UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
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BioHiTech Global, Inc. and Subsidiaries
TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations. | 24 | |
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Unregistered Sales of Equity Securities and Use of Proceeds. | 31 | |
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i
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BioHiTech Global, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 | |||||
Revenue | ||||||||||||
Equipment sales | $ | | $ | | $ | | $ | | ||||
Rental, service and maintenance | | | | | ||||||||
HEBioT |
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Management advisory and other fees (related party) |
| — |
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| — |
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Total revenue |
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Operating expenses |
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Equipment sales | | | | |||||||||
Rental, service and maintenance |
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HEBioT processing |
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Selling, general and administrative |
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Impairment expense | — | | — | | ||||||||
Depreciation and amortization |
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Total operating expenses |
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Loss from operations |
| ( |
| ( |
| ( |
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Other expenses, net |
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Interest (income) |
| ( |
| ( |
| ( |
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Interest expense |
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(Gain) on sales of fixed assets | ( | — | ( | — | ||||||||
PPP Loan forgiveness | ( | — | ( | — | ||||||||
Loss from unconsolidated entity |
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| — |
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| — | ||||
Total other expenses, net |
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Net loss |
| ( |
| ( |
| ( |
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Net loss attributable to non-controlling interests |
| ( |
| ( |
| ( |
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Net loss attributable to Parent |
| ( |
| ( |
| ( |
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Other comprehensive income | ||||||||||||
Foreign currency translation adjustment |
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Comprehensive loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Net loss attributable to Parent | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Less – preferred stock dividends | ( | ( | ( | ( | ||||||||
Deemed dividend on down round features |
| ( |
| ( |
| ( |
| ( | ||||
Net loss – common shareholders |
| ( |
| ( |
| ( |
| ( | ||||
Net loss per common share - basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Weighted average number of common shares outstanding - basic and diluted |
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See accompanying notes to unaudited interim condensed consolidated financial statements.
1
BioHiTech Global, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
| September 30, |
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2021 | December 31, | |||||
(Unaudited) | 2020 | |||||
(Revised, Note 2) | ||||||
Assets | ||||||
Current Assets | ||||||
Cash | $ | | $ | | ||
Restricted cash |
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Accounts receivable, net of allowance for doubtful accounts of $ |
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Inventory |
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Prepaid expenses and other current assets |
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Total Current Assets |
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Restricted cash |
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Equipment on operating leases, net |
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HEBioT facility, equipment, fixtures and vehicles, net |
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License and capitalized MBT facility development costs |
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Other assets |
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Total Assets | $ | | $ | | ||
Liabilities and Stockholders’ Equity |
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Current Liabilities |
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Accounts payable | $ | | $ | | ||
Accrued expenses and liabilities |
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Accrued interest payable |
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Customer deposits |
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Current portion of notes, bonds, debts and borrowings |
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Deferred revenue |
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Total Current Liabilities |
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Non-current portion of notes, bonds, debts and borrowings |
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Accrued interest (related party) | | | ||||
Non-current lease liabilities |
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Liabilities to non-controlling interests to be settled in subsidiary membership units |
| — |
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Total Liabilities |
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Series A redeemable convertible preferred stock, |
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Commitments and Contingencies |
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Stockholders' Equity |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid in capital |
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Accumulated deficit |
| ( |
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Accumulated other comprehensive (loss) |
| ( |
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Stockholders’ equity attributable to Parent |
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Stockholders’ equity attributable to non-controlling interests |
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Total Stockholders’ Equity |
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Total Liabilities and Stockholders’ Equity | $ | | $ | |
See accompanying notes to unaudited interim condensed consolidated financial statements.
2
BioHiTech Global, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended | ||||||
September 30, | ||||||
| 2021 |
| 2020 | |||
Cash flows from operating activities: |
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Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash used in operations: |
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Depreciation and amortization |
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Impairment expense |
| — |
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Amortization of operating lease right of use assets | | | ||||
Provision for bad debts |
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Share based employee and vendor compensation | | | ||||
Interest resulting from amortization of financing costs and discounts |
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Loss from unconsolidated entity | | — | ||||
(Gain) on sale of fixed assets | ( | — | ||||
PPP Loan Forgiveness | ( | — | ||||
Changes in operating assets and liabilities |
| ( |
| ( | ||
Net cash used in operating activities |
| ( |
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Cash flow used in investing activities: |
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Purchases of facility, equipment, fixtures and vehicles |
| ( |
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Proceeds from sale of vehicle | | — | ||||
Refund of deposit | — | | ||||
MBT facility development costs incurred |
| ( |
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Net cash used in investing activities |
| ( |
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Cash flows from financing activities: |
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Proceeds from the sales of common stock | | | ||||
Proceeds from the sale of Series F convertible preferred stock units |
| — |
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Proceeds from Payroll Protection Program Loan | — | | ||||
Repayment of Senior secured note | ( | — | ||||
Repayments of long-term debt |
| ( |
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Related party advances, net |
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Net cash provided by financing activities |
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Effect of exchange rate on cash (restricted and unrestricted) |
| ( |
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Net change in cash (restricted and unrestricted) |
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Cash - beginning of period (restricted and unrestricted) |
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Cash - end of period (restricted and unrestricted) | $ | | $ | | ||
Supplementary cash flow information (cash paid during the periods): | ||||||
Interest | $ | | $ | | ||
Income taxes | — | — | ||||
Supplementary Disclosure of Non-Cash Investing and Financing Activities: | ||||||
Transfer of inventory to leased equipment | $ | | $ | | ||
Acquisition of right of use leased asset and creation of lease liability | — | | ||||
Accrual of Series A preferred stock dividends | | | ||||
Payment of Series A preferred stock dividends in common stock | | — | ||||
Conversion of preferred stock into common | — | |||||
Payment of preferred stock dividends in common stock | | | ||||
Issuance of subsidiary membership interest in exchange for liabilities due non-controlling interest entity | | — | ||||
Exchange of subsidiary non-controlling interest in exchange for liabilities owed Company by non-controlling interest entity | | — | ||||
Reconciliation of Cash and Restricted Cash: | ||||||
Cash | $ | | $ | | ||
Restricted cash (current) | | | ||||
Restricted cash (non-current) | | |||||
Total cash and restricted cash at the end of the period | $ | | $ |
See accompanying notes to unaudited interim condensed consolidated financial statements.
3
BioHiTech Global, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)
Statement of Stockholders’ Equity Attributable to Parent for the Three Months Ended September 30, 2021: | ||||||||||||||||||||||
| Preferred Stock |
| Common Stock |
| Additional | Accumulated | ||||||||||||||||
| Shares |
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| Shares |
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| Paid in |
| Comprehensive |
| Accumulated |
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Outstanding | Amount | Outstanding | Amount | Capital | Other Loss | Deficit | Total | |||||||||||||||
Balance at July 1, 2021 (Revised) |
| | $ | |
| | $ | | $ | | $ | ( | $ | ( | $ | | ||||||
Common stock issued to employee under restricted stock units and vendor for services rendered | — |
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Common stock issued under Committed Equity Facility | — | — | | | | — | — | | ||||||||||||||
Sr. A Preferred stock dividend accrual | — | — | — | — | — | — | ( | ( | ||||||||||||||
Share-based employee and director compensation | — | — |
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| — |
| — |
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Deemed dividend resulting from down round adjustment in warrant exercise and preferred stock conversion pricing | — | — | — | — | | — | ( | — | ||||||||||||||
Net loss | — | — |
| — |
| — |
| — |
| — |
| ( |
| ( | ||||||||
Foreign currency translation adjustment |
| — | — |
| — | — | — | | — | | ||||||||||||
Balance at September 30, 2021 | | $ | | | $ | | $ | | $ | ( | $ | ( | $ | |
Statement of Stockholders’ Equity Attributable to Parent for the Nine Months Ended September 30, 2021: | ||||||||||||||||||||||
Additional | ||||||||||||||||||||||
Preferred Stock | Common Stock | Paid in | Accumulated | |||||||||||||||||||
Shares | Shares | Comprehensive | Accumulated | |||||||||||||||||||
| Outstanding |
| Amount |
| Outstanding |
| Amount |
| Capital |
| Other Loss |
| Deficit |
| Total | |||||||
Balance at January 1, 2021 (Revised) |
| | $ | |
| | $ | | $ | | $ | ( | $ | ( | $ | | ||||||
Common stock sold, net of offering costs | — |
| — | |
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| — |
| — |
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Common stock issued to employee under restricted stock units and vendor for services rendered |
| — | — | | | | — | — | | |||||||||||||
Warrants exercised | — | — | | | ( | — | — | — | ||||||||||||||
Sr. A preferred stock conversion, dividend payments and accrual (Sr. A preferred is not included in equity preferred shares) | ( | ( | | | | — | ( | | ||||||||||||||
Sr. C preferred stock dividend payment |
| — |
| — | | |
| | — | ( |
| — | ||||||||||
Sr. D preferred stock conversion and dividend payments | ( | ( |
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| — |
| ( |
| — | ||||||||
Sr. E preferred stock conversion | ( | ( | | | | — | — | — | ||||||||||||||
Sr. F preferred dividend payments | — | — | | | | — | ( | — | ||||||||||||||
Share-based employee and director compensation | — | — |
| — |
| — |
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| — |
| — |
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Deemed dividend resulting from down round adjustment in warrant exercise and preferred stock conversion pricing | — | — | — | — | | — | ( | — | ||||||||||||||
Net loss | — | — |
| — |
| — |
| — |
| — |
| ( |
| ( | ||||||||
Foreign currency translation adjustment | — | — |
| — |
| — |
| — |
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| — |
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Balance at September 30, 2021 |
| | $ | |
| | $ | | $ | | $ | ( | $ | ( | $ | |
Statement of Stockholders’ Equity Attributable to Non-Controlling Interests in Consolidated Subsidiaries for the Three Months Ended September 30, 2021: | |||||||||
Non- Controlling | Accumulated | ||||||||
| Equity Interest |
| Deficit |
| Total | ||||
Balance at July 1, 2021 | $ | | $ | ( | $ | | |||
Net loss |
| — |
| ( |
| ( | |||
| |||||||||
Balance at September 30, 2021 | $ | | $ | ( | $ | |
Statement of Stockholders’ Equity Attributable to Non-Controlling Interests in Consolidated Subsidiaries for the Nine Months Ended September 30, 2021: | |||||||||
Non-Controlling | Accumulated | ||||||||
Equity Interest | Deficit | Total | |||||||
Balance at January 1, 2021 |
| $ | |
| $ | ( |
| $ | |
Membership units issued to non-controlling member | | — | | ||||||
Membership units assigned to BioHiTech by non-controlling member |
| ( |
| — |
| ( | |||
Net loss |
| — |
| ( |
| ( | |||
Balance at September 30, 2021 | $ | | $ | ( | $ | |
4
BioHiTech Global, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited), continued
Statement of Stockholders’ Equity (Deficit) Attributable to Parent for the Three Months Ended September 30, 2020: | |||||||||||||||||||||||
Additional | Accumulated | ||||||||||||||||||||||
Preferred Stock | Common Stock | Paid in | Comprehensive | Accumulated | |||||||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Other Loss |
| Deficit |
| Total | ||||||||
Balance at July 1, 2020 (Revised) |
| | $ | | | $ | |
| $ | |
| $ | ( |
| $ | ( |
| $ | ( | ||||
Underwritten issuance of common stock, net of costs | — | — | | | | — | — | | |||||||||||||||
Conversion of Series A preferred stock, and payment of accrued dividends in common stock | — | — | | | | — | — | | |||||||||||||||
Conversion of Series D preferred stock, and payment of unaccrued dividends in common stock | ( | ( | | | | — | ( | — | |||||||||||||||
Series F preferred stock issuance | — | — |
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| — |
| — |
| — | ||||||||||||||
Share-based employee and director compensation | — | — | | |
| |
| — |
| — |
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Payments in common stock and warrants to vendors and creditors | — | — | | | | — | — | | |||||||||||||||
Preferred stock dividends paid in common stock | — | — | | | | — | — | | |||||||||||||||
Deemed dividend on down round feature | — | — | — | — | | — | ( | — | |||||||||||||||
Warrants exercised | — | — | — | — |
| — |
| — |
| — |
| — | |||||||||||
Preferred stock dividends | — | — | — | — |
| — |
| — |
| ( |
| ( | |||||||||||
Net loss | — | — | — | — |
| — |
| — |
| ( |
| ( | |||||||||||
Foreign currency translation adjustment | — | — | — | — |
| — |
| ( |
| — |
| ( | |||||||||||
Balance at September 30, 2020 (Revised) | | $ | | | $ | |
| $ | |
| $ | ( |
| $ | ( |
| $ | |
Statement of Stockholders’ Equity Attributable to Parent for the Nine Months Ended September 30, 2020: | ||||||||||||||||||||||
Additional | Accumulated | |||||||||||||||||||||
Preferred Stock | Common Stock | Paid in | Comprehensive | Accumulated | ||||||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Other Loss |
| Deficit |
| Total | |||||||
Balance at January 1, 2020 (Revised) |
| | $ | | | $ | | $ | | $ | ( | $ | ( | $ | | |||||||
Underwritten issuance of common stock, net of costs | — | — | | | | — | — | | ||||||||||||||
Conversion of Series A preferred stock, and payment of accrued dividends in common stock | — | — | | | | — | — | | ||||||||||||||
Conversion of Series D preferred stock, and payment of unaccrued dividends in common stock | ( | ( | | | | — | ( | — | ||||||||||||||
Series F preferred stock issuance |
| | | — | — | | — | — | | |||||||||||||
Share-based employee and director compensation |
| — | — | | | | — | — | | |||||||||||||
Payments in common stock and warrants to vendors and creditors | — | — | | | | — | — | | ||||||||||||||
Preferred stock dividends paid in common stock |
| — | — | | | | — | — | | |||||||||||||
Deemed dividend on down round feature | — | — | — | — | | — | ( | — | ||||||||||||||
Warrants exercised | — | — | | | ( | — | — | — | ||||||||||||||
Preferred stock dividends | — | — | — | — | — | — | ( | ( | ||||||||||||||
Net loss | — | — | — | — | — | — | ( | ( | ||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | ( | — | ( | ||||||||||||||
Balance at September 30, 2020 (Revised) |
| | $ | | | $ | | $ | | $ | ( | $ | ( | $ | |
Statement of Stockholders’ Equity Attributable to Non-Controlling Interests in Consolidated Subsidiaries for the Three Months Ended September 30, 2020: | |||||||||
Non-Controlling | Accumulated | ||||||||
| Equity Interest |
| Deficit |
| Total | ||||
Balance at July 1, 2020 | $ | | $ | ( | $ | | |||
Net loss | — |
| ( |
| ( | ||||
Balance at September 30, 2020 | $ | | $ | ( | $ | |
Statement of Stockholders’ Equity Attributable to Non-Controlling Interests in Consolidated Subsidiaries for the Nine Months Ended September 30, 2020: | |||||||||
Non-Controlling | Accumulated | ||||||||
| Equity Interest |
| Deficit |
| Total | ||||
Balance at January 1, 2020 | $ | | $ | ( | $ | | |||
Net loss | — |
| ( |
| ( | ||||
Balance at September 30, 2020 | $ | | $ | ( | $ | |
See accompanying notes to unaudited interim condensed consolidated financial statements.
5
BioHiTech Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2021 and 2020 and as of September 30, 2021 and December 31, 2020
Note 1. Basis of Presentation and Going Concern
Nature of Operations - BioHiTech Global, Inc. (the “Company” or “BioHiTech”) through its wholly-owned and controlled subsidiaries, provides cost-effective and sustainable environmental management solutions. Our cost-effective technology solutions include the patented processing of municipal solid waste into a valuable renewable fuel, biological disposal of food waste on-site, and proprietary real-time data analytics tools to reduce food waste generation. Our solutions enable businesses and municipalities of all sizes to lower disposal costs while having a positive impact on the environment. When used individually or in combination, our solutions lower the carbon footprint associated with waste transportation and can reduce or virtually eliminate landfill usage.
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continued to spread throughout the United States and globally and more recently in the United States intermittent increases in cases reported, as well as those from new strains of the virus. Vaccines developed for the initial strain of the virus have been released and are being distributed. The Company continues to monitor the near term and longer term impacts of COVID-19 and the related business and travel restrictions and other changes intended to reduce its spread, and its impact on operations, financial position, cash flows, inventory, supply chains, purchasing trends, customer payments, and the industry in general, in addition to the impact on its employees. Due to the nature of the pandemic, the magnitude and duration of the pandemic and its impact on the Company’s operations, liquidity and financial performance will depend on certain developments, including duration, spread and reemergence of the outbreak, its impact on our customers, supply chain partners and employees, and the range of governmental and community reactions to the pandemic, which are uncertain and cannot be fully predicted at this time.
Basis of Presentation - The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned and controlled subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is management’s opinion, however, that the accompanying condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, and the elimination of intercompany accounts and transactions which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s financial statements for the year ended December 31, 2020, which contains the audited financial statements and notes thereto, for the years ended December 31, 2020 and 2019 included within the Company’s Form 10-K filed with the Securities and Exchange Commission (“SEC”) on April 16, 2021. The financial information as of December 31, 2020 presented hereto is derived from the audited consolidated financial statements presented in the Company’s audited consolidated financial statements for the year ended December 31, 2020. The interim results for the three and nine months ended September 30, 2021 is not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any future interim periods.
As of September 30, 2021 and December 31, 2020, the Company's active wholly-owned subsidiaries were BioHiTech America, LLC, BioHiTech Europe Limited, BHT Financial, LLC and BHT Renewables LLC (formerly E.N.A. Renewables LLC), and its controlled subsidiary was Refuel America LLC (
Reclassifications to certain prior period amounts have been made to conform to current period presentation. These reclassifications have no effect on previously reported net loss.
6
BioHiTech Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2021 and 2020 and as of September 30, 2021 and December 31, 2020
Going Concern and Liquidity - For the nine months ended September 30, 2021, the Company had a consolidated net loss of $
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern. The ability of the Company to continue as a going concern is dependent on management’s further implementation of the Company’s on-going and strategic plans, which include continuing to raise funds through equity and/or debt raises. Should the Company be unable to raise adequate funds, certain aspects of the on-going and strategic plans may require modification.
Note 2. Revision of Financial Statements
During the preparation of the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021, the Company determined that there was an error in the recording of beneficial conversion features as a result of resets in the conversion price of the convertible preferred stock during the years ended December 31, 2018 and 2019. The error resulted in an understatement of additional paid in capital and accumulated deficit. The Company assessed the materiality of the misstatement in accordance with Accounting Standards Codification (“ASC”) 250, Accounting Changes and Error Corrections, SEC Staff Accounting Bulletins No. 99, Materiality, and No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, and concluded that the misstatement was not material to the Company’s consolidated financial position for the prior periods and that amendments of previously filed reports were not required. However, the Company determined that the impact of the corrections would be too significant to record in the third quarter of fiscal 2021. As such, the revision for the correction is reflected in the accompanying balance sheet as of December 31, 2020 and the accompanying statements of changes in stockholders’ equity for the three and nine months ended September 30, 2020. Disclosure of the revised amounts will also be reflected in future filings containing the applicable periods.
The effect of the revision on line items within the Company’s consolidated financial statements as of December 31, 2020 and for the three and nine months ended September 30, 2020 was as follows:
Balance Sheet:
| December 31, 2020 | ||||||||
| As Previously |
|
| ||||||
| Reported | Adjustment | As Revised | ||||||
Additional paid in capital |
| $ | |
| $ | |
| $ | |
Accumulated deficit |
| ( |
| ( |
| ( | |||
Stockholder’s equity attributable to Parent |
| |
| — |
| |
7
BioHiTech Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2021 and 2020 and as of September 30, 2021 and December 31, 2020
Statements of Changes in Stockholder’s Equity:
Additional Paid in Capital | Accumulated Deficit | |||||||||||||||||
As Previously | As Previously | |||||||||||||||||
Reported | Adjustment | As Revised | Reported | Adjustment | As Revised | |||||||||||||
January 1, 2020 |
| $ | |
| $ | |
| $ | |
| $ | ( |
| $ | ( |
| $ | ( |
July 1, 2020 |
| |
| |
| |
| ( |
| ( |
| ( | ||||||
September 30, 2020 |
| |
| |
| |
| ( |
| ( |
| ( | ||||||
January 1, 2021 |
| |
| |
| |
| ( |
| ( |
| ( | ||||||
July 1, 2021 |
| |
| |
| |
| ( |
| ( |
| ( |
Note 3. Summary of Significant Accounting Policies
The condensed consolidated financial statements have been prepared by the Company in accordance with the rules and regulations of the SEC on a consistent basis with and should be read in conjunction with our audited financial statements for the year ended December 31, 2020. Certain information has been condensed or omitted as permitted by the SEC, although we believe the disclosures that are made are adequate to make the information presented herein not misleading.
Recent Accounting Standards:
The Company has not implemented any recent accounting standards during the nine months ended September 30, 2021.
The Company has not implemented the following accounting standards:
In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. This standard requires an allowance to be recorded for all expected credit losses for certain financial assets. The new standard introduces an approach, based on expected losses, to estimate credit losses on certain types of financial instruments. ASU 2016-13 is effective for public companies for interim and annual period beginning December 15, 2022. Entities are required to apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company has not yet adopted this update and is currently evaluating the effect this new standard will have on its financial condition and results of operations.
In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The amendments in this update provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting as the market transitions from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. The amendments in this update were effective upon issuance for all entities through December 31, 2022. The Company is currently evaluating the effect the updated standard will have on its financial position, results of operations or financial statement disclosure.
In August 2020, the FASB issued ASU No. 2020-06, Debt with Conversion and other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40). The new guidance eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, the new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted earnings per share computation. This guidance is effective as of January 1, 2022 (Early adoption is permitted effective January 1, 2021). The Company is currently evaluating the effect the updated standard will have on its financial position, results of operations or financial statement disclosure.
There have been no other recent accounting standards or changes in accounting standards that have been issued but not yet adopted that are of significance, or potential significance, to the Company.
8
BioHiTech Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2021 and 2020 and as of September 30, 2021 and December 31, 2020
Note 4. Equipment on Operating Leases, net
Equipment on operating leases consist of the following:
| September 30, |
| December 31, | |||
2021 | 2020 | |||||
Leased equipment | $ | |
| $ | | |
Less: accumulated depreciation |
| ( |
| ( | ||
Total Equipment on Operating Leases, net | $ | |
| $ | |
The Company is a lessor of digester units under non-cancellable operating lease agreements expiring through January 2026.
During the three months ended September 30, 2021 and 2020, revenue under the agreements, which is included in rental, service and maintenance revenue, amounted to $
The minimum future estimated contractual payments to be received under these leases as of September 30, 2021 is as follows:
Year ending December 31, |
|
| |
2021, remaining | $ | | |
2022 |
| | |
2023 |
| | |
2024 |
| | |
2025 and thereafter |
| | |
$ | |
Note 5. HEBioT facility, equipment, fixtures and vehicles, net
HEBioT facility, equipment, fixtures and vehicles, net consist of the following:
| September 30, |
| December 31, | |||
| 2021 |
| 2020 | |||
HEBioT facility |
| $ | |
| $ | |
HEBioT equipment |
| |
| | ||
Computer software and hardware |
| |
| | ||
Furniture and fixtures |
| |
| | ||
Vehicles |
| |
| | ||
| |
| | |||
Less: accumulated depreciation and amortization |
| ( |
| ( | ||
Total HEBioT facility, equipment, fixtures and vehicles, net |
| $ | |
| $ | |
9
BioHiTech Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2021 and 2020 and as of September 30, 2021 and December 31, 2020
Note 6. MBT Facility Development and License Costs
MBT Facility Development and License Costs consist of the following:
| September 30, |
| December 31, | |||
2021 | 2020 | |||||
MBT Projects |
|
|
|
| ||
Rensselaer, NY - Survey, engineering and legal | $ | | $ | | ||
|
| |||||
Technology Licenses |
|
|
|
| ||
Future site |
| |
| | ||
Martinsburg, West Virginia, net of $ |
| |
| | ||
Total Technology Licenses |
| |
| | ||
Total MBT Facility Development and License Costs | $ | | $ | |
MBT Facility Development Costs – During 2018, the Company commenced initial development of a project in Rensselaer, NY. On August 10, 2020 the NYSDEC, by letter, informed the Company that the application had been initially denied. The Company disagrees with this decision, and as is part of the process, has exercised its right to appeal the NYSDEC findings.
Note 7. Other Assets
Other assets consist of:
| September 30, |
| December 31, | |||
2021 | 2020 | |||||
Right of use assets | $ | | $ | | ||
Investment in East Shore Port Ventures LLC |
| |
| | ||
Digester distribution agreements |
| |
| | ||
Deposits |
| |
| | ||
Total Other Assets | $ | | $ | |
Note 8. Notes, Bonds, Debts and Borrowings
Notes, Bonds, Debts and Borrowings consist of the following:
September 30, 2021 | December 31, 2020 | |||||||||||||||||||||||
Unpaid | Net | |||||||||||||||||||||||
Face | Net | Deferred | Carrying | Non- | Non- | |||||||||||||||||||
| Amount |
| Discounts |
| Costs |
| Balance |
| Current |
| Current |
| Current |
| Current | |||||||||
Demand note, line of credit | $ | | $ | — | $ | — | $ | | $ | | $ | — | $ | | $ | — | ||||||||
Advance from related party |
| |
| — |
| — |
| |
| |
| — |
| |
| — | ||||||||
Senior secured note |
| |
| ( |
| ( |
| |
| |
| — |
| |
| — | ||||||||
Payroll Protection Program note |
|
|
| — |
| — |
|
| — |
| — |
| |
| | |||||||||
Junior note due to related party |
| |
| ( |
| — |
| |
| — |
| |
| — |
| | ||||||||
Notes payable to related party | | ( | — | | | | — | — | ||||||||||||||||
Note payable |
| |
| — |
| — |
| |
| |
| — |
| — |
| | ||||||||
WV EDA senior secured bonds |
| |
| — |
| ( |
| |
| |
| |
| |
| | ||||||||
Long term debts, remaining balances |
| |
| — |
| — |
| |
| |
| |
| |
| | ||||||||
Total Notes, Bonds, Debts and Borrowings | $ | | $ | ( | $ | ( | $ | | $ | | $ | | $ | | $ | |
10
BioHiTech Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2021 and 2020 and as of September 30, 2021 and December 31, 2020
Contractual maturities and sinking fund payments of Notes, Bonds, Debts and Borrowings, based on face amounts, are as follows:
2021, | 2025 and | |||||||||||||||||
| remaining |
| 2022 |
| 2023 |
| 2024 |
| thereafter |
| Total | |||||||
Demand note, line of credit |
| $ | | $ | — | $ | — | $ | — | $ | — | $ | | |||||
Advance from related party |
| | — | — |
| — |
| — |
| | ||||||||
Senior secured note |
| | | |
| — |
| — |
| | ||||||||
Junior note due to related party |
| — | — | — |
| |
|
| | |||||||||
Notes payable to related party | | | | — | — | | ||||||||||||
Note payable |
| — | | — |
| — |
| — |
| | ||||||||
WV EDA senior secured bonds |
| |||||||||||||||||
Long term debts, remaining balances |
| — | — | — | ||||||||||||||
Total Notes, Bonds, Debts and Borrowings | $ | $ | $ | $ | $ | $ |
On September 22, 2021, the Small Business Administration fully forgave the Company’s $
The Company did not meet certain of its senior secured note’s financial covenants as of September 30, 2021 and December 31, 2020, and has received a waiver for such non-compliance through September 30, 2021. Despite its current compliance under the waiver, until such time as the Company regains compliance or receives a waiver of such covenants for a year beyond the balance sheet date, under current GAAP accounting rules the senior secured note amounting to $
The WVEDA Bonds agreement and indenture of trust place restrictions on the borrower and its members regarding additional encumbrances on the property, disposition of the property, and limitations on equity distributions. The loan agreement also provides for financial covenants. As of September 30, 2021 and December 31, 2020 the Company was not in compliance with all of the financial covenants and subsequently was in default on principal repayments due in 2020 and 2021 and has entered into a forbearance agreement with the bond trustee that provides, they will not accelerate the repayment of the bonds due to the defaults through October 1, 2022.
On May 19, 2021 the Company’s subsidiary Entsorga West Virginia, LLC (“EWV”) executed a series of notes related to the settlement of a previously recognized claim (See Note 11) with Entsorga S.p.A.(“ESpA”), the parent company of Entsorga USA, Inc., a non-controlling member of the Company’s EWV subsidiary. The series of notes are comprised of
Note 9. Equity and Equity Transactions
The Company has
11
BioHiTech Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2021 and 2020 and as of September 30, 2021 and December 31, 2020
issued; and
Outstanding | Carrying Amount | |||||||||||||||||||
Stated | Conversion | September 30, | December 31, | September 30, | December 31, | |||||||||||||||
|
| Designated |
| Issued |
| Value |
| Rate |
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
Series A Convertible* |
| | | $ | | $ | | | | $ | | $ | | |||||||
Series B Convertible |
| | |
| | n.a. | | |
| |
| | ||||||||
Series C Convertible |
| | |
| | | | |
| |
| | ||||||||
Series D Convertible |
| | |
| | | | |
| |
| | ||||||||
Series E Convertible |
| | |
| | | — | |
| |
| | ||||||||
Series F Convertible |
| | |
| | | | |
| |
| | ||||||||
Total preferred stock | | | | $ | $ | |||||||||||||||
Excluding Series A* | $ | $ |
*The Series A convertible shares are redeemable and are presented as temporary equity in the condensed consolidated balance sheets.
In connection with the September 23, 2021 Keystone Capital Partners committed equity facility agreement, the Company sold
Keystone Capital Partners, LLC Committed Equity Facility — On September 23, 2021, the Company, entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) and a Registration Rights Agreement (the “Registration Rights Agreement”) with Keystone Capital Partners, LLC (“Keystone Capital Partners”). The Company has the right to sell to Keystone Capital Partners up to the lesser of (i) $
As an initial purchase under the Purchase Agreement, upon the execution and delivery of the agreements on September 23, 2021, the Company issued and sold
Under the agreements, the Company will have the right, but not the obligation, from time to time at our sole discretion, over a period of up to
Other than the
12
BioHiTech Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2021 and 2020 and as of September 30, 2021 and December 31, 2020
$
Under the applicable rules of The Nasdaq Stock Market LLC (“Nasdaq”), in no event may we issue to Keystone Capital Partners under the Purchase Agreement more than
There are no restrictions on future financings, rights of first refusal, participation rights, penalties or liquidated damages in the Purchase Agreement or Registration Rights Agreement other than a prohibition on entering (with certain limited exceptions) into a variable rate transaction. Keystone Capital Partners has agreed not to engage in or effect, directly or indirectly, for its own principal account or for the principal account of any of its affiliates, any short sales of the Common Stock or hedging transaction that establishes a net short position in the Common Stock during the term of the Purchase Agreement.
In addition to the
Through September 30, 2021 the Company has issued
At Market Issuance Sales Agreement — On February 19, 2021, the Company entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) with B. Riley Securities, Inc. (the “Sales Agent”), pursuant to which the Company may offer and sell, from time to time, through or to the Sales Agent, shares of the Company’s common stock, par value $
During March 2021, through a series of transactions, the Company sold
Gross proceeds |
| $ | |
Less: |
|
| |
Agent’s fees |
| ( | |
Legal fees |
| ( | |
Accounting fees |
| ( | |
Filing and other fees |
| ( | |
Net proceeds to the Company | $ | |
On April 29, 2021,
During the nine months ended September 30, 2021, five participants from the Company’s stock incentive plans, were issued
During the nine months ended September 30, 2021, the Company issued
13
BioHiTech Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2021 and 2020 and as of September 30, 2021 and December 31, 2020
During the nine months ended September 30, 2021, the Company issued
During the nine months ended September 30, 2021,
During the nine months ended September 30, 2021, the Company issued
During the nine months ended September 30, 2021, the Company issued
Warrants – In connection with the issuance of convertible debt, preferred and common stock and in connection with services provided, the Company has warrants to acquire
Weighted Average | |||||||
Expiring During the Year | Warrant | Exercise Price | Exercises Price | ||||
Ending December 31, |
| Shares |
| per Share |
| per Share | |
2021 |
| | $ | $ | | ||
2022 |
| | $ | | |||
2023 |
| | $ | | |||
2024 |
| | $ | | |||
2025 |
| | $ | |
The following table summarizes the outstanding warrant activity for the nine months ended September 30, 2021:
Outstanding, January 1, 2021 |
| |
Issued | | |
Exercised - cashless common shares issued | ( | |
Expired |
| ( |
Outstanding, September 30, 2021 |
| |
In connection with the September 23, 2021 Keystone Capital Partners committed equity facility agreement, the Company sold
In connection with services rendered, in September 2021 the Company issued a warrant valued at $
14
BioHiTech Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2021 and 2020 and as of September 30, 2021 and December 31, 2020
Equity Incentive Plans — The Company has two shareholder approved equity incentive plans. There were no grants or awards during the nine months ended September 30, 2021. The following provides the compensation expense by award type and by classification in the condensed consolidated statements of operations and comprehensive loss:
Three months ended September 30, | Nine months ended September 30, | |||||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 | |||||
Stock options | $ | | $ | | $ | | $ | | ||||
Restricted stock |
| |
| |
| |
| | ||||
Total | $ | | $ | | $ | | $ | | ||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 | |||||
Rental, service and maintenance | $ | | $ | | $ | | $ | | ||||
Selling, general and administrative |
| |
| | | | ||||||
Total | $ | | $ | | $ | | $ | |
Non-controlling Interest Transactions — Effective March 19, 2021, the Company and its Refuel America LLC subsidiaries concluded an agreement with Apple Valley Waste Services, Inc. and its parent company Gold Medal Holdings, Inc. and Gold Medal Group, LLC (the Company’s co-investor in Refuel America, LLC) whereby, leading up to the effective date, during 2020 EWV offset its accounts receivable amounting to $
AVWS exchanged the EWV convertible preferred units for
As of December 31, 2020, the $
Note 10. Leases
The Company did not enter into or modify any existing leases during the nine months ended September 30, 2021. The current portion of the lease liabilities of $
Year Ending December 31, |
| ||
2021, remaining | $ | | |
2022 |
| | |
2023 |
| | |
2024 |
| | |
2025 and thereafter |
| | |
Total lease payments |
| | |
Less imputed interest |
| ( | |
Present value of lease liabilities | $ | |
15
BioHiTech Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2021 and 2020 and as of September 30, 2021 and December 31, 2020
Total lease costs under operating leases amounted to $
Note 11. Commitments and Contingencies
During the nine months ended September 30, 2021 the Company was involved in the following legal matter.
During September 2020, the Company’s Entsorga West Virginia subsidiary received notice that an affiliate of a minority owner of the facility, who also provided intellectual property, equipment and engineering services relating to the set-up and initial operation of the facility, was claiming it was owed $
From time to time, the Company may be involved in other legal matters arising in the ordinary course of business. While the Company believes that such matters are currently not material, there can be no assurance that matters arising in the ordinary course of business for which the Company is, or could be, involved in litigation, will not have a material adverse effect on its business, financial condition or results of operations
Note 12. Revenue
The Company recognizes revenue as services are performed or products are delivered and generally recognize revenue for the gross amount of consideration received as we are generally the primary obligor (or principal) in our contracts with customers as we hold complete responsibility to the customer for contract fulfillment. We record amounts collected from customers for sales tax on a net basis.
Disaggregation of Revenue — The disaggregation of revenue is as follows:
Three months ended September 30, | Nine months ended September 30, | |||||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 | |||||
Revenue Type: |
|
|
|
|
|
|
|
|
|
|
| |
Revenue recognized over time: | ||||||||||||
Rental of digesters | $ | | $ | | $ | | $ | | ||||
Revenue recognized at a point in time: | ||||||||||||
Services |
| |
| |
| |
| | ||||
Product sales |
| |
| |
| |
| | ||||
Total | $ | | $ | | $ | | $ | |
16
BioHiTech Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2021 and 2020 and as of September 30, 2021 and December 31, 2020
Note 13. Risk Concentrations
The Company operates as a single segment on a worldwide basis through its subsidiaries, resellers and independent sales agents. Gross revenues and net non-current tangible assets on a domestic and international basis are as follows:
| United |
|
| ||||||
States | International | Total | |||||||
2021: | |||||||||
Revenue, for the nine months ended September 30, 2021 | $ | | $ | | $ | | |||
Revenue, for the three months ended September 30, 2021 | | | | ||||||
Non-current tangible assets, as of September 30, 2021 |
| |
| |
| | |||
|
|
| |||||||
2020: |
|
|
|
|
| ||||
Revenue, for the nine months ended September 30, 2020 | $ | | $ | | $ | | |||
Revenue, for the three months ended September 30, 2020 | | | | ||||||
Non-current tangible assets, as of December 31, 2020 |
| |
| |
| |
Major customers — During the three months ended September 30, 2021,
As of September 30, 2021,
Vendor concentration — During the three months ended September 30, 2021,
As of September 30, 2021 and December 31, 2020, one vendor represented at least
Affiliate relationship — GMG owns a
17
BioHiTech Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2021 and 2020 and as of September 30, 2021 and December 31, 2020
Note 14. Related Party Transactions
Related parties include Directors, Senior Management Officers, and shareholders, plus their immediate family, who own a
The tables below presents the face amount of direct related party assets and liabilities and other transactions or conditions as of or during the periods indicated.
|
| September 30, |
| December 31, | ||||
2021 | 2020 | |||||||
Assets: |
| |||||||
Accounts receivable |
| (a) (b) | $ | | $ | | ||
Intangible assets, net, included in other assets |
| (c) |
| |
| | ||
Liabilities: |
|
|
|
| ||||
Accounts payable |
| (c) (d) (e) (f) |
| |
| | ||
Accrued interest payable |
| (h) |
| |
| | ||
Accrued liabilities | (j) | | | |||||
Notes payable | (j) | | | |||||
Long term accrued interest |
| (g) |
| |
| | ||
Advance from related party |
| (h) |
| |
| | ||
Junior promissory note |
| (g) |
| |
| | ||
Liabilities to non-controlling interests to be settled in subsidiary membership units | (k) | | | |||||
Other: |
|
|
|
| ||||
Line of credit guarantee |
| (i) |
| |
| |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||||
Management advisory and other fees |
| (a) | $ | — | $ | | $ | — | $ | | ||||
HEBioT revenue |
| (b) |
| |
| |
| |
| | ||||
Operating expenses - HEBioT |
| (d) |
| — |
| |
| |
| | ||||
Operating expenses - Selling, general and administrative |
| (e) |
| — |
| |
| |
| | ||||
Operating expenses - Selling, general and administrative |
| (c) (f) |
| |
| |
| |
| | ||||
Interest expense |
| (g) (h) (j) |
| |
| |
| |
| | ||||
Debt guarantee fees |
| (i) |
| |
| |
| |
| |
Summary notes:
a - | Management Advisory Fees |
| g - | Junior Promissory Note |
b - | HEBioT Disposal Revenues | h - | Advances from Related Parties | |
c - | Distribution Agreement | i - | Line of Credit | |
d - | Disposal costs | j - | Claims by Related Party settled in Notes Payable – Note 7. Notes, Bonds, Debts and Borrowings. | |
e - | Facility Lease | k - | Liabilities to non-controlling interests to be settled in subsidiary membership units. | |
f- | Business Services Fees |
Note 15. Subsequent Events
The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the financial statements are available to be issued. Any material events that occur between the balance sheet date and the date that the financial
18
BioHiTech Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2021 and 2020 and as of September 30, 2021 and December 31, 2020
statements were available for issuance are disclosed as subsequent events, while the financial statements are adjusted to reflect any conditions that existed at the balance sheet date. Based upon this review, except as disclosed within the footnotes or as discussed below, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial statements.
In connection with the Keystone Capital Partner’s committed equity facility to the Company, on October 22, 2021 the Company filed its Registration Statement on Form S-1 for the registration of
On October 29, 2021 a preferred stockholder converted
On November 2, 2021, the Compnay’s senior secured lender was issued
Note 16. Condensed Consolidating Financial Information
The WVEDA Solid Waste Disposal Revenue Bond obligations of Entsorga West Virginia LLC are not guaranteed by its members, including the Company, however the membership interests of Entsorga West Virginia LLC are pledged, and the debt agreements provide restrictions prohibiting distributions to the members, including equity distributions or providing loans or advances to the members.
19
BioHiTech Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2021 and 2020 and as of September 30, 2021 and December 31, 2020
The following pages present the Company’s condensed consolidating balance sheet as of September 30, 2021, the condensed consolidating statements of operations for the three and nine months ended September 30, 2021 and 2020, and condensed consolidating cash flows for the nine months ended September 30, 2021 and 2020 of Entsorga West Virginia LLC and the Parent consolidated with other Company subsidiaries not subject to the WVEDA Solid Waste Disposal Revenue Bond restrictions and the elimination entries necessary to present the Company’s financial statements on a consolidated basis. The following condensed consolidating financial information should be read in conjunction with the Company's consolidated financial statements.
Condensed Consolidating Balance Sheet as of September 30, 2021
| Parent |
| Entsorga |
|
| |||||||
and other | West | |||||||||||
Subsidiaries | Virginia LLC | Eliminations | Consolidated | |||||||||
Assets |
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| ||||
Cash | $ | | $ | | $ | |
| $ | | |||
Restricted cash |
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| |
| |
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| | |||
Other current assets |
| |
| |
| ( |
| | ||||
Current assets |
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| |
| ( |
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Restricted cash |
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| |
| |
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HEBioT facility and other fixed assets |
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| |
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MBT facility development and license costs |
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| |
| |
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| | |||
Other assets |
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| |
| |
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Total assets | $ | | $ | | $ | ( | $ | | ||||
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| |||||||||||
Liabilities and stockholders’ equity |
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Notes, bonds, debts and borrowings | $ | | $ | | $ | | $ | | ||||
Other current liabilities |
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| ( |
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Current liabilities |
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| ( |
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Notes, bonds, debts and borrowings |
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Accrued interest |
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Total liabilities |
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| ( |
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Redeemable preferred stock |
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Stockholders' equity: |
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| |||||||
Attributable to parent |
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| ( |
| ( |
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Attributable to non-controlling interests |
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Stockholders’ equity |
| |
| ( |
| |
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Total liabilities and stockholders’ equity | $ | | $ | | $ | ( | $ | |
20
BioHiTech Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2021 and 2020 and as of September 30, 2021 and December 31, 2020
Condensed Consolidating Statement of Operations for the three months ended September 30, 2021
| Parent |
| Entsorga |
|
| |||||||
and other | West | |||||||||||
Subsidiaries | Virginia LLC | Eliminations | Consolidated | |||||||||
Revenue | $ | |
| $ | |
| $ | |
| $ | | |
Operating expenses |
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|
|
|
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| ||||||
Equipment |
| |
| |
| | | |||||
Rental, service and maintenance expense |
| |
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| |
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| | ||
HEBioT |
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| |
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Selling, general and administrative |
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Depreciation and amortization |
| |
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Total operating expenses |
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| |
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| |
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Loss from operations | ( | ( | |
| ( | |||||||
Other (income) expenses, net | ( |
| |
| |
| | |||||
Net income (loss) | $ | | $ | ( | $ | | $ | ( |
Condensed Consolidating Statement of Operations for the nine months ended September 30, 2021
Parent |
| Entsorga |
|
| ||||||||
and other | West | |||||||||||
| Subsidiaries |
| Virginia LLC |
| Eliminations |
| Consolidated | |||||
Revenue | $ | | $ | | $ | — | $ | | ||||
Operating expenses |
|
|
|
| ||||||||
Equipment | | — | — |
| | |||||||
Rental, service and maintenance expense |
| |
| — |
|
| | |||||
HEBioT |
| — |
| |
| — |
| | ||||
Selling, general and administrative |
| |
| |
| — |
| | ||||
Depreciation and amortization |
| |
| |
| — |
| | ||||
Total operating expenses |
| |
| |
| — |
| | ||||
Loss from operations |
| ( |
| ( |
| — |
| ( | ||||
Other (income) expenses, net |
| |
| |
| — |
| | ||||
Net loss | $ | ( | $ | ( | $ | — | $ | ( |
21
BioHiTech Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2021 and 2020 and as of September 30, 2021 and December 31, 2020
Condensed Consolidating Statement of Cash Flows for the nine months ended September 30, 2021
| Parent |
| Entsorga |
|
| |||||||
and other | West | |||||||||||
Subsidiaries | Virginia LLC | Eliminations | Consolidated | |||||||||
Cash flows used in operating activities: |
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|
|
|
|
|
|
| ||||
Net loss | $ | ( | $ | ( | $ | | $ | ( | ||||
Non-cash adjustments to reconcile net loss to net cash used in operations |
| |
| |
| |
| | ||||
Changes in operating assets and liabilities |
| ( |
| |
| |
| ( | ||||
Net cash used in operations |
| ( |
| |
| |
| ( | ||||
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| |||||||||
Cash flow used in investing activities: |
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|
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|
| ||||
Purchases (sales) of facility, equipment, fixtures and vehicles |
| |
| ( |
| |
|
| ( | |||
Other investing activities |
| ( |
| |
| |
| ( | ||||
Net cash used in investing activities |
| ( |
| ( |
| |
| ( | ||||
Cash flows from financing activities: |
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|
|
|
|
|
|
| ||||
Issuances of debt and equity |
| |
| |
| |
| | ||||
Repayments of debt |
| ( |
| |
| |
| ( | ||||
Net cash provided by financing activities |
| |
| |
| |
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Effect of exchange rate on cash |
| ( |
| |
| |
| ( | ||||
Cash – beginning of period (restricted and unrestricted) |
| |
| |
| |
| | ||||
Cash – end of period (restricted and unrestricted) | $ | | $ | | $ | | $ | |
Condensed Consolidating Statement of Operations for the three months ended September 30, 2020
| Parent |
| Entsorga |
|
| |||||||
and other | West | |||||||||||
Subsidiaries | Virginia LLC | Eliminations | Consolidated | |||||||||
Revenue | $ | |
| $ | |
| $ | |
| $ | | |
Operating expenses |
|
|
|
|
|
|
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|
| |||
HEBioT |
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| | | |||||
Rental, service and maintenance expense |
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Equipment |
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Selling, general and administrative |
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Impairment expense | | | ||||||||||
Depreciation and amortization |
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| |
| | ||
Total operating expenses |
| |
|
| |
|
| |
| | ||
Loss from operations | ( | ( | |
| ( | |||||||
Other (income) expenses, net | |
| |
| |
| | |||||
Net loss | $ | ( | $ | ( | $ | | $ | ( |
22
BioHiTech Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2021 and 2020 and as of September 30, 2021 and December 31, 2020
Condensed Consolidating Statement of Operations for the nine months ended September 30, 2020
Parent |
| Entsorga |
|
| ||||||||
and other | West | |||||||||||
| Subsidiaries |
| Virginia LLC |
| Eliminations |
| Consolidated | |||||
Revenue | $ | | $ | | $ | — | $ | | ||||
Operating expenses |
|
|
|
| ||||||||
HEBioT | — | | — | | ||||||||
Rental, service and maintenance expense |
| |
| — |
| — |
| | ||||
Equipment |
| |
| — |
| — |
| | ||||
Selling, general and administrative |
| |
| |
| — |
| | ||||
Impairment expense | — | | — | | ||||||||
Depreciation and amortization |
| |
| |
| — |
| | ||||
Total operating expenses |
| |
| |
| — |
| | ||||
Loss from operations |
| ( |
| ( |
| — |
| ( | ||||
Other (income) expenses, net |
| |
| |
| — |
| | ||||
Net loss | $ | ( | $ | ( | $ | — | $ | ( |
Condensed Consolidating Statement of Cash Flows for the nine months ended September 30, 2020
| Parent |
| Entsorga |
|
|
| ||||||
and other | West |
| ||||||||||
Subsidiaries | Virginia LLC | Eliminations | Consolidated | |||||||||
Cash flows used in operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | ( |
| $ | ( |
| $ | |
| $ | ( |
Non-cash adjustments to reconcile net loss to net cash used in operations |
| |
| |
| |
| | ||||
Changes in operating assets and liabilities |
| ( |
| |
| |
| ( | ||||
Net cash used in operations |
| ( |
| |
| |
| ( | ||||
|
|
|
| |||||||||
Cash flow used in investing activities: |
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|
|
|
|
|
|
| ||||
Purchases of construction in-progress, equipment, fixtures and vehicles |
| ( |
| ( |
| |
| ( | ||||
Other investing activities |
| ( |
| |
| |
| ( | ||||
Net cash used in investing activities |
| ( |
| ( |
| |
| ( | ||||
|
|
|
| |||||||||
Cash flows from financing activities: |
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|
|
|
|
|
| |||||
Issuances of debt and equity |
| |
| |
| |
| | ||||
Repayments of debt |
| ( |
| |
| |
| ( | ||||
Net cash provided by financing activities |
| |
| |
| |
| | ||||
Effect of exchange rate on cash |
| ( |
| |
| |
| ( | ||||
Cash – beginning of period (restricted and unrestricted) |
| |
| |
| |
| | ||||
Cash – end of period (restricted and unrestricted) |
| $ | |
| $ | |
| $ | |
| $ | |
23
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
The following discussion and analysis should be read in conjunction with our unaudited interim condensed consolidated financial statements and related notes appearing elsewhere in this report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to those set forth under “Risk Factors” in our Form 10-K, as filed with the United States Securities and Exchange Commission, or the SEC, on April 16, 2021.
Cautionary Note Regarding Forward-Looking Statements
The information in this report contains forward-looking statements. All statements other than statements of historical fact made in this report are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. These forward-looking statements can be identified by the use of words such as “believes,” “estimates,” “intends”, “plans”, “could,” “possibly,” “probably,” anticipates,” “projects,” “expects,” “may,” “will,” or “should,” “designed to,” “designed for,” or other variations or similar words or language. No assurances can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Our actual results may differ significantly from management’s expectations.
Although these forward-looking statements reflect the good faith judgment of our management, such statements can only be based upon facts and factors currently known to us. Forward-looking statements are inherently subject to risks and uncertainties, many of which are beyond our control. As a result, our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth below under the caption “Risk Factors.” For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You should not unduly rely on these forward-looking statements, which speak only as of the date on which they were made. They give our expectations regarding the future but are not guarantees. We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law.
Impact of COVID-19
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continued to spread throughout the United States and globally and more recently in the United States intermittent increases in cases reported, as well as those from new strains of the virus. Vaccines developed for the initial strain of the virus have been released and are being distributed. The Company continues to monitor the near term and longer term impacts of COVID-19 and the related business and travel restrictions and other changes intended to reduce its spread, and its impact on operations, financial position, cash flows, inventory, supply chains, purchasing trends, customer payments, and the industry in general, in addition to the impact on its employees. Due to the nature of the pandemic, the magnitude and duration of the pandemic and its impact on the Company’s operations, liquidity and financial performance will depend on certain developments, including duration, spread and reemergence of the outbreak, such as the Delta variant, its impact on our customers, supply chain partners and employees, and the range of governmental and community reactions to the pandemic, which are uncertain and cannot be fully predicted at this time.
Company Overview
The Company’s mission is to reduce the environmental impact of the waste management industry through the development and deployment of cost-effective technology solutions. The Company’s suite of technologies includes on-site biological processing equipment for food waste, patented processing facilities for the conversion of municipal solid waste into an E.P.A. recognized renewable fuel, and proprietary real-time data analytics tools to reduce food waste generation. These proprietary solutions may enable certain businesses and municipalities of all sizes to lower disposal costs while having a positive impact on the environment. When used individually or in combination, we believe that the Company’s solutions can reduce the carbon footprint associated with waste transportation, repurpose non-recyclable plastics, and significantly reduce landfill usage.
24
Revolution Series™ Digesters
The Company currently markets an aerobic digestion technology solution for the disposal of food waste at the point of generation. Its line of Revolution Series Digesters have been described as self-contained, robotic digestive systems that we believe are as easy to install as a standard dishwasher with no special electrical or plumbing requirements. Units range in size depending upon capacity, with the smallest unit approximately the size of a residential washing machine. The digesters utilize a biological process to convert food waste into a liquid that is safe to discharge down an ordinary drain. This process can result in a substantial reduction in costs for customers including cruise lines, restaurants, retail stores, hospitals, hotel/hospitality companies and governmental units by eliminating the transportation and logistics costs associated with food waste disposal. The process also reduces the greenhouse gases associated with food-waste transportation and decomposition in landfills that have been linked to climate change. The Company offers its Revolution Series Digesters in several sizes targeting small to mid-sized food waste generation sites that are often more economical than traditional disposal methods. The Revolution Series Digesters are manufactured and assembled in the United States.
In an effort to expand the capabilities of its digesters, the Company developed a sophisticated Internet of Things (“IoT”) technology platform to provide its customers with transparency into their internal and supply chain waste generation and operational practices. This patented process collects weight related data from the digesters to deliver real-time data that provides valuable information that when analyzed, can improve efficiency and validate corporate sustainability efforts. The Company provides its IoT platform through a SaaS (“Software as a Service”) model that is either bundled in its rental agreements or sold through a separate annual software license. The Company continues to add new capacity sizes to its line of Revolution Series Digesters to meet customer needs.
HEBioT Resource Recovery Technology
The Company expanded its technology business in 2016 through the acquisition of certain development rights to a patented Mechanical Biological Treatment (“MBT”) technology developed by a European engineering firm that relies upon High Efficiency Biological Treatment (“HEBioT”) to process waste at the municipal or enterprise level. The technology results in a substantial reduction in landfill usage by converting a significant portion of intake, including organic waste and non-recyclable plastics, into a United States EPA recognized alternative fuel that can be used as a partial replacement for coal. The Company is currently exploring additional uses for its Solid Recovered Fuel (“SRF”) such as gasification, fuel for cogeneration and as a feedstock for bio-plastics.
The Company also, through a series of transactions in 2017 and 2018, acquired a controlling interest in the Nation’s first municipal waste processing facility utilizing the HEBioT technology located in Martinsburg, West Virginia (the “Martinsburg Facility”). The Martinsburg Facility, which commenced operations in 2019, is capable of processing up to 110,000 tons of mixed municipal waste annually. At full capacity, the Martinsburg Facility can achieve an estimated annual savings of over 2.3 million cubic feet of landfill space and eliminate many of the greenhouse gases associated with landfilling that waste. The Company plans to build additional HEBioT facilities in the coming years.
Combined Offering
The Company’s suite of products and services positions it as a provider of cost-effective, technology-based alternatives to traditional waste disposal in the United States. The use of the Company’s technology solutions independently or in combination, can help its customers meet sustainability goals by achieving a significant reduction in greenhouse gases associated with waste transportation and landfilling. In addition, the repurposing of municipal waste into a cleaner burning, EPA recognized, renewable fuel can further reduce potentially harmful emissions associated with traditional means of disposal. The overall reduction in carbon and other greenhouse gases that are linked to climate change that could be achieved through the utilization of the Company’s technology can serve as a model for the future of waste disposal in the United States.
25
Results of operations for the three months ended September 30, 2021
compared to the three months ended September 30, 2020
Overview
The Company continued its revenue growth in the quarter ended September 30, 2021 with total revenues of $4,523,317 increasing 31% over the second quarter of 2021 and 509% over the comparative third quarter of 2020. Total revenues of $4,523,317 marks the fourth consecutive new quarterly high since the Company went public in 2015. During the third quarter of 2021, each of the business lines reported revenue growth over the second quarter of 2021.
The overall contribution (revenues, less direct costs) increased to 23% of revenue in the third quarter of 2021, as compared to a negative 69% in the comparative third quarter of 2020 and 14% in the second quarter of 2021.
Selling, general and administrative expenses as a percentage of revenues decreased to 38% in the third quarter of 2021, as compared to 58% in the second quarter of 2021 and 259% in the comparative third quarter of 2020.
The loss from operations as a percentage of revenue decreased to 25% in in the third quarter of 2021, as compared to 59% in the second quarter of 2021 and 527% in the comparative third quarter of 2020.
The Company continues to achieve growth in the Digester and Corporate line of business that has been driven by sales to Carnival Cruise Lines such that revenues increased in the third quarter of 2021 by 28% to $3,938,215 as compared to the second quarter revenues of $3,078,420.
The revenues of the HEBioT line increased by 55% to $585,102 during the third quarter of 2021 as compared to the second quarter of 2021 as we continued to ramp up the facility. In addition, the contribution rate during the third quarter of 2021 was a negative 53% as compared to a negative 134% during the second quarter of 2021.
The results of operations by business line are presented below.
Three months ended September 30, | |||||||||||||||||||||||||||
Digester and Corporate | HEBioT | Total | |||||||||||||||||||||||||
| 2021 |
| 2020 |
| Change |
| 2021 |
| 2020 |
| Change |
| 2021 |
| 2020 |
| Change | ||||||||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Equipment sales | $ | 3,152,639 | $ | 293,876 | $ | 2,858,763 | $ | — | $ | — |
| — | $ | 3,152,639 | $ | 293,876 | $ | 2,858,763 | |||||||||
Rental, services and maintenance |
| 785,576 |
| 423,996 |
| 361,580 |
| — |
| — |
| — |
| 785,576 |
| 423,996 |
| 361,580 | |||||||||
HEBioT |
| — |
| — |
| — |
| 585,102 |
| 625 |
| 584,477 |
| 585,102 |
| 625 |
| 584,477 | |||||||||
Management and advisory fees and other |
| — |
| 24,380 |
| (24,380) |
| — |
| — |
| — |
| — |
| 24,380 |
| (24,380) | |||||||||
Total Revenue |
| 3,938,215 |
| 742,252 |
| 3,195,963 |
| 585,102 |
| 625 |
| 584,477 |
| 4,523,317 |
| 742,877 |
| 3,780,440 | |||||||||
Operating Expenses |
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Equipment sales |
| 2,112,407 |
| 171,002 |
| 1,941,405 |
| — |
| — |
| — |
| 2,112,407 |
| 171,002 |
| 1,941,405 | |||||||||
Rental, services and maintenance |
| 455,436 |
| 139,665 |
| 315,771 |
| — |
| — |
| — |
| 455,436 |
| 139,665 |
| 315,771 | |||||||||
HEBioT |
| — |
| — |
| — |
| 898,094 |
| 945,810 |
| (47,716) |
| 898,094 |
| 945,810 |
| (47,716) | |||||||||
Selling, general and administrative |
| 1,285,648 |
| 1,430,096 |
| (144,448) |
| 413,695 |
| 494,197 |
| (80,502) |
| 1,699,343 |
| 1,924,293 |
| (224,950) | |||||||||
Impairment expense | — | — | — | — | 917,420 | (917,420) | — | 917,420 | (917,420) | ||||||||||||||||||
Depreciation and amortization |
| 122,712 |
| 124,759 |
| (2,047) |
| 382,641 |
| 437,384 |
| (54,743) |
| 505,353 |
| 562,143 |
| (56,790) | |||||||||
Total operating expenses |
| 3,976,203 |
| 1,865,522 |
| 2,110,681 |
| 1,694,430 |
| 2,794,811 |
| (1,100,381) |
| 5,670,633 |
| 4,660,333 |
| 1,010,300 | |||||||||
Loss from operations |
| (37,988) |
| (1,123,270) |
| 1,085,282 |
| (1,109,328) |
| (2,794,186) |
| 1,684,858 |
| (1,147,316) |
| (3,917,456) |
| 2,770,140 | |||||||||
Other expenses, net |
| (63,779) |
| 336,749 |
| (400,528) |
| 686,598 |
| 686,308 |
| 290 |
| 622,819 |
| 1,023,057 |
| (400,238) | |||||||||
Net loss | $ | 25,791 | $ | (1,460,019) | $ | 1,485,810 | $ | (1,795,926) | $ | (3,480,494) | $ | 1,684,568 | $ | (1,770,135) | $ | (4,940,513) | $ | 3,170,378 |
26
Contribution
The contribution by business line and product is presented below.
Three months ended September 30, |
| |||||||||||||||||||||||||||
Digester and Corporate | HEBioT | Total |
| |||||||||||||||||||||||||
| 2021 |
| 2020 |
| Change |
| 2021 |
| 2020 |
| Change |
| 2021 |
| 2020 |
| Change |
| ||||||||||
Contribution |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Equipment sales | $ | 1,040,232 | $ | 122,874 | $ | 917,358 | $ | — | $ | — | $ | — | $ | 1,040,232 | $ | 122,874 | $ | 917,358 | ||||||||||
Rental, services and maintenance |
| 330,140 |
| 284,331 |
| 45,809 |
| — |
| — |
| — |
| 330,140 |
| 284,331 |
| 45,809 | ||||||||||
HEBioT |
| — |
| — |
| — |
| (312,992) |
| (945,185) |
| 632,193 |
| (312,992) |
| (945,185) |
| 632,193 | ||||||||||
Management and advisory fees and other |
| — |
| 24,380 |
| (24,380) |
| — |
| — |
| — |
| — |
| 24,380 |
| (24,380) | ||||||||||
Total contribution | $ | 1,370,372 | $ | 431,585 | $ | 938,787 | $ | (312,992) | $ | (945,185) | $ | 632,193 | $ | 1,057,380 | $ | (513,600) | $ | 1,570,980 | ||||||||||
Contribution rate | ||||||||||||||||||||||||||||
Equipment sales | 33 | % | 42 | % | (9) | % | — | % | — | % | — | % | 33 | % | 42 | % | (9) | % | ||||||||||
Rental, services and maintenance | 42 | 67 | (25) | — | — | — | 42 | 67 | (25) | |||||||||||||||||||
HEBioT | — | — | — | (53) | (151,230) | 151,176 | (53) | (151,230) | 151,176 | |||||||||||||||||||
Management and advisory fees and other | — | 100 | (100) | — | — | — | — | 100 | (100) | |||||||||||||||||||
Total contribution rate | 35 | % | 58 | % | 29 | % | (53) | % | (151,230) | % | 108 | % | 23 | % | (69) | % | 42 | % |
The overall Digester and Corporate contribution increased to $1,370,372 during the third quarter as compared to $431,585 in the comparative third quarter of 2020 and $974,633 during the second quarter of 2021. These increases were primarily the result of increased digester sales to Carnival Cruise Lines. The contribution margin during the third quarter of 2021 was 35%, as compared to 58% during the comparative third quarter of 2020 , which do not reflect the increased levels of sales to Carnival Cruise Lines. During the second quarter of 2021, the contribution margin was 32%.
The negative contribution at the HEBioT facility of 53% for the third quarter of 2021, improved from a negative contribution of 134% during the second quarter of 2021 as a result of increased sales and reduced expenses.
Selling, General and Administrative Expenses
Three months ended September 30, | |||||||||||||||||||||||||||
Digester and Corporate | HEBioT | Total | |||||||||||||||||||||||||
| 2021 |
| 2020 |
| Change |
| 2021 |
| 2020 |
| Change |
| 2021 |
| 2020 |
| Change | ||||||||||
Selling, general and administrative expenses | |||||||||||||||||||||||||||
Staffing | $ | 672,264 | $ | 420,388 | $ | 251,876 | $ | 87,531 | $ | 56,260 | $ | 31,271 | $ | 759,795 | $ | 476,648 | $ | 283,147 | |||||||||
Stock based compensation |
| 10,089 |
| 470,550 |
| (460,461) |
| — |
| — |
| — |
| 10,089 |
| 470,550 |
| (460,461) | |||||||||
Professional fees |
| 141,567 |
| 241,501 |
| (99,934) |
| 6,818 |
| 42,962 |
| (36,144) |
| 148,385 |
| 284,463 |
| (136,078) | |||||||||
Office operations |
| 125,854 |
| 105,140 |
| 20,714 |
| 221,924 |
| 260,764 |
| (38,840) |
| 347,778 |
| 365,904 |
| (18,126) | |||||||||
Other expenses |
| 335,874 |
| 192,517 |
| 143,357 |
| 97,422 |
| 134,211 |
| (36,789) |
| 433,296 |
| 326,728 |
| 106,568 | |||||||||
Total Selling, general and administrative expenses | $ | 1,285,648 | $ | 1,430,096 | $ | (144,448) | $ | 413,695 | $ | 494,197 | $ | (80,502) | $ | 1,699,343 | $ | 1,924,293 | $ | (224,950) |
Consolidated staffing and stock based compensation expenses of $769,884 during the third quarter of 2021 reflect the impact a reduction in issuance of short term stock based compensation as an element of compensation, resulting in a decrease of $177,314 (19%) from the third quarter of 2020, during which the several of the Company’s officers and managers accepted stock based compensation in place of cash compensation. Professional fees decreased by $136,078 primarily due to a reduction in legal fees. Other expenses increased by $106,568 as compared to the third quarter of 2020 due to a $109,044 negative swing in foreign currency exchange on an unhedged position, an increase in equipment design costs of $31,625 in the Digester and Corporate business line offset by a $43,057 decrease in management fees in the HEBioT business line.
Depreciation and Amortization
Consolidated depreciation and amortization of $505,353 for the third quarter of 2021 decreased from $562,143 for the third quarter of 2020 due to adjustments in the depreciation expense over the remaining lives of assets at the HEBioT faculty.
27
Other Expenses
Consolidated other expenses of $622,819 for the third quarter of 2021 decreased from $1,023,057 during the third quarter of 2020 primarily due to the forgiveness of the Company’s loan under the Payroll Protection Program of $421,300, offset by a $19,037 increase in net interest, and absorption of a $10,982 loss from an unconsolidated investment.
Results of operations for the nine months ended September 30, 2021
compared to the nine months ended September 30, 2020
Overview
The Company continued its revenue growth during the nine months ended September 30, 2021 with total revenues of $11,018,581 increasing 226% over the comparative period in of 2020.
The overall contribution rate (revenues, less direct costs) increased to 22% during the nine months ended September 30, 2021, as compared to a negative 8% in the comparative period in of 2020.
Selling, general and administrative expenses as a percentage of revenues decreased to 49% during the nine months ended September 30, 2021, as compared to 170% in the comparative period in of 2020.
The loss from operations as a percentage of revenue decreased to 41% during the nine months ended September 30, 2021, as compared to 257% in the comparative period in of 2020.
The Company continues to achieve growth in the Digester and Corporate line of business that has been driven by sales to Carnival Cruise Lines such that the operating loss was driven down to $793,140 during the nine months ended September 30, 2021 from $3,965,136 during the nine months ended September 30, 2020.
During the nine months ended September 30, 2021 revenues at the HEBiot facility were $1,314,204, a decrease of $69,452 from the nine months ended September 30, 2020, which was offset by a $323,652 decrease in the related direct costs, resulting in a reduction in negative contribution of $254,200 to $1,140,658 from $1,394,858 during the respective periods.
The results of operations by business line are presented below.
Nine months ended September 30, | |||||||||||||||||||||||||||
Digester and Corporate | HEBioT | Total | |||||||||||||||||||||||||
| 2021 |
| 2020 |
| Change |
| 2021 |
| 2020 |
| Change |
| 2021 |
| 2020 |
| Change | ||||||||||
Revenue | |||||||||||||||||||||||||||
Equipment sales | $ | 8,050,145 | $ | 616,992 | $ | 7,433,153 | $ | — | $ | — | — | $ | 8,050,145 | $ | 616,992 | $ | 7,433,153 | ||||||||||
Rental, services and maintenance |
| 1,654,232 |
| 1,251,122 |
| 403,110 |
| — |
| — |
| — |
| 1,654,232 |
| 1,251,122 |
| 403,110 | |||||||||
HEBioT |
| — |
| — |
| — |
| 1,314,204 |
| 1,383,656 |
| (69,452) |
| 1,314,204 |
| 1,383,656 |
| (69,452) | |||||||||
Management and advisory fees and other |
| — |
| 124,380 |
| (124,380) |
| — |
| — |
| — |
| — |
| 124,380 |
| (124,380) | |||||||||
Total Revenue |
| 9,704,377 |
| 1,992,494 |
| 7,711,883 |
| 1,314,204 |
| 1,383,656 |
| (69,452) |
| 11,018,581 |
| 3,376,150 |
| 7,642,431 | |||||||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Equipment sales |
| 5,154,747 |
| 317,406 |
| 4,837,341 |
| — |
| — |
| — |
| 5,154,747 |
| 317,406 |
| 4,837,341 | |||||||||
Rental, services and maintenance |
| 1,008,608 |
| 552,195 |
| 456,413 |
| — |
| — |
| — |
| 1,008,608 |
| 552,195 |
| 456,413 | |||||||||
HEBioT |
| — |
| — |
| — |
| 2,454,862 |
| 2,778,514 |
| (323,652) |
| 2,454,862 |
| 2,778,514 |
| (323,652) | |||||||||
Selling, general and administrative |
| 3,965,586 |
| 4,713,924 |
| (748,338) |
| 1,392,111 |
| 1,026,234 |
| 365,877 |
| 5,357,697 |
| 5,740,158 |
| (382,461) | |||||||||
Impairment expense | — | — | — | — | 917,420 | (917,420) | — | 917,420 | (917,420) | ||||||||||||||||||
Depreciation and amortization |
| 368,576 |
| 374,105 |
| (5,529) |
| 1,139,708 |
| 1,373,004 |
| (233,296) |
| 1,508,284 |
| 1,747,109 |
| (238,825) | |||||||||
Total operating expenses |
| 10,497,517 |
| 5,957,630 |
| 4,539,887 |
| 4,986,681 |
| 6,095,172 |
| (1,108,491) |
| 15,484,198 |
| 12,052,802 |
| 3,431,396 | |||||||||
Loss from operations |
| (793,140) |
| (3,965,136) |
| 3,171,996 |
| (3,672,477) |
| (4,711,516) |
| 1,039,039 |
| (4,465,617) |
| (8,676,652) |
| 4,211,035 | |||||||||
Other expenses, net |
| 683,286 |
| 1,063,714 |
| (380,428) |
| 2,031,388 |
| 1,979,331 |
| 52,057 |
| 2,714,674 |
| 3,043,045 |
| (328,371) | |||||||||
Net loss | $ | (1,476,426) | $ | (5,028,850) | $ | 3,552,424 | $ | (5,703,865) | $ | (6,690,847) | $ | 986,982 | $ | (7,180,291) | $ | (11,719,697) | $ | 4,539,406 |
28
Contribution
The contribution by business line and product is presented below.
| Nine months ended September 30, |
| ||||||||||||||||||||||||||
Digester and Corporate | HEBioT | Total |
| |||||||||||||||||||||||||
| 2021 |
| 2020 |
| Change |
| 2021 |
| 2020 |
| Change |
| 2021 |
| 2020 |
| Change |
| ||||||||||
Contribution |
| |||||||||||||||||||||||||||
Equipment sales | $ | 2,895,398 | $ | 299,586 | $ | 2,595,812 | $ | — | $ | — | $ | — | $ | 2,895,398 | $ | 299,586 | $ | 2,595,812 | ||||||||||
Rental, services and maintenance |
| 645,624 |
| 698,927 |
| (53,303) |
| — |
| — |
| — |
| 645,624 |
| 698,927 |
| (53,303) | ||||||||||
HEBioT |
| — |
| — |
| — |
| (1,140,658) |
| (1,394,858) |
| 254,200 |
| (1,140,658) |
| (1,394,858) |
| 254,200 | ||||||||||
Management and advisory fees and other |
| — |
| 124,380 |
| (124,380) |
| — |
| — |
| — |
| — |
| 124,380 |
| (124,380) | ||||||||||
Total contribution | $ | 3,541,022 | $ | 1,122,893 | $ | 2,418,129 | $ | (1,140,658) | $ | (1,394,858) | $ | 254,200 | $ | 2,400,364 | $ | (271,965) | $ | 2,672,329 | ||||||||||
Contribution rate | ||||||||||||||||||||||||||||
Equipment sales | 36 | % | 49 | % | (13) | % | — | % | — | % | — | % | 36 | % | 49 | % | (13) | % | ||||||||||
Rental, services and maintenance | 39 | 56 | (17) | — | — | — | 39 | 56 | (17) | |||||||||||||||||||
HEBioT | — | — | — | (87) | (101) | 14 | (87) | (101) | 14 | |||||||||||||||||||
Management and advisory fees and other | — | 100 | (100) | — | — | — | — | 100 | (100) | |||||||||||||||||||
Total contribution rate | 36 | % | 56 | % | 31 | % | (87) | % | (101) | % | (366) | % | 22 | % | (8) | % | 35 | % |
The overall Digester and Corporate contribution increased to $3,541,022 during the nine months ended September 30, 2021 as compared to 1,122,893 in the comparative period of 2020. This increases were primarily the result of increased digester sales to Carnival Cruise Lines. The contribution margin during the nine months ended September 30, 2021 was 36%, as compared to 56% during the comparative period of 2020 prior to significant deliveries of digesters to Carnival Cruise Lines.
As noted previously, while HEBioT revenues for the nine months ended September 30, 2021 decreased by 5% from the comparative period in 2020, direct costs also decreased, resulting in a reduction in the negative contribution rate between the periods.
Selling, General and Administrative Expenses
| Nine months ended September 30, | ||||||||||||||||||||||||||
| Digester and Corporate | HEBioT | Total | ||||||||||||||||||||||||
| 2021 |
| 2020 |
| Change |
| 2021 |
| 2020 |
| Change |
| 2021 |
| 2020 |
| Change | ||||||||||
Selling, general and administrative expenses | |||||||||||||||||||||||||||
Staffing | $ | 2,011,561 | $ | 1,887,528 | $ | 124,033 | $ | 266,297 | $ | 136,476 | $ | 129,821 | $ | 2,277,858 | $ | 2,024,004 | $ | 253,854 | |||||||||
Stock based compensation |
| 255,161 |
| 1,056,853 |
| (801,692) |
| — |
| — |
| — |
| 255,161 |
| 1,056,853 |
| (801,692) | |||||||||
Professional fees |
| 623,821 |
| 797,871 |
| (174,050) |
| 58,606 |
| 145,649 |
| (87,043) |
| 682,427 |
| 943,520 |
| (261,093) | |||||||||
Office operations |
| 370,783 |
| 335,635 |
| 35,148 |
| 564,597 |
| 380,088 |
| 184,509 |
| 935,380 |
| 715,723 |
| 219,657 | |||||||||
Other expenses |
| 704,260 |
| 636,037 |
| 68,223 |
| 502,611 |
| 364,021 |
| 138,590 |
| 1,206,871 |
| 1,000,058 |
| 206,813 | |||||||||
Total Selling, general and administrative expenses | $ | 3,965,586 | $ | 4,713,924 | $ | (748,338) | $ | 1,392,111 | $ | 1,026,234 | $ | 365,877 | $ | 5,357,697 | $ | 5,740,158 | $ | (382,461) |
Consolidated staffing and stock based compensation expenses of $2,533,019 during the nine months ended September 30, 2021 reflect the impact of staffing reductions initiated in 2020, offset in by increases in management across all lines and administrative staffing at the HEBioT facility and a reduction in stock based compensation, which during 2020 included stock based companesation to several of the Company’s officers and managers in place of cash compensation, resulting in a decrease of $547,838 (18%) from the comparative period in 2020. Professional fees during the nine months ended September 30, 2021 decreased by $261,093 as compared to the comparative period of 2020, primarily due to a decrease of $100,627 in legal fees and a decrease of $111,833 in investor relations – investment banking, primarily related to strategic initiatives in the Digester and Corporate line of business, offset by a decrease of $87,043 in the HEBioT line of business primarily due to decreased legal and accounting fees. Office operations expenses during the nine months ended September 30, 2021 increased by $219,657 as compared to the comparative period of 2020, as a result of increased travel related costs of $80,481, offset by a favorable foreign currency fluctuation of $22,960 in the Digester and Corporate line of business and increases in property taxes of $99,981 and publicity/strategy of $66,378 in the HEBioT line of business. Other expenses during the nine months ended September 30, 2021 increased by $206,813 as compared the comparative period of 2020 primarily due to an increase of $166,768 related to an adjustment of the West Virginia landfill assessment in the HEBioT line of business.
Depreciation and Amortization
Consolidated depreciation and amortization of $1,508,284 during the nine months ended September 30, 2021 decreased by $238,825 from $1,747,109 during the nine months ended September 30, 2020 due to adjustments initiated in 2021 in the depreciation expense over the remaining lives of assets at the HEBioT faculty.
29
Other Expenses
Consolidated other expenses of $2,714,674 during the nine months ended September 30, 2021 decreased by $328,371from $3,043,045 during the nine months ended September 30, 2020 primarily due to the forgiveness of the Company’s loan under the Payroll Protection Program of $421,300, offset by a $58,155 increase in net interest, and absorption of a $43,731 loss from an unconsolidated investment.
Liquidity and Capital Resources
For the nine months ended September 30, 2021, the Company had a consolidated net loss of $7,180,291, incurred a consolidated loss from operations of $4,465,617 and used net cash in consolidated operating activities of $6,178,040. At September 30, 2021, consolidated total stockholders’ equity amounted to $5,990,736, consolidated stockholders’ equity attributable to parent amounted to $5,243,259, and the Company had a consolidated working capital deficit of $10,160,217. While the Company had not met certain of its senior secured note’s financial covenants as of September 30, 2021 and has received a waiver for such non-compliance through September 30, 2021, until such time as the Company regains compliance or receives a waiver of such covenants for a year beyond the balance sheet date, under current GAAP accounting rules, the senior secured note amounting to $3,746,025 has been classified as current debt. The Company does not yet have a history of financial profitability. On September 23, 2021 the Company entered into a committed equity facility (see Note 9) for up to the lesser of $20,000,000 or the Nasdaq exchange cap, there is no assurance that the Company will continue to raise sufficient capital or debt to sustain operations or to pursue other strategic initiatives or that such financing will be on terms that are favorable to the Company. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
Cash
As of September 30, 2021 and December 31, 2020, the Company had unrestricted cash balances of $622,088 and $2,403,859, respectively. In addition, as of September 30, 2021 and December 31, 2020, the Company had restricted cash balances of $6,368,027 and $4,492,636 relating to its West Virginia EDA senior secured bonds.
Borrowing and Debt
See Note 8. Notes, Bonds, Debts and Borrowings to the Financial Statements filed herewith.
Cash Flows
Cash flows used in operating activities — We used $6,178,040 of cash in operating activities during the nine months ended September 30, 2021, a decrease of $1,332,649 from $7,510,689 of cash used in operating activities during the nine months ended September 30, 2020. Excluding the change in operating assets and liabilities, we used $5,253,610 of cash in operating activities during the nine months ended September 30, 2021, a decrease of $1,347,572 from $6,601,182 of cash used in operating activities during the nine months ended September 30, 2020. Our net loss for the nine months ended September 30, 2021 of $7,180,291 was reduced by $1,926,681 of non-cash operating income and expenses as compared to a net loss for the nine months ended September 30, 2020 of $11,719,697 that was reduced by $5,118,515 of non-cash operating income and expenses.
Cash flows used in investing activities — $273,485 of cash was used in investing activities during the nine months ended September 30, 2021, as compared to a usage of $265,122 during the nine months ended September 30, 2020.
Cash flows from financing activities — Cash flows from financing activities amounted to $6,545,237 during the nine months ended September 30, 2021, a decrease of $4,595,449 from $11,140,686 of cash flows from financing activities during the nine months ended September 30, 2020. This decrease was primarily due to a decrease in cash flows from the issuance of common and preferred stock shares of $2,449,428, a decrease in advances from related parties of $725,000, a decrease in funding under the Payroll Protection Program and an increase in repayments on the Company’s senior secured note.
30
Off Balance Sheet Arrangements
We have not entered into or are a party to any off-balance sheet arrangements during the nine months ended September 30, 2021.
Item 3. | Quantitative and Qualitative Disclosures About Market Risk. |
We are a smaller reporting company as defined by 17 C.F.R. 229 (10)(f)(i) and are not required to provide information under this item.
Item 4. | Controls and Procedures. |
Evaluation of Disclosure Controls and Procedures
Our management carried out an evaluation, with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”).
Based upon their evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that a material weakness existed and that the Company’s disclosure controls and procedures are not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Because of our limited operations, we have a small number of employees which prohibits a segregation of duties, which results in a material weakness over disclosure controls and procedures, as well as internal control over financial reporting. The Company has not had access to sufficient resources within the accounting function, which restricted the Company’s ability to gather, analyze and properly review information related to financial reporting, including complex accounting matters, in a timely manner. We expect to add additional resources as we grow and expand our overall operations. However, there can be no assurance that our operations will expand.
Changes in Internal Controls Over Financial Reporting
There have not been any significant changes in our internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - | OTHER INFORMATION |
Item 1. | Legal Proceedings. |
From time to time, we are a party to, or otherwise involved in, legal proceedings arising in the normal and ordinary course of business. As of the date of this report, we are not aware of any proceeding, threatened or pending, against us which, if determined adversely, would have a material effect on our business, results of operations, cash flows or financial position.
Item 1A. | Risk Factors. |
We are a smaller reporting company as defined by 17 C.F.R. 229 (10)(f)(i) and are not required to provide information under this item.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
On August 17, 2021 the Company issued 5,000 shares of unregistered common stock to a senior lender in connection with services rendered relating to the preparation and delivery of a waiver for certain non-compliance through the period ending June 30, 2021.
31
On August 20, 2021 the Company issued 50,000 shares of unregistered common stock to a senior lender for consent to enter into the transaction contemplated by this Offering.
On September 23, 2021, the Company issued and sold 625,000 shares of common stock to the selling stockholder for an aggregate gross purchase price of $750,000 and issued 69,137 shares to the selling stockholder as a commitment fee upon execution of a Common Stock Purchase Agreement.
All of the securities referred to, above, were issued without registration under the Securities Act of 1933, as amended (the “Securities Act”) in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act as provided in Rule 506(b) of Regulation D promulgated thereunder. All of the foregoing securities as well the Common Stock issuable upon conversion or exercise of such securities, have not been registered under the Securities Act or any other applicable securities laws and are deemed restricted securities, and unless so registered, may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Securities Act.
The sale of securities did not involve a public offering; the Company made no solicitation in connection with the sale other than communications with the investors; the Company obtained representations from the investors regarding their investment intent, experience and sophistication; and the investors either received or had access to adequate information about the Company in order to make an informed investment decision.
Item 3. | Defaults Upon Senior Securities. |
None.
Item 4. | Mine Safety Disclosures. |
Not Applicable.
Item 5. | Other Information. |
Not Applicable.
Item 6. | Exhibits. |
See the exhibits listed in the accompanying “Index to Exhibits.”
32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| BioHiTech Global, Inc. | |
|
| |
November 18, 2021 | By: | /s/ Anthony Fuller |
Name: | Anthony Fuller | |
Title: | Chief Executive Officer | |
| (Principal Executive Officer) | |
|
| |
By: | /s/ Brian C. Essman | |
Name: | Brian C. Essman | |
Title: | Chief Financial Officer and Treasurer | |
| (Principal Financial and Accounting Officer) |
33
INDEX TO EXHIBITS
Exhibit |
|
|
| Incorporated by Reference |
| Filed or | ||||
No. |
| Exhibit Description |
| Form |
| Date |
| Number |
| Herewith |
31.1 |
|
|
|
|
|
|
|
| Filed | |
31.2 |
|
|
|
|
|
|
|
| Filed | |
32.1 |
|
|
|
|
|
|
|
| Furnished* | |
32.2 |
|
|
|
|
|
|
|
| Furnished* | |
101.INS |
| Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
|
|
|
|
|
|
| Filed |
101.SCH |
| Inline XBRL Taxonomy Extension Schema Document |
|
|
|
|
|
|
| Filed |
101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
|
|
|
| Filed |
101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
|
|
|
| Filed |
101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
|
|
|
| Filed |
101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
|
|
|
| Filed |
104 | Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit) | Filed |
* This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-X.
Copies of this report (including the financial statements) and any of the exhibits referred to above will be furnished at no cost to our shareholders who make a written request to our Corporate Secretary at 80 Red Schoolhouse Road, Chestnut Ridge, New York 10977.
34