | 116,400 | 75,200 | 47,200 | 408,700 | |||||||||||||||
| Interest expense | 12,400 | 9,000 | 100 | 935,000 | 956,500 | |||||||||||||||
| Stock-based compensation | — | — | — | 56,800 | 56,800 | |||||||||||||||
| Net income (loss) | (469,200 | ) | 460,400 | (198,900 | ) | (2,027,100 | ) | (2,234,800 | ) | |||||||||||
| Capital expenditures (cash and noncash) | 60,400 | 1,300 | — | — | 61,700 | |||||||||||||||
| Total assets | $ | 1,046,600 | 1,678,400 | $ | 1,758,700 | $ | 558,400 | $ | 5,042,100 | |||||||||||
| 2016 | Industrial | Environmental | Solid | |||||||||||||||||
| Cleaning (2) | Solutions | Waste | Corporate | Total (3) | ||||||||||||||||
| Revenue | $ | 2,256,200 | $ | 1,705,400 | $ | 128,100 | $ | — | $ | 4,089,700 | ||||||||||
| Depreciation and amortization (1) | 169,400 | 82,800 | 64,800 | 42,400 | 359,400 | |||||||||||||||
| Interest expense | 17,500 | 12,200 | 500 | 169,300 | 199,500 | |||||||||||||||
| Stock-based compensation | — | — | — | 72,500 | 72,500 | |||||||||||||||
| Net income (loss) | 88,500 | 91,000 | (303,400 | ) | (1,022,500 | ) | (1,146,400 | ) | ||||||||||||
| Capital expenditures (cash and noncash) | 123,100 | 12,900 | 6,900 | — | 142,900 | |||||||||||||||
| Total assets | $ | 1,255,700 | $ | 1,993,700 | $ | 2,918,000 | $ | 992,300 | $ | 7,159,700 | ||||||||||
| (1) | Includes depreciation of property, equipment and leasehold improvement and amortization of intangibles |
| (2) | Includes mobile rail car cleaning and excludes locations classified as discontinued operations |
| (3) | Excludes discontinued operations |
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STRATEGIC ENVIRONMENTAL & ENERGY RESOURCES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 17 – LITIGATION
In March 2016, a complaint was filed by a lessor of property leased by REGS, a subsidiary of the Company. The month-to-month lease expired February 29, 2016, when REGS vacated the property. The landlord made certain claims including property damage, and loss of rents, attorney fees and other costs totaling approximately $97,000. REGS engaged defense counsel and zealously opposed the claims. In December 2016, the Company and the lessor reached a settlement of $65,000. At June 30, 2017 and December 31, 2016 $0 and $39,000 was outstanding, respectively. The case was dismissed with prejudiced and the matter is closed.
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. At June 30, 2017 and December 31, 2016 $183,300 and $212,500 was outstanding, respectively. It was agreed among the parties that all pending state and/or federal claims will be dismissed with prejudice.
NOTE 18 – SUBSEQUENT EVENTS
In August 2017, the Company paid one short-term note for $200,000 in full with accrued interest. The penalty period for shares to be issued was reached and the Company issued 150,000 common stock shares on May 31, 2017 under the terms of the revised agreement.
In August 2017, the Company paid one short-term note for $200,000 in full with accrued interest. The penalty period for shares to be issued was reached and the Company recorded 600,000 common stock shares as issuable at June 30, 2017 and will record additional shares as issuable under the terms of the agreement. These shares will be issued in the third quarter of 2017.
In August 2017, the Company paid one short-term note for $250,000 in full with accrued interest. The penalty period for shares to be issued was reached and the Company recorded 100,000 common stock shares as issuable at June 30, 2017 and will record additional shares as issuable under the terms of the agreement. These shares will be issued in the third quarter of 2017.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion is intended to assist you in understanding our business and the results of our operations. It should be read in conjunction with the Condensed Consolidated Financial Statements and the related notes that appear elsewhere in this report as well as our Report on Form 10K filed with the Securities and Exchange Commission on April 14, 2017. Certain statements made in our discussion may be forward looking. Forward-looking statements involve risks and uncertainties and a number of factors could cause actual results or outcomes to differ materially from our expectations. These risks, uncertainties, and other factors include, among others, the risks described in our Annual Report on Form 10K filed with the Securities and Exchange Commission, as well as other risks described in this Quarterly Report. Unless the context requires otherwise, when we refer to “we,” “us” and “our,” we are describing Strategic Environmental & Energy Resources, Inc. and its consolidated subsidiaries on a consolidated basis.
SEER 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 six companies with five 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 six 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 owns and manages four operating entities, one entity that is classified as discontinued operations, 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). The Company sold assets and liabilities related to several of REGS’ fixed rail car cleaning sites along with Tactical assets and liabilities in July 2017.
Tactical Cleaning Company, LLC (“Tactical”): (operating since 2005) provides cleaning services to the tanker rail car industry with offices in two states and a focus on both food-grade and petroleum based products, i.e., fuel oil and asphalt. The Company sold substantially all of the assets and liabilities of Tactical in July 2017.
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 (H2S) in biogas, landfill gas, and petroleum processing operations. These system solutions are marketed under the product names H2SPlus™, SulfAxR 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.
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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 March 31, 2017.
SEER Environmental Materials, LLC (“SEM”) formed September 2015. SEM 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. Operations to date have included the destruction of medical waste under a temporary operating permit issued by SCAQMD since May 2015 and efforts to obtain a full operating permit from SCAQMD were successful and SCAQMD issued a ‘Notice of Intent to Issue Permit to Operate’ in March 2017.
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SEER’s Financial Condition and Liquidity
As shown in the accompanying consolidated financial statements, the Company has experienced recurring losses, and has accumulated a deficit of approximately $20.9 million as of June 30, 2017, and $19.3 million as of December 31, 2016. For the six months ended June 30, 2017 we had net loss before adjustment for losses attributable to non-controlling interest of approximately $1.7 million and for the year ended December 31, 2016, we incurred net losses before adjustment for losses attributable to non-controlling interest of approximately $4.7 million. The Company had a working capital deficit of approximately $4.3 million at June 30, 2017, a decrease of approximately $300,000 in the working capital deficit of $4 million at December 31, 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 for the year ended December 31, 2016. 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, 2016.
Realization of a major portion of our assets as of June 30, 2017 and December 31, 2016, 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. The Company opened an additional rail car cleaning facility in the Midwest (Illinois) and East Coast (Maryland) during 2016 and in the Jersey Coast (Pennsylvania) in 2017 to offset some of the lost revenue previously derived from the refinery sector. Revenue from the new rail car cleaning facilities began in mid-2016 (Illinois), fourth quarter of 2016 (Maryland) and second quarter 2017 (Pennsylvania) and both Illinois and Maryland locations are experiencing monthly revenue growth for the six months ending June 30, 2017. These three rail car cleaning facilities are included with the Tactical rail car cleaning facilities in assets and liabilities held for sale at June 30, 2017 and in the discontinued operations net income number for the three and six months ended June 30, 2017 and 2016. In addition, we have undertaken a number of specific steps to improve operating efficiencies, revenues and income to continue to operate as a going concern. We continue to focus on developing organic growth in our operating companies and improving gross and net margins through increased attention to pricing, cost management and overhead reductions. Critical to achieving profitability will be our ability to license and or sell, permit and operate our CoronaLux™ waste destruction units either though our joint ventures and/or licensees. We have increased our business development efforts to address opportunities identified in expanding markets attributable to increased interest in energy conservation and emission control regulations, particularly the landfill gas and oil field emissions sectors. In addition, the Company is evaluating various forms of financing which may be available to it, i.e., debt and/or equity financing while carefully evaluating the impact on share dilution. 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.
Our primary need for liquidity is to fund working capital requirements of our businesses, capital expenditures and for general corporate purposes, including debt repayment. We have incurred losses and experienced negative operating cash flows for the past several years, and accordingly, the Company has taken a number of actions to continue to support its operations and meet its obligations. The sale of assets and liabilities of Tactical and certain locations within REGS has provided the Company working capital to repay short-term notes totaling $650,000 and accelerate growth of our high-margin technology divisions. We anticipate selling, general and administrative (SG&A) expenses to be reduced somewhat for the second half of 2017. The full synergies should be realized in 2018 with expected annualized savings in SG&A in the range of $0.5 million to $0.7 million. We believe that the actions discussed above are probable of occurring and mitigating the substantial doubt raised by our historical operating results and satisfying our estimated liquidity needs 12 months from the issuance of the financial statements. However, we cannot predict, with certainty, the outcome of our actions to generate liquidity, including the availability of additional debt financing, or whether such actions would generate the expected liquidity as currently planned. If we continue to experience operating losses, and we are not able to generate additional liquidity through the mechanisms described above or through some combination of other actions, while not expected, we might need to secure additional sources of funds, which may or may not be available to us. Additionally, a failure to generate additional liquidity could negatively impact our access to inventory or services that are important to the operation of our business.
Results of Operations for the Three Months Ended June 30, 2017 and 2016
Total revenues were approximately $2.5 million and $1.5 million for the three months ended June 30, 2017 and 2016, respectively. The increase in revenue comparing Q2 2017 to Q2 2016 is driven by an increase of approximately $284,000 or 105% in industrial cleaning revenue coupled with an increase of approximately $730,000 or 64% in environmental solutions revenue. The increase in industrial cleaning revenue is due to an uptick in industrial cleaning services as compared to the loss of significant customer that occurred during Q2 2016. The increase in the environmental solutions revenue is due to greater long-term contract revenue, one-time revenue and recurring media sales to new and existing customers.
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Operating costs, which include cost of products, cost of services, solid waste costs, general and administrative (G&A) expenses and salaries and related expenses, were $3.4 million for the quarter ended June 30, 2017 compared to $2.4 million for the quarter ended June 30, 2016. The increase in operating costs of approximately $1 million is primarily the result of a 1) a 64% increase in environmental solutions revenue resulting in a 76% increase in environmental solutions costs totaling approximately $530,000, 2) a 105% increase in industrial cleaning revenue resulting in a 60% increase in industrial cleaning costs totaling approximately $320,000, and 3) an approximately $200,000 increase in general and administrative expenses primarily driven by an increase in depreciation and amortization ($42,000), business insurance ($58,000), and professional services ($100,000). Service costs outpaced service revenue in both Q2 2017 and Q2 2016 as full utilization of manpower and the ability to utilize and bill our own equipment and rent less third-party equipment was not realized. Product costs as a percentage of product revenues were 66% for the quarter ended June 30, 2017 and 62% for the quarter ended June 30, 2016. The decrease in margin performance for the product sales is due to higher cost of chemical absorbents. G&A expenses increased by approximately $275,000 for the quarters ended June 30, 2017 as compared to the same quarter 2016, a significant driver of that increase was the Company recorded an expense for modifying existing warrants to increase the time to exercise term of the warrants of approximately $83,000 during the quarter ended June 30, 2017. Salaries and related expenses remained fairly constant at $534,400 for the quarter ended June 30, 2017 compared to $591,900 for the quarter ended June 30, 2016.
Total non-operating other income (expense), net was $(530,200) for the quarter ended June 30, 2017 compared to $(138,800) for the quarter ended June 30, 2016. For the quarter ended June 30, 2017 non-operating expenses were comprised of interest expense of $(529,600) and other expense of $(600). For the quarter ended June 30, 2016 non-operating expenses were comprised of interest expense of $(154,600) offset by other income of $15,800. The increase in interest expense in Q2 2017 compared to Q2 2016 was primarily the result of the Company having to issue common stock valued at $475,000 to note holders in accordance with penalty clauses included in the short term notes when the Company was unable to satisfy the notes when they came due.
Net income from discontinued operations included revenues, services costs, general and administrative expenses, salaries and related expenses, and other income (expense) related to the rail car cleaning facilities in Tactical and REGS. Total net income from discontinued operations was $123,600 for the quarter ended June 30, 2017 compared to $166,900 for the quarter ended June 30, 2016.
There is no provision for income taxes for the quarter ended June 30, 2016 due to prior year losses and for the quarter ended June 30, 2017, due to our net loss for the period.
The Company had a net loss, before non-controlling interest, for the quarter ended June 30, 2017 $(1,336,500) compared to a net loss, before non-controlling interest, of $(852,800) for the quarter ended June 30, 2016. Net loss attributable to SEER after deducting $40,000 for the non-controlling interest loss was $(1,296,500) for the quarter ended June 30, 2017 compared to a net loss attributable to SEER of $(795,900), after deducting $56,900 in non-controlling interest loss for the quarter ended June 30, 2016. As noted above, although revenues increased when comparing Q2 2017 to Q2 2016 and our margin on environmental solutions increased slightly, our margins on service revenues decreased due to lower utilization of manpower and owned equipment. In addition, general and administrative expense increased between Q2 2017 compared to Q2 2016 and salaries and related expenses were fairly consistent between Q2 2017 compared to Q2 2016.
Results of Operations for the Six Months Ended June 30, 2017 and 2016
Total revenues were approximately $5.1 million and $4.1 million for the six months ended June 30, 2017 and 2016, respectively, and increase of $1 million or 24%. The increase in revenue is driven by an increase of approximately $1.8 million or 108% in environmental solutions revenue coupled with a decrease of approximately $800,000 or 38% in industrial cleaning revenue. The increase in the environmental solutions revenue is due to greater long-term contract revenue, one-time revenue and recurring media sales to new and existing customers. The decrease in industrial cleaning revenue is due to the notification in April 2016 by a significant customer of the loss of routine maintenance services to this significant customer, although other industrial cleaning services would continue. Solid waste revenues were relatively flat at approximately $144,000 and $128,000, for the six months ended June 30, 2017 and 2016, respectively.
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Operating costs, which include cost of products, cost of services, solid waste costs, general and administrative (G&A) expenses and salaries and related expenses, were $6.4 million for the six months ended June 30, 2017 compared to $5.1 million for the six months ended June 30, 2016. The increase in operating costs of approximately $1.3 million is primarily the result of a 1) a 108% increase in environmental solutions revenue resulting in a 126% increase in environmental solutions costs totaling approximately $1.3 million, 2) an 38% decrease in industrial cleaning services resulting in an 8% decrease in industrial cleaning costs totaling approximately $100,000, and 3) an approximately $100,000 increase in combined general and administrative and salaries and related expenses. Service costs as a percentage of service revenues were 109% for the six months ended June 30, 2017, compared to 72% for the six months ended June 30, 2016. Service costs outpaced service revenue in the six months ended June 30, 2017 as full utilization of manpower and the ability to utilize and bill our own equipment and rent less third-party equipment was not realized. Product costs as a percentage of product revenues were 68% for the six months ended June 30, 2017 and 62% for the six months ended June 30, 2016. The decrease in margin performance for the product sales is due to higher cost of chemical absorbents. G&A expenses increased by approximately $325,000 for the six months ended June 30, 2017 as compared to the six months ended June 30, 2016. The primary reasons for the increase in G&A expenses are; 1) an increase in depreciation and amortization of approximately $30,000, 2) an increase in business insurance of approximately $82,000, 3) an increase in professional services of approximately $130,000, and 4) the Company recorded an expense for modifying existing warrants to increase the time to exercise term of the warrants of approximately $83,000. Salaries and related expenses decreased by approximately $210,000 for the six months ended June 30, 2017 compared to the six months ended June 30, 2016.
Total non-operating other income (expense), net was $(962,400) for the six months ended June 30, 2017 compared to $(171,000) for the six months ended June 30, 2016. For the six months ended June 30, 2017 non-operating expenses were comprised of interest expense of $(956,500) and other expense of $(5,900). For the six months ended June 30, 2016 non-operating expenses were comprised of interest expense of $(199,500) offset by other income of $28,500. The increase in interest expense for the six months ended June 30, 2017 compared to 2016 was primarily the result of the Company having to issue common stock valued at $820,000 to note holders in accordance with penalty clauses included in the short term notes when the Company was unable to satisfy the notes when they came due.
Net income from discontinued operations included revenues, services costs, general and administrative expenses, salaries and related expenses, and other income (expense) related to the rail car cleaning facilities in Tactical and REGS. Total net income from discontinued operations was $478,300 for the six months ended June 30, 2017 compared to $340,400 for the six months ended June 30, 2016.
There is no provision for income taxes for the six months ended June 30, 2016 due to prior year losses and for the six months ended June 30, 2017, due to our net loss for the period.
The Company had a net loss, before non-controlling interest, for the six months ended June 30, 2017 of $(1,756,500) compared to a net loss, before non-controlling interest, of $(806,000) for the six months ended June 30, 2016. Net loss attributable to SEER after deducting $91,200 for the non-controlling interest loss was $(1,665,300) for the six months ended June 30, 2017 compared to a net loss attributable to SEER of $(666,500), after deducting $139,500 in non-controlling interest loss for the six months ended June 30, 2016. As noted above, although revenues increased when comparing the six months ended June 30, 2017 to the six months ended June 30, 2016 and our margin on environmental solutions increased slightly, our margins on service revenues decreased due to lower utilization of manpower and owned equipment. In addition, general and administrative expense increased when comparing the six months ended June 30, 2017 to the six months ended June 30, 2016 and salaries and related expenses were fairly consistent for the six months ended June 30, 2017 as compared to the six months ended June 30, 2016.
Changes in Cash Flow
Operating Activities
The Company had net cash used by operating activities for the six months ended June 30, 2017 of $(529,900) compared to net cash used by operating activities for the six months ended June 30, 2016 of $(417,600), an increase of approximately $112,000. Cash provided by operating activities is driven by our net loss and adjusted by non-cash items as well as changes in operating assets and liabilities. Non-cash adjustments primarily include depreciation, amortization of intangible assets, stock based compensation expense and non-cash interest expense related to issuable common stock shares as penalty for delay in repayment of short-term notes. Non-cash adjustment totaled $1,394,900 and $591,800 for the six months ended June 30, 2017 and 2016, respectively, so non-cash adjustments had a significantly larger impact on net cash provided by operating activities for the six months ended June 30, 2017 when compared to the six months ended June 30, 2016. For the six months ended June 30, 2017, the net positive change in operating assets and liabilities was $331,800 compared to the six months ended June 30, 2016 where the net positive change in operating assets and liabilities, as described above, was $157,700. The positive change in operating assets and liabilities had a much greater impact on net cash provided by operating activities for the six months ended June 30, 2017 compared to the six months ended June 30, 2016.
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Investing activities
The purchase of property, equipment and intangibles were significantly lower in the six months ended June 30, 2017 compared to the six months ended June 30, 2016. In the six months ended June 30, 2017 the additions totaled $61,700 compared to additions in of $156,100 during the six months ended June 30, 2016. In the six months ended June 30, 2016 we received insurance proceeds of $39,300 from property damage and there were no such proceeds during the six months ended June 30, 2017.
Financing Activities
Net cash provided by financing activities was $31,600 for the six months ended June 30, 2017 compared to net cash provided by financing activities of $179,700 for the six months ended June 30, 2016. The primary difference is that in the six months ended June 30, 2017, we had proceeds from short-term notes and extension of warrants of $588,600 and made payments on notes and capital lease obligations of $(557,000), whereas for the six months ended June 30, 2016, we had proceeds for the sale of stock, exercise of warrants and warrant extensions along with proceeds from short-term notes totaling $654,900 and made payments on notes and capital lease obligations of $(475,200).
Discontinued Operations Activities
Net cash provided by operating activities of the discontinued operations totaled $611,700 and $361,100 for the six months ended June 30, 2017 and 2016, respectively.
Critical Accounting Policies, Judgments and Estimates
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, 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.
Accounts Receivable and Concentration of Credit Risk
Accounts receivable are recorded at the invoiced amounts less an allowance for doubtful accounts and do not bear interest. The allowance for doubtful accounts is based on our estimate of the amount of probable credit losses in our accounts receivable. We determine the allowance for doubtful accounts based upon an aging of accounts receivable, historical experience and management judgment. Accounts receivable balances are reviewed individually for collectability, and balances are charged off against the allowance when we determine that the potential for recovery is remote. An allowance for doubtful accounts of approximately $235,500 and $235,500 has been reserved as of June 30, 2017 and December 31, 2016, respectively.
We are exposed to credit risk in the normal course of business, primarily related to accounts receivable. Our customers operate primarily in the oil production and refining, rail transport, biogas generating and wastewater treatment industries in the United States. Accordingly, we are affected by the economic conditions in these industries as well as general economic conditions in the United States. To limit credit risk, management periodically reviews and evaluates the financial condition of its customers and maintains an allowance for doubtful accounts. As of June 30, 2017, and December 31, 2016, we do not believe that we have significant credit risk.
Fair Value of Financial Instruments
The carrying amounts of our financial instruments, including accounts receivable and accounts payable, are carried at cost, which approximates their fair value due to their short-term maturities. We believe that the carrying value of notes payable with third parties, including their current portion, approximate their fair value, as those instruments carry market interest rates based on our current financial condition and liquidity. We believe the amounts due to related parties also approximate their fair value, as their carried interest rates are consistent with those of our notes payable with third parties.
| 27 |
Long-lived Assets
We evaluate the carrying value of long-lived assets for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. An asset is considered to be impaired when the anticipated undiscounted future cash flows of an asset group are estimated to be less than its carrying value. The amount of impairment recognized is the difference between the carrying value of the asset group and its fair value. Fair value estimates are based on assumptions concerning the amount and timing of estimated future cash flows. No impairment was determined as of June 30, 2017. As of December 31, 2016, the Company determined an impairment to five CoronaLux ™ units of $809,000 incurred due to lack of sale or license of the five units for a period of more than 12 months since completion of the units.
Revenue Recognition
We recognize revenue related to contract projects and services when all of the following criteria are met: (i) persuasive evidence of an agreement exists, (ii) delivery has occurred or services have been rendered, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. Our revenue is primarily comprised of services related to industrial cleaning and railcar cleaning, which we recognize as services are rendered.
Product revenue generated from projects, which include the manufacturing of products, for removal and treatment of hazardous vapor and gasses is accounted for under the percentage-of-completion method for projects with durations in excess of three months and the completed-contract method for all other projects. 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, we 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 percentage-of-completion method, we recognize revenue primarily based on the ratio of costs incurred to date to total estimated contract costs. 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.
For contracts accounted for under the percentage-of-completion method, we include in current assets and current liabilities amounts related to construction 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. Billings in excess of costs and estimated earnings on uncompleted contracts represents the excess of billings to date over the amount of contract costs and profits recognized to date, and are recognized as a current liability.
The Company’s revenues from waste destruction licensing agreements are recognized as a single accounting unit over the term of the license. In accordance with Accounting Standards Codification (“ASC”) 605, for revenues which contain multiple deliverables, the Company separates the deliverables into separate accounting units if they meet the following criteria: (i) the delivered items have a stand-alone value to the customer; (ii) the fair value of any undelivered items can be reliably determined; and (iii) if the arrangement includes a general right of return, delivery of the undelivered items is probable and substantially controlled by the seller. Deliverables that do not meet these criteria are combined with one or more other deliverables into one accounting unit. Revenue from each accounting unit is recognized based on the applicable accounting literature, primarily ASC 605.
| 28 |
Stock-based Compensation
We account for stock-based awards at fair value on the date of grant, and recognize compensation over the service period that they are expected to vest. We estimate the fair value of stock options and stock purchase warrants using the Black-Scholes option pricing model. The estimated value of the portion of a stock-based award that is ultimately expected to vest, taking into consideration estimated forfeitures, is recognized as expense over the requisite service periods. The estimate of stock awards that will ultimately vest requires judgment, and to the extent that actual forfeitures differ from estimated forfeitures, such differences are accounted for as a cumulative adjustment to compensation expenses and recorded in the period that estimates are revised.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our filings with the Securities and Exchange Commission (SEC) are recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our chief executive officer and chief financial officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure based on the definition of “disclosure controls and procedures” as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
As of the end of the period covered by this report, and under the supervision and with the participation of our management, including our Chief Executive Officer and the person performing the similar function as Chief Financial Officer, we evaluated the effectiveness of the design and operation of these disclosure controls and procedures. Based on this evaluation and subject to the foregoing, our Chief Executive Officer and Acting Chief Financial Officer concluded that our disclosure controls and procedures were not effective.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15 (f) under the Exchange Act) during the quarter ended June 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
From time to time, the Company may become a party to legal actions or proceedings in the ordinary course of its business. As of June 30, 2017, there were no other such actions or proceedings, either individually or in the aggregate, that, if decided adversely to the Company’s interests, the Company believes would be material to its business.
Please review our report on Form 10K Part 1, Item 1A for a complete statement of “Risk Factors” that pertain to our business.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the six months ended June 30, 2017, the Company issued 500,000 shares of $.001 par value common stock valued at $350,000 in connection with penalty due on short-term notes. (See Note 9)
During the six months ended June 30, 2017, the Company recorded 700,000 shares of $.001 par value common stock valued at $470,000 as issuable to short-term note holders as required under their respective agreements. (See Note 9)
| 29 |
During the period January 1, 2017 to June 30, 2017, the Company issued 13,496 shares of its $.001 par value common stock upon the cashless exercise of 166,666 common stock options.
During the period January 1, 2017 to June 30, 2017, the Company issued an option to purchase 1,000,000 shares of its $.001 par value common stock at a strike price of $1.00 to Richard Robertson in connection with his employment agreement dated January 9, 2017. At the date of issuance 100,000 shares vested immediately and the remaining 900,000 options vest over a period of four years in a series of 16 successive equal quarterly installments of 56,250 commencing March 31, 2017 and ending December 31, 2020. The Company used the Black Scholes option pricing model to estimate the fair value of the options granted at $102,354. The assumptions used in calculating such value include a risk-free interest rate of 1.89%, expected volatility of 36.87%, an expected life of 5.5 years and a dividend rate of 0.
During the period January 1, 2017 to June 30, 2017, the Company issued an option to purchase 1,000,000 shares of its $.001 par value common stock at a strike price of $0.70 to Don Moorhead in connection with his agreement dated May 1, 2017. The options vest over a period of two years in a series of 8 successive equal quarterly installments of 125,000 commencing July 1, 2017 and ending April 1, 2019. The Company used the Black Scholes option pricing model to estimate the fair value of the options granted at $231,500. The assumptions used in calculating such value include a risk-free interest rate of 1.84%, expected volatility of 39.17%, an expected life of 4.5 years and a dividend rate of 0.
The issuance of the shares of our common stock described above was pursuant to the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended and related state private offering exemptions. All of the investors were Accredited Investors as defined in the Securities Act who took their shares for investments purposes without a view to distribution and had access to information concerning the company and its business prospects, as required by the Securities Act.
In addition, there was no general solicitation or advertising for the purchase of these shares. All certificates for these shares issued pursuant to Section 4(2) contain a restrictive legend. Finally, our stock transfer agent has been instructed not to transfer any of such shares unless such shares are registered for resale or there is an exemption with respect to their transfer.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
None
| 30 |
EXHIBIT INDEX
| 3.1 | Articles of Incorporation, dated February 13, 2002 (1) |
| 3.2 | Amendment to the Articles of Incorporation, dated December 19, 2007, changing the name and effecting a reverse (1) |
| 3.3 | Bylaws of the corporation, effective February 13, 2002 (1) |
| 4.1 | $225,000 Convertible Note and Note Agreement of the Corporation, issued February 14, 2012 (2) |
| 4.2 | Form of Warrant, having a 3-year life with $0.50 exercise price (1) |
| 4.3 | Form of Warrant, having a 5-year life with $0.50 exercise price (1) |
| 10.1 | Agreement for acquisition of MV, dated June 13, 2008 (1) |
| 10.2 | Agreement for acquisition of intellectual property from Black Stone Management Services, LLC, dated August 10, 2011 (1) |
| 10.3 | Agreement for Merger with Satellite Organizing Solutions, Inc. (1) |
| 10.4 | Consulting Agreement between the Company and Monty R. Lamirato, dated October 8, 2013 (3) |
| 10.5 | Irrevocable License and Royalty Agreement between the Company and Paragon Waste Solutions, LLC, dated March 21, 2012 (3) |
| 10.6 | SEER 2013 Equity Incentive Plan (4) |
| 10.7 | Form of Option Grant SEER 2013 Equity Incentive Plan (4) |
| 10.8 | Equity Purchase Agreement – Sterall LLC |
| 14.1 | Code of Ethics (1) |
| 21.1 | Subsidiaries of Registrant (1) |
| 31.1* | Certification of Principal Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 |
| 31.2* | Certification of Principal Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 |
| 32.1** | Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 32.2** | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 101.INS*** | XBRL Instance Document |
| 101.SCH*** | XBRL Taxonomy Extension Schema Document |
| 101.CAL*** | XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF*** | XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB*** | XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE*** | XBRL Taxonomy Extension Presentation Linkbase Document |
(1) Incorporated by reference to the Company’s Report on Form 10 filed May 21, 2013.
(2) Incorporated by reference to the Company’s Report on Form 10 Amendment No. 1 filed July 23, 2013.
(3) Incorporated by reference to the Company’s Report on Form 10-Q filed November 14, 2013
(4) Incorporated by reference to the Company’s Report on Form 10-K filed March 27, 2014
| * | Filed herewith |
| ** | This certification is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended or the Exchange Act. |
| *** | Pursuant to applicable securities laws and regulations, these interactive data files will not be deemed “filed” for the purposes of Section 18 of the Securities and Exchange Act of 1934 or otherwise subject to the liability of that section, nor will they be deemed filed or made a part of a registration statement or prospectus for purposes of Sections 11 and 12 of the Securities Act of 1933, or otherwise subject to liability under those sections. |
| 31 |
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.
| Dated: August 14, 2017 | STRATEGIC ENVIRONMENTAL & ENERGY RESOURCES, INC. | |
| By | /s/ J. John Combs III | |
|
J. John Combs III Chief Executive Officer with Responsibility to sign on behalf of Registrant as a Duly authorized officer and principal executive officer | ||
| By | /s/ Heidi Anderson | |
| Heidi Anderson | ||
| Interim Chief Financial Officer with responsibility to sign on behalf of Registrant as a duly authorized officer and principal financial officer | ||
| 32 |
Strategic Environmental & Energy Resources, Inc. 10-Q
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, J. John Combs III, certify that:
1. I have reviewed this Form 10-Q for the period ended June 30, 2017, of Strategic Environmental & Energy Resources, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated Subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
| Dated: August 14, 2017 | ||
| /s/ J. John Combs III | ||
| J. John Combs III | ||
| Chief Executive Officer |
Strategic Environmental & Energy Resources, Inc. 10-Q
EXHIBIT 31.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Heidi Anderson, certify that:
1. I have reviewed this Form 10-Q for the period ended June 30, 2017, of Strategic Environmental & Energy Resources, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated Subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
| Dated: August 14, 2017 | ||
| /s/ Heidi Anderson | ||
| Heidi Anderson | ||
| Interim Chief Financial Officer |
Strategic Environmental & Energy Resources, Inc. 10-Q
EXHIBIT 32.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
Pursuant to 18 U.S.C. 1350
(Section 906 of the Sarbanes-Oxley Act of 2002)
In connection with the Strategic Environmental & Energy Resources, Inc. (the “Company”) Quarterly Report on Form 10-Q for the period ended June 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, J. John Combs III, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the consolidated financial condition and results of operations of the Company. |
Dated: August 14, 2017
| /s/ J. John Combs III | ||
| J. John Combs III | ||
| President and Chief Executive Officer | ||
Strategic Environmental & Energy Resources, Inc. 10-Q
EXHIBIT 32.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
Pursuant to 18 U.S.C. 1350
(Section 906 of the Sarbanes-Oxley Act of 2002)
In connection with the Strategic Environmental & Energy Resources, Inc. (the “Company”) on Report on Form 10-Q for the period ended June 30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Heidi Anderson, Interim Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the consolidated financial condition and results of operations of the Company. |
Dated: August 14, 2017
| /s/ Heidi Anderson | ||
| Heidi Anderson | ||
| Interim Chief Financial Officer | ||
Document and Entity Information - shares |
6 Months Ended | |
|---|---|---|
Jun. 30, 2017 |
Jul. 31, 2017 |
|
| Document And Entity Information | ||
| Entity Registrant Name | Strategic Environmental & Energy Resources, Inc. | |
| Entity Central Index Key | 0001576197 | |
| Document Type | 10-Q | |
| Trading Symbol | SENR | |
| Document Period End Date | Jun. 30, 2017 | |
| Amendment Flag | false | |
| Current Fiscal Year End Date | --12-31 | |
| Entity a Well-known Seasoned Issuer | No | |
| Entity a Voluntary Filer | No | |
| Entity's Reporting Status Current | Yes | |
| Entity Filer Category | Smaller Reporting Company | |
| Entity Common Stock, Shares Outstanding | 55,038,575 | |
| Document Fiscal Period Focus | Q2 | |
| Document Fiscal Year Focus | 2017 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) |
Jun. 30, 2017 |
Dec. 31, 2016 |
||
|---|---|---|---|---|
| Statement of Financial Position [Abstract] | ||||
| Allowance for doubtful accounts | $ 235,500 | $ 235,500 | ||
| Preferred stock, par value (in dollars per shares) | $ 0.001 | $ 0.001 | ||
| Preferred stock, authorized | 5,000,000 | 5,000,000 | ||
| Preferred stock, issued | 0 | 0 | ||
| Common stock, par value (in dollars per shares) | $ 0.001 | $ 0.001 | ||
| Common stock, authorized | 70,000,000 | 70,000,000 | ||
| Common stock, issued | 55,738,575 | 54,525,079 | ||
| Common stock, outstanding | 55,738,575 | 54,525,079 | ||
| Shares issuable per short-term note agreements | [1] | 700,000 | ||
| ||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) |
3 Months Ended | 6 Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|||||||
| Revenue: | ||||||||||
| Products | $ 1,862,500 | $ 1,132,600 | $ 3,551,500 | $ 1,705,400 | ||||||
| Services | 555,500 | 271,400 | 1,390,000 | 2,256,200 | ||||||
| Licensing | 74,500 | 56,500 | 143,900 | 128,100 | ||||||
| Total revenue | [1] | 2,492,500 | 1,460,500 | 5,085,400 | 4,089,700 | [2] | ||||
| Operating expenses: | ||||||||||
| Products costs | 1,227,700 | 697,400 | 2,406,100 | 1,065,500 | ||||||
| Services costs | 857,100 | 534,500 | 1,508,500 | 1,631,300 | ||||||
| Solid waste costs | 53,000 | 61,700 | 110,300 | 165,600 | ||||||
| General and administrative expenses | 750,200 | 471,600 | 1,293,700 | 968,100 | ||||||
| Salaries and related expenses | 534,400 | 591,900 | 1,039,200 | 1,250,300 | ||||||
| Total operating expenses | 3,422,400 | 2,357,100 | 6,357,800 | 5,080,800 | ||||||
| Income (Loss) from operations | (929,900) | (896,600) | (1,272,400) | (991,100) | ||||||
| Other income (expense): | ||||||||||
| Interest expense | [1] | (529,600) | (154,600) | (956,500) | (199,500) | [2] | ||||
| Other | (600) | 15,800 | (5,900) | 28,500 | ||||||
| Total non-operating expense, net | (530,200) | (138,800) | (962,400) | (171,000) | ||||||
| Net loss from continuing operations | (1,460,100) | (1,035,400) | (2,234,800) | (1,162,100) | ||||||
| Discontinued operations, net of tax | 123,600 | 166,900 | 478,300 | 340,400 | ||||||
| Net loss before earnings from equity method joint ventures | (1,336,500) | (868,500) | (1,756,500) | (821,700) | ||||||
| Income from equity method joint ventures | 15,700 | 15,700 | ||||||||
| Net loss | (1,336,500) | (852,800) | (1,756,500) | (806,000) | ||||||
| Less: Net loss attributable to non-controlling interest | (40,000) | (56,900) | (91,200) | (139,500) | ||||||
| Net loss attributable to SEER common stockholders | $ (1,296,500) | $ (795,900) | $ (1,665,300) | $ (666,500) | ||||||
| Net loss per share from continuing operations (in dollars per share) | $ (0.03) | $ (0.03) | $ (0.04) | $ (0.02) | ||||||
| Net loss per share from discontinued operations (in dollars per share) | 0.01 | 0.01 | 0.01 | 0.01 | ||||||
| Net income (loss) per share, basic and diluted (in dollars per share) | $ (0.02) | $ (0.02) | $ (0.03) | $ (0.01) | ||||||
| Weighted average shares outstanding - basic and diluted (in shares) | 54,708,905 | 54,470,134 | 54,621,302 | 54,131,672 | ||||||
| ||||||||||
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) - USD ($) |
6 Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
||||||||
| Cash flows from operating activities: | |||||||||
| Net loss | $ (1,756,500) | $ (806,000) | |||||||
| Less: Discontinued operations, net of tax | 478,300 | 340,400 | |||||||
| Net loss from continuing operations | (2,234,800) | (1,146,400) | |||||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||
| Provision for doubtful accounts receivable | 65,300 | ||||||||
| Depreciation and amortization | [1],[2] | 408,700 | 359,400 | ||||||
| Stock-based compensation expense | 56,800 | 72,500 | |||||||
| Non-cash expense for interest, common stock issued for debt penalty | 820,000 | ||||||||
| Non-cash expense for interest, warrants - accretion of debt discount | 4,000 | 99,500 | |||||||
| Non-cash expense for extension of warrants | 83,600 | ||||||||
| Gain on disposition of assets | (25,600) | ||||||||
| Changes in operating assets and liabilities: | |||||||||
| Accounts receivable | 446,100 | 148,200 | |||||||
| Costs in Excess of billings on uncompleted contracts | (98,700) | 114,700 | |||||||
| Prepaid expenses and other assets | 281,400 | (95,900) | |||||||
| Accounts payable and accrued liabilities | 644,600 | (361,400) | |||||||
| Billings in excess of revenue on uncompleted contracts | (840,400) | 362,900 | |||||||
| Deferred revenue | (94,200) | (22,200) | |||||||
| Payroll taxes payable | (7,000) | 11,400 | |||||||
| Net cash provided by operating activities | (529,900) | (417,600) | |||||||
| Cash flows from investing activities: | |||||||||
| Insurance proceeds from property damage | 59,000 | ||||||||
| Purchase of property and equipment | (61,700) | (156,100) | |||||||
| Proceeds (purchases) of intangibles | 2,400 | (28,100) | |||||||
| Net cash used in investing activities | (59,300) | (125,200) | |||||||
| Cash flows from financing activities: | |||||||||
| Payments of notes and capital lease obligations | (557,000) | (455,200) | |||||||
| Payments of related party notes payable and accrued interest | (20,000) | ||||||||
| Proceeds from short-term notes | 450,000 | 200,000 | |||||||
| Proceeds from exercise of warrants | 25,000 | ||||||||
| Proceeds from warrant extensions | 138,600 | 29,900 | |||||||
| Proceeds from the sale of common stock and warrants, net of expenses | 400,000 | ||||||||
| Net cash provided by (used in) financing activities | 31,600 | 179,700 | |||||||
| Net cash flows from discontinued operations | 611,700 | 361,100 | |||||||
| Net increase in cash | 54,100 | (2,000) | |||||||
| Cash at the beginning of period | 233,200 | [3] | 257,100 | ||||||
| Cash at the end of period | 287,300 | 255,100 | |||||||
| Supplemental disclosures of cash flow information: | |||||||||
| Cash paid for interest | 53,300 | 98,000 | |||||||
| Financing of prepaid insurance premiums | $ 175,300 | 278,600 | |||||||
| Issuance of common stock for other assets | $ 720,000 | ||||||||
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ORGANIZATION AND FINANCIAL CONDITION |
6 Months Ended |
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Jun. 30, 2017 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| ORGANIZATION AND FINANCIAL CONDITION | NOTE 1 – ORGANIZATION AND FINANCIAL CONDITION Organization and Going Concern Strategic Environmental & Energy Resources, Inc. (“SEER,” “we,” or the “Company”), a Nevada corporation, is a provider of next-generation clean-technologies, waste management innovations and related services. SEER has four wholly-owned subsidiaries, three in continuing operations and one classified as discontinued operations, and two 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 four 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 and the assets and liabilities of three locations of this subsidiary which provided fixed rail car cleaning were sold along with Tactical assets and liabilities in July 2017; 2) Tactical Cleaning Company, LLC (“Tactical”), provides proprietary cleaning services related to railcar tankers, tank trucks and frac tanks to customers from its sites in Colorado and Kansas and substantially all of the assets and liabilities of this subsidiary were sold in July 2017; 3) 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.; 4) SEER Environmental Materials, LLC,(“SEM”), a materials technology company focused on development of cost-effective chemical absorbents. The two majority-owned subsidiaries are; 1) Paragon Waste Solutions, LLC (“PWS”) and 2) ReaCH4Biogas (“Reach”). PWS is currently owned 54% by SEER (see Note 7) and Reach is owned 85% 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), is currently owned 85% by SEER and 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 minimal operations for the quarter ended June 30, 2017 and 2016. Principals of Consolidation The accompanying consolidated financial statements include the accounts of SEER, its wholly-owned subsidiaries, REGS, TCC, MV and SEM and its majority-owned subsidiaries PWS and Reach, 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 consolidated financial statements, the Company has experienced recurring losses, and has accumulated a deficit of approximately $20.9 million as of June 30, 2017, and $19.3 million as of December 31, 2016. For the six months ended June 30, 2017 we had net loss before adjustment for losses attributable to non-controlling interest of approximately $1.8 million and for the year ended December 31, 2016, we incurred net losses before adjustment for losses attributable to non-controlling interest of approximately $4.7 million. The Company had a working capital deficit of approximately $4.3 million at June 30, 2017, an increase of approximately $300,000 in the working capital deficit of $4 million at December 31, 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 for the year ended December 31, 2016. 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, 2016. Realization of a major portion of our assets as of June 30, 2017 and December 31, 2016, 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. The Company opened an additional rail car cleaning facility in the Midwest (Illinois) and East Coast (Maryland) during 2016 and in the Jersey Coast (Pennsylvania) in 2017 to offset some of the lost revenue previously derived from the refinery sector. Revenue from the new rail car cleaning facilities began in mid-2016 (Illinois), fourth quarter of 2016 (Maryland) and second quarter 2017 (Pennsylvania) and both Illinois and Maryland locations are experiencing monthly revenue growth for the six months ending June 30, 2017. These three rail car cleaning facilities are included with the Tactical rail car cleaning facilities in assets and liabilities held for sale at June 30, 2017 and 2016, and as discontinued operations for the three and six months ended June 30, 2017 and 2016. In addition, we have undertaken a number of specific steps to improve operating efficiencies, revenues and income to continue to operate as a going concern. We continue to focus on developing organic growth in our operating companies and improving gross and net margins through increased attention to pricing, cost management and overhead reductions. Critical to achieving profitability will be our ability to license and or sell, permit and operate our CoronaLux™ waste destruction units either through our joint ventures and/or licensees. We have increased our business development efforts to address opportunities identified in expanding markets attributable to increased interest in energy conservation and emission control regulations, particularly the landfill gas and oil field emissions sectors. In addition, the Company is evaluating various forms of financing which may be available to it, i.e., debt and/or equity financing while carefully evaluating the impact on share dilution. 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 14, 2017 for the years ended December 31, 2016 and 2015. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
6 Months Ended |
|---|---|
Jun. 30, 2017 | |
| Accounting Policies [Abstract] | |
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 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 income (loss).
Revenue Recognition
We recognize revenue related to contract projects and services when all of the following criteria are met: (i) persuasive evidence of an agreement exists, (ii) delivery has occurred or services have been rendered, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. Our revenue is primarily comprised of services related to industrial cleaning and railcar cleaning, which we recognize as services are rendered.
Product revenue generated from projects, which include the manufacturing of products, for removal and treatment of hazardous vapor and gasses is accounted for under the percentage-of-completion method for projects with durations in excess of three months and the completed-contract method for all other projects. 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, we 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 percentage-of-completion method, we recognize revenue primarily based on the ratio of costs incurred to date to total estimated contract costs. 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.
For contracts accounted for under the percentage-of-completion method, we include in current assets and current liabilities amounts related to construction 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. Billings in excess of costs and estimated earnings on uncompleted contracts represents the excess of billings to date over the amount of contract costs and profits recognized to date, and are recognized as a current liability.
The Company’s revenues from waste destruction licensing agreements are recognized as a single accounting unit over the term of the license. In accordance with Accounting Standards Codification (“ASC”) 605, for revenues which contain multiple deliverables, the Company separates the deliverables into separate accounting units if they meet the following criteria: (i) the delivered items have a stand-alone value to the customer; (ii) the fair value of any undelivered items can be reliably determined; and (iii) if the arrangement includes a general right of return, delivery of the undelivered items is probable and substantially controlled by the seller. Deliverables that do not meet these criteria are combined with one or more other deliverables into one accounting unit. Revenue from each accounting unit is recognized based on the applicable accounting literature, primarily ASC 605.
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 $3,900 and $100,000 for the six months ended June 30, 2017 and 2016, 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 six months ended June 30, 2017 and 2016 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 June 30, 2017 and December 31, 2016. 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, 2015. The tax periods for the years ending December 31, 2009 through 2015 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. |
PROPERTY AND EQUIPMENT |
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| PROPERTY AND EQUIPMENT | NOTE 3 – PROPERTY AND EQUIPMENT
Property and equipment was comprised of the following:
Depreciation expense for the three months ended June 30, 2017 and 2016 was $167,300 and $155,500, respectively and for the six months ended June 30, 2017 and 2016 was $323,700 and $316,400, respectively. For the three months ended June 30, 2017 depreciation expense included in cost of goods sold and selling, general and administrative expenses was $142,600 and $24,700 respectively. For the six months ended June 30, 2017 depreciation expense included in cost of goods sold and selling, general and administrative expenses was $274,700 and $49,000, respectively. For the three months ended June 30, 2016 depreciation expense included in cost of goods sold and selling, general and administrative expenses was $131,400 and $24,100 respectively. For the six months ended June 30, 2016 depreciation expense included in cost of goods sold and selling, general and administrative expenses was $268,100 and $48,300, respectively.
Accumulated depreciation on leased CoronaLux™ units included in accumulated depreciation and amortization above is $381,900 and $238,800 as of June 30, 2017 and 2016, respectively.
Property and equipment included the following amounts for leases that have been capitalized at:
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INTANGIBLE ASSETS |
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| Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INTANGIBLE ASSETS | NOTE 4 – INTANGIBLE ASSETS
Intangible assets were comprised of the following:
The estimated useful lives of the intangible assets range from seven to ten years. Amortization expense was $62,300 and $22,800 for the three months ended June 30, 2017 and 2016, respectively and $85,000 and $43,000 for the six months ended June 30, 2017 and 2016, respectively. |
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ACCRUED LIABILITIES |
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| Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ACCRUED LIABILITIES | NOTE 5 – ACCRUED LIABILITIES
Accrued liabilities were comprised of the following:
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UNCOMPLETED CONTRACTS |
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| Contractors [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| UNCOMPLETED CONTRACTS | NOTE 6 – UNCOMPLETED CONTRACTS
Costs, estimated earnings and billings on uncompleted contracts are as follows:
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INVESTMENT IN PARAGON WASTE SOLUTIONS LLC |
6 Months Ended |
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Jun. 30, 2017 | |
| Business Combinations [Abstract] | |
| INVESTMENT IN PARAGON WASTE SOLUTIONS LLC | NOTE 7 – INVESTMENT IN PARAGON WASTE SOLUTIONS LLC
In 2010, the Company and Black Stone Management Services, LLC (“Black Stone”) formed PWS, whereby a total of 1,000,000 membership units were issued, 600,000 membership units to the Company and 400,000 membership units to Black Stone. Fortunato Villamagna, who serves as President of our PWS subsidiary, is a managing member and Chairman of Black Stone. In June 2012, the Company and Blackstone each allocated 10% of their respective membership units in PWS to Mr. J John Combs III, an officer and shareholder of the Company and Mr. Michael Cardillo, a shareholder of the Company and an officer of a subsidiary. There was no value attributable to the units at the time of the allocation. At June 30, 2017 and December 31, 2016 the Company owned 54% of the membership units, Black Stone owned 26% of the membership units, an outside third party 10% of the membership units and two related parties (as noted above), each owned 5% of the membership units.
In August, 2011, we acquired certain intellectual property in regards to waste destruction technology (the “IP”) from Black Stone in exchange for 1,000,000 shares of our common stock valued at $100,000. We estimated the useful life of the IP at ten years, which was consistent with the useful life of other technology included in our intangible assets, and management’s initial assessment of the potential marketability of the IP.
Since its inception through June 30, 2017, we have provided approximately $5.8 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 that we will provide the funding as an advance against future earnings distributions made by PWS.
Licensing Agreements
In 2014, Sterall ordered a total of six CoronaLux™ units, of which one unit was delivered during the year ending December 31, 2014, and five units are pending delivery at June 30, 2017. Sterall paid a non-refundable placement fee of $236,300 for the unit delivered in 2014. The fee is being recognized over the term of the agreement. Sterall also has paid a deposit of $330,000 for the five units ordered and a balance of $851,500 is still owed and has been fully reserved by the Company.
On February 22, 2014, SEER and PWS entered into an Agreement with Daniel McAteer & Associates (“DMA”) to develop, permit and exploit the PWS waste destruction technology in Ireland and United Kingdom (“Limited Territory”). The Agreement called for the formation of a Joint Venture to be owned 50% by SEER and 50% by DMA. In accordance with the agreement, DMA was to pay a one-time license fee of $350,000 for an exclusive license for the limited purpose of medical waste destruction in the Limited Territory. On June 10, 2014 Paragon Waste (UK) Ltd (“Paragon UK”, “UK Joint Venture”), was formed in accordance with the laws of Northern Ireland. A total of 300,100 shares were issued upon formation, 100 Ordinary A voting shares were issued, of which PWS received 50 Ordinary A shares and 300,000 Ordinary B non-voting shares were issued. In 2015, the Agreement with DMA was amended to where Paragon UK purchased the CoronaLux™ unit from PWS for $350,000. 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. As of June 30, 2017 a balance of $176,000 is still owed and has been fully reserved by the Company.
On March 4, 2014, PWS entered into a Licensing and Equipment Lease Agreement with eCycling International of South Carolina, LLC (“eCycling”). The License Agreement grants to eCycling the use of the PWS Technology and the CoronaLux™ waste destruction units for an initial term of five years and requires a payment of $176,875 as a non-refundable initial licensing fee and distributions of 50% of net operating profits, as defined in the agreement, in lieu of continuing royalty payments for the use of the licensed technology. eCycling originally paid the $176,875 placement fee to PWS and an additional $176,875 per the amended agreement during the year ended December 31, 2016 and the revenue is being recognized over the term of the Agreement. eCycling is still in the process of permitting the unit, and therefore, has not yet generated any NOP.
On November 17, 2014, PWS entered into an Exclusive Licensing and Equipment Lease Agreement, for a limited license territory, with Medical Waste Services, LLC (“MWS”). The License Agreement grants to MWS the use of the PWS Technology and the CoronaLux™ waste destruction units for an initial term of seven years and requires a payment of $225,000 as a non-refundable initial licensing fee and distributions of 50% of net operating profits, as defined in the agreement, in lieu of continuing royalty payments for the use of the licensed technology. PWS and Medical Waste Services, LLC (“MWS”) formed a contractual joint venture to exploit the PWS medical waste destruction technology. MWS has received approval from the California Department of Public Health and a restricted permit from the South Coast Air Quality Management District (“SCAQMD”) to operate the CoronaLux™ unit licensed by MWS at its facility in Southern California. Operations to date have included the destruction of medical waste under a temporary operating permit issued by SCAQMD since May 2015 and efforts to obtain a full operating permit from SCAQMD were successful and SCAQMD issued a ‘Notice of Intent to Issue Permit to Operate’ in March 2017.
In February 2015, PWS entered into a License Agreement with Particle Science Tech of Environmental Protection, Inc (“Particle”) a US subsidiary of Xinhua Energy Environmental Technology Co., Ltd (“Xinhua”), a large multi-national environmental company based in China. The agreement provides for the exclusive rights to distribute PWS’s patented technology in China, Hong Kong, Macau and the Taiwan territories (“Territory”). The grant was for both the medical waste, as well as the refinery vertical markets within the Territory. The Agreement calls for, among other things, the formation of a U.S. joint venture company, (“P&P Company”, to be owned 50/50 by PWS and Particle) and an obligation by Xinhua to fund all necessary and reasonable capital requirements to permit and roll out the PWS technology in the Territory as well as staff and manage the JV Entity’s operations. In 2015, PWS sold a CoronaLux™ unit to Xinhua for $430,500.
Upon the occurrence of certain events and timely performance by Xinhua, a second placement fee of $350,000 is required to be paid and, upon that second payment, it will then be granted exclusive manufacturing rights to produce the units to be deployed in the Territory.
Payments received for non-refundable licensing and placement fees have been recorded as deferred revenue in the accompanying consolidated balance sheets at June 30, 2017 and December 31, 2016 and are recognized as revenue ratably over the term of the contract. |
PAYROLL TAXES PAYABLE |
6 Months Ended |
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Jun. 30, 2017 | |
| Payroll Taxes Payable | |
| PAYROLL TAXES PAYABLE | NOTE 8 – 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.
Two of the officers of REGS also have personal 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 then appealed that rejections 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 June 30, 2017, and December 31, 2016, the outstanding balance due to the IRS was $986,300, 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. |
DEBT |
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| DEBT | NOTE 9 – DEBT
Debt as of June 30, 2017 and December 31, 2016, was comprised of the following:
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RELATED PARTY TRANSACTIONS |
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| Related Party Transactions [Abstract] | ||||||||||||||||||||||||||||
| RELATED PARTY TRANSACTIONS | NOTE 10 – RELATED PARTY TRANSACTIONS
Notes payable, related parties
Related parties accrued interest due to certain related parties as of June 30, 2017 and December 31, 2016 are as follows:
We believe the stated interest rates on the related party notes payable represent reasonable market rates based on the note payable arrangements we have 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 shall commence as of the date of this 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 revenues of approximately $94,200 for the six months ended June 30, 2017 and $205,000 for the year ended December 31, 2016, as such, royalties of approximately $21,900 and $17,200 were due at June 30, 2017 and December 31, 2016, respectively.
In August 2014, the Company entered into a second Exchange and Acquisition Agreement (“New Technologies Agreement”) with Black Stone for the acquisition of additional intellectual property (“IP”) from Black Stone in exchange for 1,000,000 shares of common stock valued at $1,050,000. In 2015 the Company and Black Stone executed a rescission agreement of the New Technologies Agreement noted above that was effective December 31, 2014. The shares issued by the Company in accordance with the agreement were returned and all acquired IP returned to Black Stone.
In September 2014, the Company entered into an Equity Purchase Agreement (“Equity Agreement”) with a third party (“Seller”) whereby the Company issued 1,200,000 shares of the Company’s common stock, valued at $1,212,000, in exchange for 22.5 membership interest units, representing 15% ownership interest in Sterall, LLC, a Delaware corporation. In March 2015, the Company and the Seller entered into a revised agreement whereby the 1,200,000 shares issued by the Company would be held by the Seller until the completion of an independent third-party valuation. Based on the fair market value of the Purchased Units from the valuation obtained by the Company, an amount of Consideration Shares will be returned to the Company to the extent that the fair market value of the Consideration Shares issued (see below) are greater than the fair market value of the Purchased Units. In no event shall the Company be obligated to issue additional shares as consideration for the Purchased Units. For purposes of this amendment, the fair market value of each Consideration Share will be $0.83333. In the event the parties are unwilling to accept the fair market value of the Purchased Units, as determined by the independent valuation specialist, on or before the Closing Date this Agreement, the transaction covered by this Agreement (the “Contemplated Transaction”) may be rescinded by either Party in writing.
In December 2014, PWS, Sterall, Inc and Sterall LLC entered into a Successor-In-Interest Agreement. The Successor-In-Interest Agreement states that Sterall Inc and Sterall LLC are in the process of consolidating their business under Sterall LLC and all agreements between PWS and Sterall Inc shall be binding in all regards Sterall LLC.
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. Operations to date have included the destruction of medical waste. For the six months ended June 30, 2017 and the year ended December 31, 2016, PWS has recorded $13,100 and $15,700 in income which represents their 50% interest in the net income of the joint venture, respectively. In addition, for the six months ended June 30, 2017 and the year ended December 31, 2016, PWS billed the joint venture approximately $36,600 and $68,000 in costs incurred on behalf of the joint venture, respectively.
Due to the ability of the Company to rescind the shares issued at the commencement of the transaction the shares were considered contingently issuable shares and as such the 1,200,000 shares not considered issued and outstanding at December 31, 2015. The 15% ownership interest in Sterall was considered contingently held until the conclusion of this transaction.
As of December 31, 2015, an independent appraisal was not performed and the Amended Equity Agreement expired by its terms. The 1,200,000 shares subject to the original Equity Agreement and the Amended Equity Agreement became unrestricted in 2016 and are now considered issued and outstanding. The shares were valued at $720,000 and have been recorded as a long term other asset pending resolution of claims by the parties involved related to the Sterall licensing agreement from September 2013, Sterall equipment deposits of $330,000 from 2014 and the equity purchase agreement noted above. As of December 31, 2016, a settlement has not been reached by the parties however, they continue to negotiate an agreement and an impairment of the long term asset in the amount of $720,000 was recorded by the Company. |
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ASSETS AND LIABILITIES HELD FOR SALE AND DISCONTINUED OPERATIONS |
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| Assets And Liabilities Held For Sale And Discontinued Operations | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ASSETS AND LIABILITIES HELD FOR SALE AND DISCONTINUED OPERATIONS | NOTE 11 – ASSETS AND LIABILITIES HELD FOR SALE AND DISCONTINUED OPERATIONS During the second quarter of 2017, we committed to a plan to sell our fixed railcar cleaning division which includes substantially all assets and liabilities of Tactical (except for cash) as well as three locations in REGS including Illinois, Maryland and Pennsylvania for a sales price of $2.4 million of proceeds at the close on July 31, 2017, subject to an adjustment for working capital changes, and guaranteed payments of $1.1 million over the next three years. In addition, the Company is entitled to receive another $1.5 million based on the performance of the fixed railcar cleaning locations, also over the next three years. Accordingly, the carrying value of the assets and liabilities associated with the railcar cleaning locations are presented as “Assets held for sale” and “Liabilities held for sale” on our consolidated balance sheet as of June 30, 2017 and December 31, 2016, and “Discontinued operations” on our consolidated statement of operations for three and six months ending June 30, 2017 and June 30, 2016, and on our consolidated statement of cash flows for the six months ending June 30, 2017 and June 30, 2016. The letter of intent for the sale was signed on June 1, 2017 and the sale was completed on July 31, 2017. Based on the estimated net sale proceeds, we expect to record a gain upon completion of this sale in Q3 2017. Assets and liabilities held for sale were comprised of the following:
Major classes of line items constituting pretax loss on discontinued operations:
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EQUITY TRANSACTIONS |
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Jun. 30, 2017 | |||||||
| Equity [Abstract] | |||||||
| EQUITY TRANSACTIONS | NOTE 12 – EQUITY TRANSACTIONS
During the six months ended June 30, 2017, the Company issued 500,000 shares of $.001 par value common stock valued at $350,000 in connection with the late payment penalty due on short-term notes. (See Note 9)
During the six months ended June 30, 2017, the Company recorded 700,000 shares of $.001 par value common stock valued at $470,000 as issuable to short-term note holders as required under their respective agreements. (See Note 9)
During the six months ended June 30, 2017, the Company issued 13,496 shares of its $.001 par value common stock upon the cashless exercise of 166,666 common stock options.
During the six months ended June 30, 2017, the Company issued an option to purchase 1,000,000 shares of its $.001 par value common stock at a strike price of $1.00 to Richard Robertson in connection with his employment agreement dated January 9, 2017. At the date of issuance 100,000 shares vested immediately and the remaining 900,000 options vest over a period of four years in a series of 16 successive equal quarterly installments of 56,250 commencing March 31, 2017 and ending December 31, 2020. The Company used the Black Scholes option pricing model to estimate the fair value of the options granted at $102,354. The assumptions used in calculating such value include a risk-free interest rate of 1.89%, expected volatility of 36.87%, an expected life of 5.5 years and a dividend rate of 0.
During the six months ended June 30, 2017, the Company issued an option to purchase 1,000,000 shares of its $.001 par value common stock at a strike price of $0.70 to Don Moorhead in connection with his agreement dated May 1, 2017. The options vest over a period of two years in a series of 8 successive equal quarterly installments of 125,000 commencing July 1, 2017 and ending April 1, 2019. The Company used the Black Scholes option pricing model to estimate the fair value of the options granted at $231,500. The assumptions used in calculating such value include a risk-free interest rate of 1.84%, expected volatility of 39.17%, an expected life of 4.5 years and a dividend rate of 0.
During the six months ended June 30, 2016, the Company sold 800,000 shares of $.001 par value common stock at $.50 per share in a private placement, receiving proceeds of $400,000.
During the six months ended June 30, 2016, the Company issued 100,000 shares of $.001 par value common stock in connection with the payment of a common stock subscription of $25,000.
During the six months ended June 30, 2016, the Company issued 50,000 shares of its $.001 par value common stock upon exercise of common stock warrants receiving proceeds of $25,000.
During the six months ended June 30, 2016, the Company treated as issued 1,200,000 shares of its $.001 par value common stock valued at $720,000 in connection with the Sterall transaction (see Note 10)
Non-controlling Interest
The non-controlling interest presented in our condensed consolidated financial statements reflects a 46% non-controlling equity interest in PWS (see Note 7). Net loss attributable to non-controlling interest, as reported on our condensed consolidated statements of operations, represents the net loss of PWS attributable to the non-controlling equity interest. The non-controlling interest is reflected within stockholders’ equity on the condensed consolidated balance sheet. |
CUSTOMER CONCENTRATIONS |
6 Months Ended |
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Jun. 30, 2017 | |
| Risks and Uncertainties [Abstract] | |
| CUSTOMER CONCENTRATIONS | NOTE 13 – CUSTOMER CONCENTRATIONS For the three and six months ended June 30, 2017, the Company did not have sales representing more than 10% to any one customer. The Company had sales from operations to one customer for the three months ended June 30, 2016 that represented more than 10% of total sales, and had one customer for the six months ended June 30, 2016 that represented approximately 32% of our total sales. 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 customer for non-financial related issues. |
NET LOSS PER SHARE |
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| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NET LOSS PER SHARE | NOTE 14 – 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:
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ENVIRONMENTAL MATTERS AND REGULATION |
6 Months Ended |
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Jun. 30, 2017 | |
| Environmental Remediation Obligations [Abstract] | |
| ENVIRONMENTAL MATTERS AND REGULATION | NOTE 15 – 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. We believe we are in substantial compliance with all federal, state and local laws regulating our business. |
SEGMENT INFORMATION AND MAJOR SEGMENT CUSTOMERS |
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| Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SEGMENT INFORMATION AND MAJOR SEGMENT CUSTOMERS | NOTE 16 – SEGMENT INFORMATION AND MAJOR CUSTOMERS The Company currently has identified three segments as follows: REGS Industrial Cleaning MV and SEM Environmental Solutions PWS Solid Waste Reach has had minimal operations through June 30, 2017. Substantially all of the assets and liabilities of Tactical, the rail car cleaning segment, was sold July 31, 2017 (Note 11). 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. We have 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 months ended June 30, 2017 and 2016 is as follows:
Segment information for the six months ended June 30, 2017 and 2016 is as follows:
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LITIGATION |
6 Months Ended |
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Jun. 30, 2017 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| LITIGATION | NOTE 17 – LITIGATION
In March 2016, a complaint was filed by a lessor of property leased by REGS, a subsidiary of the Company. The month-to-month lease expired February 29, 2016, when REGS vacated the property. The landlord made certain claims including property damage, and loss of rents, attorney fees and other costs totaling approximately $97,000. REGS engaged defense counsel and zealously opposed the claims. In December 2016, the Company and the lessor reached a settlement of $65,000. At June 30, 2017 and December 31, 2016 $0 and $39,000 was outstanding, respectively. The case was dismissed with prejudiced and the matter is closed.
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. At June 30, 2017 and December 31, 2016 $183,300 and $212,500 was outstanding, respectively. It was agreed among the parties that all pending state and/or federal claims will be dismissed with prejudice. |
SUBSEQUENT EVENTS |
6 Months Ended |
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Jun. 30, 2017 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | NOTE 18 – SUBSEQUENT EVENTS In August 2017, the Company paid one short-term note for $200,000 in full with accrued interest. The penalty period for shares to be issued was reached and the Company issued 150,000 common stock shares on May 31, 2017 under the terms of the revised agreement. In August 2017, the Company paid one short-term note for $200,000 in full with accrued interest. The penalty period for shares to be issued was reached and the Company recorded 600,000 common stock shares as issuable at June 30, 2017 and will record additional shares as issuable under the terms of the agreement. These shares will be issued in the third quarter of 2017. In August 2017, the Company paid one short-term note for $250,000 in full with accrued interest. The penalty period for shares to be issued was reached and the Company recorded 100,000 common stock shares as issuable at June 30, 2017 and will record additional shares as issuable under the terms of the agreement. These shares will be issued in the third quarter of 2017. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
6 Months Ended |
|---|---|
Jun. 30, 2017 | |
| Accounting Policies [Abstract] | |
| Use of Estimates | 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 | 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 income (loss). |
| Revenue Recognition | Revenue Recognition
We recognize revenue related to contract projects and services when all of the following criteria are met: (i) persuasive evidence of an agreement exists, (ii) delivery has occurred or services have been rendered, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. Our revenue is primarily comprised of services related to industrial cleaning and railcar cleaning, which we recognize as services are rendered.
Product revenue generated from projects, which include the manufacturing of products, for removal and treatment of hazardous vapor and gasses is accounted for under the percentage-of-completion method for projects with durations in excess of three months and the completed-contract method for all other projects. 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, we 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 percentage-of-completion method, we recognize revenue primarily based on the ratio of costs incurred to date to total estimated contract costs. 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.
For contracts accounted for under the percentage-of-completion method, we include in current assets and current liabilities amounts related to construction 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. Billings in excess of costs and estimated earnings on uncompleted contracts represents the excess of billings to date over the amount of contract costs and profits recognized to date, and are recognized as a current liability.
The Company’s revenues from waste destruction licensing agreements are recognized as a single accounting unit over the term of the license. In accordance with Accounting Standards Codification (“ASC”) 605, for revenues which contain multiple deliverables, the Company separates the deliverables into separate accounting units if they meet the following criteria: (i) the delivered items have a stand-alone value to the customer; (ii) the fair value of any undelivered items can be reliably determined; and (iii) if the arrangement includes a general right of return, delivery of the undelivered items is probable and substantially controlled by the seller. Deliverables that do not meet these criteria are combined with one or more other deliverables into one accounting unit. Revenue from each accounting unit is recognized based on the applicable accounting literature, primarily ASC 605. |
| Research and Development | 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 $3,900 and $100,000 for the six months ended June 30, 2017 and 2016, respectively. |
| Income Taxes | 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 six months ended June 30, 2017 and 2016 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 June 30, 2017 and December 31, 2016. 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, 2015. The tax periods for the years ending December 31, 2009 through 2015 are open to examination by federal and state authorities. |
| Recently issued accounting pronouncements | 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. |
PROPERTY AND EQUIPMENT (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of property plant and equipment | Property and equipment was comprised of the following:
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| Schedule of capital leased assets | Property and equipment included the following amounts for leases that have been capitalized at:
|
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INTANGIBLE ASSETS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of intangible assets | Intangible assets were comprised of the following:
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ACCRUED LIABILITIES (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of accrued liabilities | Accrued liabilities were comprised of the following:
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UNCOMPLETED CONTRACTS (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Contractors [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of uncompleted contracts | Costs, estimated earnings and billings on uncompleted contracts are as follows:
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DEBT (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of debt | Debt as of June 30, 2017 and December 31, 2016, was comprised of the following:
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RELATED PARTY TRANSACTIONS (Tables) |
6 Months Ended | |||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2017 | ||||||||||||||||||||||||||||
| Related Party Transactions [Abstract] | ||||||||||||||||||||||||||||
| Schedule of notes payable and accrued interest, related parties | Related parties accrued interest due to certain related parties as of June 30, 2017 and December 31, 2016 are as follows:
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ASSETS AND LIABILITIES HELD FOR SALE AND DISCONTINUED OPERATIONS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Assets And Liabilities Held For Sale And Discontinued Operations | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of assets and liabilities held for sale | Assets and liabilities held for sale were comprised of the following:
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| Schedule of major classes of line items constituting pretax loss on discontinued operations | Major classes of line items constituting pretax loss on discontinued operations:
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NET LOSS PER SHARE (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of potentially dilutive securities | Potentially dilutive securities were comprised of the following:
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SEGMENT INFORMATION (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of segment information | Segment information for the three months ended June 30, 2017 and 2016 is as follows:
Segment information for the six months ended June 30, 2017 and 2016 is as follows:
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ORGANIZATION AND FINANCIAL CONDITION (Details Narrative) - USD ($) |
3 Months Ended | 6 Months Ended | 12 Months Ended | |||||
|---|---|---|---|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
Dec. 31, 2016 |
||||
| Accumulated deficit | $ (20,938,800) | $ (20,938,800) | $ (19,273,500) | [1] | ||||
| Net losses before adjustment for losses attributable to non-controlling interest | (1,336,500) | $ (868,500) | (1,756,500) | $ (821,700) | (4,700,000) | |||
| Working capital | $ 4,300,000 | 4,300,000 | 4,000,000 | |||||
| Change in working capital | $ 300,000 | |||||||
| Paragon Waste Solutions, LLC [Member] | ||||||||
| Percentage ownership | 54.00% | 54.00% | ||||||
| ReaCH4Biogas [Member] | ||||||||
| Percentage ownership | 85.00% | 85.00% | ||||||
| Resource Environmental Group Services [Member] | Sales Revenue [Member] | ||||||||
| Reduction in revenue | $ 2,500,000 | |||||||
| ||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) |
6 Months Ended | |
|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
|
| Accounting Policies [Abstract] | ||
| Research and development expenses | $ 3,900 | $ 100,000 |
PROPERTY AND EQUIPMENT (Details) - USD ($) |
Jun. 30, 2017 |
Dec. 31, 2016 |
|||
|---|---|---|---|---|---|
| Property, Plant and Equipment [Line Items] | |||||
| Property and equipment, gross | $ 5,184,600 | $ 5,122,900 | |||
| Less: accumulated depreciation and amortization | (2,626,500) | (2,317,800) | |||
| Property and equipment, net | 2,558,100 | 2,805,100 | [1] | ||
| Field and Shop Equipment [Member] | |||||
| Property, Plant and Equipment [Line Items] | |||||
| Property and equipment, gross | 1,966,600 | 1,907,500 | |||
| Vehicles [Member] | |||||
| Property, Plant and Equipment [Line Items] | |||||
| Property and equipment, gross | 689,700 | 690,000 | |||
| Waste Destruction Equipment Placed In Service [Member] | |||||
| Property, Plant and Equipment [Line Items] | |||||
| Property and equipment, gross | 1,355,400 | 1,299,500 | |||
| Waste Destruction Equipment, Not Placed In Service [Member] | |||||
| Property, Plant and Equipment [Line Items] | |||||
| Property and equipment, gross | 656,200 | 712,100 | |||
| Furniture And Office Equipment [Member] | |||||
| Property, Plant and Equipment [Line Items] | |||||
| Property and equipment, gross | 322,600 | 319,700 | |||
| Leasehold Improvements [Member] | |||||
| Property, Plant and Equipment [Line Items] | |||||
| Property and equipment, gross | 10,000 | 10,000 | |||
| Building and Improvements [Member] | |||||
| Property, Plant and Equipment [Line Items] | |||||
| Property and equipment, gross | 21,200 | 21,200 | |||
| Land [Member] | |||||
| Property, Plant and Equipment [Line Items] | |||||
| Property and equipment, gross | $ 162,900 | $ 162,900 | |||
| |||||
PROPERTY AND EQUIPMENT (Details 1) - Field and Shop Equipment [Member] - USD ($) |
Jun. 30, 2017 |
Dec. 31, 2016 |
|---|---|---|
| Property, Plant and Equipment [Line Items] | ||
| Vehicles, field and shop equipment | $ 462,700 | $ 462,700 |
| Less: accumulated amortization | (269,700) | (222,800) |
| Capital lease, net | $ 193,000 | $ 239,900 |
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
| Depreciation expense | $ 167,300 | $ 155,500 | $ 323,700 | $ 316,400 |
| CoronaLux Units [Member] | ||||
| Accumulated depreciation | 381,900 | 238,800 | 381,900 | 238,800 |
| Cost of Goods Sold [Member] | ||||
| Depreciation expense | 142,600 | 131,400 | 274,700 | 268,100 |
| Selling, General And Administrative Expense [Member] | ||||
| Depreciation expense | $ 24,700 | $ 24,100 | $ 49,000 | $ 48,300 |
INTANGIBLE ASSETS (Details) - USD ($) |
Jun. 30, 2017 |
Dec. 31, 2016 |
|||
|---|---|---|---|---|---|
| Finite-Lived Intangible Assets [Line Items] | |||||
| Gross carrying amount | $ 1,444,700 | $ 1,447,100 | |||
| Accumulated amortization | (794,100) | (709,100) | |||
| Net carrying value | 650,600 | 738,000 | [1] | ||
| Goodwill [Member] | |||||
| Finite-Lived Intangible Assets [Line Items] | |||||
| Gross carrying amount | 277,800 | 277,800 | |||
| Net carrying value | 277,800 | 277,800 | |||
| Customer List [Member] | |||||
| Finite-Lived Intangible Assets [Line Items] | |||||
| Gross carrying amount | 42,500 | 42,500 | |||
| Accumulated amortization | (42,500) | (42,500) | |||
| Technology [Member] | |||||
| Finite-Lived Intangible Assets [Line Items] | |||||
| Gross carrying amount | 1,069,500 | 1,069,500 | |||
| Accumulated amortization | (696,700) | (609,300) | |||
| Net carrying value | 372,800 | 460,200 | |||
| Trade Name [Member] | |||||
| Finite-Lived Intangible Assets [Line Items] | |||||
| Gross carrying amount | 54,900 | 57,300 | |||
| Accumulated amortization | $ (54,900) | $ (57,300) | |||
| |||||
INTANGIBLE ASSETS (Details Narrative) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
| Amortization expense | $ 62,300 | $ 22,800 | $ 85,000 | $ 43,000 |
| Lower Range [Member] | ||||
| Estimated useful lives of intangible assets | 7 years | |||
| Upper Range [Member] | ||||
| Estimated useful lives of intangible assets | 10 years | |||
ACCRUED LIABILITIES (Details) - USD ($) |
Jun. 30, 2017 |
Dec. 31, 2016 |
|---|---|---|
| Payables and Accruals [Abstract] | ||
| Accrued compensation and related taxes | $ 666,300 | $ 644,800 |
| Accrued interest | 128,400 | 58,900 |
| Accrued litigation claims | 183,300 | 277,500 |
| Other | 674,800 | 399,800 |
| Total Accrued Liabilities | $ 1,652,800 | $ 1,381,000 |
UNCOMPLETED CONTRACTS (Details) - USD ($) |
6 Months Ended | 12 Months Ended | |||
|---|---|---|---|---|---|
Jun. 30, 2017 |
Dec. 31, 2016 |
||||
| Less: Billings to date | $ 2,092,100 | $ 3,063,500 | |||
| Costs and estimated earnings in excess of billings on uncompleted contracts | 112,300 | 13,600 | [1] | ||
| Revenue recognized | (1,841,700) | (1,972,700) | |||
| Billings in excess of costs and estimated earnings on uncompleted contracts | 250,400 | 1,090,800 | |||
| Contracts Receivable [Member] | |||||
| Revenue Recognized | 316,000 | 324,500 | |||
| Less: Billings to date | $ (203,700) | $ (310,900) | |||
| |||||
INVESTMENT IN PARAGON WASTE SOLUTIONS LLC (Details Narrative) - USD ($) |
1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | 62 Months Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Nov. 17, 2014 |
Jun. 10, 2014 |
Mar. 04, 2014 |
Feb. 22, 2014 |
Feb. 28, 2015 |
Jun. 30, 2012 |
Aug. 31, 2011 |
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
Dec. 31, 2016 |
Dec. 31, 2014 |
Dec. 31, 2010 |
Jun. 30, 2017 |
||||
| Business Acquisition [Line Items] | ||||||||||||||||||
| License initiation fee | $ 74,500 | $ 56,500 | $ 143,900 | $ 128,100 | ||||||||||||||
| Customer deposits | 330,000 | 330,000 | $ 330,000 | [1] | $ 330,000 | |||||||||||||
| Formation of Joint Venture Agreement [Member] | Ordinary A Voting Shares [Member] | ||||||||||||||||||
| Business Acquisition [Line Items] | ||||||||||||||||||
| Membership units issued | 100 | |||||||||||||||||
| Formation of Joint Venture Agreement [Member] | Ordinary B Non-Voting Shares [Member] | ||||||||||||||||||
| Business Acquisition [Line Items] | ||||||||||||||||||
| Membership units issued | 300,000 | |||||||||||||||||
| Exclusive Use License and Joint Operations Agreement with Sterall Inc [Member] | ||||||||||||||||||
| Business Acquisition [Line Items] | ||||||||||||||||||
| Non-refundable placement fees received | $ 236,300 | |||||||||||||||||
| Customer deposits | $ 330,000 | |||||||||||||||||
| Description of order | Sterall also has paid a deposit of $330,000 for the five units ordered and a balance of $851,500 is still owed and has been fully reserved by the Company. |
|||||||||||||||||
| Accounts receivable | $ 851,500 | $ 851,500 | $ 851,500 | |||||||||||||||
| Exclusive Use License and Equipment Lease Agreement with eCycling International [Member] | ||||||||||||||||||
| Business Acquisition [Line Items] | ||||||||||||||||||
| License initiation fee | $ 176,875 | |||||||||||||||||
| Percentage of net operating profits to be distributed | 50.00% | |||||||||||||||||
| Licensing fees paid | 176,875 | |||||||||||||||||
| Additional licensing fees paid | $ 176,875 | |||||||||||||||||
| Exclusive Use License and Equipment Lease Agreement with Medical Waste Services, LLC [Member] | ||||||||||||||||||
| Business Acquisition [Line Items] | ||||||||||||||||||
| License initiation fee | $ 225,000 | |||||||||||||||||
| Percentage of net operating profits to be distributed | 50.00% | |||||||||||||||||
| Outside Third Party [Member] | ||||||||||||||||||
| Business Acquisition [Line Items] | ||||||||||||||||||
| Percentage ownership | 10.00% | 10.00% | 10.00% | 10.00% | ||||||||||||||
| Daniel McAteer & Associates ("DMA") [Member] | Formation of Joint Venture Agreement [Member] | ||||||||||||||||||
| Business Acquisition [Line Items] | ||||||||||||||||||
| Percentage ownership | 50.00% | |||||||||||||||||
| License initiation fee | $ 350,000 | |||||||||||||||||
| Paragon Waste (UK) Ltd [Member] | Formation of Joint Venture Agreement [Member] | ||||||||||||||||||
| Business Acquisition [Line Items] | ||||||||||||||||||
| Membership units issued | 300,100 | |||||||||||||||||
| Accounts receivable | $ 176,000 | $ 176,000 | $ 176,000 | |||||||||||||||
| Paragon Waste (UK) Ltd [Member] | Formation of Joint Venture Agreement [Member] | Ordinary A Voting Shares [Member] | ||||||||||||||||||
| Business Acquisition [Line Items] | ||||||||||||||||||
| Membership units issued | 50 | |||||||||||||||||
| Black Stone Management Services [Member] | ||||||||||||||||||
| Business Acquisition [Line Items] | ||||||||||||||||||
| Membership units acquired | 400,000 | |||||||||||||||||
| Percentage ownership | 26.00% | 26.00% | 26.00% | 26.00% | ||||||||||||||
| Percentage allocated to two individuals | 10.00% | |||||||||||||||||
| Stock issued for acquisition of intellectual property | $ 100,000 | |||||||||||||||||
| Stock issued for acquisition of intellectual property (in shares) | 1,000,000 | |||||||||||||||||
| Black Stone Management Services [Member] | Waste Destruction Technology [Member] | ||||||||||||||||||
| Business Acquisition [Line Items] | ||||||||||||||||||
| Useful life | 10 years | |||||||||||||||||
| Related Parties [Member] | ||||||||||||||||||
| Business Acquisition [Line Items] | ||||||||||||||||||
| Percentage ownership | 5.00% | 5.00% | 5.00% | 5.00% | ||||||||||||||
| Xinhua Energy Environmental Technology [Member] | ||||||||||||||||||
| Business Acquisition [Line Items] | ||||||||||||||||||
| Sale of waste destruction unit | $ 430,500 | |||||||||||||||||
| Second phase royalty fees payment | $ 350,000 | |||||||||||||||||
| Percentage of net operating profits to be distributed | 50.00% | |||||||||||||||||
| Paragon Waste Solutions, LLC [Member] | ||||||||||||||||||
| Business Acquisition [Line Items] | ||||||||||||||||||
| Membership units issued | 1,000,000 | |||||||||||||||||
| Membership units acquired | 600,000 | |||||||||||||||||
| Percentage ownership | 54.00% | 54.00% | 54.00% | 54.00% | ||||||||||||||
| Payment for funding of subsidiary | $ 5,800,000 | |||||||||||||||||
| ||||||||||||||||||
PAYROLL TAXES PAYABLE (Details Narrative) - IRS [Member] - USD ($) |
1 Months Ended | ||
|---|---|---|---|
May 31, 2013 |
Jun. 30, 2017 |
Dec. 31, 2016 |
|
| Past due payroll taxes | $ 986,300 | $ 993,300 | |
| Monthly installment payments, payroll taxes | $ 25,000 |
DEBT (Details) |
6 Months Ended | ||||||
|---|---|---|---|---|---|---|---|
|
Jun. 30, 2017
USD ($)
Segment
$ / shares
shares
|
Dec. 31, 2016
USD ($)
|
||||||
| Debt Instrument [Line Items] | |||||||
| Total notes payable and capital lease obligations | $ 2,658,600 | $ 2,323,300 | |||||
| Less: current portion | (929,200) | (571,800) | [1] | ||||
| Notes payable and capital lease obligations, long-term, including debt discount | $ 1,729,400 | 1,751,500 | [1] | ||||
| Shares issuable per short-term note agreements | shares | [2] | 700,000 | |||||
| October 24, 2016 Short Term Note Payable [Member] | |||||||
| Debt Instrument [Line Items] | |||||||
| Debt issuance date | Oct. 24, 2016 | ||||||
| Long term debt, carrying amount | 200,000 | ||||||
| Debt term | 60 days | ||||||
| One-time commitment fee | $ 10,000 | ||||||
| Recurring commitment fees | $ 1,000 | ||||||
| Description of commitment fees | The note requires a one-time fee in the amount of $10,000 to compensate for the first two weeks of the term and each week thereafter (weeks 3-8) a fee of $1,000 shall be due and owing accruing on the first day of the week. |
||||||
| Collateral description | The note is secured by specific customer accounts receivables and a personal guarantee of an officer of the Company. |
||||||
| Description of debt penalty | 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 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 beginning in month 7 until paid in full. |
||||||
| Shares to be issued per month if note outstanding months 3 through 6 | shares | 100,000 | ||||||
| Shares to be issued per month if notes outsatnding 7 months or longer | shares | 200,000 | ||||||
| Shares issuable per short-term note agreements | shares | 350,000 | ||||||
| Interest expense - debt | $ 245,000 | ||||||
| Short Term Note Payable December 2016 [Member] | |||||||
| Debt Instrument [Line Items] | |||||||
| Debt issuance date | Dec. 01, 2016 | ||||||
| Long term debt, carrying amount | $ 200,000 | 200,000 | |||||
| Debt term | 60 days | ||||||
| One-time commitment fee | $ 10,000 | ||||||
| Recurring commitment fees | $ 1,000 | ||||||
| Description of commitment fees | The note requires a one-time fee in the amount of $10,000 to compensate for the first two weeks of the term and each week thereafter (weeks 3-8) a fee of $1,000 shall be due and owing accruing on the first day of the week. |
||||||
| Collateral description | The note is secured by specific customer accounts receivables and a personal guarantee of an officer of the Company. |
||||||
| Description of debt penalty | 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 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 beginning in month 7 until paid in full. |
||||||
| Shares to be issued per month if note outstanding months 3 through 6 | shares | 100,000 | ||||||
| Shares to be issued per month if notes outsatnding 7 months or longer | shares | 200,000 | ||||||
| Shares issuable per short-term note agreements | shares | 600,000 | ||||||
| Interest expense - debt | $ 405,000 | ||||||
| Short Term Note Payable January 23, 2017 [Member] | |||||||
| Debt Instrument [Line Items] | |||||||
| Debt issuance date | Jan. 23, 2017 | ||||||
| Long term debt, carrying amount | $ 200,000 | ||||||
| Debt term | 60 days | ||||||
| One-time commitment fee | $ 10,000 | ||||||
| Recurring commitment fees | $ 1,000 | ||||||
| Description of commitment fees | The note requires a one-time fee in the amount of $10,000 to compensate for the first two weeks of the term and each week thereafter (weeks 3-8) a fee of $1,000 shall be due and owing accruing on the first day of the week. |
||||||
| Collateral description | The note is secured by specific customer accounts receivables and a personal guarantee of an officer of the Company. |
||||||
| Description of debt penalty | 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 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 beginning in month 7 until paid in full. |
||||||
| Shares to be issued per month if note outstanding months 3 through 6 | shares | 100,000 | ||||||
| Shares to be issued per month if notes outsatnding 7 months or longer | shares | 200,000 | ||||||
| Shares issuable per short-term note agreements | shares | 150,000 | ||||||
| Interest expense - debt | $ 105,000 | ||||||
| Short Term Note Payable March 30, 2017 [Member] | |||||||
| Debt Instrument [Line Items] | |||||||
| Debt issuance date | Mar. 30, 2017 | ||||||
| Long term debt, carrying amount | $ 250,000 | ||||||
| Debt term | 60 days | ||||||
| One-time commitment fee | $ 10,000 | ||||||
| Recurring commitment fees | $ 1,000 | ||||||
| Description of commitment fees | The note requires a one-time fee in the amount of $10,000 to compensate for the first two weeks of the term and each week thereafter (weeks 3-8) a fee of $1,000 shall be due and owing accruing on the first day of the week. |
||||||
| Collateral description | The note is secured by specific customer accounts receivables and a personal guarantee of an officer of the Company. |
||||||
| Description of debt penalty | 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 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 beginning in month 7 until paid in full. |
||||||
| Shares to be issued per month if note outstanding months 3 through 6 | shares | 100,000 | ||||||
| Shares to be issued per month if notes outsatnding 7 months or longer | shares | 200,000 | ||||||
| Shares issuable per short-term note agreements | shares | 100,000 | ||||||
| Interest expense - debt | $ 65,000 | ||||||
| 8% Convertible Secured Promissory Note due August 2018 and October 2019 [Member] | |||||||
| Debt Instrument [Line Items] | |||||||
| Long term debt, carrying amount | $ 1,605,000 | 1,605,000 | |||||
| Interest rate | 8.00% | ||||||
| Debt term | 3 years | ||||||
| Debt discount | $ (11,200) | (14,900) | |||||
| Debt conversion, price | $ / shares | $ 0.70 | ||||||
| Collateral description | one convertible note for $250,000 has a personal guarantee of an officer of the Company |
||||||
| 8% Convertible Secured Promissory Note due August 2018 and October 2019 [Member] | Lower Range [Member] | |||||||
| Debt Instrument [Line Items] | |||||||
| Debt, maturity date | Aug. 01, 2018 | ||||||
| 8% Convertible Secured Promissory Note due August 2018 and October 2019 [Member] | Upper Range [Member] | |||||||
| Debt Instrument [Line Items] | |||||||
| Debt, maturity date | Oct. 31, 2019 | ||||||
| 8% Secured Notes Payable Due October 1, 2017 [Member] | |||||||
| Debt Instrument [Line Items] | |||||||
| Debt issuance date | Oct. 13, 2015 | ||||||
| Long term debt, carrying amount | $ 17,800 | 43,600 | |||||
| Interest rate | 8.00% | ||||||
| Frequency of payments | Monthly | ||||||
| Payment amount | $ 4,523 | ||||||
| Number of installment payments | Segment | 24 | ||||||
| Debt term | 24 months | ||||||
| Debt, maturity date | Oct. 01, 2017 | ||||||
| Collateral description | Secured by certain assets of SEM and guaranteed by SEER and MV |
||||||
| 8% Secured Notes Payable Due October 1, 2020 [Member] | |||||||
| Debt Instrument [Line Items] | |||||||
| Debt issuance date | Oct. 13, 2015 | ||||||
| Long term debt, carrying amount | $ 159,400 | 180,000 | |||||
| Interest rate | 8.00% | ||||||
| Frequency of payments | Monthly | ||||||
| Payment amount | $ 4,562 | ||||||
| Number of installment payments | Segment | 60 | ||||||
| Debt term | 60 months | ||||||
| Debt, maturity date | Oct. 01, 2020 | ||||||
| Collateral description | Secured by real estate and other assets of SEM and guaranteed by SEER and MV |
||||||
| Notes Payable Due November 1, 2017 [Member] | |||||||
| Debt Instrument [Line Items] | |||||||
| Long term debt, carrying amount | $ 175,300 | ||||||
| Interest rate | 4.25% | ||||||
| Description of debt instrument interest payment | 44,706 | ||||||
| Number of installment payments | Segment | 10 | ||||||
| Debt, maturity date | Nov. 01, 2017 | ||||||
| Capital lease obligations [Member] | |||||||
| Debt Instrument [Line Items] | |||||||
| Capital lease obligation, carrying amount | $ 62,300 | $ 109,600 | |||||
| |||||||
RELATED PARTY TRANSACTIONS (Details) - USD ($) |
Jun. 30, 2017 |
Dec. 31, 2016 |
|||
|---|---|---|---|---|---|
| Related Party Transaction [Line Items] | |||||
| Accrued interest | $ 1,652,800 | $ 1,381,000 | [1] | ||
| Related Parties [Member] | |||||
| Related Party Transaction [Line Items] | |||||
| Accrued interest | $ 11,800 | $ 11,800 | |||
| |||||
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) |
1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
|---|---|---|---|---|---|---|---|---|
Sep. 30, 2014 |
Aug. 30, 2014 |
Mar. 31, 2012 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
| Related Party Transaction [Line Items] | ||||||||
| Common stock, issued | 55,738,575 | 54,525,079 | ||||||
| Common stock, outstanding | 55,738,575 | 54,525,079 | ||||||
| Income from joint venture | $ 15,700 | $ 15,700 | ||||||
| Paragon Waste Solutions, LLC [Member] | ||||||||
| Related Party Transaction [Line Items] | ||||||||
| Percentage ownership | 54.00% | |||||||
| Income from joint venture | $ 13,100 | $ 15,700 | ||||||
| Percentage of net income in joint venture | 50.00% | |||||||
| Cost incurred for joint venture | $ 36,600 | 68,000 | ||||||
| Paragon Waste Solutions, LLC [Member] | Irrevocable License & Royalty Agreement [Member] | ||||||||
| Related Party Transaction [Line Items] | ||||||||
| Percentage of royalty revenue | 5.00% | |||||||
| Irrevocable License & Royalty Agreement with PWS [Member] | ||||||||
| Related Party Transaction [Line Items] | ||||||||
| Related party revenues | 94,200 | 205,000 | ||||||
| Royalties due | $ 21,900 | 17,200 | ||||||
| New Technologies Agreement with Black Stone [Member] | ||||||||
| Related Party Transaction [Line Items] | ||||||||
| Issuance of common stock for intangible assets | $ 1,050,000 | |||||||
| Number of shares of common stock issued for intangible asset | 1,000,000 | |||||||
| Equity Agreement With Third Party [Member] | ||||||||
| Related Party Transaction [Line Items] | ||||||||
| Issuance of common stock for investment in unconsolidated subsidaiary | $ 1,212,000 | |||||||
| Membership interests acquired | 22.5 | |||||||
| Number of shares issued for investment in unconsolidated affiliate | 1,200,000 | |||||||
| Common stock, fair value (in dollars per shares) | $ 0.83333 | |||||||
| Percentage ownership | 15.00% | |||||||
| Common stock, issued | 1,200,000 | 1,200,000 | 1,200,000 | |||||
| Common stock, outstanding | 1,200,000 | |||||||
| Sterall equipment deposits | $ 330,000 | |||||||
ASSETS AND LIABILITIES HELD FOR SALE AND DISCONTINUED OPERATIONS (Details) - USD ($) |
Jun. 30, 2017 |
Dec. 31, 2016 |
|||
|---|---|---|---|---|---|
| Total Assets held for sale | $ 1,108,900 | $ 1,024,600 | [1] | ||
| Total Liabilities held for sale | 835,800 | 603,100 | [1] | ||
| Accounts Payable [Member] | |||||
| Total Liabilities held for sale | 799,900 | 513,500 | |||
| Accrued Expenses and Other [Member] | |||||
| Total Liabilities held for sale | 35,900 | 89,600 | |||
| Property and Equipment [Member] | |||||
| Total Assets held for sale | 127,400 | 156,200 | |||
| Other [Member] | |||||
| Total Assets held for sale | 37,200 | 26,600 | |||
| Accounts Receivable [Member] | |||||
| Total Assets held for sale | $ 944,300 | $ 841,800 | |||
| |||||
ASSETS AND LIABILITIES HELD FOR SALE AND DISCONTINUED OPERATIONS (Details 1) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
| Assets And Liabilities Held For Sale And Discontinued Operations | ||||
| Services revenue | $ 1,723,600 | $ 1,101,100 | $ 3,325,100 | $ 1,976,300 |
| Services costs | 1,442,300 | 836,500 | 2,580,400 | 1,430,000 |
| General and administrative expenses | 69,300 | 39,100 | 94,800 | 83,000 |
| Salaries and related expenses | 98,200 | 60,000 | 181,200 | 121,900 |
| Other (income) expense | (9,800) | (1,400) | (9,600) | 1,000 |
| Total expenses | 1,600,000 | 934,200 | 2,846,800 | 1,635,900 |
| Operating income | 123,600 | 166,900 | 478,300 | 340,400 |
| Total income from discontinued operations | $ 123,600 | $ 166,900 | $ 478,300 | $ 340,400 |
ASSETS AND LIABILITIES HELD FOR SALE AND DISCONTINUED OPERATIONS (Details Narrative) - Railcar Cleaning [Member] |
3 Months Ended |
|---|---|
|
Jun. 30, 2017
USD ($)
| |
| Proceeds from sale of railcar cleaning division | $ 2,400,000 |
| Proceeds of guaranteed payments from sale of assets | $ 1,100,000 |
| Term for guaranteed payments received (in years) | 3 years |
| Performance based payment received | $ 1,500,000 |
EQUITY TRANSACTIONS (Details Narrative) - USD ($) |
6 Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Dec. 31, 2016 |
Dec. 31, 2015 |
||||||
| Common stock, par value (in dollars per shares) | $ 0.001 | $ 0.001 | $ 0.001 | ||||||
| Proceeds from warrant exercises | $ 25,000 | ||||||||
| Shares issuable per short-term note agreements | [1] | 700,000 | |||||||
| Cashless stock option exercise | 13,496 | ||||||||
| Number of common stock issued | 55,738,575 | 54,525,079 | |||||||
| Long term other asset | $ 60,000 | $ 16,400 | [2] | ||||||
| Common stock subscription | 100,000 | ||||||||
| Common stock subscription, value | $ 25,000 | ||||||||
| Equity Agreement With Third Party [Member] | |||||||||
| Common stock, par value (in dollars per shares) | $ 0.001 | ||||||||
| Number of common stock issued | 1,200,000 | 1,200,000 | |||||||
| Long term other asset | $ 720,000 | ||||||||
| Short-Term Note Holders [Member] | |||||||||
| Common stock, par value (in dollars per shares) | $ 0.001 | ||||||||
| Shares issuable per short-term note agreements | 700,000 | ||||||||
| Shares issuable per short-term note agreements, value | $ 470,000 | ||||||||
| Paragon Waste Solutions, LLC [Member] | |||||||||
| Non-controlling Interest | 46.00% | ||||||||
| Warrants [Member] | |||||||||
| Common stock, par value (in dollars per shares) | $ 0.001 | ||||||||
| Proceeds from warrant exercises | $ 25,000 | ||||||||
| Number of warrants exercised | 50,000 | ||||||||
| 2016 Private Placement [Member] | |||||||||
| Common stock, par value (in dollars per shares) | $ 0.001 | ||||||||
| Number of shares issued during the period | 800,000 | ||||||||
| Proceeds from stock issuance | $ 400,000 | ||||||||
| Sale price per share | $ 0.50 | ||||||||
| Stock Options [Member] | |||||||||
| Common stock, par value (in dollars per shares) | $ 0.001 | ||||||||
| Cashless stock option exercise | 166,666 | ||||||||
| Options issued | 1,000,000 | ||||||||
| Exercise price of options issued | $ 1.00 | ||||||||
| Vesting terms of options | 100,000 shares vested immediately and the remaining 900,000 options vest over a period of four years in a series of 16 successive equal quarterly installments of 56,250 commencing March 31, 2017 and ending December 31, 2020. |
||||||||
| Shares vested on issuance of option | 100,000 | ||||||||
| Vesting period of options | 4 years | ||||||||
| Fair value of options at grant date | $ 102,354 | ||||||||
| Risk-free interest rate | 1.89% | ||||||||
| Expected volatility | 36.87% | ||||||||
| Expected life | 5 years 6 months | ||||||||
| Dividend rate | 0.00% | ||||||||
| Stock Options [Member] | Donald F. Moorehead [Member] | |||||||||
| Common stock, par value (in dollars per shares) | $ 0.001 | ||||||||
| Options issued | 1,000,000 | ||||||||
| Exercise price of options issued | $ 0.70 | ||||||||
| Vesting terms of options | The options vest over a period of two years in a series of 8 successive equal quarterly installments of 125,000 commencing July 1, 2017 and ending April 1, 2019. |
||||||||
| Vesting period of options | 2 years | ||||||||
| Fair value of options at grant date | $ 231,500 | ||||||||
| Risk-free interest rate | 1.84% | ||||||||
| Expected volatility | 39.17% | ||||||||
| Expected life | 4 years 6 months | ||||||||
| Dividend rate | 0.00% | ||||||||
| Short Term Notes [Member] | |||||||||
| Common stock, par value (in dollars per shares) | $ 0.001 | ||||||||
| Shares issuable per short-term note agreements | 500,000 | ||||||||
| Shares issuable per short-term note agreements, value | $ 350,000 | ||||||||
| |||||||||
CUSTOMER CONCENTRATIONS (Details Narrative) - Sales [Member] - Segment |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
| Number of customers | 0 | 0 | 0 | 1 |
| Concentration risk | 10.00% | 10.00% | 10.00% | 32.00% |
NET LOSS PER SHARE (Details) - shares |
6 Months Ended | |
|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
|
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Potentially dilutive securities | 13,980,250 | 11,680,830 |
| Convertible Notes Payable [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Potentially dilutive securities | 2,409,820 | 1,136,400 |
| Stock Options [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Potentially dilutive securities | 2,155,000 | 930,000 |
| Warrants [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Potentially dilutive securities | 9,415,430 | 9,614,430 |
SEGMENT INFORMATION AND MAJOR CUSTOMERS (Details) - USD ($) |
3 Months Ended | 6 Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
||||||||||
| Segment Reporting Information [Line Items] | |||||||||||||
| Revenue | [1] | $ 2,492,500 | $ 1,460,500 | $ 5,085,400 | $ 4,089,700 | [2] | |||||||
| Depreciation and amortization | [1],[2] | 229,600 | 175,800 | 408,700 | 359,400 | ||||||||
| Interest expense | [1] | 529,600 | 154,600 | 956,500 | 199,500 | [2] | |||||||
| Stock-based compensation | [1] | 39,800 | 42,900 | 56,800 | 72,500 | [2] | |||||||
| Net income (loss) | [1] | (1,460,100) | (1,019,700) | (2,234,800) | (1,146,400) | [2] | |||||||
| Capital expenditures (cash and noncash) | [1] | 60,400 | 17,100 | 61,700 | 142,900 | [2] | |||||||
| Total assets | [1] | 5,042,100 | 7,159,700 | [2] | 5,042,100 | 7,159,700 | [2] | ||||||
| Industrial Cleaning [Member] | |||||||||||||
| Segment Reporting Information [Line Items] | |||||||||||||
| Revenue | [3] | 555,500 | 271,400 | 1,390,000 | 2,256,200 | ||||||||
| Depreciation and amortization | [2],[3] | 87,000 | 81,700 | 169,900 | 169,400 | ||||||||
| Interest expense | [3] | 6,100 | 9,900 | 12,400 | 17,500 | ||||||||
| Net income (loss) | [3] | (445,900) | (507,600) | (469,200) | 88,500 | ||||||||
| Capital expenditures (cash and noncash) | [3] | 60,400 | 10,100 | 60,400 | 123,100 | ||||||||
| Total assets | [3] | 1,046,600 | 1,255,700 | 1,046,600 | 1,255,700 | ||||||||
| Environmental Solutions [Member] | |||||||||||||
| Segment Reporting Information [Line Items] | |||||||||||||
| Revenue | 1,862,500 | 1,132,600 | 3,551,500 | 1,705,400 | |||||||||
| Depreciation and amortization | [2] | 75,700 | 42,700 | 116,400 | 82,800 | ||||||||
| Interest expense | 4,200 | 5,700 | 9,000 | 12,200 | |||||||||
| Net income (loss) | 243,000 | 188,300 | 460,400 | 91,000 | |||||||||
| Capital expenditures (cash and noncash) | 3,900 | 1,300 | 12,900 | ||||||||||
| Total assets | 1,678,400 | 1,993,700 | 1,678,400 | 1,993,700 | |||||||||
| Solid Waste [Member] | |||||||||||||
| Segment Reporting Information [Line Items] | |||||||||||||
| Revenue | 74,500 | 56,500 | 143,900 | 128,100 | |||||||||
| Depreciation and amortization | [2] | 42,400 | 31,500 | 75,200 | 64,800 | ||||||||
| Interest expense | 100 | 100 | 500 | ||||||||||
| Net income (loss) | (87,600) | (134,700) | (198,900) | (303,400) | |||||||||
| Capital expenditures (cash and noncash) | 3,100 | 6,900 | |||||||||||
| Total assets | 1,758,700 | 2,918,000 | 1,758,700 | 2,918,000 | |||||||||
| Corporate [Member] | |||||||||||||
| Segment Reporting Information [Line Items] | |||||||||||||
| Depreciation and amortization | [2] | 24,500 | 19,900 | 47,200 | 42,400 | ||||||||
| Interest expense | 519,300 | 138,900 | 935,000 | 169,300 | |||||||||
| Stock-based compensation | 39,800 | 42,900 | 56,800 | 72,500 | |||||||||
| Net income (loss) | (1,169,600) | (565,700) | (2,027,100) | (1,022,500) | |||||||||
| Total assets | $ 558,400 | $ 992,300 | $ 558,400 | $ 992,300 | |||||||||
| |||||||||||||
SEGMENT INFORMATION AND MAJOR CUSTOMERS (Details Narrative) |
6 Months Ended |
|---|---|
|
Jun. 30, 2017
Segment
| |
| Segment Reporting [Abstract] | |
| Number of segments | 3 |
LITIGATION (Details Narrative) - USD ($) |
1 Months Ended | 12 Months Ended | |||
|---|---|---|---|---|---|
Dec. 31, 2016 |
Jun. 30, 2016 |
Jan. 31, 2016 |
Dec. 31, 2016 |
Jun. 30, 2017 |
|
| Loss Contingencies [Line Items] | |||||
| Accrued litigation claims | $ 277,500 | $ 277,500 | $ 183,300 | ||
| Litigation Case - Property Leased [Member] | |||||
| Loss Contingencies [Line Items] | |||||
| Lease expiration date | Feb. 29, 2016 | ||||
| Damages sought value | $ 97,000 | ||||
| Settlement amount | 65,000 | ||||
| Settlement payable | 39,000 | 39,000 | 0 | ||
| Description of allegation | certain claims including property damage, and loss of rents, attorney fees and other costs |
||||
| Description of settlement | In December 2016, the Company and the lessor reached a settlement of $65,000. |
||||
| Name of plaintiff | Landlord |
||||
| Name of defendant | REGS, a subsidiary of the Company. |
||||
| Accrued litigation expense | 212,500 | ||||
| Accrued litigation claims | $ 212,500 | $ 212,500 | $ 183,300 | ||
| Litigation Case - Vehicle Accident [Member] | |||||
| Loss Contingencies [Line Items] | |||||
| Description of allegation | 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. |
||||
| Description of settlement | In the fourth quarter of 2016, the parties reached a settlement concerning the distribution of insurance proceeds and all issues of liability. |
||||
SUBSEQUENT EVENTS (Details Narrative) - Subsequent Event [Member] |
1 Months Ended |
|---|---|
|
Aug. 31, 2017
USD ($)
shares
| |
| Short-term note 1 [Member] | |
| Subsequent Event [Line Items] | |
| Repayment of short-term debt | $ | $ 200,000 |
| Number of shares issued for penalty | shares | 150,000 |
| Short-term note 2 [Member] | |
| Subsequent Event [Line Items] | |
| Repayment of short-term debt | $ | $ 200,000 |
| Number of shares issued for penalty | shares | 600,000 |
| Short-term note 3 [Member] | |
| Subsequent Event [Line Items] | |
| Repayment of short-term debt | $ | $ 250,000 |
| Number of shares issued for penalty | shares | 100,000 |