0001354488-16-007966.txt : 20160701
0001354488-16-007966.hdr.sgml : 20160701
20160701170233
ACCESSION NUMBER: 0001354488-16-007966
CONFORMED SUBMISSION TYPE: S-1/A
PUBLIC DOCUMENT COUNT: 69
FILED AS OF DATE: 20160701
DATE AS OF CHANGE: 20160701
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: Meridian Waste Solutions, Inc.
CENTRAL INDEX KEY: 0000949721
STANDARD INDUSTRIAL CLASSIFICATION: SANITARY SERVICES [4950]
IRS NUMBER: 133832215
STATE OF INCORPORATION: NY
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: S-1/A
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-212005
FILM NUMBER: 161747550
BUSINESS ADDRESS:
STREET 1: 12540 BROADWELL ROAD, ,
STREET 2: SUITE 1203
CITY: MILTON
STATE: 2Q
ZIP: 30004
BUSINESS PHONE: (678) 871-7457
MAIL ADDRESS:
STREET 1: 12540 BROADWELL ROAD, ,
STREET 2: SUITE 1203
CITY: MILTON
STATE: 2Q
ZIP: 30004
FORMER COMPANY:
FORMER CONFORMED NAME: Brooklyn Cheesecake & Desert Com
DATE OF NAME CHANGE: 20050222
FORMER COMPANY:
FORMER CONFORMED NAME: CREATIVE BAKERIES INC
DATE OF NAME CHANGE: 19970812
FORMER COMPANY:
FORMER CONFORMED NAME: WILLIAM GREENBERG JR DESSERTS & CAFES INC
DATE OF NAME CHANGE: 19950918
S-1/A
1
mrdn_s1.htm
REGISTRATION STATEMENT
mrdn_s1.htm
As filed with the Securities and Exchange Commission on July 1, 2016
File No. 333-212005
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
MERIDIAN WASTE SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
New York
4950
13-3832215
(State or other jurisdiction of
incorporation)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification No.)
12540 Broadwell Road, Suite 2104
Milton, GA 30004
Tel: (678) 871-7454
(Address and telephone number of registrant’s principal
executive offices and principal place of business)
Jeffrey Cosman
12540 Broadwell Road, Suite 2104
Milton, GA 30004
Tel: (678) 871-7454
(Name, address and telephone number of agent for service)
Communication Copies to:
Lucosky Brookman LLP
Joseph M. Lucosky, Esq.
Scott E. Linsky, Esq.
Lawrence Metelitsa, Esq.
101 Wood Avenue South, 5th Floor
Woodbridge, New Jersey 08830
Tel No.: (732) 395-4400
Fax No.: (732) 395-4401
Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. x
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, please check the following box and list the Securities Act registration Statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer,” accelerated filer,” and smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
Non-accelerated filer
¨
Accelerated filer
¨
Smaller reporting company
x
CALCULATION OF REGISTRATION FEE
Title of Each Class Of
Securities to be Registered
Amount to be Registered (1)(2)
Proposed Maximum Aggregate Offering Price per share (3)
Proposed Maximum Aggregate Offering Price
Amount of Registration Fee
Common Stock, $0.025 par value per share
1,191,774
$
1.20
$
1,430,128.80
$
144.01
(1)
In the event of a stock split, reverse stock split, stock dividend or similar transaction involving our common stock, the number of shares registered shall automatically be adjusted to cover the additional shares of stock issuable pursuant to Rule 416 under the Securities Act.
(2)
Includes 1,191,774 shares of common stock issued to Here to Serve Holding Corp. pursuant to that certain Membership Interest Purchase Agreement
(3)
Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(c) under the Securities Act, using the closing price as reported on the Over-the-Counter Market Place (the “OTCQB”) on June 10, 2016, which was $1.20 per share.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(a), MAY DETERMINE.
The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the U.S. Securities and Exchange Commission (“SEC”) is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS
Subject to completion, dated , 2016
MERIDIAN WASTE SOLUTIONS, INC.
1,191,774 SHARES OF COMMON STOCK
This prospectus relates to the resale of 1,191,774 shares of our common stock, par value $0.025 per share, by the selling security holders (the “Selling Security Holders”). The shares offered for resale by this prospectus include the following:
·
1,191,774 shares of common stock issued to Here to Serve Holding Corp. pursuant to that certain Membership Interest Purchase Agreement.
We will not receive any of the proceeds from the sale of shares of common stock by the selling security holders. See “Use of Proceeds” beginning on page 19 of this prospectus.
Our common stock is quoted on the OTCQB under the symbol “MRDN.” On June 10, 2016, the closing bid price of our common stock was $1.20 per share.
This investment involves a high degree of risk. You should purchase shares only if you can afford a complete loss. See “Risk Factors” beginning on page 8.
Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is July 1, 2016
i
TABLE OF CONTENTS
PAGE
Prospectus Summary
1
Risk Factors
8
Special Note Regarding Forward-Looking Statements
19
Use of Proceeds
19
Determination of Offering Price
19
Selling Security Holders
19
Plan of Distribution
19
Market for Common Equity and Related Stockholder Matters
22
Penny Stock Rules
23
Selected Financial Data
24
Management Discussion and Analysis of Financial Condition and Results of Operations
25
Description of Business
35
Description of Property
44
Directors, Executive Officers, Promoters and Control Persons
45
Executive Compensation
47
Transactions with Related Persons, Promoters and Certain Control Persons
49
Security Ownership of Certain Beneficial Owners and Management
49
Description of Capital Stock
50
Legal Matters
53
Experts
53
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
54
Incorporation by Reference
54
Where You Can Find More Information
54
Disclosure of Commission Position on Indemnification of Securities Act Liabilities
54
Index to Financial Statements
55
You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that which is contained in this prospectus. This prospectus may be used only where it is legal to sell these securities. The information in this prospectus may only be accurate on the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of securities. This prospectus contains important information about us that you should read and consider carefully before you decide whether to invest in our common stock. If you have any questions regarding the information in this prospectus, please contact Jeffrey Cosman, our Chief Executive Officer, at: Meridian Waste Solutions, Inc., 12540 Broadwell Road, Suite 2104 Milton, GA 30004 at (678) 871-7457.
ii
PROSPECTUS SUMMARY
This summary highlights certain information contained elsewhere in this prospectus. Because it is a summary, it may not contain all of the information that is important to you. Before investing in our common stock, you should read this entire prospectus carefully, especially the sections entitled “Risk Factors” beginning on page 8 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 25, as well our financial statements and related notes included elsewhere in this prospectus. In this prospectus, the terms “Meridian Waste Solutions, Inc.,” “Company,” “we,” “us” and “our” refer to Meridian Waste Solutions, Inc. and its wholly owned subsidiaries.
Overview
Meridian Waste Solutions, Inc. (formerly Brooklyn Cheesecake & Desserts Company, Inc. hereafter referred to as the “Company” or “Meridian”) is an integrated provider of non-hazardous solid waste collection, transfer and disposal services. We currently have all of our operations in Missouri but are actively looking to expand our presence across the Midwest, South and East regions of the United States.
Corporate Structure:
Customers
Meridian has two municipal contracts, the first of which accounted for 26% and 27% and the second of which accounted for 18% and 19% of the long term contracted revenue of Here to Serve Missouri Waste Division, LLC (“HTS Waste”) for the years ended December 31, 2015 and 2014 respectively.
Collection Services
Meridian, through its subsidiaries, provides solid waste collection services to approximately 65,000 industrial, commercial and residential customers in the Metropolitan St. Louis, Missouri area. In 2015, its collection revenue consisted of approximately 17% from services provided to industrial customers, 13% from services provided to commercial customers and 70% from services provided to residential customers.
In our commercial collection operations, we supply our customers with waste containers of various types and sizes. These containers are designed so that they can be lifted mechanically and emptied into a collection truck to be transported to a disposal facility. By using these containers, we can service most of our commercial customers with trucks operated by a single employee. Commercial collection services are generally performed under service agreements with a duration of one to five years with possible renewal options. Fees are generally determined by such considerations as individual market factors, collection frequency, the type and volume or weight of the waste to be collected, the distance to the disposal facility and the cost of disposal.
1
Residential solid waste collection services often are performed under contracts with municipalities, which we generally secure by competitive bid and which give us exclusive rights to service all or a portion of the homes in these municipalities. These contracts usually range in duration from one to five years with possible renewal options. Generally, the renewal options are automatic upon the mutual agreement of the municipality and the provider; however, some agreements provide for mandatory re-bidding. Alternatively, residential solid waste collection services may be performed on a subscription basis, in which individual households or homeowners’ or similar associations contract directly with us. In either case, the fees received for residential collection are based primarily on market factors, frequency and type of service, the distance to the disposal facility and the cost of disposal.
Additionally, we rent waste containers and provide collection services to construction, demolition and industrial sites. We load the containers onto our vehicles and transport them with the waste to either a landfill or a transfer station for disposal. We refer to this as “roll-off” collection. Roll-off collection services are generally performed on a contractual basis. Contract terms tend to be shorter in length and may vary according to the customers’ underlying projects.
Transfer and Disposal Services
Landfills are the main depository for solid waste within our marketplace. Solid waste landfills are built, operated, and tied to a state permit under stringent federal, state and local regulations. Currently, solid waste landfills in the United States must be designed, permitted, operated, closed and maintained after closure in compliance with federal, state and local regulations pursuant to Subtitle D of the Resource Conservation and Recovery Act of 1976, as amended. We do not operate hazardous waste landfills, which may be subject to even greater regulations. Operating a solid waste landfill includes excavating, constructing liners, continually spreading and compacting waste and covering waste with earth or other inert material as required, final capping, closure and post-closure monitoring. The objectives of these operations are to maintain sanitary conditions, to ensure the best possible use of the airspace and to prepare the site so that it can ultimately be used for other end use purposes.
Access to a disposal facility is a necessity for all solid waste management companies. While access to disposal facilities owned or operated by third parties can be obtained, we believe that it is preferable to internalize the waste streams when possible. Meridian is targeting further geographic, as well as operational expansion by focusing on markets with transfer stations and landfills available for acquisition.
Our transfer stations allow us to consolidate waste for subsequent transfer in larger loads, thereby making disposal in our otherwise remote landfills economically feasible. A transfer station is a facility located near residential and commercial collection routes where collection trucks take the solid waste that has been collected. The waste is unloaded from the collection trucks and reloaded onto larger transfer trucks for transportation to a landfill for final disposal. Transfer stations are generally owned by municipalities, with contracts to operate such transfer stations awarded based on bids. As an alternative to operating a transfer station directly, we could negotiate the use of a transfer station owned by a private party or operated by a competitor; however, due to synergies and more favorable rates, operating our own transfer station is more profitable. In addition to increasing our ability to internalize the waste that our collection operations collect, using transfer stations reduces the costs associated with transporting waste to final disposal sites because the trucks we use for transfer have a larger capacity than collection trucks, thus allowing more waste to be transported to the disposal facility on each trip.
Our Operating Strengths
Experienced Leadership
We have a proven and experienced senior management team. Our Chief Executive Officer, Jeffrey S. Cosman, and President and COO Walter H. Hall combine over 35 years of experience in the solid waste industry, including significant experience in local and regional operations, local and regional accounting, mergers & acquisitions, integration and the development of disposal capacity. Members of our team have held senior positions at Republic Services, Advanced Disposal, Southland Waste Services and Brown Ferris Industries. Our team has experience in the implementation of strategic marketplace plans, sales, safety, acquisitions, and coordination of assets and personnel. While our senior leadership team creates and drives our overall growth strategy, we rely on a decentralized management structure which does not interfere with local management which affords us the opportunity to capitalize on growth and cost reduction at the local level.
2
Vertically Integrated Operations
The vertical integration of our operations allows us to manage the waste stream from the point of collection through disposal, which we hope will enable us to maximize profit by controlling costs and gaining competitive advantages, while still providing high-quality service to our customers. In the St. Louis market, because we have integrated our network of collection, transfer and disposal assets, primarily using our own resources, we generate a steady, predictable stream of waste volume and capture an incremental disposal margin. As an additional benefit, we charge tipping fees to third-party collection service providers for the use of our transfer stations or landfills, providing a source of recurring revenue. We believe this internalization rate provides us with a significant cost advantage over our competitors, positioning us well to win additional profitable business through new customer acquisition and municipal contract awards. We also believe this vertically integrated structure enables us to quickly and efficiently integrate future acquisitions of transfer stations, collection operations or landfills into our current operations.
Landfill and Transfer Station Assets
We have one active and strategically located landfill at the core of our integrated operations which we believe provides us a significant competitive advantage in Missouri, in that we do not need to use our competitors’ landfills. Our landfill has substantial remaining airspace, which will help us to sustain the long-term competitive advantages that our vertically integrated model provides.
The value of our landfill may be further enhanced by synergies associated with our vertically integrated operations, including our transfer stations, which enable us to cover a greater geographic area surrounding the landfill, and provide competitive advantages in that we would not need to use our competitors’ landfills. In our experience there has generally been shift toward fewer, larger landfills has resulted in landfills that are generally located farther from population centers, with waste being transported longer distances between collection and disposal, typically after consolidation at a transfer station. With a landfill, transfer stations and collection services in place, we aim to provide vertically integrated operations that cover the substantial geographic area surrounding the landfill. In the event that non-renewal of our agreements for our transfer stations requires us to make arrangement with other transfer stations on less favorable terms, we would nevertheless benefit from the integration with our landfill operations.
Acquisition Integration and Municipal Contracts
Our business model contemplates our ability to execute and integrate value-enhancing, tuck-in acquisitions and win new municipal contracts as a core component of our growth. In the last six months since our acquisition of Christian Disposal, LLC and the Eagle Ridge Landfill, LLC Asset, we have completed two tuck-in acquisitions which we believe will improve or margins and improve cash flow.
As a management team, we have experience executing large-scale transactions by direct association with our historical success at Republic Services, Advanced Disposal and Browning Ferris Industries. In addition to significantly expanding our scale of operations, the acquisitions of Christian Disposal, LLC and Eagle Ridge Landfill, LLC enhanced our geographic footprint by providing us with complementary operations throughout the state of Missouri. This has helped us realize cost efficiencies through improved internalization by virtue of increased route concentration and more efficient utilization of our assets.
Finally, our management team has demonstrated success in municipal contract bidding, as we have over 30 municipal contracts.
3
Long-Term Contracts
We serve approximately 65,000 residential, commercial and Construction & Industrial (C&I) customers, with no single customer representing more than 12% of revenue in 2015. Our municipal customer relationships are generally supported by contracts ranging from one to five years in initial duration with subsequent renewal periods, and we have a regular renewal rate with such customers. Our standard C&I service agreement is a five-year renewable agreement. We believe our customer relationships, long-term contracts and exceptional retention rate provide us with a high degree of stability as we continue to grow.
Customer Service
We maintain a central focus on customer service and we pride ourselves on trying to consistently exceed our customers' expectations. We believe investing in our customer satisfaction will ultimately maximize customer loyalty price stability.
Commitment to Safety
The safety of our employees and customers is extremely important to us and we have a strong track record of safety and environmental compliance. We constantly review and assess our policies practices and procedures in order to create a safer work environment for our employees and to reduce the frequency of workplace injuries.
Our Growth Strategy
Growth of Existing Markets
We believe that as the residential population and number of businesses grow in our existing market, we will see waste volumes increase organically. We seek to remain active and alert with respect to the changing landscapes in the communities in which we already provide service in order obtain long-term contracts for collecting solid waste for residential collection, collection from municipalities, as well as collection from small and large commercial and industrial contracts. Obtaining long-term contracts will enable us to grow our revenue base at the same rate as the underlying economic growth in these markets. Furthermore, securing long-term contracts provides a significant barrier to entry from competitors in these markets.
Expanding into New Markets
Our operating model focuses on vertically integrated operations. We continue to pursue a growth strategy that includes acquiring solid waste companies that complement our existing business. Our goal is to create market-specific, vertically integrated operations consisting of one or more collection operations, transfer stations and landfills.
As we expand, we plan to focus our business in the secondary markets where competition from national service providers is limited. We plan to start new market development projects in certain disposal-neutral markets in which we will provide services under exclusive arrangements with municipal customers, which facilitates highly-efficient and profitable collection operations. We believe this strategic focus positions us to maintain significant share within our target markets, maximize customer retention and benefit from a higher and more stable pricing environment.
Acquisition and Integration
Our revenue model is based on organic growth of operations, the acquisition of established operations in new markets as well as being able execute value-adding, tuck-in acquisitions. We hope to direct acquisition efforts towards those markets in which in which we would be able to provide vertically integrated collection and disposal services and/or provide waste collection services, pursuant to contracts that grant exclusivity. Prior to acquisition, we analyze each prospective target for cost savings through the elimination of inefficiencies and excesses that are typically associated with private companies competing in fragmented industries. We aim to realize synergies from consolidating businesses into our existing operations, which we hope will allow us to reduce capital and expense requirements associated with truck routing, personnel, fleet maintenance, inventories and back-office administration.
4
Pursue Additional Exclusive Municipal Contracts
We intend to devote significant resources to securing additional municipal contracts. Our management team is well versed in bidding for municipal contracts with over 35 of experience and working knowledge in the solid waste industry and local service areas in existing and target markets. We hope to to procure and negotiate additional exclusive municipal contracts, allowing us to maintain stable recurring revenue but also providing a significant barrier to entry to our competitors in those markets.
Invest in Strategic Infrastructure
We will continue to invest in our infrastructure to support growth and increase our margins. We will invest resources toward its development and enhancement in order to increase our disposal capacity. Similarly, we will continue to evaluate opportunities to maximize the efficiency of our collection operations.
5
Risks Related to Our Business
·
WE ARE SUBJECT TO ENVIRONMENTAL, HEALTH AND SAFETY LAWS, WHICH RESTRICT OUR OPERATIONS AND INCREASE OUR COSTS;
·
WE MAY BECOME SUBJECT TO ENVIRONMENTAL CLEAN-UP COSTS OR LITIGATION THAT COULD CURTAIL OUR BUSINESS OPERATIONS AND MATERIALLY DECREASE OUR EARNINGS;
·
OUR BUSINESS IS CAPITAL INTENSIVE, REQUIRING ONGOING CASH OUTLAYS THAT MAY STRAIN OR CONSUME OUR AVAILABLE CAPITAL AND FORCE US TO SELL ASSETS, INCUR DEBT, OR SELL EQUITY ON UNFAVORABLE TERMS;
·
THE COMPANY’S FAILURE TO COMPLY WITH THE OBLIGATIONS SET FORTH IN THE AGREEMENTS ENTERED INTO WITH GOLDMAN SACHS SPECIALTY LENDING GROUP, L.P. MAY RESULT IN THE FORECLOSURE OF THE COMPANY’S OR ITS SUBSIDIARIES’ PLEDGED ASSETS AND OTHER ADVERSE CONSEQUENCES;
·
GOVERNMENTAL AUTHORITIES MAY ENACT CLIMATE CHANGE REGULATIONS THAT COULD INCREASE OUR COSTS TO OPERATE;
·
OUR OPERATIONS ARE SUBJECT TO ENVIRONMENTAL, HEALTH AND SAFETY LAWS AND REGULATIONS, AS WELL AS CONTRACTUAL OBLIGATIONS THAT MAY RESULT IN SIGNIFICANT LIABILITIES;
·
OUR BUSINESS IS SUBJECT TO OPERATIONAL AND SAFETY RISKS, INCLUDING THE RISK OF PERSONAL INJURY TO EMPLOYEES AND OTHERS;
·
INCREASES IN THE COSTS OF FUEL MAY REDUCE OUR OPERATING MARGINS;
·
INCREASES IN THE COSTS OF DISPOSAL MAY REDUCE OUR OPERATING MARGINS;
·
INCREASES IN THE COSTS OF LABOR MAY REDUCE OUR OPERATING MARGINS;
·
WE MAY LOSE CONTRACTS THROUGH COMPETITIVE BIDDING, EARLY TERMINATION OR GOVERNMENTAL ACTION, OR WE MAY HAVE TO SUBSTANTIALLY LOWER PRICES IN ORDER TO RETAIN CERTAIN CONTRACTS, ANY OF WHICH WOULD CAUSE OUR REVENUE TO DECLINE;
·
EFFORTS BY LABOR UNIONS TO ORGANIZE OUR EMPLOYEES COULD DIVERT MANAGEMENT ATTENTION AND INCREASE OUR OPERATING EXPENSES;
·
POOR DECISIONS BY OUR REGIONAL AND LOCAL MANAGERS COULD RESULT IN THE LOSS OF CUSTOMERS OR AN INCREASE IN COSTS, OR ADVERSELY AFFECT OUR ABILITY TO OBTAIN FUTURE BUSINESS;
·
WE ARE DEPENDENT ON OUR MANAGEMENT TEAM AND DEVELOPMENT AND OPERATIONS PERSONNEL, AND THE LOSS OF ONE OR MORE KEY EMPLOYEES OR GROUPS COULD HARM OUR BUSINESS AND PREVENT US FROM IMPLEMENTING OUR BUSINESS PLAN IN A TIMELY MANNER;
·
OUR BUSINESS IS SUBJECT TO CHANGING REGULATIONS REGARDING CORPORATE GOVERNANCE AND PUBLIC DISCLOSURE THAT HAVE INCREASED BOTH OUR COSTS AND THE RISK OF NON-COMPLIANCE; AND
·
WE NEED ADDITIONAL CAPITAL TO DEVELOP OUR BUSINESS.
Our Corporate Information
Our principal executive office is located at 12540 Broadwell Road, Suite 2104 Milton, GA 30004, and our telephone number is (678) 871-7457. Our Internet address is www.meridianwastesolutions.com.
6
The Offering
Common Stock Offered by the Selling Security Holders
1,191,774 shares of common stock issued to Here to Serve Holding Corp. pursuant to that certain Membership Interest Purchase Agreement.
Common Stock Outstanding Before the Offering
25,554,867 shares of common stock as of June 8, 2016.
,,
Common Stock Outstanding After the Offering
25,554,867 shares of common stock.
Terms of the Offering
The selling security holders will determine when and how they will sell the common stock offered in this prospectus.
Termination of the Offering
The offering will conclude upon such time as all of the common stock has been sold pursuant to the registration statement.
Use of Proceeds
We will not receive any of the proceeds from any sale of the shares of common stock by selling security holders. See “Use of Proceeds.”
Risk Factors
The common stock offered hereby involves a high degree of risk and should not be purchased by investors who cannot afford the loss of their entire investment. See “Risk Factors” beginning on page [●].
OTCQB Symbol
MRDN
7
RISK FACTORS
The following discussion and analysis should be read in conjunction with the other financial information and consolidated financial statements and related notes appearing in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results will depend upon a number of factors beyond our control and could differ materially from those anticipated in the forward-looking statements. Some of these factors are discussed below and elsewhere in this prospectus.
Risks Related to Our Business and Industry
RISKS RELATED TO OUR COMPANY AND OUR INDUSTRY
WE ARE SUBJECT TO ENVIRONMENTAL AND SAFETY LAWS, WHICH RESTRICT OUR OPERATIONS AND INCREASE OUR COSTS.
We are subject to extensive federal, state and local laws and regulations relating to environmental protection and occupational safety and health. These include, among other things, laws and regulations governing the use, treatment, storage and disposal of wastes and materials, air quality, water quality and the remediation of contamination associated with the release of hazardous substances. Our compliance with existing regulatory requirements is costly, and continued changes in these regulations could increase our compliance costs. Government laws and regulations often require us to enhance or replace our equipment. We are required to obtain and maintain permits that are subject to strict regulatory requirements and are difficult and costly to obtain and maintain. We may be unable to implement price increases sufficient to offset the cost of complying with these laws and regulations. In addition, regulatory changes could accelerate or increase expenditures for closure and post-closure monitoring at solid waste facilities and obligate us to spend sums over the amounts that we have accrued. In order to develop, expand or operate a landfill or other waste management facility, we must have various facility permits and other governmental approvals, including those relating to zoning, environmental protection and land use. The permits and approvals are often difficult, time consuming and costly to obtain and could contain conditions that limit our operations.
WE MAY BECOME SUBJECT TO ENVIRONMENTAL CLEAN-UP COSTS OR LITIGATION THAT COULD CURTAIL OUR BUSINESS OPERATIONS AND MATERIALLY DECREASE OUR EARNINGS.
The Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, or CERCLA, and analogous state laws provide for the remediation of contaminated facilities and impose strict joint and several liability for remediation costs on current and former owners or operators of a facility at which there has been a release or a threatened release of a hazardous substance. This liability is also imposed on persons who arrange for the disposal of and who transport such substances to the facility. Hundreds of substances are defined as hazardous under CERCLA and their presence, even in small amounts, can result in substantial liability. The expense of conducting a cleanup can be significant. Notwithstanding our efforts to comply with applicable regulations and to avoid transporting and receiving hazardous substances, we may have liability because these substances may be present in waste collected by us. The actual costs for these liabilities could be significantly greater than the amounts that we might be required to accrue on our financial statements from time to time.
In addition to the costs of complying with environmental regulations, we may incur costs to defend against litigation brought by government agencies and private parties. As a result, we may be required to pay fines or our permits and licenses may be modified or revoked. We may in the future be a defendant in lawsuits brought by governmental agencies and private parties who assert claims alleging environmental damage, personal injury, property damage and/or violations of permits and licenses by us. A significant judgment against us, the loss of a significant permit or license or the imposition of a significant fine could curtail our business operations and may decrease our earnings.
8
OUR BUSINESS IS CAPITAL INTENSIVE, REQUIRING ONGOING CASH OUTLAYS THAT MAY STRAIN OR CONSUME OUR AVAILABLE CAPITAL AND FORCE US TO SELL ASSETS, INCUR DEBT, OR SELL EQUITY ON UNFAVORABLE TERMS.
Our ability to remain competitive, grow and maintain operations largely depends on our cash flow from operations and access to capital. Maintaining our existing operations and expanding them through internal growth or acquisitions requires large capital expenditures. As we undertake more acquisitions and further expand our operations, the amount we expend on capital will increase. These increases in expenditures may result in lower levels of working capital or require us to finance working capital deficits. We intend to continue to fund our cash needs through cash flow from operations, equity and debt financings and borrowings under our credit facility, if necessary. However, we may require additional equity or debt financing to fund our growth.
We do not have complete control over our future performance because it is subject to general economic, political, financial, competitive, legislative, regulatory and other factors. It is possible that our business may not generate sufficient cash flow from operations, and we may not otherwise have the capital resources, to allow us to make necessary capital expenditures. If this occurs, we may have to sell assets, restructure our debt or obtain additional equity capital, which could be dilutive to our stockholders. We may not be able to take any of the foregoing actions, and we may not be able to do so on terms favorable to us or our stockholders.
THE COMPANY’S FAILURE TO COMPLY WITH THE OBLIGATIONS SET FORTH IN THE AGREEMENTS ENTERED INTO WITH GOLDMAN SACHS SPECIALTY LENDING GROUP, L.P. MAY RESULT IN THE FORECLOSURE OF THE COMPANY’S OR ITS SUBSIDIARIES’ PLEDGED ASSETS AND OTHER ADVERSE CONSEQUENCES.
Effective December 22, 2015, the Company closed a Credit and Guaranty Agreement (the “Credit Agreement”) by and among the Company, Brooklyn Cheesecake & Dessert Acquisition Corp., Here to Serve - Missouri Waste Division, LLC, Here to Serve - Georgia Waste Division, LLC, Meridian Land Company, LLC, Christian Disposal, LLC, and FWCD, LLC, and certain subsidiaries of the Company, as Guarantors, the Lenders party thereto from time to time and Goldman Sachs Specialty Lending Group, L.P., as Administrative Agent, Collateral Agent, and Lead Arranger.
Pursuant to the Credit Agreement, Lenders have agreed to extend certain credit facilities to the Companies, in an aggregate amount not to exceed $55,000,000, consisting of $40,000,000 aggregate principal amount of Tranche A Term Loans (the “Tranche A Term Loans”), $10,000,000 aggregate principal amount of Multi-Draw Term Loans (the “MDTL Term Loans”), and up to $5,000,000 aggregate principal amount of Revolving Commitments (the “Revolving Commitments” and, together with the Tranche A Term Loans and the MDTL Term Loans, the “Loans”). The proceeds of the Loans are to be used as follows: (i) the proceeds of the Tranche A Term Loans shall be applied by Companies to (a) partially fund the acquisitions of Christian Disposal, FWCD and certain assets of Eagle Ridge Landfill, LLC, (b) refinance existing indebtedness of the Companies, (c) pre-fund certain capital expenditures, (d) pay fees and expenses in connection with the transactions contemplated by the Credit Agreement and (e) for working capital and other general corporate purposes; (ii) the proceeds of the Revolving Commitments will be used for working capital and general corporate purposes and (iii) the proceeds of the MDTL Term Loans will be used for acquisitions permitted under the Credit Agreement. The Loans are evidenced, respectively, by that certain Tranche A Term Loan Note, MDTL Note and Revolving Loan Note, all issued on December 22, 2015 (collectively, the “Notes”). Under the Notes and Credit Agreement, prepayments are subject to certain prepayment premiums, and payment obligations are subject to acceleration upon the occurrence of events of default under the Credit Agreement.
The Loans and other obligations under the Credit Agreement are secured by a first position security interest in substantially all of the Company’s and the Companies’ assets in favor of the Collateral Agent, in accordance with that certain Pledge and Security Agreement dated as of December 22, 2015 (the “Pledge and Security Agreement”).
In connection with the Credit Agreement, on December 22, 2015, the Company issued that certain Purchase Warrant for Common Shares to Goldman, Sachs & Co. (the “Warrant”) for the purchase of shares of the Company’s common stock equivalent to a 6.5% Percentage Interest (as such term is defined in the Warrant) at a purchase price equal to $449,553, exercisable on or before December 22, 2023. The Warrant grants the holder certain other rights, including registration rights, preemptive rights for certain capital raises, board observation rights and indemnification.
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The Company’s failure to comply with the obligations set forth in the Credit Agreement and related documents or the occurrence of certain other specified events could result in an event of default that, if not cured or waived, could result in the acceleration of all or a substantial portion of our debt, potential foreclosure on our assets and other adverse consequences. Events of Default under the Credit Agreement include, without limitation, the Company’s: failure to make payments when due, defaults under other agreements, breach of certain covenants or representations, bankruptcy, change of control and termination of a material contract.
For more detailed information with respect to the Credit Agreement and related documents please refer to Exhibit 4.2 hereof.
THE COMPANY’S FAILURE TO MAINTAIN CERTAIN LEVERAGE RATIOS SET FORTH IN THE CREDIT AGREEMENT HAS HISTORICALLY RESULTED IN, AND MAY CONTINUE TO RESULT IN, THE COMPANY BEING UNABLE TO DRAW DOWN ADDITONAL FUNDS PURSUANT TO THE CREDIT AGREEMENT, AND AS A RESULT, WE MAY NEED TO SEEK OTHER SOURCES OF CAPITAL, WHICH COULD BE ON LESS FAVORABLE TERMS .
Due to certain unanticipated delays in integration of landfill operations, including due to flooding in St. Louis area in December 2015, the Company has historically not been able to, and may continue not to be able to, maintain the leverage ratios set forth in the Credit Agreement. As a result, the Company will not be able to draw down additional funds pursuant to the Credit Agreement until such time as such leverage ratios comply with the requirements of the Credit Agreement. If the Company is unable to draw down additional funds pursuant to the Credit Agreement, it may be required to seek other sources of capital, and such capital may only be available on terms that are substantially less favorable than the terms of the Credit Agreement.
WE DEPEND ON A LIMITED NUMBER OF CUSTOMERS FOR OUR REVENUE.
At this time, the Company has two municipal contracts that account for 26% and 18% of our long term contracted revenues for the fiscal year ended December 31, 2015. Because we depend on these customers for a majority of our revenue, a loss of one of these customers could materially adversely affect our business and financial condition. If these principal customers cease using our services, our business could be materially adversely affected.
GOVERNMENTAL AUTHORITIES MAY ENACT CLIMATE CHANGE REGULATIONS THAT COULD INCREASE OUR COSTS TO OPERATE.
Environmental advocacy groups and regulatory agencies in the United States have been focusing considerable attention on the emissions of greenhouse gases and their potential role in climate change. Congress has considered recent proposed legislation directed at reducing greenhouse gas emissions and President Obama has indicated his support of legislation aimed at reducing greenhouse gases. The EPA has proposed rules to regulate greenhouse gases, regional initiatives have formed to control greenhouse gases and certain of the states in which we operate are contemplating air pollution control regulations that are more stringent than existing and proposed federal regulations, in particular the regulation of emissions of greenhouse gases. The adoption of laws and regulations to implement controls of greenhouse gases, including the imposition of fees or taxes, could adversely affect our collection operations. Changing environmental regulations could require us to take any number of actions, including the purchase of emission allowances or installation of additional pollution control technology, and could make some operations less profitable, which could adversely affect our results of operations.
OUR OPERATIONS ARE SUBJECT TO ENVIRONMENTAL, HEALTH AND SAFETY LAWS AND REGULATIONS, AS WELL AS CONTRACTUAL OBLIGATIONS THAT MAY RESULT IN SIGNIFICANT LIABILITIES.
We risk incurring significant environmental liabilities in connection with our use, treatment, storage, transfer and disposal of waste materials. Under applicable environmental laws and regulations, we could be liable if our operations are found to cause environmental damage to our properties or to the property of other landowners, particularly as a result of the contamination of air, drinking water or soil. Under current law, we could also be held liable for damage caused by conditions that existed before we acquired the assets or operations involved. This risk is of particular concern as we execute our growth strategy, partially though acquisitions, because we may be unsuccessful in identifying and assessing potential liabilities during our due diligence investigations. Further, the counterparties in such transactions may be unable to perform their indemnification obligations owed to us. Additionally, we could be liable if we arrange for the transportation, disposal or treatment of hazardous substances that cause environmental contamination, or if a predecessor owner made such arrangements and, under applicable law, we are treated as a successor to the prior owner. Any substantial liability for environmental damage could have a material adverse effect on our financial condition, results of operations and cash flows.
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OUR BUSINESS IS SUBJECT TO OPERATIONAL AND SAFETY RISKS, INCLUDING THE RISK OF PERSONAL INJURY TO EMPLOYEES AND OTHERS.
Providing environmental and waste management services, including operating landfills, involves risks such as vehicular accidents and equipment defects, malfunctions and failures. Additionally, there are risks associated with waste mass instability and releases of hazardous materials or odors. There may also be risks presented by the potential for subsurface chemical reactions causing elevated landfill temperatures and increased production of leachate, landfill gas and odors. Any of these risks could potentially result in injury or death of employees and others, a need to shut down or reduce operation of facilities, increased operating expense and exposure to liability for pollution and other environmental damage, and property damage or destruction.
While we seek to minimize our exposure to such risks through comprehensive training, compliance and response and recovery programs, as well as vehicle and equipment maintenance programs, if we were to incur substantial liabilities in excess of any applicable insurance, our business, results of operations and financial condition could be adversely affected. Any such incidents could also adversely impact our reputation and reduce the value of our brand. Additionally, a major operational failure, even if suffered by a competitor, may bring enhanced scrutiny and regulation of our industry, with a corresponding increase in operating expense.
INCREASES IN THE COSTS OF FUEL MAY REDUCE OUR OPERATING MARGINS.
The price and supply of fuel needed to run our collection vehicles is unpredictable and fluctuates based on events outside our control, including geopolitical developments, supply and demand for oil and gas, actions by OPEC and other oil and gas producers, war and unrest in oil producing countries, regional production patterns and environmental concerns. Any significant price escalations or reductions in the supply could increase our operating expenses or interrupt or curtail our operations. Failure to offset all or a portion of any increased fuel costs through increased fees or charges would reduce our operating margins.
CHANGES IN INTEREST RATES MAY AFFECT OUR PROFITABILITY.
Potential future acquisitions could require us to incur substantial additional indebtedness in the future, which will increase our interest expense. Further, to the extent that these borrowings are subject to variable rates of interest, increases in interest rates will increase our interest expense, which will affect our profitability. We bear exposure to, and are primarily affected by, changes in LIBOR rates.
INCREASES IN THE COSTS OF DISPOSAL MAY REDUCE OUR OPERATING MARGINS.
In 2015, we disposed of approximately 100% of the waste that we collect in landfills operated by others, and, even with our recent acquisition of a landfill, that rate may not decrease significantly in the immediate future. We may incur increases in disposal fees paid to third parties. Failure to pass these costs on to our customers may reduce our operating margins. In December 2015, the Company purchased Eagle Ridge as part of its strategy to internalize a majority of its volume. As of April 2016, the Company has begun to move its volume away from third party landfills. Going forward, the Company may not internalize all of its volume in its own landfill, which may limit the expected savings it anticipated from the acquisition of Eagle Ridge.
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INCREASES IN THE COSTS OF LABOR MAY REDUCE OUR OPERATING MARGINS.
We compete with other businesses in our markets for qualified employees. A shortage of qualified employees would require us to enhance our wage and benefits packages to compete more effectively for employees or to hire more expensive temporary employees. Labor is our second largest operating cost, and even relatively small increases in labor costs per employee could materially affect our cost structure. Failure to attract and retain qualified employees, to control our labor costs, or to recover any increased labor costs through increased prices we charge for our services or otherwise offset such increases with cost savings in other areas may reduce our operating margins.
INCREASES IN COSTS OF INSURANCE WOULD REDUCE OUR OPERATING MARGINS.
One of our largest operating costs is maintaining insurance coverage, including general liability, automobile physical damage and liability, property, employment practices, pollution, directors and officers, fiduciary, workers’ compensation and employer’s liability coverage, as well as umbrella liability policies to provide excess coverage over the underlying limits contained in our primary general liability, automobile liability and employer’s liability policies. Changes in our operating experience, such as an increase in accidents or lawsuits or a catastrophic loss, could cause our insurance costs to increase significantly or could cause us to be unable to obtain certain insurance. Increases in insurance costs would reduce our operating margins. Changes in our industry and perceived risks in our business could have a similar effect.
WE MAY NOT BE ABLE TO MAINTAIN SUFFICIENT INSURANCE COVERAGE TO COVER THE RISKS ASSOCIATED WITH OUR OPERATIONS, WHICH COULD RESULT IN UNINSURED LOSSES THAT WOULD ADVERSELY AFFECT OUR FINANCIAL CONDITION.
Integrated non-hazardous waste companies are exposed to a variety of risks that are typically covered by insurance arrangements. However, we may not be able to maintain sufficient insurance coverage to cover the risks associated with our operations for a variety of reasons. Increases in insurance costs and changes in the insurance markets may, given our resources, limit the coverage that we are able to maintain or prevent us from insuring against certain risks. Large or unexpected losses may exceed our policy limits, adversely affecting our results of operations, and may result in the termination or limitation of coverage, exposing us to uninsured losses, thereby adversely affecting our financial condition.
OUR FAILURE TO REMAIN COMPETITIVE WITH OUR NUMEROUS COMPETITORS, SOME OF WHOM HAVE GREATER RESOURCES, COULD ADVERSELY AFFECT OUR ABILITY TO RETAIN EXISTING CUSTOMERS AND OBTAIN FUTURE BUSINESS.
Because our industry is highly competitive, we compete with large companies and municipalities, many of whom have greater financial and operational resources. The non-hazardous solid waste collection and disposal industry includes large national, publicly-traded waste management companies; regional, publicly-held and privately-owned companies; and numerous small, local, privately-owned companies. Additionally, many counties and municipalities operate their own waste collection and disposal facilities and have competitive advantages not available to private enterprises. If we are unable to successfully compete against our competitors, our ability to retain existing customers and obtain future business could be adversely affected.
WE MAY LOSE CONTRACTS THROUGH COMPETITIVE BIDDING, EARLY TERMINATION OR GOVERNMENTAL ACTION, OR WE MAY HAVE TO SUBSTANTIALLY LOWER PRICES IN ORDER TO RETAIN CERTAIN CONTRACTS, ANY OF WHICH WOULD CAUSE OUR REVENUE TO DECLINE.
We are parties to contracts with municipalities and other associations and agencies. Many of these contracts are or will be subject to competitive bidding. We may not be the successful bidder, or we may have to substantially lower prices in order to be the successful bidder. In addition, some of our customers may terminate their contracts with us before the end of the contract term. If we were not able to replace revenue from contracts lost through competitive bidding or early termination or from lowering prices or from the renegotiation of existing contracts with other revenue within a reasonable time period, our revenue could decline.
Municipalities may annex unincorporated areas within counties where we provide collection services, and as a result, our customers in annexed areas may be required to obtain service from competitors who have been franchised or contracted by the annexing municipalities to provide those services. Some of the local jurisdictions in which we currently operate grant exclusive franchises to collection and disposal companies, others may do so in the future, and we may enter markets where franchises are granted by certain municipalities. Unless we are awarded a franchise by these municipalities, we will lose customers which will cause our revenue to decline.
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We are currently pursuing through a bidding process the renewal of an agreement to which we are currently party, for the operation of a transfer station, scheduled to expire in the fourth quarter of 2016. If we are not awarded renewal of this agreement, we will be forced to utilize other transfer stations which would cause our revenue to decline.
EFFORTS BY LABOR UNIONS TO ORGANIZE OUR EMPLOYEES COULD DIVERT MANAGEMENT ATTENTION AND INCREASE OUR OPERATING EXPENSES.
We do not have any union representation in our operations. Groups of employees may seek union representation in the future, and the negotiation of collective bargaining agreements could divert management attention and result in increased operating expenses and lower net income. If we are unable to negotiate acceptable collective bargaining agreements, we might have to wait through “cooling off” periods, which are often followed by union-initiated work stoppages, including strikes. Depending on the type and duration of these work stoppages, our operating expenses could increase significantly.
POOR DECISIONS BY OUR REGIONAL AND LOCAL MANAGERS COULD RESULT IN THE LOSS OF CUSTOMERS OR AN INCREASE IN COSTS, OR ADVERSELY AFFECT OUR ABILITY TO OBTAIN FUTURE BUSINESS.
We manage our operations on a decentralized basis. Therefore, regional and local managers have the authority to make many decisions concerning their operations without obtaining prior approval from executive officers. Poor decisions by regional or local managers could result in the loss of customers or an increase in costs, or adversely affect our ability to obtain future business.
WE ARE VULNERABLE TO FACTORS AFFECTING OUR LOCAL MARKETS, WHICH COULD ADVERSELY AFFECT OUR STOCK PRICE RELATIVE TO OUR COMPETITORS.
Because the non-hazardous waste business is local in nature, our business in one or more regions or local markets may be adversely affected by events and economic conditions relating to those regions or markets even if the other regions of the country are not affected. As a result, our financial performance may not compare favorably to our competitors with operations in other regions, and our stock price could be adversely affected by our inability to compete effectively with our competitors.
SEASONAL FLUCTUATIONS WILL CAUSE OUR BUSINESS AND RESULTS OF OPERATIONS TO VARY AMONG QUARTERS, WHICH COULD ADVERSELY AFFECT OUR STOCK PRICE.
Based on historic trends experienced by the businesses we have acquired, we expect our operating results to vary seasonally, with revenue typically lowest in the first quarter, higher in the second and third quarters, and again lower in the fourth quarter. This seasonality generally reflects the lower volume of waste during the winter months. Adverse weather conditions negatively affect waste collection productivity, resulting in higher labor and operational costs. The general increase in precipitation during the winter months increases the weight of collected waste, resulting in higher disposal costs, as costs are often calculated on a per ton basis. Because of these factors, we expect operating income to be generally lower in the winter months. As a result, our operating results may be negatively affected by these variations. Additionally, severe weather during any time of the year can negatively affect the costs of collection and disposal and may cause temporary suspensions of our collection services. Long periods of inclement weather may interfere with collection operations and reduce the volume of waste generated by our customers. Any of these conditions can adversely affect our business and results of operations, which could negatively affect our stock price.
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WE ARE DEPENDENT ON OUR MANAGEMENT TEAM AND DEVELOPMENT AND OPERATIONS PERSONNEL, AND THE LOSS OF ONE OR MORE KEY EMPLOYEES OR GROUPS COULD HARM OUR BUSINESS AND PREVENT US FROM IMPLEMENTING OUR BUSINESS PLAN IN A TIMELY MANNER.
Our success depends substantially upon the continued services of our executive officers and other key members of management, particularly our chief executive officer, Mr. Jeffrey S. Cosman. From time to time, there may be changes in our executive management team resulting from the hiring or departure of executives. Such changes in our executive management team may be disruptive to our business. We are also substantially dependent on the continued service of our existing development and operations personnel because of the complexity of our service and technologies. We have an employment agreement with Mr. Cosman. We maintain key person life insurance policy on Mr. Cosman. The loss of one or more of our key employees or groups could seriously harm our business.
WE HAVE IDENTIFIED A LACK OF ADEQUATE SEGREGATION OF DUTIES AND ABSENCE OF AN AUDIT COMMITTEE AS A MATERIAL WEAKNESS IN OUR INTERNAL CONTROLS, WHICH COULD CAUSE STOCKHOLDERS AND PROSPECTIVE INVESTORS TO LOSE CONFIDENCE IN THE RELIABILITY OF OUR FINANCIAL REPORTING.
We currently have limited segregation of duties among our officers and employees with respect to the preparation and review of financial statements, which is a material weakness in internal controls. If we fail to maintain an effective system of internal controls, we may not be able to accurately report financial results or prevent fraud. As a result, current and potential stockholders could lose confidence in the company's financial reporting that could harm the trading price of our shares, if a trading market does develop.
The company has identified limited segregation as a material weakness in the company's internal controls. We intend to remedy this material weakness by hiring additional employees and reallocating duties among employees, including responsibilities for financial reporting, as soon as we have available sufficient resources and personnel. However, until such time, this material weakness will continue to exist.
WE NEED ADDITIONAL CAPITAL TO DEVELOP OUR BUSINESS.
The development of our services will require the commitment of substantial resources to implement our business plan. In addition, substantial expenditures will be required to enable us to complete projects in the future. Currently, we have a credit agreement with Goldman Sachs Specialty Lending Group. However, it is likely we would need to seek additional financing through subsequent future private or public offerings of our equity securities or through strategic partnerships and other arrangements with corporate partners.
We cannot give you any assurance that any additional financing will be available to us, or if available, will be on terms favorable to us. The sale of additional equity securities will result in dilution to our stockholders. The occurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financing covenants that would restrict our operations. If adequate additional financing is not available on acceptable terms, we may not be able to implement our business development plan or continue our business operations.
RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK
THE MARKET PRICE OF OUR COMMON STOCK IS LIKELY TO BE VOLATILE AND COULD SUBJECT US TO LITIGATION.
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The market price of our common stock has been and is likely to continue to be subject to wide fluctuations. Factors affecting the market price of our common stock include:
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variations in our operating results, earnings per share, cash flows from operating activities, deferred revenue, and other financial metrics and non-financial metrics, and how those results compare to analyst expectations;
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issuances of new stock which dilutes earnings per share;
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forward looking guidance to industry and financial analysts related to future revenue and earnings per share;
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the net increases in the number of customers and paying subscriptions, either independently or as compared with published expectations of industry, financial or other analysts that cover our company;
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changes in the estimates of our operating results or changes in recommendations by securities analysts that elect to follow our common stock;
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announcements of technological innovations, new services or service enhancements, strategic alliances or significant agreements by us or by our competitors;
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announcements by us or by our competitors of mergers or other strategic acquisitions, or rumors of such transactions involving us or our competitors;
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announcements of customer additions and customer cancellations or delays in customer purchases;
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recruitment or departure of key personnel; and
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trading activity by a limited number of stockholders who together beneficially own a majority of our outstanding common stock.
In addition, if the stock market in general experiences uneven investor confidence, the market price of our common stock could decline for reasons unrelated to our business, operating results or financial condition. The market price of our common stock might also decline in reaction to events that affect other companies within, or outside, our industries even if these events do not directly affect us. Some companies that have experienced volatility in the trading price of their stock have been the subject of securities class action litigation. If we are to become the subject of such litigation, it could result in substantial costs and a diversion of management’s attention and resources.
THE OWNERSHIP BY OUR CHIEF EXECUTIVE OFFICER OF SERIES A PREFERRED STOCK WILL LIKELY LIMIT YOUR ABILITY TO INFLUENCE CORPORATE MATTERS.
Mr. Jeffrey S. Cosman, our chief executive officer, is the beneficial owner of 100% of the outstanding shares of the Company’s Series A Preferred Stock. As a result, our chief executive officer would have significant influence over most matters that require approval by our stockholders, including the election of directors and approval of significant corporate transactions, even if other stockholders oppose them. In addition, Mr. Cosman beneficially owns approximately 49% of our issued and outstanding common stock. This concentration of ownership might also have the effect of delaying or preventing a change of control of our company that other stockholders may view as beneficial.
OUR COMMON STOCK IS CURRENTLY ELIGIBLE FOR QUOTATION ON THE OTCQB OPERATED BY OTC MARKETS GROUP, INC. AND AN INVESTOR’S ABILITY TO TRADE OUR COMMON STOCK MAY BE LIMITED BY TRADING VOLUME.
The trading volume in our common shares has been relatively limited. A consistently active trading market for our common stock may not develop on the OTCQB. The average daily trading volume in our common stock on the OTCQB as of April 14, 2016 was limited or negligible. Accordingly, the ability of our shareholders to sell their shares of our common stock may be extremely limited.
WE ARE SUBJECT TO PENNY STOCK RULES WHICH WILL MAKE THE SHARES OF OUR COMMON STOCK MORE DIFFICULT TO SELL.
We are currently subject to the SEC’s “penny stock” rules because our shares of common stock sell below $5.00 per share. Penny stocks generally are equity securities with a price of less than $5.00 per share. The penny stock rules require broker-dealers to deliver a standardized risk disclosure document prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson, and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with the customer’s confirmation.
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In addition, the penny stock rules require that prior to a transaction the broker dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. The penny stock rules are burdensome and may reduce purchases of any offerings and reduce the trading activity for shares of our common stock. As long as our shares of common stock are subject to the penny stock rules, the holders of such shares of common stock may find it more difficult to sell their securities.
THERE MAY BE RESTRICTIONS ON YOUR ABILITY TO RESELL SHARES OF COMMON STOCK UNDER RULE 144.
Currently, Rule 144 under the Securities Act permits the public resale of securities under certain conditions after a six or twelve month holding period by the seller, including requirements with respect to the manner of sale, sales volume restrictions, filing requirements and a requirement that certain information about the issuer is publicly available. At the time that stockholders intend to resell their shares under Rule 144, there can be no assurances that we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or, if so, current in our reporting requirements under the Exchange Act, in order for stockholders to be eligible to rely on Rule 144 at such time. In addition to the foregoing requirements of Rule 144 under the federal securities laws, the various state securities laws may impose further restrictions on the ability of a holder to sell or transfer the shares of Common Stock.
SALES OF OUR CURRENTLY ISSUED AND OUTSTANDING STOCK MAY BECOME FREELY TRADABLE PURSUANT TO RULE 144 AND MAY DILUTE THE MARKET FOR YOUR SHARES AND HAVE A DEPRESSIVE EFFECT ON THE PRICE OF THE SHARES OF OUR COMMON STOCK
A substantial majority of our outstanding shares of common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under the Act and as required under applicable state securities laws. Rule 144 provides in essence that an Affiliate (as such term is defined in Rule 144(a)(1)) of an issuer who has held restricted securities for a period of at least six months (one year after filing Form 10 information with the SEC for shell companies and former shell companies) may, under certain conditions, sell every three months, in brokerage transactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading volume during the four calendar weeks prior to the sale (the four calendar week rule does not apply to companies quoted on the OTC Bulletin Board). Rule 144 also permits, under certain circumstances, the sale of securities, without any limitation, by a person who is not an Affiliate of the Company and who has satisfied a one-year holding period. A sale under Rule 144 or under any other exemption from the Act, if available, or pursuant to subsequent registrations of our shares of common stock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.
YOU MAY EXPERIENCE DILUTION OF YOUR OWNERSHIP INTEREST BECAUSE OF THE FUTURE ISSUANCE OF ADDITIONAL SHARES OF OUR COMMON STOCK AND BECAUSE OF OUR PREFERRED STOCK AND OUTSTANDING WARRANTS.
In the future, we expect to issue our authorized but previously unissued equity securities in connection with future financing, resulting in the dilution of the ownership interests of our present stockholders. We are currently authorized to issue an aggregate of 80,000,000 shares of capital stock, which includes 4,928,829 shares of blank check preferred stock, par value $0.001, for which the designations, rights and preferences may be established by the Board.
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We may also issue additional shares of our common stock or other securities that are convertible into or exercisable for common stock in connection with hiring or retaining employees or consultants, future acquisitions, future sales of our securities for capital raising purposes, or for other business purposes. The future issuance of any such additional shares of our common stock or other securities may create downward pressure on the trading price of our common stock. There can be no assurance that we will not be required to issue additional shares, warrants or other convertible securities in the future in conjunction with hiring or retaining employees or consultants, future acquisitions, future sales of our securities for capital raising purposes or for other business purposes, including at a price (or exercise prices) below the price at which shares of our common stock are trading.
There are currently 71,120 shares of Series B Preferred Stock outstanding, which may be converted into Common Stock using the “Conversion Formula” set forth in the Series B Preferred Stock Certificate of Designations, which is equal to the Original Issue Price divided by 75% of the average closing bid price of the Common Stock for the five (5) consecutive trading days ending on the trading day of the receipt by the Company of the applicable notice of conversion.
In connection with the Credit Agreement the Company issued in favor of Goldman, Sachs & Co. a Purchase Warrant for Common Shares, dated December 22, 2015 (the “GS Warrant”). The GS Warrant may be converted by the holder, at any time until December 22, 2023, into the number of shares of Common Stock that, after giving effect to conversion of the GS Warrant, is equal to a 6.5% ownership interest in the Company calculated on a fully-diluted basis, pursuant to the terms and conditions of the Warrant.
In connection with subscriptions pursuant to a private placement offering during 2016, the Company granted “true-up” rights with respect to subscription agreements in the aggregate amount of $1,600,000, with such agreements providing that the Company shall issue additional shares of Common Stock in the event that, prior to the first anniversary of such subscription agreement, an investor sells all of the Common Stock purchased under such subscription agreement and receives less than the full amount of the purchase price paid under such subscription agreement.
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In connection with subscriptions pursuant to a second private placement offering during 2016, the Company issued warrants to purchase Common Stock (the “Private Placement Warrants”). In the event that, for a six-month period beginning six months from the date of such a subscription (subject to extension under certain circumstances), one or more of such subscribers were to sell all shares of Common Stock purchased by such subscriber pursuant to such offering and fail to receive proceeds equal to or in excess of the aggregate purchase price paid by such subscriber for such shares, such subscriber could exercise the Private Placement Warrant, requiring the Company to, at its election, (i) issue to such subscriber the number of shares of Common Stock equivalent to amount by which such purchase price exceeds such sale proceeds, valued at the average closing price for the Common Stock on the primary trading market on the three (3) trading days preceding the date of exercise or (ii) redeem such shortfall amount in cash. The Private Placement Warrants may be exercised more than once each, in the event that sale proceeds, including shares issued pursuant to a Private Placement Warrant, continue to fall short of the original purchase price and the Company has not elected to redeem such Private Placement Warrant for cash.
POSSIBLE ADVERSE EFFECT OF ISSUANCE OF PREFERRED STOCK
Our Restated Certificate of Incorporation authorizes the issuance of 5,000,000 shares of preferred stock, of which 4,928,829 shares are available for issuance, with designations, rights and preferences as determined from time to time by the Board of Directors. As a result of the foregoing, the Board of Directors can issue, without further shareholder approval, Preferred Stock with dividend, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of the holders of Common Stock. The issuance of Preferred Stock could, under certain circumstances, discourage, delay or prevent a change in control of the Company.
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WE DO NOT EXPECT TO PAY DIVIDENDS ON OUR COMMON STOCK AND INVESTORS SHOULD NOT BUY OUR COMMON STOCK EXPECTING TO RECEIVE DIVIDENDS.
We have not paid any dividends on our common stock in the past, and do not anticipate that we will declare or pay any dividends in the foreseeable future. Consequently, investors will only realize an economic gain on their investment in our common stock if the price appreciates. Investors should not purchase our common stock expecting to receive cash dividends. Because we do not pay dividends on our common stock, and there may be limited trading, investors may not have any manner to liquidate or receive any payment on their investment. Therefore, our failure to pay dividends may cause investors to not see any return on investment even if we are successful in our business operations. In addition, holders of our Series B Preferred Stock are entitled to dividends at a rate of 12% of their original issue price (as set forth in the Certificate of Designations, the “Original Issue Price”) per share per annum, which dividends are payable prior and in preference to any payment of dividend on our common stock. Because we do not pay dividends on our common stock, we may have trouble raising additional funds, which could affect our ability to expand our business operations.
IF THE COMPANY WERE TO DISSOLVE OR WIND-UP, HOLDERS OF OUR COMMON STOCK WOULD NOT RECEIVE A LIQUIDATION PREFERENCE.
If we were to wind-up or dissolve our company and liquidate and distribute our assets, our common stockholders would share in our assets only after we satisfy any amounts we owe to our creditors and preferred equity holders. Our Series B preferred equity holders are entitled receive, in the event of any liquidation, dissolution or winding up of the Company, prior and in preference to any distribution to holders of our common stock, an amount per share equal to the sum of $100 and any accrued and unpaid dividends on the Series B preferred stock. If our liquidation or dissolution were attributable to our inability to profitably operate our business, then it is likely that we would have material liabilities at the time of liquidation or dissolution. Accordingly, we may not have sufficient assets available after the payment of our creditors and preferred equity holders to enable you to receive any liquidation distribution with respect to any common stock you hold.
18
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The information contained in this registration statement, including in the documents incorporated by reference into this registration statement, includes some statements that are not purely historical and that are forward-looking statements.” Such forward-looking statements include, but are not limited to, statements regarding our and our management’s expectations, hopes, beliefs, intentions or strategies regarding the future, including our financial condition and results of operations. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipates,” “believes, “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “possible,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” and similar expressions, or the negatives of such terms, may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.
The forward-looking statements contained in this registration statement are based on current expectations and beliefs concerning future developments and the potential effects on the parties and the transaction. There can be no assurance that future developments actually affecting us will be those anticipated. Those that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements, including the following forward-looking statements, involve a number of risks, uncertainties (some of which are beyond the Company’s control) or other assumptions.
USE OF PROCEEDS
We will not receive any proceeds from the sale of common stock by the Selling Security Holders. All of the net proceeds from the sale of our common stock will go to the Selling Security Holders as described below in the sections entitled “Selling Security Holders” and “Plan of Distribution”.
DETERMINATION OF OFFERING PRICE
Our common stock currently trades on the OTCQB under the symbol “MRDN”. The proposed offering price of the shares of common stock is $1.20 and has been estimated solely for the purpose of computing the amount of the registration fee in accordance with Rule 457(c) of the Securities Act of 1933, on the basis of the closing bid price of common stock of the Company as reported on the OTCQB on June 10, 2016. The Selling Security Holders may sell shares in any manner at the current market price.
SELLING SECURITY HOLDERS
The 1,191,774 shares being offered for resale in this registration statement are comprised of 1,191,774 shares of common stock issued to Here to Serve Holding Corp. pursuant to that certain Membership Interest Purchase Agreement.
All expenses incurred with respect to the registration of the common stock will be borne by us, but we will not be obligated to pay any underwriting fees, discounts, commission or other expenses incurred by the Selling Security Holders in connection with the sale of such shares.
Except as indicated below, neither the Selling Security Holders nor any of their associates or affiliates has held any position, office, or other material relationship with us in the past three years.
The following table sets forth the name of the Selling Security Holders, the number of shares of common stock beneficially owned by each of the Selling Security Holders as of the date hereof and the number of share of common stock being offered by each of the Selling Security Holders. The shares being offered hereby are being registered to permit public secondary trading, and the selling stockholders may offer all or part of the shares for resale from time to time. However, the selling stockholder is under no obligation to sell all or any portion of such shares nor is the selling stockholders obligated to sell any shares immediately upon effectiveness of this prospectus. All information with respect to share ownership has been furnished by the Selling Security Holders. The Number of Shares Beneficially Owned After the Offering” column assumes the sale of all shares offered.
19
Name
Shares
Beneficially
Owned Prior to
Offering
Shares to be
Offered
Amount
Beneficially
Owned After
Offering (1)
Percent
Beneficially
Owned After
the Offering
Here to Serve Holding Corp (2)
1,191,774
1,191,774
0
*%
* less than 1%
(1)
This number assumes each Selling Security Holder sells all of its shares being offered pursuant to this prospectus.
(2)
Here to Serve Holding Corp. is a Nevada Corporation. Our Chief Executive Officer, Mr. Jeffrey Cosman is the Chief Executive Officer and Director of Here to Serve Holding Corp. and accordingly, has sole voting and dispositive power over the shares.
PLAN OF DISTRIBUTION
The 1,191,774 shares being offered for resale in this registration statement are comprised of 1,191,774 shares of common stock issued to Here to Serve Holding Corp. pursuant to that certain Membership Interest Purchase Agreement.
The Selling Security Holders and any of its respective pledges, donees, assignees and other successors-in-interest may, from time to time, sell any or all of their shares of our common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. The Selling Security Holders may use any one or more of the following methods when selling shares:
·
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
·
block trades in which the broker-dealer will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction;
·
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
·
an exchange distribution in accordance with the rules of the applicable exchange;
·
privately negotiated transactions;
·
broker-dealers may agree with the Selling Security Holders to sell a specified number of such shares at a stipulated price per share;
·
through the writing of options on the shares;
·
a combination of any such methods of sale; and
·
any other method permitted pursuant to applicable law.
20
The Selling Security Holders or their respective pledgees, donees, transferees or other successors in interest, may also sell the shares directly to market makers acting as principals and/or broker-dealers acting as agents for themselves or their customers. Such broker-dealers may receive compensation in the form of discounts, concessions or commissions from the Selling Security Holders and/or the purchasers of shares for whom such broker-dealers may act as agents or to whom they sell as principal or both, which compensation as to a particular broker-dealer might be in excess of customary commissions. Market makers and block purchasers purchasing the shares will do so for their own account and at their own risk. It is possible that a Selling Security Holder will attempt to sell shares of Common Stock in block transactions to market makers or other purchasers at a price per share which may be below the then market price. The Selling Security Holders cannot assure that all or any of the shares offered in this prospectus will be issued to, or sold by, the Selling Security Holders. In addition, the Selling Security Holders and any brokers, dealers or agents, upon effecting the sale of any of the shares offered in this prospectus are underwriters” as that term is defined under the Securities Act or the Exchange Act, or the rules and regulations under such acts. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.
Discounts, concessions, commissions and similar selling expenses, if any, attributable to the sale of shares will be borne by a Selling Security Holder. The Selling Security Holders may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares if liabilities are imposed on that person under the Securities Act.
The Selling Security Holders may from time to time pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time under this prospectus after we have filed an amendment to this prospectus under Rule 424(b)(3) or any other applicable provision of the Securities Act amending the list of Selling Security Holders to include the pledgee, transferee or other successors in interest as a Selling Security Holder under this prospectus.
The Selling Security Holders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus and may sell the shares of common stock from time to time under this prospectus after we have filed an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of Selling Security Holders to include the pledgee, transferee or other successors in interest as a Selling Security Holder under this prospectus.
We are required to pay all fees and expenses incident to the registration of the shares of common stock. Otherwise, all discounts, commissions or fees incurred in connection with the sale of our common stock offered hereby will be paid by the Selling Security Holders.
The Selling Security Holders acquired the securities offered hereby in the ordinary course of business and have advised us that they have not entered into any agreements, understandings or arrangements with any underwriters or broker-dealers regarding the sale of their shares of common stock, nor is there an underwriter or coordinating broker acting in connection with a proposed sale of shares of common stock by any Selling Security Holder. We will file a supplement to this prospectus if a Selling Security Holder enters into a material arrangement with a broker-dealer for sale of common stock being registered. If the Selling Security Holders use this prospectus for any sale of the shares of common stock, they will be subject to the prospectus delivery requirements of the Securities Act.
Broker-dealers engaged by the selling security holders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling security holders (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.
21
The anti-manipulation rules of Regulation M under the Exchange Act, may apply to sales of our common stock and activities of the Selling Security Holders. The Selling Security Holders will act independently of us in making decisions with respect to the timing, manner and size of each sale.
The Company is required to pay certain fees and expenses incurred by the Company incident to the registration of the securities. The Company has agreed to indemnify the selling security holders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
(a) Market Information
Beginning March 22, 2006, the Company's common stock was quoted on the OTC Markets under the symbol "BCKE". On April 15, 2015, the Company received approval from FINRA to change its stock symbol to MRDN. The following table sets forth the range of quarterly high and low bid prices, as reported during the last two fiscal years.
Period
High
Low
Fiscal Year 2016:
First Quarter
$
1.80
1.02
Second Quarter (through June 10, 2016)
1.95
1.20
Fiscal Year 2015:
First Quarter
$
1.80
1.30
Second Quarter
1.60
1.02
Third Quarter
1.11
0.55
Fourth Quarter
2.00
0.30
Fiscal Year 2014:
First Quarter
$
0.60
$
0.60
Second Quarter
0.60
0.60
Third Quarter
0.60
0.60
Fourth Quarter
1.38
1.38
The above quotations reflect inter-dealer prices, without retail mark-up, markdown or commission and may not reflect actual transactions. On June 10, 2016, the closing price for our common stock was $1.20 per share.
(b) Holders
As of June 10, 2016, we had 45 stockholders of record of our common stock. Such number of record holders was derived from the records maintained by our transfer agent, Issuer Direct.
(c) Dividends
We have not paid any dividends to the holders of our common stock and we do not expect to pay any such dividends in the foreseeable future as we expect to retain our future earnings for use in the operation and expansion of our business.
(d) Securities Authorized for Issuance under Equity Compensation Plan
Effective March 10, 2016, the Board approved, authorized and adopted the 2016 Equity and Incentive Plan (the “Plan”) and certain forms of ancillary agreements to be used in connection with the issuance of stock and/or options pursuant to the Plan (the “Plan Agreements”). The Plan provides for the issuance of up to 7,500,000 shares of common stock, par value $0.025 per share, of the Company through the grant of non-qualified options (the “Non-qualified options”), incentive options (the “Incentive Options” and together with the Non-qualified Options, the “Options”) and restricted stock (the “Restricted Stock”) to directors, officers, consultants, attorneys, advisors and employees.
22
Equity Compensation Plan Information
Plan Category
Number of securities to be issued upon exercise of outstanding options, warrants and rights
(a)
Weighted-average exercise price of outstanding options, warrants and rights compensation plans (excluding securities reflected in column (a))
(b)
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
(c)
Equity compensation plans approved by security holders
0
0
0
E Equity compensation plans not approved by security holders
4,253,074
0
7,500,000
Total
4,253,074
0
7,500,000
Transfer Agent
Our stock transfer agent is Issuer Direct Corporation, 500 Perimeter Park Drive, Morrisville, NC 27560.
PENNY STOCK RULES
The U.S. Securities and Exchange Commission has also adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the Nasdaq system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system).
A purchaser is purchasing penny stock, which limits the ability to sell the stock. The shares offered by this prospectus constitute penny stock under the Exchange Act. The shares will remain penny stocks for the foreseeable future. The classification of penny stock makes it more difficult for a broker-dealer to sell the stock into a secondary market, which makes it more difficult for a purchaser to liquidate his/her investment. Any broker-dealer engaged by the purchaser for the purpose of selling his or her shares in us will be subject to Rules 15g-1 through 15g-10 of the Exchange Act. Rather than creating a need to comply with those rules, some broker-dealers will refuse to attempt to sell penny stock.
The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document, which:
·
Contains a description of the nature and level of risk in the market for penny stock in both public offerings and secondary trading;
·
Contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the Securities Act;
23
·
Contains a brief, clear, narrative description of a dealer market, including “bid” and “ask” price for the penny stock and the significance of the spread between the bid and ask price;
·
Contains a toll-free number for inquiries on disciplinary actions;
·
Defines significant terms in the disclosure document or in the conduct of trading penny stocks; and
·
Contains such other information and is in such form (including language, type, size and format) as the Securities and Exchange Commission shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, to the customer:
·
The bid and offer quotations for the penny stock;
·
The compensation of the broker-dealer and its salesperson in the transaction;
·
The number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and
·
Monthly account statements showing the market value of each penny stock held in the customer’s account.
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgement of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement. These disclosure requirements will have the effect of reducing the trading activity in the secondary market for our stock because it will be subject to these penny stock rules. Therefore, stockholders may have difficulty selling their securities.
SELECTED FINANCIAL DATA
The following selected financial information is derived from the Company’s Financial Statements appearing elsewhere in this Prospectus and should be read in conjunction with the Company’s Financial Statements, including the notes thereto, appearing elsewhere in this Prospectus.
Summary of Statements of Operations
For the Years Ended December 31 (audited):
Year Ended December 31, 2015
Successor
Period from Acquisition May 16, 2014 to December 31, 2014
Predecessor
Period from January 1, 2014 to May 15, 2014
Revenue
$
13,506,097
$
7,953,471
4,248,605
Gross Profit
$
3,370,493
$
2,001,659
$
1,140,810
Expenses
$
17,640,895
$
4,179,808
$
688,732
Total Other Income (Expenses)
$
(4,961,488
)
$
(478,593
)
$
(181,015
)
Net (loss) income
$
(19,231,890
)
$
(2,656,742
)
$
271,063
Basic net loss per share
$
(1.33
)
$
(0.27
)
Weighted average number of shares outstanding
(Basic and Diluted)
14,468,576
9,963,418
24
For the Three Months Ended March 31 (unaudited):
2016
2015
Revenue
$
7,488,239
$
3,035,819
Gross Profit
$
2,261,252
$
821,185
Expenses
$
7,417,245
$
3,387,923
Other Expenses
$
1,270,873
$
185,908
Net Loss
$
6,426,866
$
2,752,646
Basic Net Loss Per Share
$
0.30
$
0.25
Weighted average number of common shares outstanding - basic and diluted
21,680,019
11,114,873
Balance Sheet
For the Years Ended December 31 (audited):
2015
2014
Cash
$
2,729,795
$
438,907
Total Assets
$
51,683,246
$
21,711,682
Current Liabilities
$
10,788,838
$
7,037,058
Long Term Liabilities
$
40,787,745
$
8,867,148
Total Liabilities
$
51,576,583
$
15,904,206
Total Shareholders Equity
$
106,663
$
5,807,476
March 31,
2016
December 31,
2015
(unaudited)
(audited)
Cash
$
1,766,569
$
2,729,795
Total Assets
$
53,137,006
$
51,683,246
Current Liabilities
$
10,823,180
$
10,788,838
Long Term Liabilities
$
43,209,620
$
40,787,745
Total Liabilities
$
54,032,800
$
51,576,583
Total Shareholders (Deficit) Equity
$
(895,764)
$
106,663
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Special Note Regarding Forward-Looking Statements
This registration statement and other reports filed by our Company from time to time with the U.S. Securities and Exchange Commission (collectively the “Filings”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, our management as well as estimates and assumptions made by our management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to us or our management identify forward-looking statements. Such statements reflect our current view with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including those set forth in the Risk Factors beginning on page 8. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
25
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this report.
Overview
We intend for this discussion to provide information that will assist in understanding our consolidated financial statements, the changes in certain key items in those consolidated financial statements, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our consolidated financial statements. This discussion should be read in conjunction with our consolidated financial statements and accompanying notes for the fiscal year ended December 31, 2015 and year ended December 31, 2014.
Executive Overview
General Overview of Our Business
The platform operation of the Company is our subsidiary Here To Serve Missouri Waste Division, LLC (“HTS Waste”). HTS Waste is in the business of collection of non-hazardous solid waste. Our revenue is generated primarily by collection services provided to residential customers. The following table reflects the total revenue of Meridian Waste Services, LLC (“Predecessor”) for the years ending December 31, 2013, the combined revenues for HTS Waste and the Predecessor for the year ended December 31, 2014, and for the year ended December 31, 2015 (dollars in thousands):
2015
2014
2013
%
%
%
$
increase
$
increase
$
Increase
Revenue
13,506
11
%
12,202
8
%
11,350
11
%
As our revenues continue to grow in this existing market, we plan to increase the rate of this growth by expanding the collection business into the commercial arena as well as increasing our presence in the “roll-off” business. Roll-off service is the hauling and disposal of large waste containers (typically between 10 and 40 cubic yards) that are loaded on to and off of the collection vehicle.
The following discussion and analysis should be read in conjunction with the financial statements, the related notes thereto and the pro forma financials included in this annual report on Form 10-K.
Results of Operations
Revenue
The Company’s revenue for the three months ended March 31, 2016 was $7,488,239, a 147% increase over the three months ended March 31, 2015 of $3,035,819. This increase is due to the continued growth of HTS Waste, the acquisitions of Christian Disposal and Eagle Ridge.
26
The Company’s revenue for the year ended December 31, 2015 was $13,506,000, an 11% increase over the annualized revenue for the year ended December 31, 2014 of $12,202,000. This increase is due to the continued growth of HTS Waste, the acquisitions of Christian Disposal and Eagle Ridge, and the expansion into other service product lines.
Gross Profit
Gross profit was approximately $2,300,000 for the three months ended March 31, 2016, or approximately 30%. This is an increase of approximately 3% from the three months ended March 31, 2015. Gross profit was approximately $800,000 for the three months ended March 31, 2015, or approximately 27%, The increase is the result of management’s ability to improve efficiencies of operations by reducing work hours by our drivers and workers, consolidating routes and focusing on our pricing structure at new and existing accounts and decreased landfill costs as the company began internalizing its waste.
Gross profit was approximately $3,400,000 for the year ending December 31, 2015, or approximately 25%. This is consistent with the seven and one-half months ending December 31, 2014 and relatively consistent with the gross profit percentage of the Predecessor, MWS. The decrease from the Predecessor is due to an increase in depreciation expense included in cost of sales and an increase in disposal cost. The increase in depreciation expense is due to the application of “push-down” accounting adjusting the value of depreciable property to fair value on May 15, 2014 and the addition of new equipment.
Operating Expenses
Selling, general and administrative expenses were $7,417,245 for the three months ended March 31, 2016. This is consistent of the level of selling, general and administrative expenses for the three months ending March 31, 2015. As compared with the three months ended March 31, 2015, selling, general and administrative expenses increased approximately 119% for the three months ended March 31, 2016. This is consistent with the increase in revenue for the same periods. The expenses reflect costs associated with incentive packages totaling approximately $3,500,000 awarded to certain employees and vendors of the Company and certain other one-time items relating to the acquisitions of Christian Disposal, LLC and Eagle Ridge Landfill, LLC in December 2015.
Selling, general and administrative expenses were $17,641,000for the year ended December 31, 2015. This is a significant increase over the level of selling, general and administrative expenses of approximately $4,400,000 for the seven and one-half months ending December 31, 2014 and that of the Predecessor. This is largely due to significant incentive packages totaling approximately $7,400,000 awarded to certain employees and vendors and certain other one-time expenses in connection with the acquisitions of Christian Disposal, LLC and Eagle Ridge Landfill, LLC and reorganization of the Company. In addition, the increase is related to the use of “push-down” accounting related to the business combinations which occurred in May 2014 and December 2015.
Segment Information
Not applicable.
Liquidity and Capital Resources
As of March 31, 2016, the Company had negative working capital of $4,613,287. In the three months ended March 31, 2016, cash generated from operating activities, excluding one-time acquisition and transition expenses of approximately $467,000, was approximately $408,000. In addition, as of March 31, 2016, the Company had approximately $1,767,000 in cash and cash equivalents and $1,947,000 in short-term investments to cover its short term cash requirements. Further, the Company has approximately $12,850,000 of borrowing capacity on its multi-draw term loans and revolving commitments with Goldman Sachs as discussed below.
The Company purchased over $2 million of new equipment while increasing long term debt by approximately $2,377,000 during the three months ended March 31, 2016. The increase in debt was due to the Company borrowing on its revolving commitments with Goldman Sachs as discussed below.
27
Our primary uses of cash have been for working capital purposes to support our operations and our efforts to become a reporting company with the SEC. All funds received have been expended in the furtherance of growing our business operations, establishing our brand and making sure our work is completed with efficiency and with the highest quality. The following trends are reasonably likely to result in a material decrease in our liquidity over the next 12 to 24 months:
o
An increase in working capital requirements to finance additional marketing efforts,
o
Increases in advertising, public relations and sales promotions for existing customers and to attract new customers as the company expands, and
o
The cost of being a public company.
At March 31, 2016, we had total cash and short-term investments of $3,713,695, the majority of which was funded by Goldman Sachs from the draw on the revolving commitments of $2,150,000 and $1,100,000 from a private placement stock offering.
During the 3 months ending September 30, 2015, the Company eliminated its Credit Facility with Comerica Bank (see Debt Restructuring with Praesidian Capital Opportunity Fund III, LP below). In December 2015, the Company subsequently refinanced its debt with Praesidian in connection with the acquisitions of Christian Disposal and Eagle Ridge (see Goldman Sachs Credit Agreement below).
We currently have no material commitments for capital expenditures and believe that our cash requirements over the next 12 months will be approximately $1,000,000. In order to fund future growth and expansion through acquisitions and capital expenditures, the company may be required to raise capital through the sale of its securities.
In order to fund future expansion through acquisitions and capital expenditures, the Company may raise additional capital through the sale of its securities on the public market.
As of December 31, 2015, the Company had negative working capital of $5,871,000. Cash generated from operating activities, excluding one-time expenses of approximately $3,295,000 related to the refinancing of debt and acquisitions, was approximately $1,470,000 for the year ended December 31, 2015.
The Company purchased over $1 million of new equipment while increasing long term debt by approximately $30,000,000 during the year ended December 31, 2015. The increase in debt was due to the debt restructuring as part of the acquisitions as discussed below.
During the 3 months ending September 30, 2015, the Company eliminated its Credit Facility with Comerica Bank (see Debt Restructuring with Praesidian Capital Opportunity Fund III, LP below). In December 2015, the Company subsequently refinanced its debt with Praesidian in connection with the acquisitions of Christian Disposal and Eagle Ridge (see Goldman Sachs Credit Agreement below).
We currently have no material commitments for capital expenditures and believe that our cash requirements over the next 12 months will be approximately $1,000,000. In order to fund future growth and expansion through acquisitions and capital expenditures, the company may be required to raise capital through the sale of its securities.
In order to fund future expansion through acquisitions and capital expenditures, the Company may be required to raise capital through the sale of its securities on the public market.
Debt Restructuring with Praesidian Capital Opportunity Fund III, LP
On August 6, 2015, the Company entered into a financing agreement with Praesidian Capital Opportunity Fund III, LP whereby the Comerica facilities described below and other short term bridge financing were paid. Total proceeds from this financing were used to eliminate this debt.
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Goldman Sachs Credit Agreement
On December 22, 2015, in connection with the closing of acquisitions of Christian Disposal, LLC and certain assets of Eagle Ridge Landfill, LLC, the Company was extended certain credit facilities by Goldman Sachs, consisting of $40,000,000 aggregate principal amount of Tranche A Term Loans, $10,000,000 aggregate principal amount of Multi- Draw Term Loans and up to $5,000,000 aggregate principal amount of Revolving Commitments. At December 31, 2015, only the Tranche A Term Loan was drawn and had an outstanding balance of $40,000,000. It is collateralized by the assets of the Company. The debt has a maturity date of December 22, 2020 with interest paid monthly at an annual rate of 9%. In addition, there is a commitment fee paid monthly on the Mutli-Draw Term Loans and Revolving Commitments at an annual rate of 0.5%.
The proceeds of the loans were used to partially fund the acquisitions referenced above and refinance existing debt with Praesidian, among other things. The Company re-paid in full and terminated its agreements with Praesidian which effected the cancellation of certain warrants that the Company issued to Fund III for the purchase of 931,826 shares of the Company’s common stock and to Fund III-A for the purchase of 361,196 shares of the Company’s common stock. In consideration for the cancellation of the Praesidian Warrants, the Company issued to Praesidian Capital Opportunity Fund III, LP, 1,153,052 shares of common stock and issued to Praesidian Capital Opportunity Fund III-A, LP, 446,948 shares of common stock. Due to the early termination of the notes and cancellation of the warrants, the Company recorded a loss on extinguishment of debt of $1,899,161 in the year ended December 31, 2015.
In addition, in connection with the credit agreement, the Company issued warrants to Goldman Sachs for the purchase of shares of the Company’s common stock equivalent to a 6.5% Percentage Interest at a purchase price equal to $449,553, exercisable on or before December 22, 2023. The warrants grant the holder certain other rights, including:
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put rights, providing that the holder may demand that the Company purchase all of such warrant from the holder for cash upon the earliest to occur of (i) the Maturity Date, (ii) the payment of at least 75% of the obligations under the Credit Agreement, (iii) an uncured event of default and (iv) a Sale Transactions (as defined in the Goldman Sachs Warrants);
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demand registration rights, providing that the holder may demand that the Company file registration statements, including a shelf registration statement (if the Company is eligible at such time to utilize a shelf registration for the Warrant Shares) at any time;
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piggyback registration rights, providing that the holder be given notice of a proposed registration of Equity Securities in connection with an underwritten public offering of such Equity Securities and upon request of holder, the Company shall cause such Warrant Shares to be registered;
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preemptive rights to participate pro rata in raises of Senior Capital (Equity Securities, indebtedness, debt securities other than Common Shares (or Equity Securities convertible or exercisable or exchangeable (directly or indirectly) for Common Shares) or first lien indebtedness for borrowed money.;
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information rights and the right to appoint a non-voting observer to the Company’s Board of Directors;
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and indemnification rights.
The foregoing summary does not purport to be complete; please refer to the Goldman Sachs Warrants, Exhibit 4.6, hereof.
Inflation and Seasonality
Based on our industry and our historic trends, we expect our operations to vary seasonally. Typically, revenue will be highest in the second and third calendar quarters and lowest in the first and fourth calendar quarters. These seasonal variations result in fluctuations in waste volumes due to weather conditions and general economic activity. We also expect that our operating expenses may be higher during the winter months due to periodic adverse weather conditions that can slow the collection of waste, resulting in higher labor and operational costs.
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Critical Accounting Policies
Basis of Consolidation
The consolidated financial statements for the year ended December 31, 2015 include the operations of the Company and its wholly-owned subsidiaries, Here To Serve Missouri Waste Division, LLC, Meridian Land Company, LLC, Here to Serve Technology, LLC and Christian Disposal, LLC. The following two subsidiaries of the Company, Here To Serve Georgia Waste Division, LLC and Here to Serve Technology, LLC, a Georgia Limited Liability Company had no operations during the period.
All significant intercompany accounts and transactions have been eliminated in consolidation.
Impairment of long-lived assets
The Company periodically reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less that the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value.
Use of Estimates
Management estimates and judgments are an integral part of consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). We believe that the critical accounting policies described in this section address the more significant estimates required of management when preparing our consolidated financial statements in accordance with GAAP. We consider an accounting estimate critical if changes in the estimate may have a material impact on our financial condition or results of operations. We believe that the accounting estimates employed are appropriate and resulting balances are reasonable; however, actual results could differ from the original estimates, requiring adjustment to these balances in future periods.
Accounts Receivable
Accounts receivable are recorded at management’s estimate of net realizable value. At December 31, 2015 and 2014 the Company had approximately $2,326,000 and $660,000 of gross trade receivables, respectively.
Our reported balance of accounts receivable, net of the allowance for doubtful accounts, represents our estimate of the amount that ultimately will be realized in cash. We review the adequacy and adjust our allowance for doubtful accounts on an ongoing basis, using historical payment trends and the age of the receivables and knowledge of our individual customers. However, if the financial condition of our customers were to deteriorate, additional allowances may be required. At December 31, 2015 and 2014 the Company had approximately $618,000 and $71,000 recorded for the allowance for doubtful accounts, respectively.
Revenue Recognition
The Company follows the guidance of ASC 605 for revenue recognition. In general, the Company records revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable and collectability is reasonably assured.
We generally provide services under contracts with municipalities or individual customers. Municipal and commercial contracts are generally long-term and often have renewal options. Advance billings are recorded as deferred revenue, and revenue is recognized over the period services are provided. We recognize revenue when all four of the following criteria are met:
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Persuasive evidence of an arrangement exists such as a service agreement with a municipality, a hauling customer or a disposal customer;
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Services have been performed such as the collection and hauling of waste;
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The price of the services provided to the customer is fixed or determinable; and
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Collectability is reasonably assured.
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Property, plant and equipment
The cost of property, plant, and equipment is depreciated over the estimated useful lives of the related assets utilizing the straight-line method of depreciation. The cost of leasehold improvements is depreciated (amortized) over the lesser of the length of the related leases or the estimated useful lives of the assets. Ordinary repairs and maintenance are expensed when incurred and major repairs will be capitalized and expensed if it benefits future periods.
Intangible Assets
Intangible assets that are subject to amortization are reviewed for potential impairment whenever events or circumstances indicate that carrying amounts may not be recoverable. Assets not subject to amortization are tested for impairment at least annually.
Investment in Related Party Affiliate
The Company has an investment in a privately held corporation in the mobile apps industry. As the Company exercises significant influence on this entity, this investment is recorded using the equity method of accounting. The Company monitors this investment for impairment and makes appropriate reductions in the carrying value if the Company determines that an impairment charge is required based primarily on the financial condition and near-term prospect of this entity.
Goodwill
Goodwill is the excess of our purchase cost over the fair value of the net assets of acquired businesses. We do not amortize goodwill, but as discussed in the Asset Impairments section below, we assess our goodwill for impairment at least annually.
Landfill Accounting
Capitalized landfill costs
Cost basis of landfill assets — We capitalize various costs that we incur to make a landfill ready to accept waste. These costs generally include expenditures for land (including the landfill footprint and required landfill buffer property); permitting; excavation; liner material and installation; landfill leachate collection systems; landfill gas collection systems; environmental monitoring equipment for groundwater and landfill gas; and directly related engineering, capitalized interest, on-site road construction and other capital infrastructure costs. The cost basis of our landfill assets also includes asset retirement costs, which represent estimates of future costs associated with landfill final capping, closure and post-closure activities. These costs are discussed below.
Final capping, closure and post-closure costs — Following is a description of our asset retirement activities and our related accounting:
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Final capping — Involves the installation of flexible membrane liners and geosynthetic clay liners, drainage and compacted soil layers and topsoil over areas of a landfill where total airspace capacity has been consumed. Final capping asset retirement obligations are recorded on a units-of-consumption basis as airspace is consumed related to the specific final capping event with a corresponding increase in the landfill asset. The final capping is accounted for as a discrete obligation and recorded as an asset and a liability based on estimates of the discounted cash flows and capacity associated with the final capping.
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Closure — Includes the construction of the final portion of methane gas collection systems (when required), demobilization and routine maintenance costs. These are costs incurred after the site ceases to accept waste, but before the landfill is certified as closed by the applicable state regulatory agency. These costs are recorded as an asset retirement obligation as airspace is consumed over the life of the landfill with a corresponding increase in the landfill asset. Closure obligations are recorded over the life of the landfill based on estimates of the discounted cash flows associated with performing closure activities.
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Post-closure — Involves the maintenance and monitoring of a landfill site that has been certified closed by the applicable regulatory agency. Generally, we are required to maintain and monitor landfill sites for a 30-year period. These maintenance and monitoring costs are recorded as an asset retirement obligation as airspace is consumed over the life of the landfill with a corresponding increase in the landfill asset. Post-closure obligations are recorded over the life of the landfill based on estimates of the discounted cash flows associated with performing post-closure activities.
We develop our estimates of these obligations using input from our operations personnel, engineers and accountants. Our estimates are based on our interpretation of current requirements and proposed regulatory changes and are intended to approximate fair value. Absent quoted market prices, the estimate of fair value is based on the best available information, including the results of present value techniques. In many cases, we contract with third parties to fulfill our obligations for final capping, closure and post closure. We use historical experience, professional engineering judgment and quoted and actual prices paid for similar work to determine the fair value of these obligations. We are required to recognize these obligations at market prices whether we plan to contract with third parties or perform the work ourselves. In those instances where we perform the work with internal resources, the incremental profit margin realized is recognized as a component of operating income when the work is performed.
Once we have determined the final capping, closure and post-closure costs, we inflate those costs to the expected time of payment and discount those expected future costs back to present value. During the year ended December 31, 2015 we inflated these costs in current dollars until the expected time of payment using an inflation rate of 2.5%. We discounted these costs to present value using the credit-adjusted, risk-free rate effective at the time an obligation is incurred, consistent with the expected cash flow approach. Any changes in expectations that result in an upward revision to the estimated cash flows are treated as a new liability and discounted at the current rate while downward revisions are discounted at the historical weighted average rate of the recorded obligation. As a result, the credit-adjusted, risk-free discount rate used to calculate the present value of an obligation is specific to each individual asset retirement obligation. The weighted average rate applicable to our long-term asset retirement obligations at December 31, 2015 is approximately 8.5%.
We record the estimated fair value of final capping, closure and post-closure liabilities for our landfills based on the capacity consumed through the current period. The fair value of final capping obligations is developed based on our estimates of the airspace consumed to date for the final capping. The fair value of closure and post-closure obligations is developed based on our estimates of the airspace consumed to date for the entire landfill and the expected timing of each closure and post-closure activity. Because these obligations are measured at estimated fair value using present value techniques, changes in the estimated cost or timing of future final capping, closure and post-closure activities could result in a material change in these liabilities, related assets and results of operations. We assess the appropriateness of the estimates used to develop our recorded balances annually, or more often if significant facts change.
Changes in inflation rates or the estimated costs, timing or extent of future final capping, closure and post-closure activities typically result in both (i) a current adjustment to the recorded liability and landfill asset and (ii) a change in liability and asset amounts to be recorded prospectively over either the remaining capacity of the related discrete final capping or the remaining permitted and expansion airspace (as defined below) of the landfill. Any changes related to the capitalized and future cost of the landfill assets are then recognized in accordance with our amortization policy, which would generally result in amortization expense being recognized prospectively over the remaining capacity of the final capping or the remaining permitted and expansion airspace of the landfill, as appropriate. Changes in such estimates associated with airspace that has been fully utilized result in an adjustment to the recorded liability and landfill assets with an immediate corresponding adjustment to landfill airspace amortization expense.
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Remaining permitted airspace — Our engineers, in consultation with third-party engineering consultants and surveyors, are responsible for determining remaining permitted airspace at our landfills. The remaining permitted airspace is determined by an annual survey, which is used to compare the existing landfill topography to the expected final landfill topography.
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Expansion airspace — We also include currently unpermitted expansion airspace in our estimate of remaining permitted and expansion airspace in certain circumstances. First, to include airspace associated with an expansion effort, we must generally expect the initial expansion permit application to be submitted within one year and the final expansion permit to be received within five years. Second, we must believe that obtaining the expansion permit is likely, considering the following criteria:
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o
Personnel are actively working on the expansion of an existing landfill, including efforts to obtain land use and local, state or provincial approvals;
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We have a legal right to use or obtain land to be included in the expansion plan;
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There are no significant known technical, legal, community, business, or political restrictions or similar issues that could negatively affect the success of such expansion; and
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Financial analysis has been completed based on conceptual design, and the results demonstrate that the expansion meets the Company’s criteria for investment.
For unpermitted airspace to be initially included in our estimate of remaining permitted and expansion airspace, the expansion effort must meet all of the criteria listed above. These criteria are evaluated by our field-based engineers, accountants, managers and others to identify potential obstacles to obtaining the permits. Once the unpermitted airspace is included, our policy provides that airspace may continue to be included in remaining permitted and expansion airspace even if certain of these criteria are no longer met as long as we continue to believe we will ultimately obtain the permit, based on the facts and circumstances of a specific landfill.
When we include the expansion airspace in our calculations of remaining permitted and expansion airspace, we also include the projected costs for development, as well as the projected asset retirement costs related to the final capping, closure and post-closure of the expansion in the amortization basis of the landfill.
Once the remaining permitted and expansion airspace is determined in cubic yards, an airspace utilization factor (“AUF”) is established to calculate the remaining permitted and expansion capacity in tons. The AUF is established using the measured density obtained from previous annual surveys and is then adjusted to account for future settlement. The amount of settlement that is forecasted will take into account several site-specific factors including current and projected mix of waste type, initial and projected waste density, estimated number of years of life remaining, depth of underlying waste, anticipated access to moisture through precipitation or recirculation of landfill leachate, and operating practices. In addition, the initial selection of the AUF is subject to a subsequent multi-level review by our engineering group, and the AUF used is reviewed on a periodic basis and revised as necessary. Our historical experience generally indicates that the impact of settlement at a landfill is greater later in the life of the landfill when the waste placed at the landfill approaches its highest point under the permit requirements.
After determining the costs and remaining permitted and expansion capacity at our landfill, we determine the per ton rates that will be expensed as waste is received and deposited at the landfill by dividing the costs by the corresponding number of tons. We calculate per ton amortization rates for the landfill for assets associated with each final capping, for assets related to closure and post-closure activities and for all other costs capitalized or to be capitalized in the future. These rates per ton are updated annually, or more often, as significant facts change.
It is possible that actual results, including the amount of costs incurred, the timing of final capping, closure and post-closure activities, our airspace utilization or the success of our expansion efforts could ultimately turn out to be significantly different from our estimates and assumptions. To the extent that such estimates, or related assumptions, prove to be significantly different than actual results, lower profitability may be experienced due to higher amortization rates or higher expenses; or higher profitability may result if the opposite occurs. Most significantly, if it is determined that expansion capacity should no longer be considered in calculating the recoverability of a landfill asset, we may be required to recognize an asset impairment or incur significantly higher amortization expense. If at any time management makes the decision to abandon the expansion effort, the capitalized costs related to the expansion effort are expensed immediately.
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Deferred Revenue
The Company records deferred revenue for customers that were billed in advance of services. The balance in deferred revenue represents amounts billed in October, November and December for services that will be provided during January, February and March.
Cost of Services
Cost of services include all employment costs associated with waste collection, transfer and disposal, damage claims, landfill costs, personal property taxes associated with collection vehicles and other direct cost of the collection and disposal process.
Concentrations
The Company maintains its cash and cash equivalents in bank deposit accounts, which could, at times, exceed federally insured limits. The Company has not experienced any losses in such accounts; however, amounts in excess of the federally insured limit may be at risk if the bank experiences financial difficulties. The Company places its cash with high credit quality financial institutions. The Company’s accounts at these institutions are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000.
Financial instruments which also potentially subject the Company to concentrations of credit risk consist principally of trade accounts receivable; however, concentrations of credit risk with respect to trade accounts receivables are limited due to generally short payment terms.
Stock-Based Compensation
Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718. To date, the Company has not adopted a stock option plan and has not granted any stock options.
Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also require measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.
Pursuant to ASC Topic 505-50, for share based payments to consultants and other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized over the service period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the reporting date.
The Company recorded stock based compensation expense of $8,187,000 and $339,000 during the years ended December 31, 2015 and 2014, respectively.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers. Amendments in this Update create Topic 606, Revenue from Contracts with Customers, and supersede the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. In addition, the amendments supersede the cost guidance in Subtopic 605-35, Revenue Recognition—Construction-Type and Production-Type Contracts, and create new Subtopic 340-40, Other Assets and Deferred Costs—Contracts with Customers. In summary, the core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This Accounting Standards Update is the final version of Proposed Accounting Standards Update 2011-230—Revenue Recognition (Topic 605) and Proposed Accounting Standards Update 2011–250—Revenue Recognition (Topic 605): Codification Amendments, both of which have been deleted. Accounting Standards Update 2014-09. The amendments in this Update are effectively for the Company for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company is currently evaluating the effects of ASU 2014-09 on the consolidated financial statements.
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Off-Balance Sheet Arrangements
There were no off-balance sheet arrangements during the fiscal years ended December 31, 2015 and 2014 that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our interests.
DESCRIPTION OF BUSINESS
History
Meridian Waste Solutions, Inc. (formerly known as Brooklyn Cheesecake & Desserts Company, Inc.) (the “Company”) was incorporated in November 1993 in New York. Prior to October 17, 2014, the Company derived revenue by licensing its trademarks to a third party (the “Legacy Business”).
On October 17, 2014, the Company entered into that certain Membership Interest Purchase Agreement (the “Purchase Agreement”) by and among Here to Serve Holding Corp., a Delaware corporation, as seller (“Here to Serve”), the Company, as parent, Brooklyn Cheesecake & Dessert Acquisition Corp., a wholly-owned subsidiary of the Company, as buyer (the “Acquisition Corp.”), the Chief Executive Officer of the Company (the “Company Executive”), the majority shareholder of the Company (the “Company Majority Shareholder”) and certain shareholders of Here to Serve (the “Here to Serve Shareholders”), pursuant to which the Acquisition Corp acquired from Here to Serve all of Here to Serve’s right, title and interest in and to (i) 100% of the membership interests of Here to Serve – Missouri Waste Division, LLC d/b/a Meridian Waste, a Missouri limited liability company (“HTS Waste”); (ii) 100% of the membership interests of Here to Serve Technology, LLC, a Georgia limited liability company (“HTS Tech”); and (iii) 100% of the membership interests of Here to Serve Georgia Waste Division, LLC, a Georgia limited liability company (“HTS Waste Georgia”, and together with HTS Waste and HTS Tech, collectively, the “Membership Interests”). As consideration for the Membership Interests, on October 31, 2014 (the “Closing Date”) (i) the Company issued to Here to Serve 9,054,134 shares of the Company’s common stock (the “HTS Common Stock”); (ii) the Company issued to the holder of Class A Preferred Stock of Here to Serve (“Here to Serve’s Class A Preferred Stock”) 51 shares of the Company’s Series A Preferred Stock (the “Series A Preferred Stock”); (iii) the Company issued to the holder of Class B Preferred Stock of Here to Serve (“Here to Serve’s Class B Preferred Stock”) an aggregate of 71,120 shares of the Company’s Series B Preferred Stock (the “Series B Preferred Stock,” together with the HTS Common Stock and the Series A Preferred Stock,the “Purchase Price Shares;”), and (iv) the Company shall assume certain assumed liabilities (the “Initial Consideration”).
As further consideration, on the Closing Date of the transaction contemplated under the Purchase Agreement, (i) in satisfaction of all accounts payable and shareholder loans, Here to Serve paid to the Company Majority Shareholder $70,000 and (ii) Here to Serve purchased from the Company Majority Shareholder 230,000 shares of the Company’s common stock for a purchase price of $230,000. Pursuant to the Purchase Agreement, to the extent Purchase Price Shares are issued to individual shareholders of Here to Serve at or upon closing of the Purchase Agreement: (i) shares of common stock of Here to Serve held by the individuals listed on Schedule 2.2 of the Purchase Agreement valued at $2,564,374.95 will be cancelled in accordance with such Schedule 2.2; (ii) 1,000,000 shares of Here to Serve’s Class A Preferred Stock valued at $1,000 will be cancelled; and (iii) 71,120 shares of Here to Serve’s Class B Preferred Stock valued at $7,121,000 will be cancelled (the “Additional Consideration”).
The closing of the Purchase Agreement resulted in a change of control of the Company and the Legacy Business was spun out to a shareholder in connection with the same.
On March 27, 2015, the Company filed a Certificate of Amendment of the Certificate of Incorporation to change the name of the Company from Brooklyn Cheesecake & Desserts Company, Inc. to Meridian Waste Solutions, Inc. (the “Name Change”). On April 15, 2015, the Company received approval from FINRA for the Name Change and to change its stock symbol from BCKE to MRDN.
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Recent Developments
Effective December 22, 2015, the Company consummated the closing of the Amended and Restated Membership Interest Purchase Agreement, dated October 16, 2015, by and among the Company, Timothy M. Drury ("Seller"), Christian Disposal LLC (“Christian Disposal”), FWCD, LLC (“FWCD”), Missouri Waste and Georgia Waste, as amended by that certain First Amendment thereto, dated December 4, 2015 (the “Christian Purchase Agreement”). Pursuant to the Christian Purchase Agreement, the Company purchased from Seller 100% of the membership interests of Christian Disposal in exchange for the following: (i) Thirteen Million Dollars ($13,000,000), subject to a working capital adjustment in accordance with Section 1.4 of the Christian Purchase Agreement; (ii) 1,750,000 shares of the Company’s common stock; (iii) a Convertible Promissory Note in the amount of One Million Two Hundred Fifty Thousand Dollars ($1,250,000), bearing interest at 8% per annum (the “Seller Note”); and (iv) an additional purchase price of Two Million Dollars ($2,000,000), payable upon completion of an extension under a certain contract to which Christian Disposal is party, in accordance with, and subject to any applicable reductions set forth in, Section 1.3(b) of the Purchase Agreement.
Effective December 22, 2015, Meridian Land Company, LLC (“Meridian Land”), a wholly-owned subsidiary of the Company, consummated the closing of that certain Asset Purchase Agreement, dated November 13, 2015, by and between Meridian Land and Eagle Ridge Landfill, LLC (“Eagle”), as amended by that certain Amendment to Asset Purchase Agreement, dated December 18, 2015, to which the Company and WCA Waste Corporation are also party (the “Eagle Purchase Agreement”), pursuant to which Meridian Land purchased from Eagle, a landfill located in Pike County, Missouri and substantially all of the assets used by Eagle related to such business, including certain debts, in exchange for $9,506,500, subject to a working capital adjustment.
Overview
Meridian Waste Solutions, Inc. (formerly Brooklyn Cheesecake & Desserts Company, Inc. hereafter referred to as the “Company” or “Meridian”) is an integrated provider of non-hazardous solid waste collection, transfer and disposal services. We currently have all of our operations in Missouri but are aggressively looking to expand our presence across the Midwest, South and East regions of the United States.
Corporate Structure
Here to Serve – Missouri Waste Division, LLC d/b/a Meridian Waste
HTS Waste is a non-hazardous solid waste management company providing collection services for approximately 45,000 commercial, industrial and residential customers in Missouri. We own one collection operation based out of Bridgeton, Missouri. Approximately 100% of HTS Waste’s 2015 revenue was from collection, utilizing over 60 collection vehicles.
Here To Serve began non-hazardous waste collection operations in May 2014 upon the acquisition of nearly all of the assets from Meridian Waste Service, LLC that in turn became the core of our operations. From our formation through today, we have begun to create the infrastructure needed to expand our operations through acquisitions and market development opportunities.
Christian Disposal, LLC; FWCD
Christian Disposal, along with its subsidiary, FWCD, LLC, is a non-hazardous solid waste management company providing collection and transfer services for approximately 35,000 commercial, industrial and residential customers in Missouri. Christian Disposal’s collection operation is based out of Winfield, Missouri. Along with operations in Winfield, Christian Disposal operates two transfer stations, in the O’Fallon, Missouri and St. Peters, Missouri and own one transfer station, in Winfield, Missouri. Approximately 100% of Christian Disposal and FWCD’s 2015 revenue was from collection and transfer, utilizing over 35 collection vehicles.
Christian Disposal began non-hazardous waste collection operations in 1978. Our acquisition of Christian Disposal is a key element of our strategy to create the vertically integrated infrastructure needed to expand our operations.
Meridian Land Company, LLC (Assets of Eagle Ridge Landfill & Hauling)
The Eagle Ridge Landfill (the “Eagle Ridge Landfill”), acquired by Meridian Land, is currently permitted to accept municipal solid waste. The Eagle Ridge Landfill is located in Bowling Green, Missouri. Meridian Land Company currently owns 265 acres at Eagle Ridge with 56.7 acres permitted and constructed to receive waste.
In addition to the Eagle Ridge Landfill, the Company operates, through Meridian Land Company, hauling operations in Bowling Green, Missouri, servicing commercial, residential and roll off customers in this market. The Company will be looking to expand its footprint in the market through an aggressive sales and marketing strategy, as well as through additional acquisitions.
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Customers
Meridian has two municipal contracts, the first of which accounted for 26% and 27%, and the second of which accounted for 18% and 19%, respectively, of HTS Waste’s long-term contracted revenue for the years ended December 31, 2015 and 2014 respectively.
Collection Services
Meridian, through its subsidiaries, provides solid waste collection services to approximately 75,000 industrial, commercial and residential customers in the Metropolitan St. Louis, Missouri area. In 2015, its collection revenue consisted of approximately 17% from services provided to industrial customers, 13% from services provided to commercial customers and 70% from services provided to residential customers.
In our commercial collection operations, we supply our customers with waste containers of various types and sizes. These containers are designed so that they can be lifted mechanically and emptied into a collection truck to be transported to a disposal facility. By using these containers, we can service most of our commercial customers with trucks operated by a single employee. Commercial collection services are generally performed under service agreements with a duration of one to five years with possible renewal options. Fees are generally determined by such considerations as individual market factors, collection frequency, the type of equipment we furnish, the type and volume or weight of the waste to be collected, the distance to the disposal facility and the cost of disposal.
Residential solid waste collection services often are performed under contracts with municipalities, which we generally secure by competitive bid and which give us exclusive rights to service all or a portion of the homes in these municipalities. These contracts usually range in duration from one to five years with possible renewal options. Generally, the renewal options are automatic upon the mutual agreement of the municipality and the provider; however, some agreements provide for mandatory re-bidding. Alternatively, residential solid waste collection services may be performed on a subscription basis, in which individual households or homeowners’ or similar associations contract directly with us. In either case, the fees received for residential collection are based primarily on market factors, frequency and type of service, the distance to the disposal facility and the cost of disposal.
Additionally, we rent waste containers and provide collection services to construction, demolition and industrial sites. We load the containers onto our vehicles and transport them with the waste to either a landfill or a transfer station for disposal. We refer to this as “roll-off” collection. Roll-off collection services are generally performed on a contractual basis. Contract terms tend to be shorter in length and may vary according to the customers’ underlying projects.
Transfer and Disposal Services
Landfills are the main depository for solid waste in the United States. Solid waste landfills are built, operated, and tied to a state permit under stringent federal, state and local regulations. Currently, solid waste landfills in the United States must be designed, permitted, operated, closed and maintained after closure in compliance with federal, state and local regulations pursuant to Subtitle D of the Resource Conservation and Recovery Act of 1976, as amended. We do not operate hazardous waste landfills, which may be subject to even greater regulations. Operating a solid waste landfill includes excavating, constructing liners, continually spreading and compacting waste and covering waste with earth or other inert material as required, final capping, closure and post-closure monitoring. The objectives of these operations are to maintain sanitary conditions, to ensure the best possible use of the airspace and to prepare the site so that it can ultimately be used for other end use purposes.
Access to a disposal facility is a necessity for all solid waste management companies. While access to disposal facilities owned or operated by third parties can be obtained, we believe that it is preferable to internalize the waste streams when possible. Meridian is targeting further geographic, as well as operational expansion by focusing on markets with transfer stations and landfills available for acquisition.
Our transfer stations allow us to consolidate waste for subsequent transfer in larger loads, thereby making disposal in our otherwise remote landfills economically feasible. A transfer station is a facility located near residential and commercial collection routes where collection trucks take the solid waste that has been collected. The waste is unloaded from the collection trucks and reloaded onto larger transfer trucks for transportation to a landfill for final disposal. Transfer stations are generally owned by municipalities, with contracts to operate such transfer stations awarded based on bids. As an alternative to operating a transfer station directly, we could negotiate the use of a transfer station owned by a private party or operated by a competitor; however, due to synergies and more favorable rates, operating our own transfer station is more profitable. In addition to increasing our ability to internalize the waste that our collection operations collect, using transfer stations reduces the costs associated with transporting waste to final disposal sites because the trucks we use for transfer have a larger capacity than collection trucks, thus allowing more waste to be transported to the disposal facility on each trip.
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Our Operating Strengths
Experienced Leadership
We have a proven and experienced senior management team. Our Chief Executive Officer, Jeffrey S. Cosman, and President and COO Wally Hally combine over 35 years of experience in the solid waste industry, including significant experience in local and regional operations, local and regional accounting, mergers & acquisitions, integration and the development of disposal capacity. Members of our team have held senior positions at Republic Services, Advanced Disposal, Southland Waste Services and Brown Ferris Industries. Our team has a proven track record development and implementation of strategic marketplace plans, sales, safety, acquisitions, and coordination of assets and personnel. While our senior leadership team creates and drives our overall growth strategy, we rely on a decentralized management structure which does not interfere with local management which affords us the opportunity to capitalize on growth and cost reduction at the local level.
Vertically Integrated Operations
The vertical integration of our operations allows us to manage the waste stream from the point of collection through disposal, which we hope will enable us to maximize profit by controlling costs and gaining competitive advantages, while still providing high-quality service to our customers. In the St. Louis market, because we have integrated our network of collection, transfer and disposal assets, primarily using our own resources, we generate a steady, predictable stream of waste volume and capture an incremental disposal margin. As an additional benefit, we charge tipping fees to third-party collection service providers for the use of our transfer stations or landfills, providing a source of recurring revenue. We believe this internalization rate provides us with a significant cost advantage over our competitors, positioning us well to win additional profitable business through new customer acquisition and municipal contract awards. We also believe this vertically integrated structure enables us to quickly and efficiently integrate future acquisitions of transfer stations, collection operations or landfills into our current operations.
Landfill and Transfer Station Assets
We have one active and strategically located landfill at the core of our integrated operations which we believe provides us a significant competitive advantage in Missouri, in that we do not need to use our competitors’ landfills. Our landfill has substantial remaining airspace, which will help us to sustain the long-term competitive advantages that our vertically integrated model provides.
The value of our landfill may be further enhanced by synergies associated with our vertically integrated operations, including our transfer stations, which enable us to cover a greater geographic area surrounding the landfill, and provide competitive advantages in that we would not need to use our competitors’ landfills. In our experience there has generally been shift toward fewer, larger landfills has resulted in landfills that are generally located farther from population centers, with waste being transported longer distances between collection and disposal, typically after consolidation at a transfer station. With a landfill, transfer stations and collection services in place, we aim to provide vertically integrated operations that cover the substantial geographic area surrounding the landfill. In the event that non-renewal of our agreements for our transfer stations requires us to make arrangement with other transfer stations on less favorable terms, we would nevertheless benefit from the integration with our landfill operations.
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Acquisition Integration and Municipal Contracts
Our business model contemplates our ability to execute and integrate value-enhancing, tuck-in acquisitions and win new municipal contracts as a core component of our growth. In the last six months since our acquisition of Christian Disposal, LLC and the Eagle Ridge Landfill, LLC Asset, we have completed two tuck-in acquisitions which we believe will improve or margins and improve cash flow.
As a management team, we have experience executing large-scale transactions by direct association with our historical success at Republic Services, Advanced Disposal and Browning Ferris Industries. In addition to significantly expanding our scale of operations, the acquisitions of Christian Disposal, LLC and Eagle Ridge Landfill, LLC enhanced our geographic footprint by providing us with complementary operations throughout the state of Missouri. This has helped us realize cost efficiencies through improved internalization by virtue of increased route concentration and more efficient utilization of our assets.
Finally, our management team has demonstrated success in municipal contract bidding, as we have over 30 municipal contracts.
Long-Term Contracts
We serve approximately 75,000 residential, commercial and Construction and Industrial customers, with no single customer representing more than 12% of revenue in 2015. Our municipal customer relationships are generally supported by contracts ranging from three to seven years in initial duration with subsequent renewal periods, and we have a historical renewal rate of 100% with such customers. Our standard C&I service agreement is a five-year renewable agreement. We believe our customer relationships, long-term contracts and exceptional retention rate provide us with a high degree of stability as we continue to grow.
Customer Service
We maintain a central focus on customer service and we pride ourselves on trying to consistently exceed our customers' expectations. We believe investing in our customers’ satisfaction will ultimately maximize customer loyalty price stability.
Commitment to Safety
The safety of our employees and customers is extremely important to us and we have a strong track record of safety and environmental compliance. We constantly review and assess our policies practices and procedures in order to create a safer work environment for our employees and to reduce the frequency of workplace injuries.
Our Growth Strategy
Growth of Existing Markets
We believe that as the residential population and number of businesses grow in our existing market, we will see waste volumes increase organically. We seek to remain active and alert with respect to the changing landscapes in the communities in which we already provide service in order obtain long-term contracts for collecting solid waste for residential collection, collection from municipalities, as well as collection from small and large commercial and industrial contracts. Obtaining long-term contracts will enable us to grow our revenue base at the same rate as the underlying economic growth in these markets. Furthermore, securing long-term contracts provides a significant barrier to entry from competitors in these markets.
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Expanding into New Markets
Our operating model focuses on vertically integrated operations. We continue to pursue a growth strategy that includes acquiring solid waste companies that complement our existing business. Our goal is to create market-specific, vertically integrated operations consisting of one or more collection operations, transfer stations and landfills.
As we expand, we plan to focus our business in the secondary markets where competition from national service providers is limited. We plan to start new market development projects in certain disposal-neutral markets in which we will provide services under exclusive arrangements with municipal customers, which facilitates highly-efficient and profitable collection operations and lower capital requirements. We believe this strategic focus positions us to maintain significant share within our target markets, maximize customer retention and benefit from a higher and more stable pricing environment.
Acquisition and Integration
Our revenue model is based on organic growth of operations, the acquisition of established operations in new markets as well as being able execute value-adding, tuck-in acquisitions. We hope to direct acquisition efforts towards those markets in which in which we would be able to provide vertically integrated collection and disposal services and/or provide waste collection services, pursuant to contracts that grant exclusivity. Prior to acquisition, we analyze each prospective target for cost savings through the elimination of inefficiencies and excesses that are typically associated with private companies competing in fragmented industries. We aim to realize synergies from consolidating businesses into our existing operations, which we hope will allow us to reduce capital and expense requirements associated with truck routing, personnel, fleet maintenance, inventories and back-office administration.
Pursue Additional Exclusive Municipal Contracts
We intend to devote significant resources to securing additional municipal contracts. Our management team is well versed in bidding for municipal contracts with over 35 of experience and working knowledge in the solid waste industry and local service areas in existing and target markets. We hope to to procure and negotiate additional exclusive municipal contracts, allowing us to maintain stable recurring revenue but also providing a significant barrier to entry to our competitors in those markets.
Invest in Strategic Infrastructure
We will continue to invest in our infrastructure to support growth and increase our margins. Given the long remaining life of our existing landfill, we will invest resources toward its development and enhancement in order to increase our disposal capacity. Similarly, we will continue to evaluate opportunities to maximize the efficiency of our collection operations.
Waste Industry Overview
The non-hazardous solid waste industry can be divided into the following three categories: collection, transfer and disposal services. In our management’s experience, companies engaging in collection and/or transfer operations of solid waste typically have lower margins than those performing disposal service operations. By vertically integrating collection, transfer and disposal operations, operators seek to capture significant waste volumes and improve operating margins.
During the past four decades, our industry has experienced periods of substantial consolidation activity; however, we believe significant fragmentation remains. We believe that there are two primary factors that lead to consolidation:
●
Stringent industry regulations have caused operating and capital costs to rise, with many local industry participants finding these costs difficult to bear and deciding to either close their operations or sell them to larger operators; and
●
Larger operators are increasingly pursuing economies of scale by vertically integrating their operations or by utilizing their facility, asset and management infrastructure over larger volumes and, accordingly, larger solid waste collection and disposal companies aim to become more cost-effective and competitive by controlling a larger waste stream and by gaining access to significant financial resources to make acquisitions.
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Competition
The solid waste collection and disposal industry is highly competitive and fragmented and requires substantial labor and capital resources. The industry presently includes large, publicly-held, national waste companies such as Republic Services, Inc. and Waste Management, Inc., as well as numerous other public and privately-held waste companies. Our existing market and certain of the markets in which we will likely compete are served by one or more of these companies, as well as by numerous privately-held regional and local solid waste companies of varying sizes and resources, some of which have accumulated substantial goodwill in their markets. We also compete with operators of alternative disposal facilities and with counties, municipalities and solid waste districts that maintain their own waste collection and disposal operations. Public sector operations may have financial advantages over us because of potential access to user fees and similar charges, tax revenues and tax-exempt financing.
We compete for collection based primarily on geographic location and the price and quality of our services. From time to time, our competitors may reduce the price of their services in an effort to expand their market share or service areas or to win competitively bid municipal contracts. These practices may cause us to reduce the price of our services or, if we elect not to do so, to lose business.
Our management has observed significant consolidation in the solid waste collection and disposal industry, and, as a result of this perceived consolidation, we encounter competition in our efforts to acquire landfills, transfer stations and collection operations. Competition exists not only for collection, transfer and disposal volume but also for acquisition candidates. We generally compete for acquisition candidates with large, publicly-held waste management companies, private equity backed firms as well as numerous privately-held regional and local solid waste companies of varying sizes and resources. Competition in the disposal industry may also be affected by the increasing national emphasis on recycling and other waste reduction programs, which may reduce the volume of waste deposited in landfills. Accordingly, it may become uneconomical for us to make further acquisitions or we may be unable to locate or acquire suitable acquisition candidates at price levels and on terms and conditions that we consider appropriate, particularly in markets we do not already serve.
Sales and Marketing
We focus our marketing efforts on increasing and extending business with existing customers, as well as increasing our new customer base. Our sales and marketing strategy is to provide prompt, high quality, comprehensive solid waste collection to our customers at competitive prices. We target potential customers of all sizes, from small quantity generators to large companies and municipalities. Because the waste collection and disposal business is a highly localized business, most of our marketing activity is local in nature.
Government Contracts
We are party to contracts with municipalities and other associations and agencies. Many of these contracts are or will be subject to competitive bidding. We may not be the successful bidder, or we may have to substantially lower prices in order to be the successful bidder. In addition, some of our customers may have the right to terminate their contracts with us before the end of the contract term.
Municipalities may annex unincorporated areas within counties where we provide collection services, and as a result, our customers in annexed areas may be required to obtain service from competitors who have been franchised or contracted by the annexing municipalities to provide those services. Some of the local jurisdictions in which we currently operate grant exclusive franchises to collection and disposal companies, others may do so in the future, and we may enter markets where franchises are granted by certain municipalities, thereby reducing the potential market opportunity for us.
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Regulation
Our business is subject to extensive and evolving federal, state and local environmental, health, safety and transportation laws and regulations. These laws and regulations are administered by the U.S. Environmental Protection Agency, or EPA, and various other federal, state and local environmental, zoning, air, water, transportation, land use, health and safety agencies. Many of these agencies regularly inspect our operations to monitor compliance with these laws and regulations. Governmental agencies have the authority to enforce compliance with these laws and regulations and to obtain injunctions or impose civil or criminal penalties in cases of violations. We believe that regulation of the waste industry will continue to evolve, and we will adapt to future legal and regulatory requirements to ensure compliance.
Our operations are subject to extensive regulation, principally under the federal statutes described below.
The Resource Conservation and Recovery Act of 1976, as amended, or RCRA. RCRA regulates the handling, transportation and disposal of hazardous and non-hazardous wastes and delegates authority to states to develop programs to ensure the safe disposal of solid wastes. On October 9, 1991, the EPA promulgated Solid Waste Disposal Facility Criteria for non-hazardous solid waste landfills under Subtitle D of RCRA. Subtitle D includes location standards, facility design and operating criteria, closure and post-closure requirements, financial assurance standards and groundwater monitoring, as well as corrective action standards, many of which had not commonly been in place or enforced at landfills. Subtitle D applies to all solid waste landfill cells that received waste after October 9, 1991, and, with limited exceptions, required all landfills to meet these requirements by October 9, 1993. All states in which we operate have EPA-approved programs which implemented at least the minimum requirements of Subtitle D and in some states even more stringent requirements.
The Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or CERCLA. CERCLA, which is also known as Superfund, addresses problems created by the release or threatened release of hazardous substances (as defined in CERCLA) into the environment. CERCLA’s primary mechanism for achieving remediation of such problems is to impose strict joint and several liability for cleanup of disposal sites on current owners and operators of the site, former site owners and operators at the time of disposal and parties who arranged for disposal at the facility (i.e., generators of the waste and transporters who select the disposal site). The costs of a CERCLA cleanup can be substantial. Liability under CERCLA is not dependent on the existence or intentional disposal of “hazardous wastes” (as defined under RCRA), but can also be based upon the release or threatened release, even as a result of lawful, unintentional and non-negligent action, of any one of the more than 700 “hazardous substances” listed by the EPA, even in minute amounts.
The Federal Water Pollution Control Act of 1972, as amended, or the Clean Water Act. This act establishes rules regulating the discharge of pollutants into streams and other waters of the United States (as defined in the Clean Water Act) from a variety of sources, including solid waste disposal sites. If runoff from our transfer stations may be discharged into surface waters, the Clean Water Act requires us to apply for and obtain discharge permits, conduct sampling and monitoring and, under certain circumstances, reduce the quantity of pollutants in those discharges. In 1990, the EPA issued additional rules under the Clean Water Act, which establish standards for management of storm water runoff from landfills and which require landfills that receive, or in the past received, industrial waste to obtain storm water discharge permits. In addition, if a landfill or transfer station discharges wastewater through a sewage system to a publicly-owned treatment works, the facility must comply with discharge limits imposed by the treatment works. Also, if development of a landfill may alter or affect “wetlands,” the owner may have to obtain a permit and undertake certain mitigation measures before development may begin. This requirement is likely to affect the construction or expansion of many solid waste disposal sites.
The Clean Air Act of 1970, as amended, or the Clean Air Act. The Clean Air Act provides for increased federal, state and local regulation of the emission of air pollutants. The EPA has applied the Clean Air Act to solid waste landfills and vehicles with heavy duty engines, such as waste collection vehicles. Additionally, in March 1996, the EPA adopted New Source Performance Standards and Emission Guidelines (the “Emission Guidelines”) for municipal solid waste landfills to control emissions of landfill gases. These regulations impose limits on air emissions from solid waste landfills. The Emission Guidelines impose two sets of emissions standards, one of which is applicable to all solid waste landfills for which construction, reconstruction or modification was commenced before May 30, 1991. The other applies to all municipal solid waste landfills for which construction, reconstruction or modification was commenced on or after May 30, 1991. These guidelines, combined with the new permitting programs established under the Clean Air Act, could subject solid waste landfills to significant permitting requirements and, in some instances, require installation of gas recovery systems to reduce emissions to allowable limits. The EPA also regulates the emission of hazardous air pollutants from municipal landfills and has promulgated regulations that require measures to monitor and reduce such emissions.
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Climate Change. A variety of regulatory developments, proposals or requirements have been introduced that are focused on restricting the emission of carbon dioxide, methane and other gases known as greenhouse gases. Congress has considered legislation directed at reducing greenhouse gas emissions. There has been support in various regions of the country for legislation that requires reductions in greenhouse gas emissions, and some states have already adopted legislation addressing greenhouse gas emissions from various sources. In 2007, the U.S. Supreme Court held in Massachusetts, et al. v. EPA that greenhouse gases are an “air pollutant” under the federal Clean Air Act and, thus, subject to future regulation. In a move toward regulating greenhouse gases, on December 15, 2009, the EPA published its findings that emission of carbon dioxide, methane and other greenhouse gases present an endangerment to human health and the environment because greenhouse gases are, according to EPA, contributing to climate change. On October 30, 2009, the EPA published the greenhouse gas reporting final rule, effective December 29, 2009, which establishes a new comprehensive scheme requiring certain specified industries as well as operators of stationary sources emitting more than established annual thresholds of carbon dioxide-equivalent greenhouse gases to inventory and report their greenhouse gas emissions annually. Municipal solid waste landfills are subject to the rule. In 2009, the EPA also proposed regulations that would require a reduction in emissions of greenhouse gases from motor vehicles. According to the EPA, the final motor vehicle greenhouse gas standards will trigger construction and operating permit requirements for stationary sources that exceed potential-to-emit (PTE) thresholds for regulated pollutants. As a result, the EPA has proposed to tailor these programs such that only large stationary sources, such as electric generating units, cement production facilities, and petroleum refineries will be required to have air permits that authorize greenhouse gas emissions.
The Occupational Safety and Health Act of 1970, as amended, or OSHA. OSHA establishes certain employer responsibilities, including maintenance of a workplace free of recognized hazards likely to cause death or serious injury, compliance with standards promulgated by the Occupational Safety and Health Administration and various record keeping, disclosure and procedural requirements. Various standards, including standards for notices of hazards, safety in excavation and demolition work and the handling of asbestos, may apply to our operations.
Flow Control/Interstate Waste Restrictions. Certain permits and approvals, as well as certain state and local regulations, may limit a landfill or transfer station to accepting waste that originates from specified geographic areas, restrict the importation of out-of-state waste or wastes originating outside the local jurisdiction or otherwise discriminate against non-local waste. From time to time, federal legislation is proposed that would allow some local flow control restrictions. Although no such federal legislation has been enacted to date, if such federal legislation should be enacted in the future, states in which we use landfills could limit or prohibit the importation of out-of-state waste or direct that wastes be handled at specified facilities. These restrictions could also result in higher disposal costs for our collection operations. If we were unable to pass such higher costs through to our customers, our business, financial condition and operating results could be adversely affected.
State and Local Regulation. Each state in which we now operate or may operate in the future has laws and regulations governing the generation, storage, treatment, handling, transportation and disposal of solid waste, occupational safety and health, water and air pollution and, in most cases, the siting, design, operation, maintenance, closure and post-closure maintenance of landfills and transfer stations. State and local permits and approval for these operations may be required and may be subject to periodic renewal, modification or revocation by the issuing agencies. In addition, many states have adopted statutes comparable to, and in some cases more stringent than, CERCLA. These statutes impose requirements for investigation and cleanup of contaminated sites and liability for costs and damages associated with such sites, and some provide for the imposition of liens on property owned by responsible parties. Furthermore, many municipalities also have ordinances, local laws and regulations affecting our operations. These include zoning and health measures that limit solid waste management activities to specified sites or activities, flow control provisions that direct or restrict the delivery of solid wastes to specific facilities, laws that grant the right to establish franchises for collection services and then put such franchises out for bid and bans or other restrictions on the movement of solid wastes into a municipality.
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Certain state and local jurisdictions may also seek to enforce flow control restrictions through local legislation or contractually. In certain cases, we may elect not to challenge such restrictions. These restrictions could reduce the volume of waste going to landfills in certain areas, which may adversely affect our ability to operate our landfills at their full capacity and/or reduce the prices that we can charge for landfill disposal services. These restrictions may also result in higher disposal costs for our collection operations. If we were unable to pass such higher costs through to our customers, our business, financial condition and operating results could be adversely affected.
Permits or other land use approvals with respect to a landfill, as well as state or local laws and regulations, may specify the quantity of waste that may be accepted at the landfill during a given time period and/or specify the types of waste that may be accepted at the landfill. Once an operating permit for a landfill is obtained, it must generally be renewed periodically.
There has been an increasing trend at the state and local level to mandate and encourage waste reduction and recycling and to prohibit or restrict the disposal in landfills of certain types of solid wastes, such as yard wastes, beverage containers, unshredded tires, lead-acid batteries, paper, cardboard and household appliances.
Many states and local jurisdictions have enacted “bad boy” laws that allow the agencies that have jurisdiction over waste services contracts or permits to deny or revoke these contracts or permits based on the applicant’s or permit holder’s compliance history. Some states and local jurisdictions go further and consider the compliance history of the parent, subsidiaries or affiliated companies, in addition to that of the applicant or permit holder. These laws authorize the agencies to make determinations of an applicant’s or permit holder’s fitness to be awarded a contract to operate and to deny or revoke a contract or permit because of unfitness unless there is a showing that the applicant or permit holder has been rehabilitated through the adoption of various operating policies and procedures put in place to assure future compliance with applicable laws and regulations.
Some state and local authorities enforce certain federal laws in addition to state and local laws and regulations. For example, in some states, RCRA, OSHA, parts of the Clean Air Act and parts of the Clean Water Act are enforced by local or state authorities instead of the EPA, and in some states those laws are enforced jointly by state or local and federal authorities.
Public Utility Regulation. In many states, public authorities regulate the rates that landfill operators may charge.
Seasonality
Based on our industry and our historic trends, we expect our operations to vary seasonally. Typically, revenue will be highest in the second and third calendar quarters and lowest in the first and fourth calendar quarters. These seasonal variations result in fluctuations in waste volumes due to weather conditions and general economic activity. We also expect that our operating expenses may be higher during the winter months due to periodic adverse weather conditions that can slow the collection of waste, resulting in higher labor and operational costs.
Employees
As of April 9, 2016, we have approximately 180 full-time employees. None of our employees are represented by a labor union. We have not experienced any work stoppages and we believe that our relations with our employees are good.
DESCRIPTION OF PROPERTY
Our principal executive office is located at 12540 Broadwell Road, Suite 2104, Milton, Georgia and is an approximately 3,500 sq. ft. office space rented at a rate of $2,600 per month. We also lease approximately 8,500 sq. ft. of office space rented at a rate of $23,000 per month in Bridgeton, Missouri. It is our belief that such space is adequate for our immediate office needs. Additional space may be required as we expand our business activities, but we do not foresee any significant difficulties in obtaining additional office facilities if deemed necessary.
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Our principal property and equipment is comprised of land, a landfill, buildings, vehicles and equipment in the State of Missouri. In addition, we lease real property and own a landfill. These properties are sufficient to meet the Company’s current operational needs; however, the Company is exploring the potential acquisition and/or leasing of additional properties pursuant to its growth strategies.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Directors and Executive Officers
The following table and text sets forth the names and ages of all our directors and executive officers and our key management personnel as of June 8, 2016. All of our directors serve until the next annual meeting of stockholders and until their successors are elected and qualified, or until their earlier death, retirement, resignation or removal. Executive officers serve at the discretion of the Board of Directors, and are elected or appointed to serve until the next Board of Directors meeting following the annual meeting of stockholders, and until their successors are elected and qualified, or until their earlier death, resignation or removal. Also provided is a brief description of the business experience of each director and executive officer and the key management personnel during the past five years and an indication of directorships held by each director in other companies subject to the reporting requirements under the Federal securities laws.
Name
Age
Position
Jeffrey Cosman (1)
45
Chief Executive Officer, Chairman of the Board of Directors
Walter H. Hall (2)
58
President, Chief Operating Officer, Director
(1)
Jeffrey Cosman was appointed Chief Executive Officer and Director on October 31, 2014. Mr. Cosman was confirmed as the Chairman of the Board on February 10, 2016.
(2)
Walter H. Hall was appointed President, Chief Operating Officer, and a member of the Board of Directors on March 11, 2016.
All directors hold office until the next annual meeting of shareholders and until their successors are elected and qualified.
Officers are appointed by the Board of Directors and serve at the discretion of the Board.
Jeffrey S. Cosman, age 45, Chief Executive Officer, Director
Jeffrey S. Cosman combines over 10 years’ experience in the solid waste industry, which includes local operations, local and regional accounting and corporate finance. Mr. Cosman has served as the Chief Executive Officer and a Director of the Company since October 31, 2014, and has managed the operations of Here to Serve - Missouri Waste Division, LLC and Here to Serve - Georgia Waste Division, LLC since May 2014. In 2012, Mr. Cosman purchased Rosewood Communication Supply, a warehouse centric telecom parts and supplies distributor. In 2010, Mr. Cosman shifted his career focus back to the solid waste industry, founding, in 2010, Legacy Waste Solutions, LLC, a compressed natural gas consulting business. Prior to that, in the early 2000’s, Mr. Cosman became involved in start-up technology in the medical device industry, following his work at Republic Services from February 1996 until February 1999, where, in his role in Corporate Finance, Mr. Cosman assisted due diligence of acquisitions, provided accounting guidance in over 168 transactions totaling $1.6 Billion in annualized revenue, supported corporate controllers in monthly reporting and assisted in the preparation of a registration statement for Republic Services. From 1993 through 1996, Mr. Cosman had a career in professional baseball with the New York Mets’ minor league organization. In addition, Mr. Cosman has experience in mobile-based app development, medical device sales leadership and capital raising. Mr. Cosman holds a B.B.A. in Managerial Finance and Banking and Finance, and a Bachelors of Accountancy from the University of Mississippi. The Board of Directors believes that Mr. Cosman’s “ground up” experience in the solid waste industry, together with his background in related fields, as well as finance, will support the Company’s growth plans as it moves forward in implementing its transition into the waste industry.
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Mr. Cosman is the majority shareholder in Here To Serve Holding Corp, an OTC Markets company based in Milton, Georgia. Mr. Cosman has approximately 65% of the outstanding shares of Here To Serve Holding Corp. The Company does not have an arrangement with Here To Serve or Mr. Cosman for past, current or future services to be performed between Here To Serve and Meridian Waste Solutions, Inc. Mr. Cosman may in the future consult from time to time with Here To Serve on matters that do not conflict with the operation of the Company. Mr. Cosman spends several hours a month on Here To Serve.
Additionally, Mr. Cosman has a minority equity interest in Rush The Puck, LLC. The Company does not have an arrangement with Rush The Puck, LLC or Mr. Cosman for past, current or future services to be performed between Rush The Puck LLC and Meridian Waste Solutions, Inc. Mr. Cosman spends approximately one hour per week on Rush The Puck, LLC.
Walter H. Hall, age 58, President, Chief Operating Officer, Director
Walter H. Hall, age 58, brings 25 years of management experience in the waste industry. Most recently Mr. Hall served as Chief Operating Officer for Advanced Disposal Services, Inc., from 2001 through 2014, where he had direct responsibility for profit and loss decisions, development and implementation of strategic marketplace plans, sales, safety, acquisitions, and coordination of assets and personnel for a company having operations in multiple states with annual revenues in excess of $1 billion. Prior to that, Mr. Hall held positions as President and General Manager with Southland Waste Systems and Southland Waste Systems of Georgia, respectively, following six years with Brown Ferris Industries as District Manager and Regional Operations Manager. Mr. Hall has an undergraduate degree from Mississippi College. The Board of Directors believes that Mr. Hall’s extensive and directly applicable experience within the waste industry makes him ideally qualified to help lead the Company towards continued growth.
Legal Proceedings
There are no material proceedings to which any director or officer, or any associate of any such director or officer, is a party that is adverse to our Company or any of our subsidiaries or has a material interest adverse to our Company or any of our subsidiaries. No director or executive officer has been a director or executive officer of any business which has filed a bankruptcy petition or had a bankruptcy petition filed against it during the past ten years. No current director or executive officer has been convicted of a criminal offense or is the subject of a pending criminal proceeding during the past ten years. No current director or executive officer has been the subject of any order, judgment or decree of any court permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities during the past ten years. No current director or officer has been found by a court to have violated a federal or state securities or commodities law during the past ten years.
In addition, there are no material proceedings to which any affiliate of our Company, or any owner of record or beneficially of more than five percent of any class of voting securities of our Company, is a party that is adverse to our Company or any of our subsidiaries or has a material interest adverse to our Company or any of our subsidiaries. We are not currently involved in any litigation that we believe could have a materially adverse effect on our financial condition or results of operations.
However, from time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
Director Independence
On an annual basis, each director and executive officer will be obligated to disclose any transactions with our Company and any of its subsidiaries in which a director or executive officer, or any member of his or her immediate family, have a direct or indirect material interest. Following completion of these disclosures, our board of directors will make an annual determination as to the independence of each director using the current standards for “independence” that satisfy both the criteria for the Nasdaq and the NYSE MKT.
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As of June 10, 2016, the board of directors determined that the Company does not currently have any directors that are considered “independent” under the aforementioned standards.
Committees of the Board of Directors
Concurrent with having sufficient members and resources, the board of directors intends to establish an audit committee and a compensation committee. The audit committee will review the results and scope of the audit and other services provided by the independent auditors and review and evaluate the system of internal controls. The compensation committee will review and recommend compensation arrangements for the officers and employees. No final determination has yet been made as to the memberships of these committees or when we will have sufficient members to establish committees. We believe that we will need a minimum of three (3) independent directors to have effective committee systems.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following Summary Compensation Table sets forth all compensation earned, in all capacities, during the fiscal years ended December 31, 2015 and 2014 by each of the executive officers.
Name and Principal Position
Year
Salary ($)
Stock Awards ($)
Total
Jeffrey Cosman (1) (2)
2015
$
500,000
$
7,216,180
(3)
$
7,716,180
Chief Executive Officer, Director
2014
$
574,017
$
0
$
574,017
Anthony Merante (1)
2015
--
--
--
Chief Executive Officer, Chief Financial Officer, Director
2014
0
0
0
Walter H. Hall, Jr.
2015
--
--
--
President, Chief Operating Officer, Director (4)
2014
--
--
--
(1)
Anthony Merante, former Director, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer and Corporate Secretary resigned from all positions effective as of October 31, 2014.
(2)
Effective October 31, 2014, Jeffrey S. Cosman was appointed Chief Executive Officer of the Company and Director. All of Mr. Cosman’s salary was accrued for 2014; $187,500 of Mr. Cosman’s salary was accrued for 2015.
(3)
Mr. Cosman received 5,590,843 shares of common stock, having a grant date fair market value of $1.29 per share.
(4)
Mr. Hall was appointed President, Chief Operating Officer and Director on March 11, 2016.
Option Grants
We did not grant any options to any of our executive officers during the years ended December 31, 2015 and 2014.
Compensation of Directors
At this time, our directors do not receive a fee for physical attendance at each meeting of the Board of Directors or a committee thereof.
Employment Contracts, Termination of Employment and Change in Control Arrangements
Jeffrey Cosman - Employment Agreement, Director Agreement and Restricted Stock Agreement
47
On March 11, 2016, the Company entered into an employment agreement with Mr. Cosman (the “Cosman Employment Agreement”). Mr. Cosman is currently the Chief Executive Officer and Chairman of the Board of Directors of the Company and prior to the execution and delivery of the Cosman Employment Agreement, terms of Mr. Cosman’s employment were governed by that certain previous employment agreement assumed by the Company in connection with the Company’s purchase of certain membership interests owned by such previous employer on October 17, 2014. The Cosman Employment Agreement has an initial term from March 11, 2016 through December 31, 2017 and the term will automatically renew for one (1) year periods unless otherwise terminated in accordance with the terms therein. Mr. Cosman will receive a base salary of $525,000 and Mr. Cosman’s compensation will increase by 5% on January 1 of each year. Mr. Cosman may also receive a cash bonus based on the Company’s performance relative to its annual target performance, as well as an annual equity bonus in the form of restricted common stock, in accordance with the Company’s 2016 Equity and Incentive Plan (the “Plan”) and subject to the restrictions contained therein, equivalent to 6% of the value of all acquisitions by the Company or its subsidiaries of substantially all the assets of existing businesses or of controlling interests in existing business entities and equity or debt financings during the preceding year. Upon any termination of Mr. Cosman’s employment with the Company, except for a termination for Cause, Mr. Cosman shall be entitled to a severance payment equal to the greater of (i) five years’ worth of the then--existing base salary and (ii) the last year’s bonus.
On March 11, 2016, the Company entered into a director agreement with the Company’s Chairman of the Board and Chief Executive Officer, Jeffrey Cosman, as amended by the First Amendment to Director Agreement entered into by the parties on April 13, 2016 (the “Cosman Director Agreement”).
On March 11, 2016, the Company entered into a restricted stock agreement with Mr. Cosman (the “Cosman Restricted Stock Agreement”), pursuant to which 4,253,074 shares of the Company's common stock, subject to certain restrictions set forth in the Cosman Restricted Stock Agreement, were issued to Mr. Cosman pursuant to the Cosman Employment Agreement and the Plan.
The above descriptions of the Cosman Employment Agreement and Cosman Director Agreement do not purport to be complete and are qualified in their entirety by the full text of the Cosman Employment Agreement, form of Director Agreement and form of First Amendment to Director Agreement, which are attached as Exhibit 10.1 and Exhibit 10.2 to the Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission on March 17, 2016, and Exhibit 10.27 of this Annual Report on Form 10-K, respectively, and incorporated herein by reference.
Walter H. Hall, Jr. - Director Agreement and Employment Agreement
On March 11, 2016, the Company entered into a director agreement with Mr. Walter H. Hall, Jr., as amended by the First Amendment to Director Agreement entered into by the parties on April 13, 2016 (the “Hall Director Agreement”), concurrent with Mr. Hall’s appointment to the Board of Directors of the Company (the “Board”) effective March 11, 2016 (the “Effective Date”).
On March 11, 2016, the Company entered into an executive employment agreement with Mr. Hall (the “Hall Employment Agreement”). Under the Hall Employment Agreement, Mr. Hall shall serve as the President and Chief Operating Officer of the Company for an initial term of thirty-six (36) months, with automatic renewal for one (1) year periods thereafter, unless otherwise terminated pursuant to the terms contained therein. Mr. Hall will receive a base salary of $300,000 beginning upon the Company’s closing of acquisitions in the aggregate amount of $35,000,000 from the date the Hall Employment Agreement is executed. Mr. Hall may also receive an annual bonus of up to $175,000, or such larger amount approved by the Board, as well as an annual equity bonus (in the form of restricted common stock, in accordance with the Plan and subject to the restrictions contained therein) equivalent to 2% of the value of all acquisitions by the Company or its subsidiaries of substantially all the assets of existing businesses or of controlling interests in existing business entities and equity or debt financings during the preceding year. Additionally, Mr. Hall received two million (2,000,000) restricted shares of the Company’s common stock upon the execution of the Hall Employment Agreement.
The above descriptions of the Hall Director Agreement and Hall Employment Agreement do not purport to be complete and are qualified in their entirety by the full text of the form of Director Agreement, Hall Employment Agreement and form of First Amendment to Director Agreement which are attached as Exhibit 10.2, and Exhibit 10.3 to the Current Report on Form 8-K filed with the U.S Securities and Exchange Commission on March 17, 2016, and Exhibit 10.27 of this Annual Report on Form 10-K, respectively, and incorporated herein by reference.
48
TRANSACTIONS WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS
Any future transactions or loans between us and our officers, directors, principal stockholders or affiliates will be on terms no less favorable to us than could be obtained from an unaffiliated third party, and will be approved by a majority of disinterested directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of June 8, 2016, certain information with respect to the beneficial ownership of our common stock by each shareholder known by us to be the beneficial owner of more than 5% of our Common Stock and by each of our current directors and executive officers. Each person has sole voting and investment power with respect to the shares of Common Stock, except as otherwise indicated.
This table is prepared based on information supplied to us by the listed security holders, any Schedules 13D or 13G and Forms 3 and 4, and other public documents filed with the SEC.
Under the rules of the Securities and Exchange Commission, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power to vote or direct the voting of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under the Securities and Exchange Commission rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary beneficial interest.
Shares of Common Stock which an individual or group has a right to acquire within 60 days pursuant to the exercise or conversion of options are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table below.
Based on a total of 25,554,867 shares of common stock outstanding as of June 8, 2016, except as otherwise indicated.
(2)
Based on a total of 51 shares of Series A Preferred outstanding as of June 8, 2016.
(3)
Based on a total of 71,120 shares of Series B Preferred outstanding as of June 8, 2016.
(4)
Includes 3,322,809 shares of the common stock of the Company issued to Here to Serve Holding Corp. Mr. Cosman is the Chief Executive Officer and Director of Here to Serve Holding Corp. and, accordingly, has sole voting power and sole dispositive power over such 3,322,809 shares. This amount does not include 4,253,074 shares of restricted stock issued to Mr. Cosman, which has not yet vested.
(5)
Assumes conversion of Series B shares of such holder based on share price of $1.43; includes 672,775 shares of common stock
(6)
These shares are owned by the following persons: Praesidian Capital Opportunity Fund III, LP; Praesidian Capital Opportunity Fund III-A, LP; Praesidian Capital Opportunity Management III, LLC; Praesidian Capital Opportunity Management III-A, LLC; and Jason Drattell
(7)
Assumes full exercise of Purchase Warrant for Common Shares dated December 22, 2015.
There are no arrangements, known to the Company, including any pledge by any person of securities of the Company, the operation of which may at a subsequent date result in a change in control of the Company.
Changes in Control
We are not aware of any arrangements that may result in changes in control” as that term is defined by the provisions of Item 403(c) of Regulation S-K.
DESCRIPTION OF CAPITAL STOCK
General
Our authorized capital stock consists of 75,000,000 shares of common stock, par value of $0.025 per share, and 5,000,000 shares of preferred stock, par value of $0.001 per share. As of June 8, 2016 there were 25,554,867 shares of our common stock issued and outstanding held by 42 holders of record. We currently have (i) 51 shares of Series A Preferred Stock authorized of which 51 shares of Series A Preferred Stock are issued and outstanding and (ii) 71,210 shares of Series B Preferred Stock authorized of which 71,210 shares of Series B Preferred Stock are issued and outstanding.
Common Stock
Each share of our common stock entitles its holder to one vote in the election of each director and on all other matters voted on generally by our stockholders. No share of our common stock affords any cumulative voting rights. This means that the holders of a majority of the voting power of the shares voting for the election of directors can elect all directors to be elected if they choose to do so.
Holders of our common stock will be entitled to dividends in such amounts and at such times as our Board of Directors in its discretion may declare out of funds legally available for the payment of dividends. We currently do not anticipate paying any cash dividends on the common stock in the foreseeable future. Any future dividends will be paid at the discretion of our Board of Directors after taking into account various factors, including:
50
●
general business conditions;
●
industry practice;
●
our financial condition and performance;
●
our future prospects;
●
our cash needs and capital investment plans;
●
our obligations to holders of any preferred stock we may issue;
●
income tax consequences; and
●
the restrictions New York and other applicable laws and our credit arrangements may impose, from time to time.
If we liquidate or dissolve our business, the holders of our common stock will share ratably in all our assets that are available for distribution to our stockholders after our creditors are paid in full and the holders of all series of our outstanding preferred stock, if any, receive their liquidation preferences in full.
Our common stock has no preemptive rights and is not convertible or redeemable or entitled to the benefits of any sinking or repurchase fund.
Preferred Stock
General
The Company has 5,000,000 authorized shares of preferred stock par value $0.001 per share, which have two classes. The Series A Preferred Stock has 51 shares issued and outstanding and the Series B Preferred Stock has 71,210 shares issued and outstanding.
Our Board has the authority, within the limitations and restrictions in our certificate of incorporation, to issue shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any series or the designation of any series, without further vote or action by the stockholders. The issuance of shares of preferred stock may have the effect of delaying, deferring or preventing a change in our control without further action by the stockholders. The issuance of shares of preferred stock with voting and conversion rights may adversely affect the voting power of the holders of our common stock. In some circumstances, this issuance could have the effect of decreasing the market price of our common stock.
Undesignated preferred stock may enable our Board to render more difficult or to discourage an attempt to obtain control of our company by means of a tender offer, proxy contest, merger or otherwise, and thereby to protect the continuity of our management. The issuance of shares of preferred stock may adversely affect the rights of our common stockholders. For example, any shares of preferred stock issued may rank prior to the common stock as to dividend rights, liquidation preference or both, may have full or limited voting rights and may be convertible into shares of common stock. As a result, the issuance of shares of preferred stock, or the issuance of rights to purchase shares of preferred stock, may discourage an unsolicited acquisition proposal or bids for our common stock or may otherwise adversely affect the market price of our common stock or any existing preferred stock.
51
Series A Preferred Stock
Each share of the Series A preferred Stock has no conversion rights, is senior to any other class or series of capital stock of the Company and special voting rights. Each one (1) share of Series A Preferred Stock shall have voting rights equal to (x) 0.019607 multiplied by the total issued and outstanding Common Stock eligible to vote at the time of the respective vote (the “Numerator”), divided by (y) 0.49, Minus (z) the Numerator.
Series B Preferred Stock
Holders of the Series B Preferred Stock shall be entitled to receive when and if declared by the Board of Directors cumulative dividends at the rate of twelve percent (12%) of the Original Issue Price. In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the holders of Series B Preferred Stock shall be entitled to receive, immediately prior and in preference to any distribution to holders of the Company’s common stock, an amount per share equal to the sum of $100.00 and any accrued and unpaid dividends of the Series B Preferred Stock. Each share of Series B Preferred Stock may be converted at the option of the holder into the Company’s common stock. The shares shall be converted using the “Conversion Formula” set forth in the Series B Preferred Stock Certificate of Designations, which is equal to the Original Issue Price divided by 75% of the average closing bid price of the Common Stock for the five (5) consecutive trading days ending on the trading day of the receipt by the Company of the applicable notice of conversion.
Warrants
The Company has outstanding warrants issued to Goldman Sachs for the purchase of shares of the Company’s common stock equivalent to a 6.5% of the total number of outstanding shares of the Company’s common stock on a fully-diluted basis, exercisable on or before December 22, 2023 (the “Goldman Sachs Warrants”) The Goldman Sachs Warrants grant the holder certain other rights, including:
·
put rights, providing that the holder may demand that the Company purchase all of such warrant from the holder for cash upon the earliest to occur of (i) the Maturity Date, (ii) the payment of at least 75% of the obligations under the Credit Agreement, (iii) an uncured event of default and (iv) a Sale Transactions (as defined in the Goldman Sachs Warrants);
·
demand registration rights, providing that the holder may demand that the Company file registration statements, including a shelf registration statement (if the Company is eligible at such time to utilize a shelf registration for the Warrant Shares) at any time;
·
piggyback registration rights, providing that the holder be given notice of a proposed registration of Equity Securities in connection with an underwritten public offering of such Equity Securities and upon request of holder, the Company shall cause such Warrant Shares to be registered;
·
preemptive rights to participate pro rata in raises of Senior Capital (Equity Securities, indebtedness, debt securities other than Common Shares (or Equity Securities convertible or exercisable or exchangeable (directly or indirectly) for Common Shares) or first lien indebtedness for borrowed money.;
·
information rights and the right to appoint a non-voting observer to the Company’s Board of Directors;
·
and indemnification rights.
The foregoing summary does not purport to be complete; please refer to the Goldman Sachs Warrants, Exhibit 4.6, hereof.
In connection with subscriptions pursuant to a private placement offering during 2016, the Company granted “true-up” rights with respect to subscription agreements in the aggregate amount of $1,600,000, with such agreements providing that the Company shall issue additional shares of Common Stock in the event that, prior to the first anniversary of such subscription agreement, an investor sells all of the Common Stock purchased under such subscription agreement and receives less than the full amount of the purchase price paid under such subscription agreement.
In connection with subscriptions pursuant to a second private placement offering during 2016, the Company issued warrants to purchase Common Stock (the “Private Placement Warrants”). In the event that, for a six-month period beginning six months from the date of such a subscription (subject to extension under certain circumstances), one or more of such subscribers were to sell all shares of Common Stock purchased by such subscriber pursuant to such offering and fail to receive proceeds equal to or in excess of the aggregate purchase price paid by such subscriber for such shares, such subscriber could exercise the Private Placement Warrant, requiring the Company to, at its election, (i) issue to such subscriber the number of shares of Common Stock equivalent to amount by which such purchase price exceeds such sale proceeds, valued at the average closing price for the Common Stock on the primary trading market on the three (3) trading days preceding the date of exercise or (ii) redeem such shortfall amount in cash. The Private Placement Warrants may be exercised more than once each, in the event that sale proceeds, including shares issued pursuant to a Private Placement Warrant, continue to fall short of the original purchase price and the Company has not elected to redeem such Private Placement Warrant for cash.
Options
There are no options currently outstanding.
52
LEGAL MATTERS
There are no material proceedings to which any director or officer, or any associate of any such director or officer, is a party that is adverse to our Company or any of our subsidiaries or has a material interest adverse to our Company or any of our subsidiaries. No director or executive officer has been a director or executive officer of any business which has filed a bankruptcy petition or had a bankruptcy petition filed against it during the past ten years. No current director or executive officer has been convicted of a criminal offense or is the subject of a pending criminal proceeding during the past ten years. No current director or executive officer has been the subject of any order, judgment or decree of any court permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities during the past ten years. No current director or officer has been found by a court to have violated a federal or state securities or commodities law during the past ten years.
In addition, there are no material proceedings to which any affiliate of our Company, or any owner of record or beneficially of more than five percent of any class of voting securities of our Company, is a party that is adverse to our Company or any of our subsidiaries or has a material interest adverse to our Company or any of our subsidiaries. We are not currently involved in any litigation that we believe could have a materially adverse effect on our financial condition or results of operations.
From time to time we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
EXPERTS
No expert or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of the common stock was employed on a contingency basis, or had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in the registrant or any of its parents or subsidiaries. Nor was any such person connected with the registrant or any of its parents or subsidiaries as a promoter, managing or principal underwriter, voting trustee, director, officer, or employee.
The financial statements of the Company included in this prospectus and in the registration statement have been audited by D’Arelli Pruzansky, P.A. Certified Public Accountants, to the extent and for the period set forth in their report appearing elsewhere herein and in the registration statement, and are included in reliance upon such report given upon the authority of said firm as experts in auditing and accounting.
The validity of the issuance of the common stock hereby will be passed upon for us by Lucosky Brookman LLP.
53
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There have been no changes in or disagreements with accountants on accounting or financial disclosure matters.
INCORPORATION BY REFERENCE
We incorporate by reference all documents subsequently filed by us with the SEC pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934 until all of the securities that may be offered by this prospectus are sold. We are not, however, incorporating by reference any documents or portions thereof, whether specifically listed above or filed in the future, that are not deemed “filed” with the SEC. Any statements contained in this prospectus, in an amendment hereto or in a document incorporated by reference herein shall be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained herein or in any subsequently filed document that is also incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus.
We will provide without charge to each person to whom this prospectus is delivered, including any beneficial owner, upon written or oral request of such person, a copy of any or all of the documents that have been or that may be incorporated by reference in this prospectus. Exhibits to the filings will not be sent, however, unless those exhibits have been specifically incorporated by reference in this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the Securities Act, with respect to the shares of common stock being offered by this prospectus. This prospectus does not contain all of the information in the registration statement and its exhibits. For further information with respect to us and the common stock offered by this prospectus, we refer you to the registration statement and its exhibits. Statements contained in this prospectus as to the contents of any contract or any other document referred to are not necessarily complete, and in each instance, we refer you to the copy of the contract or other document filed as an exhibit to the registration statement. Each of these statements is qualified in all respects by this reference. You may read and copy any document that we file at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549, on official business days during the hours of 10:00 am and 3:00 pm. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. All filings we make with the SEC are also available on the SEC’s web site at http://www.sec.gov. You may also request a copy of these filings, at no cost, by writing us at Meridian Waste Solutions, Inc., 12540 Broadwell Road, Suite 2104 Milton, GA 30004.
We are subject to the periodic reporting requirements of the Exchange Act, and we will file periodic reports, proxy statements and other information with the SEC. These periodic reports, proxy statements and other information are available for inspection and copying at the public reference room and website of the SEC referred to above. We maintain a website at http://www.meridianwastesolutions.com. You may access our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act with the SEC free of charge at our website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. We have not incorporated by reference into this prospectus the information contained in, or that can be accessed through, our website, and you should not consider it to be a part of this prospectus.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
OF SECURITIES ACT LIABILITIES
Our directors and officers are indemnified as provided by the Nevada corporate law and our Bylaws. We have agreed to indemnify each of our directors and certain officers against certain liabilities, including liabilities under the Securities Act. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the provisions described above, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than our payment of expenses incurred or paid by our director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
54
INDEX TO FINANCIAL STATEMENTS
March 31, 2016
(unaudited)
PAGE
Balance Sheets
F-1
Statements of Operations
F-2
Statements of Cash Flows
F-3
Notes to Financial Statements
F-4 to F-27
December 31, 2015
(Audited)
PAGE
Report of Independent Registered Public Accoutant Consolidated Financial Statements
F-28
Consolidated Balance Sheets
F-29
Consolidated Statements of Operations
F-30
Consolidated Statements of Changes in Shareholders’ Equity
F-31
Consolidated Statements of Cash Flows
F-32
Notes to the Consolidated Financial Statements
F-33 to F-67
December 31, 2014
(Audited)
PAGE
Reports of Independent Registered Public Accountant
F-68
Consolidated Balance Sheets
F-70
Consolidated Statements of Operations
F-71
Consolidated Statements of Changes in Shareholders' Equity (Deficit)
F-72
Consolidated Statements of Cash Flows
F-73
Notes to the Consolidated Financial Statements
F-74 to F-88
55
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2016 AND DECEMBER 31, 2015
Assets
March 31,
2016
(UNAUDITED)
December 31,
2015
Current assets:
Cash and cash equivalents
$
1,766,569
$
2,729,795
Short-term investments
1,947,127
-
Accounts receivable, net of allowance
2,013,933
1,707,818
Prepaid expenses
393,728
427,615
Other current assets
88,537
52,359
Total current assets
6,209,894
4,917,587
Property, plant and equipment, at cost net of accumulated depreciation
16,040,835
14,433,740
Other assets:
Investment in related party affiliate
362,080
364,185
Deposits
10,954
10,954
Loan fees, net of accumulated amortization
1,115,200
1,416,697
Goodwill
7,234,420
7,479,642
Landfill assets, net of accumulated amortization
3,371,212
3,393,476
Customer list, net of accumulated amortization
18,636,744
19,500,362
Non-compete, net of accumulated amortization
145,459
155,699
Website, net of accumulated amortization
10,208
10,904
Total other assets
30,886,277
32,331,919
Total assets
$
53,137,006
$
51,683,246
Liabilities and Shareholders' (Deficit) Equity
Current liabilities:
Accounts payable
$
1,981,859
$
1,988,050
Accrued expenses
474,806
280,069
Notes payable, related party
359,891
359,891
Deferred compensation
1,036,630
996,380
Deferred revenue
3,045,935
2,912,264
Convertible notes due related parties, includes put premiums
15,065
15,065
Contingent liability
1,000,000
1,000,000
Derivative liability - stock warrants
2,640,000
2,820,000
Current portion - long term debt
268,994
417,119
Total current liabilities
10,823,180
10,788,838
Long term liabilities:
Asset retirement obligation
245,428
200,252
Long term debt, net of current
42,964,192
40,587,493
2,376,699
Total long term liabilities
43,209,620
40,787,745
Total liabilities
54,032,800
51,576,583
Shareholders' equity:
Preferred Series A stock, par value $.001, 51 shares authorized, issued and outstanding
-
-
Preferred Series B stock, par value $.001, 71,210 shares authorized, issued and outstanding
71
71
Common stock, par value $.025, 75,000,000 shares authorized, 24,537,982 and 21,038,650 share issued and outstanding, respectively
613,449
525,966
Treasury stock, at cost, 230,000 shares
(224,250
)
(224,250
)
Additional paid in capital
32,961,418
27,624,492
Accumulated deficit
(34,246,482
)
(27,819,616
)
Total shareholders' (deficit) equity
(895,794
)
106,663
Total liabilities and shareholders' equity
$
53,137,006
$
51,683,246
F-1
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDING MARCH 31, 2016 AND 2015
Three months ended
March 31, 2016 (UNAUDITED)
March 31, 2015 (UNAUDITED)
Revenue
Services
$
7,488,239
$
3,035,819
7,488,239
3,035,819
Total revenue
Cost of sales and services
Cost of sales and services
4,469,898
1,833,058
Depreciation
757,089
381,576
Total cost of sales and services
5,226,987
2,214,634
Gross Profit
2,261,252
821,185
Expenses
Bad debt expense
44,589
2,738
Compensation and related expense
4,230,768
2,145,907
Depreciation and amortization
950,317
725,612
Selling, general and administrative
2,191,571
513,666
Total expenses
7,417,245
3,387,923
Other income (expenses):
Miscellaneous income
6,700
1,097
Loss on disposal of assets
(1,451
)
-
Unrealized gain (loss) on interest rate swap
-
3,071
Unrealized gain on change in fair value of derivative liability
180,000
-
Loss on extinguishment of debt
-
-
Loss from proportionate share of equity method investment
(2,105
)
-
Recapitalization expense
-
-
Unrealized gain on investment
-
-
Interest income
2,139
-
Interest expense
(1,456,156
)
(190,076
)
Total other expenses
(1,270,873
)
(185,908
)
Net loss
$
(6,426,866
)
$
(2,752,646
)
Basic net loss per share
$
(0.30
)
$
(0.25
)
Weighted average number of shares outstanding
(Basic and Diluted)
21,680,019
11,114,873
F-2
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDING MARCH 31, 2016 AND 2015
Periods ending
March 31, 2016 (UNAUDITED)
March 31, 2015 (UNAUDITED)
Cash flows from operating activities:
Net loss
$
(6,426,866
)
$
(2,752,646
)
Adjustments to reconcile net loss to net cash (used in) provided
from operating activities:
Depreciation and amortization
1,707,406
1,107,189
Interest accretion on landfill liabilities
45,176
Amortization of capitalized loan fees & debt discount
413,639
-
Unrealized gain on swap agreement
-
(3,072
)
Unrealized gain on derivatives
(180,000
)
-
Stock issued to vendors for services
778,985
260,325
Stock issued to employees as incentive compensation
3,545,422
1,486,265
Loss from proportionate share of equity investment
2,105
Loss on disposal of equipment
1,451
-
Changes in working capital items net of acquisitions:
Accounts receivable, net of allowance
(306,115
)
143,253
Prepaid expenses and other current assets
(2,291
)
(89,989
)
Accounts payable and accrued expenses
188,546
122,276
Deferred compensation
40,250
170,000
Deferred revenue
133,671
30,927
Other current liabilities
-
(340,044
)
Net cash (used in) provided from operating activities
(58,621
)
134,484
Cash flows from investing activities:
Landfill additions / ARO adjustments
(29,669
)
Acquisition of property, plant and equipment
(2,436,439
)
(295,913
)
Purchases of short-term investments
(1,947,127
)
True up related to acquisition
245,222
Proceeds from sale of property, plant and equipment
46,975
-
Net cash used in investing activities
(4,121,038
)
(295,913
)
Cash flows from financing activities:
Proceeds from loans
2,150,000
-
Proceeds from issuance of common stock
1,100,000
-
Principle payments on notes payable
(33,567
)
(489,286
)
Proceeds from line of credit
-
750,000
Net cash provided from financing activities
3,216,433
260,714
Net change in cash
(963,226
)
99,285
Beginning cash
2,729,795
438,907
Ending cash
$
1,766,569
$
538,192
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest
$
997,341
$
272,840
Cash paid for taxes
$
-
$
-
Supplemental Non-Cash Investing and Financing Information:
Disposition of capitalized software in exchange for equal value of equity in acquiring entity
$
-
$
434,532
F-3
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016
NOTE 1 - NATURE OF OPERATIONS AND ORGANIZATION
Meridian Waste Solutions, Inc. (the “Company” or “Meridian”) is currently operating under five separate Limited Liability Companies:
(1) Here To Serve Missouri Waste Division, LLC (“HTSMWD”), a Missouri Limited Liability Company;
(2) Here To Serve Georgia Waste Division, LLC (“HTSGWD”), a Georgia Limited Liability Company;
(3) Meridian Land Company, LLC (“MLC”), a Georgia Limited Liability Company;
(4) Here to Serve Technology, LLC (“HTST”), a Georgia Limited Liability Company; and
(5) Christian Disposal, LLC and subsidiary (“CD”), a Missouri Limited Liability Company.
On January 7, 2015, in an effort to give investors a more concentrated presence in the waste industry the Company sold the assets of HTST to Mobile Science Technologies, Inc., a Georgia corporation (MSTI), a related party due to being owned and managed by some of the shareholders of the Company. On this date HTST ceased operations and became a dormant Limited Liability Company (“LLC”). Currently, Meridian is formalizing plans to dissolve HTST, in which this LLC will cease to exist.
In 2014, HTSMWD purchased the assets of a large solid waste disposal company in the St. Louis, MO market. This acquisition is considered the platform company for future acquisitions in the solid waste disposal industry. HTSGWD was created to facilitate expansion in this industry throughout the Southeast.
The Company is primarily in the business of residential and commercial waste disposal and hauling and has contracts with various cities and municipalities. The majority of the Company’s customers are located in the St. Louis metropolitan and surrounding areas.
Acquisition of Christian Disposal, LLC and Eagle Ridge Landfill, LLC
On December 22, 2015, Meridian Waste Solutions, Inc. and subsidiaries (the “Company”) completed its acquisition of Christian Disposal LLC, and subsidiary (“Christian Purchase Agreement”). Pursuant to the Christian Purchase Agreement, the Company acquired 100% of the membership interests of Christian Disposal, which is integrated into the operations of the Company; refer to intangible assets and acquisition footnote below.
Simultaneous with the closing thereof, Christian Disposal LLC, and subsidiary, entered into a Lease Agreement, in which, the Company leased 4551 Commerce Avenue, High Ridge, Missouri, for a five-year term at a monthly rent of $6,500. Additionally, the Company entered into an employment agreement with an executive employee for a term of five years.
Concurrently, the Company completed an asset purchase agreement with WCA Waste Corporation (the “Eagle Purchase Agreement”). The Company acquired all of the assets of Eagle Ridge Landfill, LLC (“ERL”), its rights and properties related to such business of ERL, which includes certain assets and operations of the Eagle Ridge Hauling Business (“ERH”) and certain debts, which is now operating under Meridian Land Company, LLC. Refer to intangible assets and acquisition footnote below.
Recapitalization
On October 17, 2014 Here to Serve Missouri Waste Division, LLC, (HTSMWD) a Missouri Limited Liability Company, which is the historical business, entered into a Share Exchange Agreement with the Company and the sole member of HTSMWD whereby the Company agreed to acquire the membership interest of HTSMWD, HTST and HTSGWD in exchange for 9,054,134 shares of the Company’s common stock. This transaction was closed on October 17, 2014 and HTSMWD became wholly-owned by the Company. The Company is deemed to have issued 1,139,284 shares of common stock which represents the outstanding common shares of the Company just prior to the closing of the transaction.
F-4
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016
NOTE 1 - NATURE OF OPERATIONS AND ORGANIZATION (CONTINUED)
At closing, the Company issued 9,054,134 shares of its common stock to the sole member of HTSMWD and the shareholders of the sole member who obtained approximately 90% control and management control of the Company. The transaction was accounted for as a reverse acquisition and recapitalization of HTSMWD, HTST and HTSGWD whereby HTSMWD is considered the acquirer for accounting purposes. The consolidated financial statements after the acquisition include the balance sheets of both companies and HTST and HTSGWD at historical cost, the historical results of HTSMWD, HTST and HTSGWD. All share and per share information in the accompanying consolidated financial statements and footnotes has been retroactively restated to reflect the recapitalization (see Explanation of Membership Interest Purchase Agreement below).
Liquidity and Capital Resources
As of March 31, 2016, the Company had negative working capital of $4,613,287. This lack of liquidity is mitigated by the Company’s ability to generate positive cash flow from operating activities. In the three months ended March 31, 2016, cash generated from operating activities, excluding one-time acquisition and transition expenses of approximately $467,000, was approximately $408,000. In addition, as of March 31, 2016, the Company had approximately $1,767,000 in cash and cash equivalents and $1,947,000 in short-term investments to cover its short term cash requirements. Further, the Company has approximately $12,850,000 of borrowing capacity on its multi-draw term loans and revolving commitments.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10Q and Article 803 of Regulation SX. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by US GAAP for complete financial statements. The unaudited consolidated financial statements and notes included herein should be read in conjunction with the annual consolidated financial statements and notes for the year ended December 31, 2015 included in our Annual Report on Form 10K filed with the SEC on April 14, 2016.
In the opinion of management, all adjustments (consisting of normal recurring items) necessary to present fairly the Company’s financial position as of March 31, 2016, and the results of operations and cash flows for the three months ending March 31, 2016 have been made. The results of operations for the three months ended March 31, 2016 are not necessarily indicative of the results to be expected for a full year.
Basis of Consolidation
The consolidated financial statements for the three months ending March 31, 2016 include the operations of the Company and its wholly-owned subsidiaries, Here To Serve Missouri Waste Division, LLC, Meridian Land Company, LLC, Here to Serve Technology, LLC, Here To Serve Georgia Waste Division, LLC and Christian Disposal, LLC. The following two subsidiaries of the Company, Here To Serve Georgia Waste Division, LLC and Here to Serve Technology, LLC, a Georgia Limited Liability Company had no operations during the period. The consolidated financial statements for the three months ending March 31, 2015 include the operations of the Company and its wholly-owned subsidiaries, Here To Serve Missouri Waste Division, LLC, Here To Serve Georgia Waste Division, LLC and Here to Serve Technology, LLC, a Georgia Limited Liability Company.
All significant intercompany accounts and transactions have been eliminated in consolidation.
F-5
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and Cash Equivalents and Short-term Investments
The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents. Short-term investments consist of investments that have a remaining maturity of less than one year as of the date of the balance sheet.
Management determines the appropriate classification of short-term investments at the time of purchase and evaluates such designation as of each balance sheet date. All short-term investments to date have been classified as held-to-maturity and carried at amortized costs, which approximates fair market value, on our Consolidated Balance Sheets. For the three months ended March 31, 2016 and 2015, interest income of $2,139 and $0, respectively, was recorded related to the held-to-maturity securities. Our short-term investments’ contractual maturities occur before March 31, 2017.
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, account payable, accrued expenses, and notes payable. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these consolidated financial statements.
Derivative Instruments
The Company enters into financing arrangements that consist of freestanding derivative instruments or are hybrid instruments that contain embedded derivative features. The Company accounts for these arrangements in accordance with Accounting Standards Codification topic 815, Accounting for Derivative Instruments and Hedging Activities (“ASC 815”) as well as related interpretations of this standard. In accordance with this standard, derivative instruments are recognized as either assets or liabilities in the balance sheet and are measured at fair values with gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely related to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized as either a gain or loss in earnings. The Company determines the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation models, considering of the rights and obligations of each instrument.
The Company estimates fair values of derivative financial instruments using various techniques (and combinations thereof) that are considered consistent with the objective measuring fair values. In selecting the appropriate technique, the Company considers, among other factors, the nature of the instrument, the market risks that it embodies and the expected means of settlement. For less complex derivative instruments, such as freestanding warrants, the Company generally use the Black Scholes model, adjusted for the effect of dilution, because it embodies all of the requisite assumptions (including trading volatility, estimated terms, dilution and risk free rates) necessary to fair value these instruments. Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques (such as Black-Scholes model) are highly volatile and sensitive to changes in the trading market price of our common stock. Since derivative financial instruments are initially and subsequently carried at fair values, our income (expense) going forward will reflect the volatility in these estimates and assumption changes. Under the terms of this accounting standard, increases in the trading price of the Company’s common stock and increases in fair value during a given financial quarter result in the application of non-cash derivative expense. Conversely, decreases in the trading price of the Company’s common stock and decreases in trading fair value during a given financial quarter result in the application of non-cash derivative income.
F-6
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Impairment of long-lived assets
The Company periodically reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less that the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. During the three months ending March 31, 2016, the Company experienced no losses due to impairment.
Income Taxes
The Company accounts for income taxes pursuant to the provisions of ASC 740-10, “Accounting for Income Taxes,” which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.
The Company follows the provisions of the ASC 740 -10 related to, Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.
The Company analyzes its tax positions by utilizing ASC 740-10-25 Definition of Settlement, which provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the completion of an examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. As of March 31, 2016, tax years ended December 31, 2015, 2014, and 2013 are still potentially subject to audit by the taxing authorities.
Use of Estimates
Management estimates and judgments are an integral part of consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). We believe that the critical accounting policies described in this section address the more significant estimates required of management when preparing our consolidated financial statements in accordance with GAAP. We consider an accounting estimate critical if changes in the estimate may have a material impact on our financial condition or results of operations. We believe that the accounting estimates employed are appropriate and resulting balances are reasonable; however, actual results could differ from the original estimates, requiring adjustment to these balances in future periods.
F-7
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Accounts Receivable
Accounts receivable are recorded at management’s estimate of net realizable value. At March 31, 2016 and December 31, 2015 the Company had approximately $2,641,000 and $2,326,000 of gross trade receivables, respectively.
Our reported balance of accounts receivable, net of the allowance for doubtful accounts, represents our estimate of the amount that ultimately will be realized in cash. We review the adequacy and adjust our allowance for doubtful accounts on an ongoing basis, using historical payment trends and the age of the receivables and knowledge of our individual customers. However, if the financial condition of our customers were to deteriorate, additional allowances may be required. At March 31, 2016 and December 31, 2015 the Company had approximately $627,000 and $618,000 recorded for the allowance for doubtful accounts, respectively.
Advertising costs
Advertising costs, except for costs associated with direct-response advertising, are charged to operations when incurred. The costs of direct-response advertising are capitalized and amortized over the period during which future benefits are expected to be received. The Company did not capitalize any advertising for the three months ended March 31, 2016. Advertising expenses were approximately $12,000 for the three months ended March 31, 2016.
Property, plant and equipment
The cost of property, plant, and equipment is depreciated over the estimated useful lives of the related assets utilizing the straight-line method of depreciation. The cost of leasehold improvements is depreciated (amortized) over the lesser of the length of the related leases or the estimated useful lives of the assets. Ordinary repairs and maintenance are expensed when incurred and major repairs will be capitalized and expensed if it benefits future periods.
Intangible Assets
Intangible assets that are subject to amortization are reviewed for potential impairment whenever events or circumstances indicate that carrying amounts may not be recoverable. Assets not subject to amortization are tested for impairment at least annually. The Company has intangible assets related to its purchase of Meridian Waste Services, LLC, Christian Disposal LLC and Eagle Ridge Landfill, LLC, which are further discussed in the notes below.
Investment in Related Party Affiliate
The Company has an investment in a privately held corporation in the mobile apps industry. As the Company exercises significant influence on this entity, this investment is recorded using the equity method of accounting. The Company monitors this investment for impairment and makes appropriate reductions in the carrying value if the Company determines that an impairment charge is required based primarily on the financial condition and near-term prospect of this entity.
F-8
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Goodwill
Goodwill is the excess of our purchase cost over the fair value of the net assets of acquired businesses. We do not amortize goodwill, but as discussed in the impairment of long lived assets section above, we assess our goodwill for impairment at least annually.
Website Development Costs
The Company accounts for website development costs in accordance with Accounting Standards Codification 350-50 “Website Development Costs”. Accordingly, all costs incurred in the planning stage are expensed as incurred, costs incurred in the website application and infrastructure development stage that meet specific criteria are capitalized and costs incurred in the day to day operation of the website are expensed as incurred.
Landfill Accounting
Capitalized landfill costs
Cost basis of landfill assets — We capitalize various costs that we incur to make a landfill ready to accept waste. These costs generally include expenditures for land (including the landfill footprint and required landfill buffer property); permitting; excavation; liner material and installation; landfill leachate collection systems; landfill gas collection systems; environmental monitoring equipment for groundwater and landfill gas; and directly related engineering, capitalized interest, on-site road construction and other capital infrastructure costs. The cost basis of our landfill assets also includes asset retirement costs, which represent estimates of future costs associated with landfill final capping, closure and post-closure activities. These costs are discussed below.
Final capping, closure and post-closure costs — Following is a description of our asset retirement activities and our related accounting:
·
Final capping — Involves the installation of flexible membrane liners and geosynthetic clay liners, drainage and compacted soil layers and topsoil over areas of a landfill where total airspace capacity has been consumed. Final capping asset retirement obligations are recorded on a units-of-consumption basis as airspace is consumed related to the specific final capping event with a corresponding increase in the landfill asset. The final capping is accounted for as a discrete obligation and recorded as an asset and a liability based on estimates of the discounted cash flows and capacity associated with the final capping.
F-9
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
·
Closure — Includes the construction of the final portion of methane gas collection systems (when required), demobilization and routine maintenance costs. These are costs incurred after the site ceases to accept waste, but before the landfill is certified as closed by the applicable state regulatory agency. These costs are recorded as an asset retirement obligation as airspace is consumed over the life of the landfill with a corresponding increase in the landfill asset. Closure obligations are recorded over the life of the landfill based on estimates of the discounted cash flows associated with performing closure activities.
·
Post-closure — Involves the maintenance and monitoring of a landfill site that has been certified closed by the applicable regulatory agency. Generally, we are required to maintain and monitor landfill sites for a 30-year period. These maintenance and monitoring costs are recorded as an asset retirement obligation as airspace is consumed over the life of the landfill with a corresponding increase in the landfill asset. Post-closure obligations are recorded over the life of the landfill based on estimates of the discounted cash flows associated with performing post-closure activities.
We develop our estimates of these obligations using input from our operations personnel, engineers and accountants. Our estimates are based on our interpretation of current requirements and proposed regulatory changes and are intended to approximate fair value. Absent quoted market prices, the estimate of fair value is based on the best available information, including the results of present value techniques. In many cases, we contract with third parties to fulfill our obligations for final capping, closure and post closure. We use historical experience, professional engineering judgment and quoted and actual prices paid for similar work to determine the fair value of these obligations. We are required to recognize these obligations at market prices whether we plan to contract with third parties or perform the work ourselves. In those instances where we perform the work with internal resources, the incremental profit margin realized is recognized as a component of operating income when the work is performed.
Once we have determined the final capping, closure and post-closure costs, we inflate those costs to the expected time of payment and discount those expected future costs back to present value. During the three months ended March 31, 2016 we inflated these costs in current dollars until the expected time of payment using an inflation rate of 2.5%. Accretion expense was approximately $42,500 for the three months ended March 31, 2016. We discounted these costs to present value using the credit-adjusted, risk-free rate effective at the time an obligation is incurred, consistent with the expected cash flow approach. Any changes in expectations that result in an upward revision to the estimated cash flows are treated as a new liability and discounted at the current rate while downward revisions are discounted at the historical weighted average rate of the recorded obligation. As a result, the credit adjusted, risk-free discount rate used to calculate the present value of an obligation is specific to each individual asset retirement obligation. The weighted average rate applicable to our long-term asset retirement obligations at March 31, 2016 is approximately 8.5%.
We record the estimated fair value of final capping, closure and post-closure liabilities for our landfills based on the capacity consumed through the current period. The fair value of final capping obligations is developed based on our estimates of the airspace consumed to date for the final capping. The fair value of closure and post-closure obligations is developed based on our estimates of the airspace consumed to date for the entire landfill and the expected timing of each closure and post-closure activity. Because these obligations are measured at estimated fair value using present value techniques, changes in the estimated cost or timing of future final capping, closure and post-closure activities could result in a material change in these liabilities, related assets and results of operations. We assess the appropriateness of the estimates used to develop our recorded balances annually, or more often if significant facts change.
F-10
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Changes in inflation rates or the estimated costs, timing or extent of future final capping, closure and post-closure activities typically result in both (i) a current adjustment to the recorded liability and landfill asset and (ii) a change in liability and asset amounts to be recorded prospectively over either the remaining capacity of the related discrete final capping or the remaining permitted and expansion airspace (as defined below) of the landfill. Any changes related to the capitalized and future cost of the landfill assets are then recognized in accordance with our amortization policy, which would generally result in amortization expense being recognized prospectively over the remaining capacity of the final capping or the remaining permitted and expansion airspace of the landfill, as appropriate. Changes in such estimates associated with airspace that has been fully utilized result in an adjustment to the recorded liability and landfill assets with an immediate corresponding adjustment to landfill airspace amortization expense.
·
Remaining permitted airspace — Our engineers, in consultation with third-party engineering consultants and surveyors, are responsible for determining remaining permitted airspace at our landfills. The remaining permitted airspace is determined by an annual survey, which is used to compare the existing landfill topography to the expected final landfill topography.
·
Expansion airspace — We also include currently unpermitted expansion airspace in our estimate of remaining permitted and expansion airspace in certain circumstances. First, to include airspace associated with an expansion effort, we must generally expect the initial expansion permit application to be submitted within one year and the final expansion permit to be received within five years. Second, we must believe that obtaining the expansion permit is likely, considering the following criteria:
o
Personnel are actively working on the expansion of an existing landfill, including efforts to obtain land use and local, state or provincial approvals;
o
We have a legal right to use or obtain land to be included in the expansion plan;
o
There are no significant known technical, legal, community, business, or political restrictions or similar issues that could negatively affect the success of such expansion; and
o
Financial analysis has been completed based on conceptual design, and the results demonstrate that the expansion meets the Company’s criteria for investment.
For unpermitted airspace to be initially included in our estimate of remaining permitted and expansion airspace, the expansion effort must meet all of the criteria listed above. These criteria are evaluated by our field-based engineers, accountants, managers and others to identify potential obstacles to obtaining the permits. Once the unpermitted airspace is included, our policy provides that airspace may continue to be included in remaining permitted and expansion airspace even if certain of these criteria are no longer met as long as we continue to believe we will ultimately obtain the permit, based on the facts and circumstances of a specific landfill.
When we include the expansion airspace in our calculations of remaining permitted and expansion airspace, we also include the projected costs for development, as well as the projected asset retirement costs related to the final capping, closure and post-closure of the expansion in the amortization basis of the landfill.
F-11
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Once the remaining permitted and expansion airspace is determined in cubic yards, an airspace utilization factor (“AUF”) is established to calculate the remaining permitted and expansion capacity in tons. The AUF is established using the measured density obtained from previous annual surveys and is then adjusted to account for future settlement. The amount of settlement that is forecasted will take into account several site-specific factors including current and projected mix of waste type, initial and projected waste density, estimated number of years of life remaining, depth of underlying waste, anticipated access to moisture through precipitation or recirculation of landfill leachate, and operating practices. In addition, the initial selection of the AUF is subject to a subsequent multi-level review by our engineering group, and the AUF used is reviewed on a periodic basis and revised as necessary. Our historical experience generally indicates that the impact of settlement at a landfill is greater later in the life of the landfill when the waste placed at the landfill approaches its highest point under the permit requirements.
After determining the costs and remaining permitted and expansion capacity at each of our landfill, we determine the per ton rates that will be expensed as waste is received and deposited at the landfill by dividing the costs by the corresponding number of tons. We calculate per ton amortization rates for the landfill for assets associated with each final capping, for assets related to closure and post-closure activities and for all other costs capitalized or to be capitalized in the future. These rates per ton are updated annually, or more often, as significant facts change.
It is possible that actual results, including the amount of costs incurred, the timing of final capping, closure and post-closure activities, our airspace utilization or the success of our expansion efforts could ultimately turn out to be significantly different from our estimates and assumptions. To the extent that such estimates, or related assumptions, prove to be significantly different than actual results, lower profitability may be experienced due to higher amortization rates or higher expenses; or higher profitability may result if the opposite occurs. Most significantly, if it is determined that expansion capacity should no longer be considered in calculating the recoverability of a landfill asset, we may be required to recognize an asset impairment or incur significantly higher amortization expense. If at any time management makes the decision to abandon the expansion effort, the capitalized costs related to the expansion effort are expensed immediately.
F-12
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
For the three months ended March 31, 2016 the Company operations related to its landfill assets and liability are presented in the tables below:
Three Months Ended March 31, 2016 (UNAUDITED)
Year Ended December 31, 2015
Landfill Assets
Beginning balance
$
3,393,476
$
3,396,519
Capital additions
26,984
-
Amortization of landfill assets
(51,933
)
(3,043
)
Asset retirement adjustments
2,685
$
3,371,212
$
3,393,476
Landfill Asset Retirement Obligation
Beginning balance
$
200,252
$
196,519
Obligations incurred and capitalized
2,685
Obligations settled
-
-
Interest accretion
42,491
3,733
Revisions in estimates and interest rate assumption
-
-
$
245,428
$
200,252
Revenue Recognition
The Company recognizes revenue when persuasive evidence of arrangement exists, services have been provided, the seller’s price to the buyer is fixed or determinable, and collection is reasonably assured. The majority of the Company’s revenues are generated from the fees charged for waste collection, transfer, disposal and recycling. The fees charged for our services are generally defined in service agreements and vary based on contract-specific terms such as frequency of service, weight, volume and the general market factors influencing a region’s rate.
Deferred Revenue
The Company records deferred revenue for customers that were billed in advance of services. The balance in deferred revenue represents amounts billed in January, February, and March for services that will be provided during April, May, and June.
Cost of Services
Cost of services include all employment costs associated with waste collection, transfer and disposal, damage claims, landfill costs, personal property taxes associated with collection vehicles and other direct cost of the collection and disposal process.
F-13
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Concentrations
The Company maintains its cash and cash equivalents in bank deposit accounts, which could, at times, exceed federally insured limits. The Company has not experienced any losses in such accounts; however, amounts in excess of the federally insured limit may be at risk if the bank experiences financial difficulties. The Company places its cash with high credit quality financial institutions. The Company’s accounts at these institutions are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. At March 31, 2016, the Company had $1,766,569 of cash in United States bank deposits, of which $959,985 was federally insured and $806,583 was not federally insured.
Financial instruments which also potentially subject the Company to concentrations of credit risk consist principally of trade accounts receivable; however, concentrations of credit risk with respect to trade accounts receivables are limited due to generally short payment terms.
For the three months ended March 31, 2016, the Company had one contract that accounted for approximately 12% of the Company's revenue. For the three months ended March 31, 2015, the Company had two contracts that accounted for approximately 51% of the Company's revenue, collectively.
Basic Income (Loss) Per Share
Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. At March 31, 2016 the Company had two convertible notes outstanding that are not convertible into common stock until June 2016. Additionally, the Company issued stock warrants for 1,673,559 common shares.
For the three months ended March 31, 2016, the Company had 832,859 of weighted-average common shares relating to the convertible debt, under the if-converted method, however, these shares are not dilutive because the Company recorded a loss during the fiscal year.
At March 31, 2016, and December 31, 2015 the Company had a series of convertible notes and warrants outstanding that could be converted into approximately, 2,506,418 and 2,548,559 common shares, respectively. These are not presented in the consolidated statements of operations since the company incurred a loss and the effect of these shares is anti- dilutive.
Stock-Based Compensation
Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718. To date, the Company has not adopted a stock option plan and has not granted any stock options.
Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also require measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.
F-14
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Pursuant to ASC Topic 505-50, for share based payments to consultants and other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized over the service period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the reporting date.
The Company recorded stock based compensation expense of $3,545,422 and $1,486,265 during the three months ended March 31, 2016 and 2015, respectively, which is included in compensation and related expense on the statement of operations.
Recent Accounting Pronouncements
The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.
NOTE 3 – PROPERTY, PLANT AND EQUIPMENT
The following is a summary of property, plant, and equipment—at cost, less accumulated depreciation:
March 31, 2016 (UNAUDITED)
Decemeber 31, 2015
Land
$
1,690,000
$
1,690,000
Buildings & Building Improvements
692,156
692,156
Furniture & office equipment
288,726
258,702
Containers
4,524,382
4,453,386
Trucks, Machinery, & Equipment
12,209,606
9,948,686
Total cost
19,404,870
17,042,930
Less accumulated depreciation
(3,364,035
)
(2,609,190
)
Net property and Equipment
$
16,040,835
$
14,433,740
As of March 31, 2016, the Company has $395,000 of land and building which are held for sale and included in amounts noted above. These held for sale assets were not depreciated during the three months ended March 31, 2016. Depreciation expense for three months ended March 31, 2016 and 2015 was $780,919 and $394,403, respectively.
F-15
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016
NOTE 4 - INTANGIBLE ASSETS AND ACQUISITION
Christian Disposal Acquisition
On December 22, 2015, the Company, in order to expand into new markets and maximize the rate of waste internalization, acquired 100% of the membership interests of Christian Disposal LLC pursuant to that certain Amended and Restated Membership Interest Purchase Agreement, dated October 16, 2015, as amended by that certain First Amendment thereto, dated December 4, 2015.
The acquisition was accounted for by the Company using acquisition method under business combination accounting. Under this method, the purchase price paid by the acquirer is allocated to the assets acquired and liabilities assumed as of the acquisition date based on the fair value. By the application of “push-down” accounting, our assets, liabilities and equity were accordingly adjusted to fair value on December 22, 2015. Determining the fair value of certain assets and liabilities assumed is judgmental in nature and often involves the use of significant estimates and assumptions.
The purchase of Christian Disposal, LLC included the acquisition of assets of $20,035,847 and liabilities of $2,152,738. The aggregate purchase price consisted of the following:
Cash consideration
$
13,008,109
Restricted stock consideration
2,625,000
Convertible Promissory Note
1,250,000
Contingent additional purchase price
1,000,000
Total
$
17,883,109
As noted in the table above, the purchase price could be increased by a maximum amount of $2,000,000 depending upon the extension of certain contracts to which Christian Disposal, LLC is a party. At March 31, 2016, the fair value of the additional purchase price was determined to be $1,000,000. Also, the Company issued 1,750,000 restricted shares of common stock as consideration which was valued at market at the date of the closing.
The following table summarizes the estimated fair value of Christian Disposal LLC, and subsidiary, assets acquired and liabilities assumed at the date of acquisition:
Cash
$
442,395
Accounts receivable
974,538
Prepaid expense
84,196
Other current assets
53,810
Customer lists intangible assets
8,180,000
Non-competition agreement intangible asset
56,000
Goodwill
5,604,110
Property, Plant, and Equipment
4,640,798
Account payable
(1,001,721
)
Deferred revenue
(1,007,525
)
Accrued expenses
(106,396
)
Capital lease
(37,096
)
Total
$
17,883,109
F-16
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016
NOTE 4 - INTANGIBLE ASSETS AND ACQUISITION (CONTINUED)
Eagle Ridge Landfill, LLC and Eagle Ridge Hauling Business
On December 22, 2015, the Company, in order to expand into new markets and maximize the rate of waste internalization, consummated the closing of the certain Asset Purchase Agreement dated November 13, 2015, by and between the Company and Eagle Ridge Landfill, LLC, as amended by the certain Amendment to Asset Purchase Agreement, dated December 18, 2015, to which the Company and WCA Waste Corporation are also party. Pursuant to the Eagle Ridge Purchase Agreement, Meridian Land acquired a landfill located in Pike County, Missouri and certain assets, rights, and properties related to such business of Eagle Ridge, including certain debts.
The acquisition was accounted for by the Company using the acquisition method under business combination accounting. Under this method, the purchase price paid by the acquirer is allocated to the assets acquired and liabilities assumed as of the acquisition date based on the fair value. By the application of “push-down” accounting, our assets, liabilities and equity were accordingly adjusted to fair value on December 22, 2015. Determining the fair value of certain assets and liabilities assumed is judgmental in nature and often involves the use of significant estimates and assumptions.
The purchase of Eagle Ridge Landfill, LLC and certain assets included the acquisition of assets of $9,947,224 and liabilities of $283,737. The aggregate purchase price consisted of a cash consideration of $9,663,487.
The following table summarizes the estimated fair value of Eagle Ridge Landfill LLC., assets acquired and liabilities assumed at the date of acquisition:
Cash
$
470
Accounts receivable
272,480
Prepaid expense
6,870
Customer lists intangible assets
2,000,000
Landfill permit (including ARO)
3,396,519
Goodwill
1,630,310
Land
1,550,000
Property, Plant, and Equipment
1,090,575
Deferred revenue
(87,218
)
Asset retirement obligation - permits
(196,519
)
Total
$
9,663,487
F-17
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016
NOTE 4 - INTANGIBLE ASSETS AND ACQUISITION (CONTINUED)
The following unaudited pro forma consolidated results of operations have been prepared as if the acquisitions of Christian Disposal and Eagle Ridge occurred at January 1, 2014:
Three months ended
March 31,
2015
(UNAUDITED)
Total Revenue
$
6,921,168
Net (loss) income
(2,412,011
)
Basic net loss per share
$
(0.22
)
Shares outstanding
11,114,873
The following tables set forth the intangible assets, both acquired and developed, including accumulated amortization for the three months ended March 31, 2016:
March 31, 2016
Remaining
Accumulated
Net Carrying
Useful Life
Cost
Amortization
Value
Customer lists
13.4 years
24,187,452
5,550,708
18,636,744
Non compete agreement
3.9 years
206,000
60,541
145,459
Website
3.7 years
13,920
3,712
10,208
$
24,407,372
$
5,614,961
$
18,792,411
F-18
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016
NOTE 4 - INTANGIBLE ASSETS AND ACQUISITION (CONTINUED)
In the three months ended March 31, 2016, customer lists include the intangible assets related to customer relationships acquired through the acquisition of Christian Disposal and Eagle Ridge with a cost basis of $10,180,000. The customer list intangible assets are amortized over their useful life which ranged from 5 to 20 years. Amortization expense, excluding amortization of landfill assets of $51,933, amounted to $874,554 and $712,786 for the three months ended March 31, 2016 and 2015 respectively.
NOTE 5 - NOTES PAYABLE AND CONVERTIBLE NOTES
The Company had the following long-term debt:
March 31, 2016 (UNAUDITED)
December 31,
2015
Goldman Sachs - Tranche A Term Loan - LIBOR Interest
$
40,000,000
$
40,000,000
Goldman Sachs - Revolver
2,150,000
-
Goldman Sachs - MDTL
-
-
Convertible Notes Payable
1,250,000
1,250,000
Capitalized lease - financing company, secured by equipment
33,882
37,097
Equipment loans
364,764
395,118
Notes payable to seller of Meridian, subordinated debt
1,475,000
1,475,000
Less: debt discount
(2,040,460
)
(2,152,603
)
Total debt
43,233,186
41,004,612
Less: current portion
(268,994
)
(417,119
)
Long term debt less current portion
$
42,964,192
$
40,587,493
Convertible Notes Payable
The Company issued two promissory notes to related parties during the year ended December 31, 2014. These notes totaled $125,000 and are generally convertible into common stock of the Company at discounts of 20% to 25% of the lowest average trading prices for the stock during periods five to one day prior to the conversion date. These notes bear interest at 10% to 12%, are unsecured, and mature within one year of the date issued. The notes were issued to provide working capital for the Company. These notes are considered a stock settled debt in accordance with ASC 480 since any future stock issued upon conversion will have a fixed monetary value. Due to the conversion feature included in the notes, the Company has recorded a premium on the notes totaling $31,250 as of December 31, 2014. This amount has been charged to interest expense by the Company.
In 2015, as part of the purchase price consideration of the Christian Disposal acquisition, the Company issued a convertible promissory note to seller in the amount of $1,250,000. The note bears interest at 8% and matures on December 31, 2020. The seller may convert all or any part of the outstanding and unpaid amount of this note into fully paid and non-assessable common stock in accordance with the agreement.
In previous periods the Company issued two other notes to other related parties. These notes totaled $110,000 and are generally convertible into common stock of the Company at discounts of 20% to 25% of the lowest average trading prices for the stock during periods five to one day prior to the conversion date. These notes bear interest at 10% to 12%, are unsecured, and mature within one year of the date issued. The notes were issued to provide working capital for the Company. These notes are considered a stock settled debt in accordance with ASC 480 since any future stock issued upon conversion will have a fixed monetary value. Due to the conversion feature included in the notes, the Company has recorded a premium on the notes totaling $35,833 as of December 31, 2014. This amount has been charged to interest expense by the Company.
F-19
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016
NOTE 5 - NOTES PAYABLE AND CONVERTIBLE NOTES (CONTINUED)
In 2015, approximately $225,000 of the issued promissory notes were converted into approximately 461,000 shares at the contractual conversion price. At March 31, 2016 the Company had $12,500 remaining in convertible notes to related parties, which includes $2,500 in put premiums.
Notes Payable
At December 31, 2014 the Company had a short term, non-interest bearing note payable of $150,000 which was incurred in connection with the Membership Interest Purchase Agreement discussed above. The Company also had a loan from Here to Serve Holding Corp. due to expenses paid by Here to Serve on behalf of the Company prior to the recapitalization. This loan totaled $376,585 bringing total notes payable to $526,585. In 2015, the short term, non-interest bearing note was paid off, and at March 31, 2016, the Company’s loan from Here to Serve Holding Corp. was $359,891.
Praesidian Notes Payable
On August 6, 2015, the Company refinanced its long-term debt payable to Comerica Bank. Proceeds from notes issued by the Company to Praesidian Capital Opportunity Fund III, LP and Praesidian Capital Opportunity Fund III-A, LP (together referred to as Praesidian) were $10,845,000. These funds were distributed as follows:
Payoff of short term bridge financing
$
432,938
Payoff of lines of credit with Commerica Bank
1,745,799
Payoff of senior debt to Comerica Bank
7,953,433
Refinancing fees
712,830
$
10,845,000
The Company’s Senior Secured Loan with Comerica Bank had an interest rate of LIBOR plus 4.25% with a two-year term based on a seven-year amortization schedule. In addition, the Company had a working capital line of credit with Comerica Bank of $1,250,000 at 4.75% of which the Company had drawn down $1,185,081 and $1,085,160 as of August 6, 2015 and December 31, 2014, respectively. There was CAPEX line of credit of $750,000, of which the Company had drawn down $560,718 and $590,000 as of August 6, 2015 and December 31, 2014, respectively; again at 4.75% interest. As noted above, these debts were paid off from the proceeds received from Praesidian.
The debt to Praesidian had a maturity date of August 6, 2020 with interest paid monthly at an annual rate of 14%. In addition to the 14% interest rate, the Company issued to Praesidian warrants to purchase 1,293,022 shares of Common Stock of the Company. The Company repaid this debt in full. See discussion below.
Goldman Sachs Credit Agreement
On December 22, 2015, in connection with the closing of acquisitions of Christian Disposal, LLC and certain assets of Eagle Ridge Landfill, LLC, the Company was extended certain credit facilities by Goldman Sachs, consisting of $40,000,000 aggregate principal amount of Tranche A Term Loans, $10,000,000 aggregate principal amount of Multi- Draw Term Loans and up to $5,000,000 aggregate principal amount of Revolving Commitments. During the three months ended March 31, 2016, the Company borrowed $2,150,000 in relation to the Revolving Commitments. At March 31, 2016, the Company had at total outstanding balance of $42,150,000 consisting of the Tranche A Term Loan and draw of the Revolving Commitments. The loans are collateralized by the assets of the Company. The debt has a maturity date of December 22, 2020 with interest paid monthly at an annual rate of 9%. In addition, there is a commitment fee paid monthly on the Mutli-Draw Term Loans and Revolving Commitments at an annual rate of 0.5%.
F-20
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016
NOTE 5 - NOTES PAYABLE AND CONVERTIBLE NOTES (CONTINUED)
The proceeds of the loans were used to partially fund the acquisitions referenced above and refinance existing debt with Praesidian, among other things. The funds to payoff the Praesidian notes were distributed as follows:
Aggregate outstanding principal balance of the Notes
$
10,845,043
Aggregate accrued but unpaid interest on the Notes
82,844
Prepayment Premium
325,351
Accrued PIK
9,941
Tax Liability
150,000
Accrued but unpaid fees and expenses
4,000
Payoff Amount
$
11,417,179
The Company re-paid in full and terminated its agreements with Praesidian which effected the cancellation of certain warrants that the Company issued to Fund III for the purchase of 931,826 shares of the Company’s common stock and to Fund III-A for the purchase of 361,196 shares of the Company’s common stock. In consideration for the cancellation of the Praesidian Warrants, the Company issued to Praesidian Capital Opportunity Fund III, LP, 1,153,052 shares of common stock and issued to Praesidian Capital Opportunity Fund III-A, LP, 446,948 shares of common stock. Due to the early termination of the notes and cancellation of the warrants, the Company recorded a loss on extinguishment of debt of $1,899,161 in the year ended December 31, 2015.
In addition, in connection with the credit agreement, the Company issued warrants to Goldman Sachs for the purchase of shares of the Company’s common stock equivalent to a 6.5% Percentage Interest at a purchase price equal to $449,553, exercisable on or before December 22, 2023. The warrants grant the holder certain other rights, including registration rights, preemptive rights for certain capital raises, board observation rights and indemnification. See discussion of warrants below.
Subordinated Debt
In connection with the acquisition with Meridian Waste Services, LLC on May 15, 2014, notes payable to the sellers of Meridian issued five-year term subordinated debt loans paying interest at 8%. At March 31, 2016 and December 31, 2015, the balance on these loans was $1,475,000 and $1,475,000, respectively.
The debt payable to Comerica at December 31, 2015 and the Equipment loans at December 31, 2015 were the debt of Here to Serve- Missouri Waste Division, LLC, a subsidiary of the Company.
Equipment Loans
During the year ended December 31, 2015, the Company entered into four long-term loan agreements in connection with the purchase of equipment with rates between 4% and 5%. At March 31, 2016, the balance of these four loans was $364,764.
Derivative Liability - Warrants
As indicated above, the Company issued warrants to Goldman Sachs to purchase shares of common stock. Due to the put feature contained in the agreement, a derivative liability was recorded for the warrant.
The Company’s derivative warrant instrument related to Goldman Sachs has been measured at fair value at March 31, 2016, using the Black-Scholes model. The liability is revalued at each reporting period and changes in fair value are recognized currently in the consolidated statement of operations.
F-21
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016
NOTE 5 - NOTES PAYABLE AND CONVERTIBLE NOTES (CONTINUED)
The key inputs used in the March 31, 2016 and December 31, 2015 fair value calculations were as follows:
March 31,
2016
December 31,
2015
Purchase Price
$
450,000
$
450,000
Time to expiration
12/22/2023
12/22/2023
Risk-free interest rate
1.60
%
2.15
%
Estimated volatility
45
%
45
%
Dividend
0
%
0
%
Stock price on March 31, 2016
$
1.80
$
1.90
Expected forfeiture rate
0
%
0
%
The change in the market value for the period ending March 31, 2016 is as follows:
Fair value of warrants @ December 31, 2015
$
2,820,000
Unrealized gain on derivative liability
(180,000
)
Fair value of warrants @ March 31, 2016
$
2,640,000
NOTE 6- SHAREHOLDERS’ EQUITY
Common Stock
The Company has authorized 75,000,000 shares of $0.025 par common stock. At March 31, 2016 and December 31, 2015 there were 24,537,982 and 21,038,650 shares issued and outstanding.
Treasury Stock
During 2014, the Company’s Board of Directors authorized a stock repurchase of 230,000 shares of its common stock for approximately $230,000 at an average price of $1.00 per share. As March 31, 2016 and December 31, 2015 the Company holds 230,000 shares of its common stock in its treasury.
Preferred Stock
The Company has authorized 5,000,000 shares of Preferred Stock, for which two classes have been designated to date. Series A has 51 shares issued and outstanding and Series B has 71,210 shares issued and outstanding as of March 31, 2016 and December 31, 2015, respectively.
Each share of Series A Preferred Stock has no conversion rights, is senior to any other class or series of capital stock of the Company and has special voting rights. Each one (1) share of Series A Preferred Stock shall have voting rights equal to (x) 0.019607 multiplied by the total issued and outstanding Common Stock eligible to vote at the time of the respective vote (the “Numerator”), divided by (y) 0.49, minus (z) the Numerator.
F-22
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016
NOTE 6- SHAREHOLDERS’ EQUITY (CONTINUED)
Holders of Series B Preferred Stock shall be entitled to receive when and if declared by the Board of Directors cumulative dividends at the rate of twelve percent (12%) of the Original Issue Price. In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the holders of Series B Preferred Stock shall be entitled to receive, immediately prior and in preference to any distribution to holders of the Company’s common stock, an amount per share equal to the sum of $100.00 and any accrued and unpaid dividends of the Series B Preferred Stock. Each share of Series B Preferred Stock may be converted at the option of the holder into the Company’s Common stock. The shares shall be converted using the “Conversion Formula”: divide the Original Issue Price by 75% of the average closing bid price of the Common Stock for the five (5) consecutive trading days ending on the trading day of the receipt by the Company of the notice of conversion.
At March 31, 2016 and December 31, 2015, the Company’s Series B Preferred Stock dividends in arrears on the 12% cumulative preferred stock were approximately $1,246,175 ($17.50 per share) and $1,033,000 ($14.50 per share), respectively.
Common Stock Transactions
During the three months ended March 31, 2016 and the year ended December 31, 2015, the Company issued, 3,499,332 and 11,075,232 shares of common stock, respectively. The fair values of the shares of common stock were based on the quoted trading price on the date of issuance. Of the 3,499,332 shares issued for the three months ended March 31, 2016, the Company:
1.
Issued 517,188 of these shares were issued to vendors for services rendered generating a professional fees expense of $778,985;
2.
Issued 2,000,000 of these shares to officers and employees as incentive compensation resulting in compensation expense of $3,100,000;
3.
Issued 982,144 shares of common stock as part of a private placement offering to accredited investors for aggregate gross proceeds to the Company of $1,100,000. The Company expensed certain issuance costs associated with this offering.
The Company has issued and outstanding warrants of 1,673,559 common shares, as adjusted, with the current exercise price of $0.269, as adjusted, expiring December 31, 2023. A summary of the status of the Company’s outstanding common stock warrants as of March 31, 2016 and December 31, 2015, with changes during the years ending on those dates are as follows:
F-23
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016
NOTE 6- SHAREHOLDERS’ EQUITY (CONTINUED)
Number
of
Shares
Average Exercise Price
If
Exercised
Expiration Date
Granted - Praesidian
1,293,022
$
0.025
$
32,326
-
Cancellation - Praesidian
(1,293,022
)
$
0.025
(32,326
)
-
Granted - Goldman Sachs
1,673,559
$
0.269
449,518
December 31, 2023
Forfeited
-
-
-
-
Exercised
-
-
-
-
Outstanding, December 31, 2015
1,673,559
$
-
$
449,518
-
Warrants exercisable at December 31, 2015
1,673,559
Granted
-
-
-
-
Forfeited
-
-
-
-
Exercised
-
-
-
-
Outstanding, March 31, 2016
1,673,559
$
-
$
449,518.00
Warrants exercisable at March 31, 2016
1,673,559
NOTE 7 - FAIR VALUE MEASUREMENT
ASC Topic 820 establishes a fair value hierarchy, giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data and requires disclosures for assets and liabilities measured at fair value based on their level in the hierarchy. Also, ASC Topic 820 provides clarification that in circumstances, in which a quoted price in an active market for the identical liabilities is not available, a reporting entity is required to measure fair value using one or more of the techniques provided for in this update.
The standard describes a fair value hierarchy based on three levels of input, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:
Level 1 - Quoted prices in active markets for identical assets and liabilities.
Level 2 - Input other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets of liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the
asset or liabilities.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
The following table sets forth the liabilities at March 31, 2016 and 2015, which is recorded on the balance sheet at fair value on a recurring basis by level within the fair value hierarchy. As required, these are classified based on the lowest level of input that is significant to the fair value measurement:
F-24
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016
NOTE 7 - FAIR VALUE MEASUREMENT (CONTINUED)
Fair Value Measurements at Reporting Date Using
December 31, 2015
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Signifcant
Unobservable
Inputs
(Level 3)
Derivative liability
$
2,820,000
$
-
$
-
$
2,820,000
Stock settled debt
12,500
10,000
-
2,500
$
2,832,500
$
10,000
$
-
$
2,822,500
Fair Value Measurements at Reporting Date Using
March 31, 2016
(UNAUDITED)
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Signifcant
Unobservable
Inputs
(Level 3)
Derivative liability
$
2,640,000
$
-
$
2,640,000
Stock settled debt
12,500
10,000
-
2,500
$
2,652,500
$
10,000
$
-
$
2,642,500
NOTE 8 - LEASES
The Company’s has entered into non-cancellable leases for its office, warehouse facilities and some equipment. These lease agreements commence on various dates from September 1, 2010 to December 2015 and all expires on or before December, 2020. Future minimum lease payments at March 31, 2016 are as follows:
2016
$
331,806
2017
448,408
2018
164,493
2019
111,103
2020
71,500
Thereafter
-
Total
$
1,127,310
The Company has also entered into various other leases on a month to month basis for machinery and equipment. Rent expense amounted to $114,790 and $85,565 for the three months ended March 31, 2016 and 2015, respectively.
F-25
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016
NOTE 9 - BONDING
In connection with normal business activities of a company in the solid waste disposal industry, Meridian may be required to acquire a performance bond. As part of the Company’s December 22, 2015 acquisitions of Christian Disposal, LLC and Eagle Ridge Landfill, LLC, Meridian acquired a performance bond in the approximate amount of $7,400,000 with annual expenses of $221,000. For the three months ended March 31, 2016, the Company had approximately $29,000 of expenses related to this performance bond and for the three months ended March 31, 2015, the Company was not required to obtain a performance bond.
Note 10 - LITIGATION
The Company is involved in various lawsuits related to the operations of its subsidiaries. Management believes that it has adequate insurance coverage and/or has appropriately accrued for the settlement of these claims. If applicable, claims that exceed amounts accrued and/or that are covered by insurance, management believes they are without merit and intends to vigorously defend and resolve with no material impact on financial condition.
NOTE 11 - RELATED PARTY TRANSACTIONS
Sale of Capitalized Software
On January 7, 2015, in an effort to give investors a more concentrated presence in the waste industry the Company sold the capitalized software assets of Here to Serve Technology, LLC (HTST) to Mobile Science Technologies, Inc., a Georgia corporation (MSTI), a related party due to being owned by some of the shareholders of the Company. No gain or loss was recognized on this transaction as the Company received equity equal to book value ($434,532) of the capitalized software in the exchange. This represents approximately 15% of the equity of MSTI and is reflected in the accompanying balance sheet as “investment in related party affiliate”. The Company's investment of 15% of the common stock of MSTI is accounted for under the equity method because the company exercises significant influence over its operating and financial activities. Significant influence is exercised because both Companies have a Board Member in common. Accordingly, the investment in MSTI is carried at cost, adjusted for the Company's proportionate share of earnings or losses.
F-26
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016
NOTE 11 - RELATED PARTY TRANSACTIONS (CONTINUED)
The following presents unaudited summary financial information for MSTI. Such summary financial information has been provided herein based upon the individual significance of this unconsolidated equity method investment to the consolidated financial information of the Company.
Following is a summary of financial position and results of operations of MSTI:
Summary of Statements of Financial Condition
Three Months Ended
March 31, 2016
Assets
Current assets
$
3,609
Noncurrent assets
2,877,313
Total assets
2,880,922
Liabilities and Equity
Current liabilities
234,362
Noncurrent liabilities
-
Equity
2,646,560
Total liabilities and equity
$
2,880,922
Summary of Statements of Operations
Revenues
$
177
Expense
14,210
Net loss
$
(14,033
)
The Company recorded losses from its investment in MSTI, accounted for under the equity method, of approximately $2,100 for the three months ended March 31, 2016. The charge reflected the Company’s share of MSTI losses recorded in that period. While the Company has ongoing agreements with MSTI relating to the use of MSTI's software technology, the Company has no obligation to otherwise support the activities of MSTI. As of March 31, 2016, the Company has $133,000 in prepaid expenses related to MSTI.
NOTE 12 – EQUITY AND INCENTIVE PLANS
Effective March 10, 2016, the Board of Directors (the “Board”) of the Company approved, authorized and adopted the 2016 Equity and Incentive Plan (the “ Plan”) and certain forms of ancillary agreements to be used in connection with the issuance of stock and/or options pursuant to the Plan (the “Plan Agreements”). The Plan provides for the issuance of up to 7,500,000 shares of common stock, par value $.025 per share (the “Common Stock”), of the Company through the grant of nonqualified options (the “Non-qualified options”), incentive options (the “Incentive Options” and together with the Non-qualified Options, the “Options”) and restricted stock (the “Restricted Stock”) to directors, officers, consultants, attorneys, advisors and employees.
F-27
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
Meridian Waste Solutions, Inc.
We have audited the accompanying consolidated balance sheets of Meridian Waste Solutions, Inc. and Subsidiaries as of December 31, 2015 and 2014 and the related consolidated statements of operations, changes in shareholders’ equity, and cash flows for the year ended December 31, 2015 and for the Period from January 1, 2014 to May 15, 2014 (the “Predecessor Company”) and from the Period from Acquisition May 16, 2014 to December 31, 2014 (the “Successor Company”). These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Meridian Waste Solutions, Inc. and Subsidiaries at December 31, 2015 and 2014 and the results of their operations and their cash flows for the year ended December 31, 2015 and for the Period from January 1, 2014 to May 15, 2014 (the “Predecessor Company”) and from the Period from Acquisition May 16, 2014 to December 31, 2014 (the “Successor Company”), in conformity with accounting principles generally accepted in the United States of America.
/s/ D’Arelli Pruzansky, P.A.
Certified Public Accountants
Coconut Creek, Florida
April 13, 2016
F-28
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2015 AND 2014
Assets
2015
2014
Current assets:
Cash
$
2,729,795
$
438,907
Accounts receivable, net of allowance
1,707,818
588,479
Prepaid expenses
427,615
221,999
Other current assets
52,359
41,852
Total current assets
4,917,587
1,291,237
Property, plant and equipment, at cost net of accumulated depreciation
14,433,740
7,654,765
Other assets:
Investment in related party affiliate
364,185
-
Deposits
10,954
8,303
Capitalized software
-
434,532
Loan fees, net of accumulated amortization
1,416,697
39,365
Goodwill
7,479,642
-
Landfill assets, net of accumulated amortization
3,393,476
-
Customer list, net of accumulated amortization
19,500,362
12,139,792
Non-compete, net of accumulated amortization
155,699
130,000
Website, net of accumulated amortization
10,904
13,688
Total other assets
32,331,919
12,765,680
Total assets
$
51,683,246
$
21,711,682
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable
$
1,988,050
$
449,840
Accrued expenses
280,069
67,365
Notes payable, related party
359,891
526,585
Deferred compensation
996,380
729,000
Deferred revenue
2,912,264
1,929,882
Convertible notes due related parties, includes put premiums
15,065
302,083
Operating line of credit and capital expenditure line of credit
-
1,675,160
Contingent liability
1,000,000
-
Derivative liability - stock warrants
2,820,000
-
Current portion - long term debt
417,119
1,357,143
Total current liabilities
10,788,838
7,037,058
Long term liabilities:
Derivative liability - interest rate swap
-
40,958
Asset retirement obligation
200,252
-
Long term debt, net of current
40,587,493
8,826,190
Total long term liabilities
40,787,745
8,867,148
Total liabilities
51,576,583
15,904,206
Shareholders' equity:
Preferred Series A stock, par value $.001, 51 shares authorized, issued and outstanding
-
-
Preferred Series B stock, par value $.001, 71,210 shares authorized, issued and outstanding
71
71
Common stock, par value $.025, 75,000,000 shares authorized, 21,038,650 and 9,963,618 share issued and outstanding, respectively
525,966
249,085
Treasury stock, at cost
(224,250
)
(224,250
)
Additional paid in capital
27,624,492
14,370,296
Accumulated deficit
(27,819,616
)
(8,587,726
)
Total shareholders' equity
106,663
5,807,476
Total liabilities and shareholders' equity
$
51,683,246
$
21,711,682
F-29
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014
Successor
Predecessor
Year Ended December 31, 2015
Period from Acquisition May 16, 2014 to December 31, 2014
Period from January 1, 2014 to May 15, 2014
Revenue
Software sales
$
-
$
1,864
$
-
Services
13,506,097
7,951,607
4,248,605
Total revenue
13,506,097
7,953,471
4,248,605
Cost of sales and services
Cost of sales and services
8,521,379
5,019,286
2,603,280
Depreciation
1,614,225
932,526
504,515
Total cost of sales and services
10,135,604
5,951,812
3,107,795
Gross Profit
3,370,493
2,001,659
1,140,810
Expenses
Bad debt expense
37,467
98,381
-
Compensation and related expense
9,107,497
751,398
213,391
Depreciation and amortization
2,940,724
1,932,459
5,748
Selling, general and administrative
5,555,207
1,397,570
469,593
Total expenses
17,640,895
4,179,808
688,732
Other income (expenses):
Miscellaneous income
27,623
1,331
2,996
Loss on disposal of assets
(21,851
)
(20,830
)
-
Unrealized gain (loss) on interest rate swap
40,958
(40,958
)
-
Unrealized loss on change in fair value of derivative liability
(1,664,213
)
-
-
Loss on extinguishment of debt
(1,899,161
)
-
-
Loss from proportionate share of equity investment
(70,347
)
-
-
Recapitalization expense
-
(70,000
)
-
Interest expense
(1,374,497
)
(348,136
)
(184,011
)
Total other income (expenses)
(4,961,488
)
(478,593
)
(181,015
)
Net (loss) income
$
(19,231,890
)
$
(2,656,742
)
$
271,063
Basic net loss per share
$
(1.33
)
$
(0.27
)
Weighted average number of shares outstanding
(Basic and Diluted)
14,468,576
9,963,418
F-30
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014
Common Shares
Common Stock, Par
Preferred Series A Shares
Preferred Series A Stock, Par
Preferred Series B Shares
Preferred Series B Stock, Par
Treasury Stock
Additional Paid in Capital
Members' Equity
Accumulated Deficit
Total
Predecessor
Balance at December 31, 2013
-
$
-
-
$
-
-
$
-
$
-
$
-
$
1,539,738
$
1,539,738
Net income, from January 1 to
May 15, 2014
-
-
-
-
-
-
-
-
271,063
-
271,063
Members' distributions, from
January 1 to May 15, 2014
-
-
-
-
-
-
-
-
(585,000
)
-
(585,000
)
Balance at May 15, 2014
-
-
-
-
-
-
-
-
1,225,801
-
1,225,801
Successor
Balance at May 16, 2014
9,054,134
$
226,353
51
$
-
71,210
$
71
$
-
$
12,992,347
$
(5,930,984
)
$
7,287,787.0
Recapitalization of
the Company
1,139,284
28,482
-
-
-
-
-
(28,482
)
-
-
Treasury stock purchased
as part of recapitalization
(230,000
)
(5,750
)
-
-
-
-
(224,250
)
-
-
(230,000
)
Common stock issued for conversion of related party debt
-
-
-
-
-
-
-
1,406,431
-
1,406,431
Net loss
-
-
-
-
-
-
-
-
(2,656,742
)
(2,656,742
)
Balance at December 31, 2014
9,963,418
$
249,085
51
$
-
71,210
$
71
$
(224,250
)
$
14,370,296
$
(8,587,726
)
$
5,807,476
Common stock exchanged for services
1,573,550
$
39,339
-
$
-
-
$
-
$
-
$
791,631
$
-
$
830,970
Common stock issued for compensation
5,690,843
142,271
-
-
-
-
-
7,213,909
-
7,356,180
Common stock issued for conversion of related party debt
460,839
11,521
-
-
-
-
-
307,406
-
318,927
Common stock issued in connection with Membership Purchase
1,750,000
43,750
-
-
-
-
-
2,581,250
-
2,625,000
Common stock issued in connection with cancellation of Praesidian warrants
1,600,000
40,000
-
-
-
-
-
2,360,000
-
2,400,000
Net loss
-
-
-
-
-
-
-
-
(19,231,890
)
(19,231,890
)
Balance December 31, 2015
21,038,650
$
525,966
51
$
-
71,210
$
71
$
(224,250
)
$
27,624,492
$
-
$
(27,819,616
)
$
106,663
F-31
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014
Successor
Predecessor
Year Ended December 31, 2015
Period from Acquisition May 16, 2014 to December 31, 2014
Period from January 1, 2014 to May 15, 2014
Cash flows from operating activities:
Net (loss) income
$
(19,231,890
)
$
(2,656,742
)
$
271,063
Adjustments to reconcile net income to net cash (used in) provided
from operating activities:
Depreciation and amortization
4,554,949
2,864,985
510,263
Unrealized gain on swap agreement
(40,958
)
-
-
Unrealized loss on derivatives
1,664,213
-
-
Stock issued to vendors for services
830,970
-
-
Stock issued to employees as incentive compensation
7,356,180
-
-
Loss on extinguishment of debt
1,899,161
-
-
Loss from proportionate share of equity investment
70,347
-
-
Loss on disposal of equipment
21,851
20,830
-
Changes in working capital items net of acquisitions:
Accounts receivable, net of allowance
325,322
43,843
(153,443
)
Prepaid expenses and other current assets
(71,247
)
(140,307
)
66,176
Due to Here to Serve Holding Corp.
-
376,585
-
Deposits
(2,651
)
-
-
Accounts payable and accrued expenses
642,797
431,328
133,219
Deferred compensation
267,380
243,000
-
Deferred revenue
(112,361
)
51,778
(32,360
)
Derivative liability
-
40,958
-
Other current liabilities
-
932,135
-
Net cash (used in) provided from operating activities
(1,825,937
)
2,208,392
794,918
Cash flows from investing activities:
Cash portion paid for acquisition
(22,667,862
)
-
-
Purchased capitalized software
-
(60,512
)
-
Acquisition of property, plant and equipment
(1,280,011
)
(1,407,251
)
(170,886
)
Purchased software
-
(13,920
)
-
Proceeds from sale of property, plant and equipment
79,737
-
-
Net cash used in investing activities
(23,868,136
)
(1,481,682
)
(170,886
)
Cash flows from financing activities:
(Repayments) borrowings on notes due related parties
(134,785
)
123,333
-
Member distributions
-
-
(585,000
)
Proceeds from loans
52,207,716
-
-
Payments for purchase of treasury stock
-
(230,000
)
-
Increase in capitalized loan fees
(1,395,903
)
-
-
Principle payments on notes payable
(21,016,907
)
(791,667
)
(449,499
)
(Repayments on) proceeds from line of credit
(1,675,160
)
590,000
-
Net cash provided from (used in) financing activities
27,984,961
(308,334
)
(1,034,499
)
Net change in cash
2,290,888
418,376
(410,467
)
Beginning cash
438,907
20,531
1,461,372
Ending cash
$
2,729,795
$
438,907
$
1,050,905
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest
$
1,374,497
$
348,136
$
52,559
Supplemental Non-Cash Investing and Financing Information:
Stock as consideration in acquisition
$
2,625,000
$
-
$
-
Stock for cancellation of warrants
$
2,400,000
$
-
$
-
Stock in exchange for forgiveness of debt
$
318,927
$
-
$
-
Contingent liability in conjunction with acquisition
$
1,000,000
$
-
$
-
Debt forgiveness by related party in connection with recapitalization
$
-
$
1,406,431
$
-
Convertible promissory note issued for acquisition
$
1,250,000
$
-
$
-
F-32
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
Note 1 - NATURE OF OPERATIONS AND ORGANIZATION
Meridian Waste Solutions, Inc. (formerly Brooklyn Cheesecake and Desserts Company, Inc.) (the “Company” or “Meridian”) is currently operating under five separate Limited Liability Companies:
(1) Here To Serve Missouri Waste Division, LLC (“HTSMWD”), a Missouri Limited Liability Company;
(2) Here To Serve Georgia Waste Division, LLC (“HTSGWD”), a Georgia Limited Liability Company;
(3) Meridian Land Company, LLC (“MLC”), a Georgia Limited Liability Company;
(4) Here to Serve Technology, LLC (“HTST”), a Georgia Limited Liability Company; and
(5) Christian Disposal, LLC and subsidiary (“CD”), a Missouri Limited Liability Company.
On January 7, 2015, in an effort to give investors a more concentrated presence in the waste industry the Company sold the assets of HTST to Mobile Science Technologies, Inc., a Georgia corporation (MSTI), a related party due to being owned and managed by some of the shareholders of the Company. On this date HTST ceased operations and became a dormant Limited Liability Company (“LLC”). Currently, Meridian is formalizing plans to dissolve HTST, in which this LLC will cease to exist.
In 2014, HTSMWD purchased the assets of a large solid waste disposal company in the St. Louis, MO market. This acquisition is considered the platform company for future acquisitions in the solid waste disposal industry. HTSGWD was created to facilitate expansion in this industry throughout the Southeast.
The Company is primarily in the business of residential and commercial waste disposal and hauling and has contracts with various cities and municipalities. The majority of the Company’s customers are located in the St. Louis metropolitan and surrounding areas.
Acquisition of Christian Disposal, LLC and Eagle Ridge Landfill, LLC
On December 22, 2015, Meridian Waste Solutions, Inc. and subsidiaries (the “Company”) completed its acquisition of Christian Disposal LLC, and subsidiary (“Christian Purchase Agreement”). Pursuant to the Christian Purchase Agreement, the Company acquired 100% of the membership interests of Christian Disposal, which is integrated into the operations of the Company; refer to intangible assets and acquisition footnote below.
Simultaneous with the closing thereof, Christian Disposal LLC, and subsidiary, entered into a Lease Agreement, in which, the Company leased 4551 Commerce Avenue, High Ridge, Missouri, for a five-year term at a monthly rent of $6,500. Additionally, the Company entered into an employment agreement with an executive employee for a term of five years.
Concurrently, the Company completed an asset purchase agreement with WCA Waste Corporation (the “Eagle Purchase Agreement”). The Company acquired all of the assets of Eagle Ridge Landfill, LLC (“ERL”), its rights and properties related to such business of ERL, which includes certain assets and operations of the Eagle Ridge Hauling Business (“ERH”) and certain debts, which is now operating under Meridian Land Company, LLC. Refer to intangible assets and acquisition footnote below.
F-33
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
Note 1 - NATURE OF OPERATIONS AND ORGANIZATION (CONTINUED)
Recapitalization
On October 17, 2014 Here to Serve Missouri Waste Division, LLC, (HTSMWD) a Missouri Limited Liability Company, which is the historical business, entered into a Share Exchange Agreement with the Company and the sole member of HTSMWD whereby the Company agreed to acquire the membership interest of HTSMWD, HTST and HTSGWD in exchange for 9,054,134 shares of the Company’s common stock. This transaction was closed on October 17, 2014 and HTSMWD became wholly-owned by the Company. The Company is deemed to have issued 1,139,284 shares of common stock which represents the outstanding common shares of the Company just prior to the closing of the transaction.
At closing, the Company issued 9,054,134 shares of its common stock to the sole member of HTSMWD and the shareholders of the sole member who obtained approximately 90% control and management control of the Company. The transaction was accounted for as a reverse acquisition and recapitalization of HTSMWD, HTST and HTSGWD whereby HTSMWD is considered the acquirer for accounting purposes. The consolidated financial statements after the acquisition include the balance sheets of both companies and HTST and HTSGWD at historical cost, the historical results of HTSMWD, HTST and HTSGWD. All share and per share information in the accompanying consolidated financial statements and footnotes has been retroactively restated to reflect the recapitalization (see Explanation of Membership Interest Purchase Agreement below).
Acquisition of Here to Serve Holding Corporation
On October 17, 2014, (the “Execution Date”), Meridian Waste Solutions, Inc. entered into that certain Membership Interest Purchase Agreement (the “Purchase Agreement”) by and among Here to Serve Holding Corp., a Delaware corporation, as seller (“Here to Serve”), the Company, as parent, Brooklyn Cheesecake & Dessert Acquisition Corp., a wholly-owned subsidiary of the Company, as buyer (the “Acquisition Corp.”), the Chief Executive Officer of the Company (the “Company Executive”), the majority shareholder of the Company (the “Company Majority Shareholder”) and certain shareholders of Seller (the “Seller Shareholders”), pursuant to which the Acquisition Corp shall acquire from Here to Serve all of Here to Serve’s right, title and interest in and to:
I.
100% of the membership interests of Here to Serve – Missouri Waste Division, LLC d/b/a Meridian Waste, a Missouri limited liability company (“HTS Waste”);
II.
100% of the membership interests of Here to Serve Technology, LLC, a Georgia limited liability company (“HTS Tech”); and
III.
100% of the membership interests of Here to Serve - Georgia Waste Division, LLC, a Georgia limited liability company (“HTS Waste Georgia”, and together with HTS Waste and HTS Tech, collectively, the “Membership Interests”). As consideration for the Membership Interests:
i.
the Company shall issue to Here to Serve 9,054,134 shares of the Company’s common stock, (the “Common Stock”);
ii.
the Company shall issue to the holder of Class A Preferred Stock of Here to Serve (“Here to Serve’s Class A Preferred Stock”) 51 shares of the Company’s to-be-designated Class A Preferred Stock (the “Class A Preferred Stock”), which Class A Preferred Stock shall have the rights and preferences as described in the Purchase Agreement.
iii.
the Company shall issue to the holder of Class B Preferred Stock of Here to Serve (Here to Serve’s Class B Preferred Stock”) an aggregate of 71,120 shares of the Company’s to-be-designated Class B Preferred Stock (the “Class B Preferred Stock”), (the Common Stock, the Class A Preferred Stock and the Class B Preferred Stock are referred to as the “Purchase Price Shares;”), and
F-34
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
Note 1 - NATURE OF OPERATIONS AND ORGANIZATION (CONTINUED)
iv.
the Company shall assume certain assumed liabilities (the “Initial Consideration”).
As further consideration, at the closing of the transaction contemplated under the Purchase Agreement:
a.
in satisfaction of all accounts payable and shareholder loans, Here to Serve will pay to Company Majority Shareholder $70,000 and
b.
the Company purchased from the then Company Majority Shareholder 230,000 shares of the Company’s common stock for a purchase price of $230,000. Pursuant to the Purchase Agreement, to the extent Purchase Price Shares are issued to individual shareholders of Here to Serve at or upon closing of the Purchase Agreement:
a.
shares of common stock of Here to Serve held by the individuals will be cancelled
b.
1,000,000 shares of Here to Serve’s Class A Preferred Stock will be cancelled; and
c.
71,120 shares of Here to Serve’s Class B Preferred Stock will be cancelled (the “Additional Consideration”).
On October 17, 2014, the directors and majority shareholders of the Company approved the Purchase Agreement and the transactions contemplated under the Purchase Agreement. The directors of Here to Serve and the Here to Serve Shareholders approved the Purchase Agreement and the transactions contemplated thereunder. This closing of the Purchase Agreement results in a change of control of the Company and the Company changed its business plan to that of HTSMWD.
Change in Reporting Entity
The merger of Here to Serve Holding Corp. (Here to Serve), a Delaware Corporation, and Meridian Waste Services, LLC became effective May 15, 2014. The merger was accounted for by the Company using business combination accounting. Under this method, the purchase price paid by the acquirer is allocated to the assets acquired and liabilities assumed as of the acquisition date based on the fair value. By the application of “pushdown” accounting, our assets, liabilities and equity were accordingly adjusted to fair value on May 15, 2014. Determining the fair value of certain assets and liabilities assumed is judgmental in nature and often involves the use of significant estimates and assumptions.
At the time of merger Here to Serve was a company with nominal operations whereas Meridian Waste Services, LLC consisted of the active and carry-forward business. Accordingly Meridian Waste Services, LLC is deemed to be the predecessor entity and as such is presented as the comparable financial statements. As such our financial statements are presented in two distinct periods to indicate the application of two different basis of accounting. Periods prior to May 15, 2014 are identified herein as “Predecessor,” while periods subsequent to the Here to Serve merger are identified as “Successor.” As a result of the change in basis of accounting from historical cost to reflect the Here to Serve’s purchase cost, the financial statements for Predecessor periods are not comparable to those of Successor periods.
F-35
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Basis
The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP” accounting).
Basis of Consolidation
The consolidated financial statements for the year ended December 31, 2015 include the operations of the Company and its wholly-owned subsidiaries, Here To Serve Missouri Waste Division, LLC, Meridian Land Company, LLC, Here to Serve Technology, LLC and Christian Disposal, LLC. The following two subsidiaries of the Company, Here To Serve Georgia Waste Division, LLC and Here to Serve Technology, LLC, a Georgia Limited Liability Company had no operations during the period.
The consolidated financial statements for the year ended December 31, 2014 include the operations of the Company and its wholly-owned subsidiaries, Here To Serve Missouri Waste Division, LLC and Here To Serve Technology, LLC. The following subsidiary of the Company, Here To Serve Georgia Waste Division, LLC had no operations during the period.
All significant intercompany accounts and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents.
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, account payable, accrued expenses, and notes payable. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these consolidated financial statements.
Derivative Instruments
The Company enters into financing arrangements that consist of freestanding derivative instruments or are hybrid instruments that contain embedded derivative features. The Company accounts for these arrangements in accordance with Accounting Standards Codification topic 815, Accounting for Derivative Instruments and Hedging Activities (“ASC 815”) as well as related interpretations of this standard. In accordance with this standard, derivative instruments are recognized as either assets or liabilities in the balance sheet and are measured at fair values with gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely related to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized as either a gain or loss in earnings. The Company determines the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation models, considering all of the rights and obligations of each instrument.
F-36
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company estimates fair values of derivative financial instruments using various techniques (and combinations thereof) that are considered consistent with the objective measuring fair values. In selecting the appropriate technique, the Company considers, among other factors, the nature of the instrument, the market risks that it embodies and the expected means of settlement. For less complex derivative instruments, such as freestanding warrants, the Company generally use the Black-Scholes model, adjusted for the effect of dilution, because it embodies all of the requisite assumptions (including trading volatility, estimated terms, dilution and risk free rates) necessary to fair value these instruments. Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques (such as Black-Scholes model) are highly volatile and sensitive to changes in the trading market price of our common stock. Since derivative financial instruments are initially and subsequently carried at fair values, our income (expense) going forward will reflect the volatility in these estimates and assumption changes. Under the terms of this accounting standard, increases in the trading price of the Company’s common stock and increases in fair value during a given financial quarter result in the application of non-cash derivative expense. Conversely, decreases in the trading price of the Company’s common stock and decreases in trading fair value during a given financial quarter result in the application of non-cash derivative income.
Impairment of long-lived assets
The Company periodically reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less that the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. During the year ending December 31, 2015, the Company experienced no losses due to impairment.
Income Taxes
The Company accounts for income taxes pursuant to the provisions of ASC 740-10, “Accounting for Income Taxes,” which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.
The Company follows the provisions of the ASC 740 -10 related to, Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.
F-37
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company analyzes its tax positions by utilizing ASC 740-10-25 Definition of Settlement, which provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the completion of an examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. As of December 31, 2015, tax years ended December 31, 2014, 2013, 2012 are still potentially subject to audit by the taxing authorities.
Use of Estimates
Management estimates and judgments are an integral part of consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). We believe that the critical accounting policies described in this section address the more significant estimates required of management when preparing our consolidated financial statements in accordance with GAAP. We consider an accounting estimate critical if changes in the estimate may have a material impact on our financial condition or results of operations. We believe that the accounting estimates employed are appropriate and resulting balances are reasonable; however, actual results could differ from the original estimates, requiring adjustment to these balances in future periods.
Accounts Receivable
Accounts receivable are recorded at management’s estimate of net realizable value. At December 31, 2015 and 2014 the Company had approximately $2,326,000 and $660,000 of gross trade receivables, respectively.
Our reported balance of accounts receivable, net of the allowance for doubtful accounts, represents our estimate of the amount that ultimately will be realized in cash. We review the adequacy and adjust our allowance for doubtful accounts on an ongoing basis, using historical payment trends and the age of the receivables and knowledge of our individual customers. However, if the financial condition of our customers were to deteriorate, additional allowances may be required. At December 31, 2015 and 2014 the Company had approximately $618,000 and $71,000 recorded for the allowance for doubtful accounts, respectively.
Advertising costs
Advertising costs, except for costs associated with direct-response advertising, are charged to operations when incurred. The costs of direct-response advertising are capitalized and amortized over the period during which future benefits are expected to be received. The Company did not capitalize any advertising for the years ended December 31, 2015 and 2014, respectively. Advertising expenses were approximately $79,000 and $65,000 for the years ended December 31, 2015 and 2014, respectively.
F-38
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property, plant and equipment
The cost of property, plant, and equipment is depreciated over the estimated useful lives of the related assets utilizing the straight-line method of depreciation. The cost of leasehold improvements is depreciated (amortized) over the lesser of the length of the related leases or the estimated useful lives of the assets. Ordinary repairs and maintenance are expensed when incurred and major repairs will be capitalized and expensed if it benefits future periods.
Intangible Assets
Intangible assets that are subject to amortization are reviewed for potential impairment whenever events or circumstances indicate that carrying amounts may not be recoverable. Assets not subject to amortization are tested for impairment at least annually. The Company has intangible assets related to its purchase of Meridian Waste
Services, LLC, Christian Disposal LLC and Eagle Ridge Landfill, LLC, which are further discussed in the notes below.
During 2015 and 2014, the Company assessed its intangible assets, based on estimated future cash flows and concluded that the carrying amount of its intangible assets did not exceed its fair value.
Investment in Related Party Affiliate
The Company has an investment in a privately held corporation in the mobile apps industry. As the Company exercises significant influence on this entity, this investment is recorded using the equity method of accounting. The Company monitors this investment for impairment and makes appropriate reductions in the carrying value if the Company determines that an impairment charge is required based primarily on the financial condition and near-term prospect of this entity.
Goodwill
Goodwill is the excess of our purchase cost over the fair value of the net assets of acquired businesses. We do not amortize goodwill, but as discussed in the impairment of long lived assets section above, we assess our goodwill for impairment at least annually.
Capitalized Software
The Company acquired a software product that is under further development. This asset was being amortized over a three to five year period using the straight-line method of depreciation for book purposes beginning when the software is completed.
F-39
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Capitalized Software - Continued
The Company capitalizes internal software development costs subsequent to establishing technological feasibility of a software application in accordance with guidelines established by “ASC 985-20-25” Accounting for the costs of Computer Software to Be Sold, Leased or Otherwise Marketed, requiring certain software development costs to be capitalized upon the establishment of technological feasibility. The establishment of technological feasibility and the ongoing assessment of the recoverability of these costs require considerable judgement by management with respect to certain external factors such as anticipated future revenue, estimated economic life and changes in software and hardware technologies. Amortization of the capitalized software development costs begins when the product is available for general release to customers. Capitalized costs are amortized over the remaining estimated economic life of the product. For the year ended December 31, 2014, the Company has capitalized costs associated with the development of several mobile science technology products and mobile apps that has not been placed into service. In 2015, the Company sold the software to a related party. Refer to the related party note below for further discussion.
Website Development Costs
The Company accounts for website development costs in accordance with Accounting Standards Codification 350-50 “Website Development Costs”. Accordingly, all costs incurred in the planning stage are expensed as incurred, costs incurred in the website application and infrastructure development stage that meet specific criteria are capitalized and costs incurred in the day to day operation of the website are expensed as incurred.
Landfill Accounting
Capitalized landfill costs
Cost basis of landfill assets — We capitalize various costs that we incur to make a landfill ready to accept waste. These costs generally include expenditures for land (including the landfill footprint and required landfill buffer property); permitting; excavation; liner material and installation; landfill leachate collection systems; landfill gas collection systems; environmental monitoring equipment for groundwater and landfill gas; and directly related engineering, capitalized interest, on-site road construction and other capital infrastructure costs. The cost basis of our landfill assets also includes asset retirement costs, which represent estimates of future costs associated with landfill final capping, closure and post-closure activities. These costs are discussed below.
Final capping, closure and post-closure costs — Following is a description of our asset retirement activities and our related accounting:
·
Final capping — Involves the installation of flexible membrane liners and geosynthetic clay liners, drainage and compacted soil layers and topsoil over areas of a landfill where total airspace capacity has been consumed. Final capping asset retirement obligations are recorded on a units-of-consumption basis as airspace is consumed related to the specific final capping event with a corresponding increase in the landfill asset. The final capping is accounted for as a discrete obligation and recorded as an asset and a liability based on estimates of the discounted cash flows and capacity associated with the final capping.
F-40
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
·
Closure — Includes the construction of the final portion of methane gas collection systems (when required), demobilization and routine maintenance costs. These are costs incurred after the site ceases to accept waste, but before the landfill is certified as closed by the applicable state regulatory agency. These costs are recorded as an asset retirement obligation as airspace is consumed over the life of the landfill with a corresponding increase in the landfill asset. Closure obligations are recorded over the life of the landfill based on estimates of the discounted cash flows associated with performing closure activities.
·
Post-closure — Involves the maintenance and monitoring of a landfill site that has been certified closed by the applicable regulatory agency. Generally, we are required to maintain and monitor landfill sites for a 30-year period. These maintenance and monitoring costs are recorded as an asset retirement obligation as airspace is consumed over the life of the landfill with a corresponding increase in the landfill asset. Post-closure obligations are recorded over the life of the landfill based on estimates of the discounted cash flows associated with performing post-closure activities.
We develop our estimates of these obligations using input from our operations personnel, engineers and accountants. Our estimates are based on our interpretation of current requirements and proposed regulatory changes and are intended to approximate fair value. Absent quoted market prices, the estimate of fair value is based on the best available information, including the results of present value techniques. In many cases, we contract with third parties to fulfill our obligations for final capping, closure and post closure. We use historical experience, professional engineering judgment and quoted and actual prices paid for similar work to determine the fair value of these obligations. We are required to recognize these obligations at market prices whether we plan to contract with third parties or perform the work ourselves. In those instances where we perform the work with internal resources, the incremental profit margin realized is recognized as a component of operating income when the work is performed.
Once we have determined the final capping, closure and post-closure costs, we inflate those costs to the expected time of payment and discount those expected future costs back to present value. During the year ended December 31, 2015 we inflated these costs in current dollars until the expected time of payment using an inflation rate of 2.5%. We discounted these costs to present value using the credit-adjusted, risk-free rate effective at the time an obligation is incurred, consistent with the expected cash flow approach. Any changes in expectations that result in an upward revision to the estimated cash flows are treated as a new liability and discounted at the current rate while downward revisions are discounted at the historical weighted average rate of the recorded obligation. As a result, the credit-adjusted, risk-free discount rate used to calculate the present value of an obligation is specific to each individual asset retirement obligation. The weighted average rate applicable to our long-term asset retirement obligations at December 31, 2015 is approximately 8.5%.
We record the estimated fair value of final capping, closure and post-closure liabilities for our landfills based on the capacity consumed through the current period. The fair value of final capping obligations is developed based on our estimates of the airspace consumed to date for the final capping. The fair value of closure and post-closure obligations is developed based on our estimates of the airspace consumed to date for the entire landfill and the expected timing of each closure and post-closure activity. Because these obligations are measured at estimated fair value using present value techniques, changes in the estimated cost or timing of future final capping, closure and post-closure activities could result in a material change in these liabilities, related assets and results of operations. We assess the appropriateness of the estimates used to develop our recorded balances annually, or more often if significant facts change.
F-41
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Changes in inflation rates or the estimated costs, timing or extent of future final capping, closure and post-closure activities typically result in both (i) a current adjustment to the recorded liability and landfill asset and (ii) a change in liability and asset amounts to be recorded prospectively over either the remaining capacity of the related discrete final capping or the remaining permitted and expansion airspace (as defined below) of the landfill. Any changes related to the capitalized and future cost of the landfill assets are then recognized in accordance with our amortization policy, which would generally result in amortization expense being recognized prospectively over the remaining capacity of the final capping or the remaining permitted and expansion airspace of the landfill, as appropriate. Changes in such estimates associated with airspace that has been fully utilized result in an adjustment to the recorded liability and landfill assets with an immediate corresponding adjustment to landfill airspace amortization expense.
·
Remaining permitted airspace — Our engineers, in consultation with third-party engineering consultants and surveyors, are responsible for determining remaining permitted airspace at our landfills. The remaining permitted airspace is determined by an annual survey, which is used to compare the existing landfill topography to the expected final landfill topography.
·
Expansion airspace — We also include currently unpermitted expansion airspace in our estimate of remaining permitted and expansion airspace in certain circumstances. First, to include airspace associated with an expansion effort, we must generally expect the initial expansion permit application to be submitted within one year and the final expansion permit to be received within five years. Second, we must believe that obtaining the expansion permit is likely, considering the following criteria:
o
Personnel are actively working on the expansion of an existing landfill, including efforts to obtain land use and local, state or provincial approvals;
o
We have a legal right to use or obtain land to be included in the expansion plan;
o
There are no significant known technical, legal, community, business, or political restrictions or similar issues that could negatively affect the success of such expansion; and
o
Financial analysis has been completed based on conceptual design, and the results demonstrate that the expansion meets the Company’s criteria for investment.
For unpermitted airspace to be initially included in our estimate of remaining permitted and expansion airspace, the expansion effort must meet all of the criteria listed above. These criteria are evaluated by our field-based engineers, accountants, managers and others to identify potential obstacles to obtaining the permits. Once the unpermitted airspace is included, our policy provides that airspace may continue to be included in remaining permitted and expansion airspace even if certain of these criteria are no longer met as long as we continue to believe we will ultimately obtain the permit, based on the facts and circumstances of a specific landfill.
When we include the expansion airspace in our calculations of remaining permitted and expansion airspace, we also include the projected costs for development, as well as the projected asset retirement costs related to the final capping, closure and post-closure of the expansion in the amortization basis of the landfill.
F-42
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Once the remaining permitted and expansion airspace is determined in cubic yards, an airspace utilization factor (“AUF”) is established to calculate the remaining permitted and expansion capacity in tons. The AUF is established using the measured density obtained from previous annual surveys and is then adjusted to account for future settlement. The amount of settlement that is forecasted will take into account several site-specific factors including current and projected mix of waste type, initial and projected waste density, estimated number of years of life remaining, depth of underlying waste, anticipated access to moisture through precipitation or recirculation of landfill leachate, and operating practices. In addition, the initial selection of the AUF is subject to a subsequent multi-level review by our engineering group, and the AUF used is reviewed on a periodic basis and revised as necessary. Our historical experience generally indicates that the impact of settlement at a landfill is greater later in the life of the landfill when the waste placed at the landfill approaches its highest point under the permit requirements.
After determining the costs and remaining permitted and expansion capacity at each of our landfill, we determine the per ton rates that will be expensed as waste is received and deposited at the landfill by dividing the costs by the corresponding number of tons. We calculate per ton amortization rates for the landfill for assets associated with each final capping, for assets related to closure and post-closure activities and for all other costs capitalized or to be capitalized in the future. These rates per ton are updated annually, or more often, as significant facts change.
It is possible that actual results, including the amount of costs incurred, the timing of final capping, closure and post-closure activities, our airspace utilization or the success of our expansion efforts could ultimately turn out to be significantly different from our estimates and assumptions. To the extent that such estimates, or related assumptions, prove to be significantly different than actual results, lower profitability may be experienced due to higher amortization rates or higher expenses; or higher profitability may result if the opposite occurs. Most significantly, if it is determined that expansion capacity should no longer be considered in calculating the recoverability of a landfill asset, we may be required to recognize an asset impairment or incur significantly higher amortization expense. If at any time management makes the decision to abandon the expansion effort, the capitalized costs related to the expansion effort are expensed immediately.
F-43
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
For the year ended December 31, 2015 the Company operations related to its landfill assets and liability are presented in the tables below:
Landfill Assets
Year Ended December 31, 2015
January 1, 2015, Beginning Balance
$
-
Capital additions (Landfill acquired on December 22, 2015)
3,396,519
Amortization of landfill assets
(3,043
)
Asset retirement adjustments
-
December 31, 2015, Ending Balance
$
3,393,476
Landfill Liability
January 1, 2015, Beginning Balance
$
-
Obligations incurred and capitalized (Landfill acquired on December 22, 2015)
196,519
Obligations settled
-
Interest accretion
3,733
Revisions in estimates and interest rate assumption
-
Acquisition, divestures and other adjustments
-
December 31, 2015, Ending Balance
$
200,252
Revenue Recognition
The Company recognizes revenue when there is persuasive evidence that services have been provided and a collection is reasonably assured. The majority of the Company’s revenues are generated from the fees charged for waste collection, transfer, disposal and recycling. The fees charged for our services are generally defined in service agreements and vary based on contract-specific terms such as frequency of service, weight, volume and the general market factors influencing a region’s rate.
Deferred Revenue
The Company records deferred revenue for customers that were billed in advance of services. The balance in deferred revenue represents amounts billed in October, November and December for services that will be provided during January, February and March.
F-44
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cost of Services
Cost of services include all employment costs associated with waste collection, transfer and disposal, damage claims, landfill costs, personal property taxes associated with collection vehicles and other direct cost of the collection and disposal process.
Concentrations
The Company maintains its cash and cash equivalents in bank deposit accounts, which could, at times, exceed federally insured limits. The Company has not experienced any losses in such accounts; however, amounts in excess of the federally insured limit may be at risk if the bank experiences financial difficulties. The Company places its cash with high credit quality financial institutions. The Company’s accounts at these institutions are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000.
Financial instruments which also potentially subject the Company to concentrations of credit risk consist principally of trade accounts receivable; however, concentrations of credit risk with respect to trade accounts receivables are limited due to generally short payment terms.
The Company has two contracts that account for a large portion of the Company’s revenue. During the year ended December 31, 2015, these contracts accounted for approximately 44% of the Company’s revenues and less than 5% of the Company’s accounts receivable balance at December 31, 2015. During the year ended December 31, 2014, the Company had two customers that accounted for approximately 46% of the Company’s revenues and approximately 53% of the Company’s accounts receivable balance at December 31, 2014. The Company did not have any other customers that represented a significant portion of the Company’s revenue or account receivables for the fiscal years ended December 31, 2015 and 2014, respectively.
Basic Income (Loss) Per Share
Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. At December 31, 2015 the Company had two convertible notes outstanding that is not convertible into common stock until June 2016. Additionally, the Company issued stock warrants for 1,673,559 common shares.
For the year ended December 31, 2015, the Company had 1,673,559 of weighted-average common shares relating to the convertible debt, under the if-converted method, however, these shares are not dilutive because the Company recorded a loss during the fiscal year.
At December 31, 2015, and 2014 the Company had a series of convertible notes and warrants outstanding that could be converted into approximately, 2,548,559 and 291,047 common shares, respectively. These are not presented in the consolidated statements of operations since the company incurred a loss and the effect of these shares is anti- dilutive.
F-45
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock-Based Compensation
Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718. To date, the Company has not adopted a stock option plan and has not granted any stock options.
Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also require measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.
Pursuant to ASC Topic 505-50, for share based payments to consultants and other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized over the service period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the reporting date.
The Company recorded stock based compensation expense of $7,356,000 and $339,000 during the years ended December 31, 2015 and 2014, respectively.
Recent Accounting Pronouncements
The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.
NOTE 3 – PROPERTY, PLANT AND EQUIPMENT
The following is a summary of property, plant, and equipment—at cost, less accumulated depreciation:
2015
2014
Land
$
1,690,000
$
-
Building & Improvements
692,156
-
Furniture & Office Equipment
258,702
240,102
Containers
4,453,386
2,847,205
Truck, Machinery & Equipment
9,948,686
5,523,773
Total Cost
17,042,930
8,611,080
Less accumulated depreciation
(2,609,190
)
(956,315
)
Net property, plant and Equipment
$
14,433,740
$
7,654,765
As of December 31, 2015 the Company has $395,000 of land and building which are held for sale and included in amounts noted above. These held for sale assets were not depreciated during the year ending December 31, 2015. Depreciation expense for the years ended December 31, 2015 and 2014 was $1,683,000 and $965,000, respectively.
F-46
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 3 – PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
During 2015 and 2014, the Company assessed these long-term assets, based on estimated future cash flows and concluded that the carrying amount of its long-term assets did not exceed its fair value, therefore the Company did not record any impairment loss on these assets.
NOTE 4 - INTANGIBLE ASSETS AND ACQUISITION
Christian Disposal Acquisition
On December 22, 2015, the Company, in order to expand into new markets and maximize the rate of waste internalization, acquired 100% of the membership interests of Christian Disposal LLC pursuant to that certain Amended and Restated Membership Interest Purchase Agreement, dated October 16, 2015, as amended by that certain First Amendment thereto, dated December 4, 2015.
The acquisition was accounted for by the Company using acquisition method under business combination accounting. Under this method, the purchase price paid by the acquirer is allocated to the assets acquired and liabilities assumed as of the acquisition date based on the fair value. By the application of “push-down” accounting, our assets, liabilities and equity were accordingly adjusted to fair value on December 22, 2015. Determining the fair value of certain assets and liabilities assumed is judgmental in nature and often involves the use of significant estimates and assumptions.
The purchase of Christian Disposal, LLC included the acquisition of assets of $20,035,847 and liabilities of $2,152,738. The aggregate purchase price consisted of the following:
Cash consideration
$
13,008,109
Restricted stock consideration
2,625,000
Convertible Promissory Note
1,250,000
Contingent additional purchase price
1,000,000
Total
$
17,883,109
As noted in the table above, the purchase price could be increased by a maximum amount of $2,000,000 depending upon the extension of certain contracts to which Christian Disposal, LLC is a party. At December 31, 2015, the fair value of the additional purchase price was determined to be $1,000,000. Also, the Company issued 1,750,000 restricted shares of common stock as consideration which was valued at market at the date of the closing.
F-47
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 4 - INTANGIBLE ASSETS AND ACQUISITION (CONTINUED)
The following table summarizes the estimated fair value of Christian Disposal LLC, and subsidiary, assets acquired and liabilities assumed at the date of acquisition:
Cash
$
197,173
Accounts receivable
974,538
Prepaid expense
84,196
Other current assets
53,810
Customer lists intangible assets
8,180,000
Non-competition agreement intangible asset
56,000
Goodwill
5,849,332
Property, plant, and equipment
4,640,798
Account payable
(1,001,721
)
Deferred revenue
(1,007,525
)
Accrued expenses
(106,396
)
Capital lease
(37,096
)
Total
$
17,883,109
Eagle Ridge Landfill, LLC and Hauling Acquisition
On December 22, 2015, the Company, in order to expand into new markets and maximize the rate of waste internalization, consummated the closing of the certain Asset Purchase Agreement dated November 13, 2015, by and between the Company and Eagle Ridge Landfill, LLC, as amended by the certain Amendment to Asset Purchase Agreement, dated December 18, 2015, to which the Company and WCA Waste Corporation are also party. Pursuant to the Eagle Ridge Purchase Agreement, Meridian Land acquired a landfill located in Pike County, Missouri and certain assets, rights, and properties related to such business of Eagle Ridge, including certain debts.
The acquisition was accounted for by the Company using business combination accounting. Under this method, the purchase price paid by the acquirer is allocated to the assets acquired and liabilities assumed as of the acquisition date based on the fair value. By the application of “push-down” accounting, our assets, liabilities and equity were accordingly adjusted to fair value on December 22, 2015. Determining the fair value of certain assets and liabilities assumed is judgmental in nature and often involves the use of significant estimates and assumptions.
F-48
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 4 - INTANGIBLE ASSETS AND ACQUISITION (CONTINUED)
The purchase of Eagle Ridge Landfill, LLC and certain assets included the acquisition of assets of $9,947,224 and liabilities of $283,737. The aggregate purchase price consisted of a cash consideration of $9,663,487.
The following table summarizes the estimated fair value of Eagle Ridge Landfill LLC., assets acquired and liabilities assumed at the date of acquisition:
Cash
$
470
Accounts receivable
272,480
Prepaid expense
6,870
Customer lists intangible assets
2,000,000
Landfill permit (including ARO)
3,396,519
Goodwill
1,630,310
Land
1,550,000
Property, Plant, and Equipment
1,090,575
Deferred revenue
(87,218
)
Asset retirement obligation - permits
(196,519
)
Total
$
9,663,487
The following unaudited pro forma consolidated results of operations have been prepared as if the acquisitions of Christian Disposal and Eagle Ridge occurred at January 1, 2014:
Successor
Predecessor
Year Ended December 31, 2015
Period from Acquisition May 16, 2014 to December 31, 2014
Period from January 1, 2014 to May 15, 2014
Total Revenue
$
28,861,001
$
17,872,328
$
10,199,328
Net (loss) income
(17,763,377
)
(1,581,195
)
916,391
Basic net loss per share
$
(1.23
)
$
(0.16
)
$
-
Meridian Waste Services, LLC Acquisition
In 2014, the Company, in order to establish a presence in the solid waste disposal industry, entered into an asset purchase agreement by and among the Company, HTSMWD, Meridian Waste Services, LLC (“MWS”) and the members of MWS, pursuant to which HTSMWD acquired certain assets and liabilities of MWS, in exchange for $11,115,000 cash, 13,191,667 shares of Class A Common Stock of HTSHC and 71,210 shares of Series B Cumulative Convertible Preferred Stock of HTSHC.
F-49
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 4 - INTANGIBLE ASSETS AND ACQUISITION (CONTINUED)
The acquisition was accounted for by the Company using the acquisition method under business combination accounting. Under this method, the purchase price paid by the acquirer is allocated to the assets acquired and liabilities assumed as of the acquisition date based on the fair value. By the application of “push-down” accounting, our assets, liabilities and equity were accordingly adjusted to fair value on May 15, 2014. Determining the fair value of certain assets and liabilities assumed is judgmental in nature and often involves the use of significant estimates and assumptions.
The purchase of MWS included the acquisition of assets of $22,175,706 and liabilities of $2,075,956. The aggregate purchase price consisted of the following:
Cash consideration
$
11,000,000
Estimated value of common stock issued to sellers
1,978,750
Estimated value of preferred stock issued to sellers
7,121,000
Total
$
20,099,750
The following table summarizes the estimated fair value of MWS assets acquired and liabilities assumed at the date of acquisition:
Accounts receivable
$
632,322
Prepaid expenses
123,544
Deposits
8,303
Containers
2,710,671
Furniture and equipment
299,450
Trucks
4,243,964
Customer lists
14,007,452
Non-compete agreement
150,000
Accounts payable and accrued expenses
(54,387
)
Notes payable
(143,464
)
Deferred revenue
(1,878,105
)
Total
$
20,099,750
F-50
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 4 - INTANGIBLE ASSETS AND ACQUISITION (CONTINUED)
The following tables set forth the intangible assets, both acquired and developed, including accumulated amortization for the years ended December 31, 2015 and December 31, 2014:
December 31, 2015
Remaining
Accumulated
Net Carrying
Useful Life
Cost
Amortization
Value
Customer lists
13.7 years
$
24,187,452
$
4,687,090
$
19,500,362
Non compete agreement
4.2 years
206,000
50,301
155,699
Website
3.9 years
13,920
3,016
10,904
$
24,407,372
$
4,740,407
$
19,666,965
December 31, 2014
Remaining
Accumulated
Net Carrying
Useful Life
Cost
Amortization
Value
Capitalized software
5.0 years
$
434,532
$
-
$
434,532
Customer list
4.5 years
14,007,452
1,867,660
12,139,792
Loan fees
4.5 years
50,613
11,248
39,365
Non compete agreement
4.5 years
150,000
20,000
130,000
Website
4.9 years
13,920
232
13,688
$
14,656,517
$
1,899,140
$
12,757,377
F-51
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 4 - INTANGIBLE ASSETS AND ACQUISITION (CONTINUED)
In the year ended December 31, 2015, customer lists include the intangible assets related to customer relationships acquired through the acquisition of Christian Disposal and Eagle Ridge with a cost basis of $10,180,000. The customer list intangible assets are amortized over their useful life which ranged from 5 to 20 years. Amortization expense, excluding amortization of landfill assets of $3,043, amounted to $2,869,385 and $1,899,140 for the period ending December 31, 2015 and 2014 respectively.
NOTE 5 - NOTES PAYABLE AND CONVERTIBLE NOTES
The Company had the following long-term debt:
December 31, 2015
December 31, 2014
Debt payable to Comerica Bank, senior debt
$
-
$
8,708,333
Debt payable to Praesidian Capital Opportunity Fund III, senior lender
-
-
Debt payable to Praesidian Capital Opportunity Fund III-A, senior lender
-
-
Goldman Sachs - Tranche A Term Loan - LIBOR Interest
40,000,000
-
Goldman Sachs - Revolver
-
-
Goldman Sachs - MDTL
-
-
Convertible Notes Payable
1,250,000
-
Capitalized lease - financing company, secured by equipment,
37,097
Equipment loans
395,118
-
Notes payable to seller of Meridian, subordinated debt
1,475,000
1,475,000
Less: debt discount
(2,152,603
)
-
Total debt
41,004,611
10,183,333
Less: current portion
(417,119
)
(1,357,143
)
Long term debt less current portion
$
40,587,493
$
8,826,190
Convertible Notes Payable
The Company issued two promissory notes to related parties during the year ended December 31, 2014. These notes totaled $125,000 and are generally convertible into common stock of the Company at discounts of 20% to 25% of the lowest average trading prices for the stock during periods five to one day prior to the conversion date. These notes bear interest at 10% to 12%, are unsecured, and mature within one year of the date issued. The notes were issued to provide working capital for the Company. These notes are considered a stock settled debt in accordance with ASC 480 since any future stock issued upon conversion will have a fixed monetary value. Due to the conversion feature included in the notes, the Company has recorded a premium on the notes totaling $31,250 as of December 31, 2014. This amount has been charged to interest expense by the Company.
In 2015, as part of the purchase price consideration of the Christian Disposal acquisition, the Company issued a convertible promissory note to seller in the amount of $1,250,000. The note bears interest at 8% and matures on December 31, 2020. The seller may convert all or any part of the outstanding and unpaid amount of this note into fully paid and non-assessable common stock in accordance with the agreement.
F-52
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 5 - NOTES PAYABLE AND CONVERTIBLE NOTES (CONTINUED)
In previous periods the Company issued two other notes to other related parties. These notes totaled $110,000 and are generally convertible into common stock of the Company at discounts of 20% to 25% of the lowest average trading prices for the stock during periods five to one day prior to the conversion date. These notes bear interest at 10% to 12%, are unsecured, and mature within one year of the date issued. The notes were issued to provide working capital for the Company. These notes are considered a stock settled debt in accordance with ASC 480 since any future stock issued upon conversion will have a fixed monetary value. Due to the conversion feature included in the notes, the Company has recorded a premium on the notes totaling $35,833 as of December 31, 2014. This amount has been charged to interest expense by the Company.
In 2015, approximately $225,000 of the issued promissory notes were converted into approximately 461,000 shares at the contractual conversion price. At December 31, 2015 the Company had $12,500 remaining in convertible notes to related parties, which includes $2,500 in put premiums.
Notes Payable
At December 31, 2014 the Company had a short term, non-interest bearing note payable of $150,000 which was incurred in connection with the Membership Interest Purchase Agreement discussed above. The Company also had a loan from Here to Serve Holding Corp. due to expenses paid by Here to Serve on behalf of the Company prior to the recapitalization. This loan totaled $376,585 bringing total notes payable to $526,585. In 2015, the short term, non-interest bearing note was paid off, and at December 31, 2015, the Company’s loan from Here to Serve Holding Corp. was $359,891.
Praesidian Notes Payable
On August 6, 2015, the Company refinanced its long-term debt payable to Comerica Bank. Proceeds from notes issued by the Company to Praesidian Capital Opportunity Fund III, LP and Praesidian Capital Opportunity Fund III-A, LP (together referred to as Praesidian) were $10,845,000. These funds were distributed as follows:
Payoff of short term bridge financing
$
432,938
Payoff of lines of credit with Commerica Bank
1,745,799
Payoff of senior debt to Comerica Bank
7,953,433
Refinancing fees
712,830
$
10,845,000
The Company’s Senior Secured Loan with Comerica Bank had an interest rate of LIBOR plus 4.25% with a two-year term based on a seven-year amortization schedule. In addition, the Company had a working capital line of credit with Comerica Bank of $1,250,000 at 4.75% of which the Company had drawn down $1,185,081 and $1,085,160 as of August 6, 2015 and December 31, 2014, respectively. There was CAPEX line of credit of $750,000, of which the Company had drawn down $560,718 and $590,000 as of August 6, 2015 and December 31, 2014, respectively; again at 4.75% interest. As noted above, these debts were paid off from the proceeds received from Praesidian.
The debt to Praesidian had a maturity date of August 6, 2020 with interest paid monthly at an annual rate of 14%. In addition to the 14% interest rate, the Company issued to Praesidian warrants to purchase 1,293,022 shares of Common Stock of the Company.
F-53
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 5 - NOTES PAYABLE AND CONVERTIBLE NOTES (CONTINUED)
Goldman Sachs Credit Agreement
On December 22, 2015, in connection with the closing of acquisitions of Christian Disposal, LLC and certain assets of Eagle Ridge Landfill, LLC, the Company was extended certain credit facilities by Goldman Sachs, consisting of $40,000,000 aggregate principal amount of Tranche A Term Loans, $10,000,000 aggregate principal amount of Multi- Draw Term Loans and up to $5,000,000 aggregate principal amount of Revolving Commitments. At December 31, 2015, only the Tranche A Term Loan was drawn and had an outstanding balance of $40,000,000. It is collateralized by the assets of the Company. The debt has a maturity date of December 22, 2020 with interest paid monthly at an annual rate of 9%. In addition, there is a commitment fee paid monthly on the Mutli-Draw Term Loans and Revolving Commitments at an annual rate of 0.5%.
The proceeds of the loans were used to partially fund the acquisitions referenced above and refinance existing debt with Praesidian, among other things. The funds to payoff the Praesidian notes were distributed as follows:
Aggregate outstanding principal balance of the Notes
$
10,845,043
Aggregate accrued but unpaid interest on the Notes
82,844
Prepayment Premium1
325,351
Accrued PIK
9,941
Tax Liability
150,000
Accrued but unpaid fees and expenses
4,000
Payoff Amount
$
11,417,179
The Company re-paid in full and terminated its agreements with Praesidian which effected the cancellation of certain warrants that the Company issued to Fund III for the purchase of 931,826 shares of the Company’s common stock and to Fund III-A for the purchase of 361,196 shares of the Company’s common stock. In consideration for the cancellation of the Praesidian Warrants, the Company issued to Praesidian Capital Opportunity Fund III, LP, 1,153,052 shares of common stock and issued to Praesidian Capital Opportunity Fund III-A, LP, 446,948 shares of common stock. Due to the early termination of the notes and cancellation of the warrants, the Company recorded a loss on extinguishment of debt of $1,899,161 in the year ended December 31, 2015.
In addition, in connection with the credit agreement, the Company issued warrants to Goldman Sachs for the purchase of shares of the Company’s common stock equivalent to a 6.5% Percentage Interest at a purchase price equal to $449,553, exercisable on or before December 22, 2023. The warrants grant the holder certain other rights, including registration rights, preemptive rights for certain capital raises, board observation rights and indemnification. See discussion of warrants below.
Subordinated Debt
In connection with the acquisition with Meridian Waste Services, LLC on May 15, 2014, notes payable to the sellers of Meridian issued five-year term subordinated debt loans paying interest at 8%. At December 31, 2015 and December 31, 2014, the balance on these loans was $1,475,000 and $1,475,000, respectively.
The debt payable to Comerica at December 31, 2014 and the Equipment loans at December 31, 2015 were the debt of Here to Serve- Missouri Waste Division, LLC, a subsidiary of the Company.
F-54
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 5 - NOTES PAYABLE AND CONVERTIBLE NOTES (CONTINUED)
Equipment Loans
Finally, during the year ended December 31, 2015, the Company entered into four long-term loan agreements in connection with the purchase of equipment with rates between 4% and 5%. At December 31, 2015, the balance of these four loans was $425,149.
Derivative Liability - Warrants
As indicated above, the Company issued warrants to Praesidian and Goldman Sachs to purchase shares of common stock. Due to the put features contained in the agreements, derivative liabilities were recorded for the warrants.
The Company’s derivative warrant instruments related to Praesidian have been measured at fair value at the date of cancellation, December 22, 2015, using the Black-Scholes model. The Back-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk free interest rate, the current stock price, the estimated volatility of the stock price in the future and the dividend rate. The key inputs used in the December 22, 2015 fair value calculations were as follows:
December 22, 2015
Current exercise price
$
0.025
Time to expiration
8/6/2016
Risk-free interest rate
0.33
%
Estimated volatility
230
%
Dividend
0
%
Stock price on December 22, 2015
$
1.50
Expected forfeiture rate
0
%
The Company’s derivative warrant instruments related to Goldman Sachs have been measured at fair value at the date of issuance December 22, 2015 and December 31, 2015, using the Black-Scholes model. The liability is revalued at each reporting period and changes in fair value are recognized currently in the consolidated statement of operations.
F-55
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 5 - NOTES PAYABLE AND CONVERTIBLE NOTES (CONTINUED)
The key inputs used in the December 22, and December 31, 2015 fair value calculations were as follows:
December 22, 2015
Purchase Price
$
450,000
Time to expiration
12/22/2023
Risk-free interest rate
2.11
%
Estimated volatility
45
%
Dividend
0
%
Stock price on December 22, 2015
$
1.50
Expected forfeiture rate
0
%
December 31, 2015
Purchase Price
$
450,000
Time to expiration
12/22/2023
Risk-free interest rate
2.15
%
Estimated volatility
45
%
Dividend
0
%
Stock price on December 31, 2015
$
1.90
Expected forfeiture rate
0
%
The change in the market value for the period ending December 31, 2015 is as follows:
Fair value of warrants @ December 31, 2014
$
-
Issuance of Praesdian warrants @ August 6, 2015
904,427
Unrealized loss on derivative liability
1,004,213
Cancellation of Praesidian warrants @ December 22, 2015
(1,908,640
)
Issuance of Goldman warrants @ December 22, 2015
2,160,000
Unrealized loss on derivative liability
660,000
Fair value of warrants @ December 31, 2015
$
2,820,000
Derivative Liability – Interest Rate Swap
The Company sometimes borrows at variable rates and uses interest rate swaps as cash flow hedges of future interest payments, which have the economic effect of converting borrowings from floating rates to fixed rates. The interest rate swaps allow the Company to raise long-term borrowings at floating rates and swap them into fixed rates that are lower than those available if it borrowed at fixed rates directly. Under the interest rate swaps, the Company agrees with other parties to exchange, at specified intervals, the difference between fixed contract rates and floating rate interest amounts calculated by reference to the agreed notional principal amounts.
F-56
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 5 - NOTES PAYABLE AND CONVERTIBLE NOTES (CONTINUED)
At December 31, 2014, the Company had $5,414,634 of non-amortizing variable rate debt outstanding with interest payments due on a monthly basis. The note accrues interest at the 1-month LIBOR plus 4.25%. In order to hedge interest rate risk, the Company entered into an interest rate swap for a notional amount of $5,414,634 at fixed rate of 4.75%. Under the swap agreement, the Company pays the fixed rate on the $5,414,634 notional amount on a monthly basis, and receives the 1-month LIBOR plus 4.25% on a monthly basis. Payments are settled on a net basis, and the Company has effectively converted its variable-rate debt into fixed-rate debt with an effective interest rate of 4.75%. As discussed above, the debts to Comerica were paid off from the funding received from Praesidian. The net settlement amount of the interest rate swap as of December 31, 2015 and December 31, 2014 was $0 and $40,958, respectively.
NOTE 6- SHAREHOLDERS’ EQUITY
Common Stock
The Company has authorized 75,000,000 shares of $0.025 par common stock. At December 31, 2015 and 2014 there were 21,038,650 and 9,963,418 shares issued and outstanding.
Treasury Stock
During 2014, the Company’s Board of Directors authorized a stock repurchase of 230,000 shares of its common stock for approximately $230,000 at an average price of $1.00 per share. As of December 31, 2015 and 2014 the Company holds 230,000 shares of its common stock in its treasury.
Preferred Stock
The Company has authorized 5,000,000 shares of Preferred Stock, for which two classes have been designated to date. Series A has 51 shares issued and outstanding and Series B has 71,210 shares issued and outstanding as of December 31, 2015 and 2014, respectively.
Each share of Series A Preferred Stock has no conversion rights, is senior to any other class or series of capital stock of the Company and special voting rights. Each one (1) share of Series A Preferred Stock shall have voting rights equal to (x) 0.019607 multiplied by the total issued and outstanding Common Stock eligible to vote at the time of the respective vote (the “Numerator”), divided by (y) 0.49, minus (z) the Numerator.
Holders of Series B Preferred Stock shall be entitled to receive when and if declared by the Board of Directors cumulative dividends at the rate of twelve percent (12%) of the Original Issue Price. In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the holders of Series B Preferred Stock shall be entitled to receive, immediately prior and in preference to any distribution to holders of the Company’s common stock, an amount per share equal to the sum of $100.00 and any accrued and unpaid dividends of the Series B Preferred Stock. Each share of Series B Preferred Stock may be converted at the option of the holder into the Company’s Common stock. The shares shall be converted using the “Conversion Formula”: divide the Original Issue Price by 75% of the average closing bid price of the Common Stock for the five (5) consecutive trading days ending on the trading day of the receipt by the Company of the notice of conversion.
At December 31, 2015 and 2014, the Company’s Series B Preferred Stock dividends in arrears on the 12% cumulative preferred stock were approximately $1,033,000 ($14.50 per share) and $2.50 ($2.50 per share), respectively.
F-57
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 6- SHAREHOLDERS’ EQUITY (CONTINUED)
Common Stock Transactions
During the years ended December 31, 2015 and 2014, the Company issued, 11,075,232 and 9,054,134 shares of common stock, respectively. The fair values of the shares of common stock were based on the quoted trading price on the date of issuance. Of the 11.1 million shares issued for year ending December 31, 2015, the Company:
1.
Issued 1,573,550 of these shares were issued to vendors for services generating a professional fees expense of $830,970;
2.
Issued 5,690,843 of these shares to officers and employees as incentive compensation resulting in compensation expense of $7,356,180;
3.
Issued 460,839 shares of common stock, due to the conversion of related party debt. Per the convertible note agreement, the shares were converted at 75% of the closing bid price on the date of conversion. The value of the debt and accrued interest converted was $318,927;
4.
Issued 1,750,000 shares as part of the acquisition of Christian Disposal LLC, these shares were record as part of the purchased price consideration as noted above. These share were valued at market as of the date of the acquisition; and,
5.
Issued 1,600,000 shares of common stock, due to the cancellation of Praesidian warrants. As part of this extinguishment of debt the company recorded a loss of approximately, $1.8 million.
For fiscal year ended December 31, 2014, the Company acquired the membership interest of HTSMWD, HTST and HTSGWD in exchange for 9,054,134 shares of the Company’s common stock. This transaction was closed on October 17, 2014 and HTSMWD became wholly-owned by the Company. The Company is deemed to have issued 1,139,284 shares of common stock which represents the outstanding common shares of the Company just prior to the closing of the transaction.
The Company has issued and outstanding warrants of 1,673,559 common shares, as adjusted, with the current exercise price of $0.269, as adjusted, expiring December 31, 2023. A summary of the status of the Company’s outstanding common stock warrants as of December 31, 2015 and 2014, with changes during the years ending on those dates are as follows:
F-58
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 6- SHAREHOLDERS’ EQUITY (CONTINUED)
Number
of
Shares
Average Exercise Price
If
Exercised
Expiration Date
Outstanding, January 1, 2014
-
$
-
$
-
-
Granted
-
-
-
-
Forfeited
-
-
-
-
Exercised
-
-
-
-
Outstanding, December 31, 2014
-
$
-
$
-
Granted - Praesidian
1,293,022
$
0.025
$
32,326
-
Forfeited/Cancellation - Praesidian
(1,293,022
)
$
0.025
(32,326
)
-
Granted - Goldman Sachs
1,673,559
$
0.269
449,518
December 31, 2023
Forfeited/Cancellation - Goldman Sachs
-
-
-
-
Exercised
-
-
-
-
Outstanding, December 31, 2015
1,673,559
$
-
$
449,518
-
Warrants exercisable at December 31, 2015
1,673,559
NOTE 7 - INCOME TAXES
The Company accounts for income taxes in accordance with Accounting Standards Codification (ASC-740) “Accounting for Income Taxes”, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and income tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.
The Company had a net operating loss carry forward of approximately $12.3 million at December 31, 2015 and had no Federal or State income tax obligations. The Company had no significant tax effects resulting from the temporary differences that give rise to deferred tax assets and deferred tax liabilities for the years ended December 31, 2015 and 2014 other than net operating losses.
The Company’s loss carry forward of approximately $12.3 may offset future taxable income through tax year 2035. However, in accordance with IRC Section 382, the availability and utilization of the losses may be severely limited since the business combination that occurred on October 17, 2014 triggered the IRC Section 382 limitations.
Prior to October 17, 2014, the date of the reverse acquisition transaction discussed in Note 1 above, the operating entities were owned by unrelated third party partners/members, and as limited liability companies, the operating companies’ losses for the period January 1, 2014 to October 17,2014 flowed through to such partners/members. Therefore, as there were no tax allocation arrangements with the previous partners/members, the Company has not recorded in these financials statements any current or deferred income tax expense, income tax liabilities or deferred tax assets/liabilities relating to such pre-acquisition activity (losses).
The table below summarizes the differences between the Company’s effective tax rate and the statutory federal rate of 34% as follows for the periods ended December 31, 2015 and 2014:
F-59
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 7 - INCOME TAXES (CONTINUED)
Years Ended December 31,
2015
2014
Computed "expected" benefit
$
(6,538,843
)
$
(773,000
)
Effect of state income taxes, net of federal benefit
(769,276
)
(136,000
)
Effect of change in tax rates
-
(280,760
)
Pre-acquisition losses
-
640,000
Stock based compensation and other permanent differences
4,577,831
-
Increase in valution allowance
2,730,288
549,760
$
-
$
-
Deferred tax assets and liabilities are provided for significant income and expense items recognized in different year for tax and financial reporting purposes. The Components of the net deferred tax assets for the years ended December 31, 2015 and 2014 were as follows:
Years Ended December 31,
2015
2014
Net operating loss carry forward
$
4,686,288
$
1,956,000
Less: Valuation allowance
(4,686,288
)
(1,956,000
)
$
-
$
-
The valuation allowance was increased by approximately $2,730,288 and $550,000 during the years ended December 31, 2015 and 2014.
NOTE 8 - FAIR VALUE MEASUREMENT
ASC Topic 820 establishes a fair value hierarchy, giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data and requires disclosures for assets and liabilities measured at fair value based on their level in the hierarchy. Also, ASC Topic 820 provides clarification that in circumstances, in which a quoted price in an active market for the identical liabilities is not available, a reporting entity is required to measure fair value using one or more of the techniques provided for in this update.
The standard describes a fair value hierarchy based on three levels of input, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:
Level 1 - Quoted prices in active markets for identical assets and liabilities.
Level 2 - Input other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets of liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liabilities.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
F-60
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 8 - FAIR VALUE MEASUREMENT (CONTINUED)
The following table sets forth the liabilities at December 31, 2015 and 2014, which is recorded on the balance sheet at fair value on a recurring basis by level within the fair value hierarchy. As required, these are classified based on the lowest level of input that is significant to the fair value measurement:
Fair Value Measurements at Reporting Date Using
December 31, 2015
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant Other
Observable
Inputs
(Level 3)
Derivative liability
$
2,820,000
$
-
$
-
$
2,820,000
Stock settled debt premium
12,500
10,000
-
2,500
Total
$
2,832,500
$
10,000
$
-
$
2,822,500
Fair Value Measurements at Reporting Date Using
December 31, 2014
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant Other
Observable
Inputs
(Level 3)
Interest Rate Swap
$
40,958
$
-
$
-
$
40,958
Stock settled debt
308,083
235,000
-
67,083
Total
$
349,041
$
235,000
$
-
$
108,041
F-61
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 9 - LEASES
The Company’s has entered into non-cancellable leases for its office, warehouse facilities and some equipment. These lease agreements commence on various dates from September 1, 2010 to December 2015 and all expires on or before December, 2020. Future minimum lease payments at December 31, 2015 are as follows:
2016
$
442,408
2017
448,408
2018
164,493
2019
111,103
2020
71,500
Thereafter
-
Total
$
1,237,912
The Company has also entered into various other leases on a month to month basis for machinery and equipment. Rent expense amounted to $320,154 and $177,801 for the year ended December 31, 2015 and 2014, respectively.
NOTE 10 – BONDING
In connection with normal business activities of a company in the solid waste disposal industry, Meridian may be required to acquire a performance bond. As part of the Company’s December 22, 2015 acquisitions of Christian Disposal, LLC and Eagle Ridge Landfill, LLC, Meridian acquired a performance bond in the approximate amount of $7,400,000 with annual expenses of $221,000. For fiscal year ended December 31, 2015, the Company had approximately $6,000 of expenses related to this performance bond and for fiscal year ended December 31, 2014, the Company was not required to obtain a performance bond.
NOTE 11 - EMPLOYMENT CONTRACT
Pursuant to the Christian Disposal, LLC and subsidiary purchase, the company has entered into an employment contract with its Area Vice President of Business Development and Marketing through 2020 that provides for a minimum annual salary, cash and stock option bonuses. At December 31, 2015, the total commitment, excluding incentives, was approximately $1,500,000.
Note 12 - LITIGATION
The Company is involved in various lawsuits related to the operations of its subsidiaries. Management believes that it has adequate insurance coverage and/or has appropriately accrued for the settlement of these claims. If applicable, claims that exceed amounts accrued and/or that are covered by insurance, management believes they are without merit and intends to vigorously defend and resolve with no material impact on financial condition.
F-62
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 13 – RELATED PARTY TRANSACTIONS
Sale of Capitalized Software
On January 7, 2015, in an effort to give investors a more concentrated presence in the waste industry the Company sold the capitalized software assets of Here to Serve Technology, LLC (HTST) to Mobile Science Technologies, Inc., a Georgia corporation (MSTI), a related party due to being owned by some of the shareholders of the Company. No gain or loss was recognized on this transaction as the Company received equity equal to book value ($434,532) of the capitalized software in the exchange. This represents approximately 15% of the equity of MSTI and is reflected in the accompanying balance sheet as “investment in related party affiliate”. The Company's investment of 15% of the common stock of MSTI is accounted for under the equity method because the company exercises significant influence, over its operating and financial activities. Significant influence is exercised because both Companies have a Board Member in common. Accordingly, the investment in MSTI is carried at cost, adjusted for the Company's proportionate share of earnings or losses.
F-63
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 13 – RELATED PARTY TRANSACTIONS (CONTINUED)
The following presents unaudited summary financial information for MSTI. Such summary financial information has been provided herein based upon the individual significance of this unconsolidated equity investment to the consolidated financial information of the Company.
Following is a summary of financial position and results of operations of MSTI:
Summary of Statements of Financial Condition
2015
(UNAUDITED)
Assets
Current assets
$
4,481
Noncurrent assets
2,869,553
Total assets
$
2,874,034
Liabilities and Equity
Current liabilities
$
213,264
Noncurrent liabilities
-
Equity
2,660,770
Total liabilities and equity
$
2,874,034
Summary of Statements of Operations
Revenues
$
1,364
Expense
470,342
Net loss
$
(468,978
)
The Company recorded losses from its investment in MSTI, accounted for under the equity method, of approximately $70,000 during fiscal year ended 2015. The charge reflected the Company’s share of MSTI losses recorded in that period, as well as the write-down of the investment and the write-off of certain receivables. While the Company has ongoing agreements with MSTI relating to the use of MSTI's software technology, the Company has no obligation to otherwise support the activities of MSTI. As of December 31, 2015, the Company has $133,000 in prepaid expenses related to MSTI.
NOTE 14 - SUBSEQUENT EVENTS
EQUITY AND INCENTIVE PLAN
Effective March 10, 2016, the Board of Directors (the “Board”) of the Company approved, authorized and adopted the 2016 Equity and Incentive Plan (the “ Plan”) and certain forms of ancillary agreements to be used in connection with the issuance of stock and/or options pursuant to the Plan (the “Plan Agreements”). The Plan provides for the issuance of up to 7,500,000 shares of common stock, par value $.025 per share (the “Common Stock”), of the Company through the grant of non-qualified options (the “Non-qualified options”), incentive options (the “Incentive Options” and together with the Non-qualified Options, the “Options”) and restricted stock (the “Restricted Stock”) to directors, officers, consultants, attorneys, advisors and employees.
F-64
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 14 - SUBSEQUENT EVENTS (CONTINUED)
The Plan shall be administered by a committee consisting of two or more independent, non-employee and outside directors (the “Committee”). In the absence of such a Committee, the Board shall administer the Plan. The Plan is currently being administered by the Board.
Options are subject to the following conditions:
(i)
The Committee determines the strike price of Incentive Options at the time the Incentive Options are granted. The assigned strike price must be no less than 100% of the Fair Market Value (as defined in the Plan) of the Company’s Common Stock. In the event that the recipient is a Ten Percent Owner (as defined in the Plan), the strike price must be no less than 110% of the Fair Market Value of the Company.
(ii)
The strike price of each Non-qualified Option will be at least 100% of the Fair Market Value of such share of the Company’s Common Stock on the date the Non-qualified Option is granted, unless the Committee, in its sole and absolute discretion, elects to set the strike price of such Non-qualified Option below Fair Market Value.
(iii)
The Committee fixes the term of Options, provided that Options may not be exercisable more than ten years from the date the Option is granted, and provided further that Incentive Options granted to a Ten Percent Owner may not be exercisable more than five years from the date the Incentive Option is granted.
(iv)
The Committee may designate the vesting period of Options. In the event that the Committee does not designate a vesting period for Options, the Options will vest in equal amounts on each fiscal quarter of the Company through the five (5) year anniversary of the date on which the Options were granted. The vesting period accelerates upon the consummation of a Sale Event (as defined in the Plan).
(v)
Options are not transferable and Options are exercisable only by the Options’ recipient, except upon the recipient’s death.
(vi)
Incentive Options may not be issued in an amount or manner where the amount of Incentive Options exercisable in one year entitles the holder to Common Stock of the Company with an aggregate Fair Market value of greater than $100,000.
Awards of Restricted Stock are subject to the following conditions:
(i)
The Committee grants Restricted Stock Options and determines the restrictions on each Restricted Stock Award (as defined in the Plan). Upon the grant of a Restricted Stock Award and the payment of any applicable purchase price, grantee is considered the record owner of the Restricted Stock and entitled to vote the Restricted Stock if such Restricted Stock is entitled to voting rights.
(ii)
Restricted Stock may not be delivered to the grantee until the Restricted Stock has vested.
(iii)
Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as provided in the Plan or in the Award Agreement (as defined in the Plan).
F-65
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 14 - SUBSEQUENT EVENTS (CONTINUED)
EMPLOYMENT AGREEMENT
Jeffrey Cosman - Employment Agreement, Director Agreement and Restricted Stock Agreement
On March 11, 2016, the Company entered into an employment agreement with Mr. Cosman (the “Cosman Employment Agreement”). Mr. Cosman is currently the Chief Executive Officer and Chairman of the Board of Directors of the Company and prior to the execution and delivery of the Cosman Employment Agreement, terms of Mr. Cosman’s employment were governed by that certain previous employment agreement assumed by the Company in connection with the Company’s purchase of certain membership interests owned by such previous employer on October 17, 2014. The Cosman Employment Agreement has an initial term from March 11, 2016 through December 31, 2017 and the term will automatically renew for one (1) year periods unless otherwise terminated in accordance with the terms therein. Mr. Cosman will receive a base salary of $525,000 and Mr. Cosman’s compensation will increase by 5% on January 1 of each year. Mr. Cosman may also receive a cash bonus based on the Company’s performance relative to its annual target performance, as well as an annual equity bonus in the form of restricted common stock, in accordance with the Company’s 2016 Equity and Incentive Plan (the “Plan”) and subject to the restrictions contained therein, equivalent to 6% of the value of all acquisitions by the Company or its subsidiaries of substantially all the assets of existing businesses or of controlling interests in existing business entities and equity or debt financings during the preceding year. Upon any termination of Mr. Cosman’s employment with the Company, except for a termination for Cause, Mr. Cosman shall be entitled to a severance payment equal to the greater of (i) five years’ worth of the then existing base salary and (ii) the last year’s bonus.
On March 11, 2016, the Company entered into a director agreement with the Company’s Chairman of the Board and Chief Executive Officer, Jeffrey Cosman, as amended by the First Amendment to Director Agreement entered into by the parties on April 13, 2016 (the "Cosman Director Agreement").
On March 11, 2016, the Company entered into a restricted stock agreement with Mr. Cosman (the “Cosman Restricted Stock Agreement”), pursuant to which 4,253,074 shares of the Company's common stock, subject to certain restrictions set forth in the Cosman Restricted Stock Agreement, were issued to Mr. Cosman pursuant to the Cosman Employment Agreement and the Plan.
Walter H. Hall, Jr. - Director Agreement and Employment Agreement
On March 11, 2016, the Company entered into a director agreement with Mr. Walter H. Hall, Jr., as amended by the First Amendment to Director Agreement entered into by the parties on April 13, 2016 (the “Hall Director Agreement”), concurrent with Mr. Hall’s appointment to the Board of Directors of the Company (the “Board”) effective March 11, 2016 (the “Effective Date”).
F-66
MERIDIAN WASTE SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
On March 11, 2016, the Company entered into an executive employment agreement with Mr. Hall (the “Hall Employment Agreement”). Mr. Hall will have the title of President and Chief Operating Officer. The Hall Employment Agreement has an initial term of thirty-six (36) months and the term will automatically renew for one (1) year periods, unless otherwise terminated pursuant to the terms contained therein. Mr. Hall will receive a base salary of $300,000 beginning upon the Company’s closing of acquisitions in the aggregate amount of $35,000,000 from the date the Hall Employment Agreement is executed. Mr. Hall may also receive an annual bonus of up to $175,000, or such larger amount approved by the Board, as well as an annual equity bonus (in the form of restricted common stock, in accordance with the Plan and subject to the restrictions contained therein) equivalent to 2% of the value of all acquisitions by the Company or its subsidiaries of substantially all the assets of existing businesses or of controlling interests in existing business entities and equity or debt financings during the preceding year. Additionally, Mr. Hall received two million (2,000,000) restricted shares of the Company’s common stock upon the execution of the Hall Employment Agreement
EQUITY SUBSCRIPTION AGREEMENT
On April 8, 2016, the Company completed the final closing (the “the Closing”) of a private placement offering to accredited investors (the “Offering”) of up to $1,600,000 of the Company’s restricted common stock, par value $0.025 per share.
In connection with the Closing, the Company entered into definitive subscription agreements (the “Subscription Agreements”) with five (5) accredited investors (the “Investors”) and issued an aggregate of 1,428,573 shares of Common Stock for aggregate gross proceeds to the Company of $1,600,000.
The Subscription Agreements provide that the Company shall issue additional shares of Common Stock in the event that, prior to the first anniversary of the Subscription Agreement, such Investor sells all of the Common Stock purchased under the Subscription Agreement and receives less than the full amount of the purchase price paid under the Subscription Agreement, and the Subscription Agreements contain typical representations and warranties.
F-67
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The Board of Directors and Shareholders
Meridian Waste Solutions, Inc.
We have audited the accompanying balance sheet of Meridian Waste Services, LLC (the “Predecessor Company”) as of December 31, 2013 and the related statements of operations, changes in members’ equity, and cash flows for the period from January 1, 2014 to May 15, 2014 and for the year ended December 31, 2013. These financial statements are the responsibility of the Predecessor Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Predecessor Company as of December 31, 2013 and the results of their operations and their cash flows for the period from January 1, 2014 to May 15, 2014 and for the year ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America.
s/ D’Arelli Pruzansky, P.A.
Certified Public Accountants
Boca Raton, Florida
April 13, 2015
F-68
Report of Independent Registered Public Accounting Firm
To The Board of Directors and Shareholders
Meridian Waste Solutions, Inc.
We have audited the accompanying consolidated balance sheets of Meridian Waste Solutions, Inc. and Subsidiaries (formerly Brooklyn Cheesecake and Desserts Company, Inc.) (the “Successor Company”) as of December 31, 2014, and the related consolidated statements of operations, changes in stockholders' deficit, and cash flows for the period from May 16, 2014 to December 31, 2014. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the Successor’s Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Successor Company as of December 31, 2014, and the results of its operations and cash flows for the period from May 16, 2014 to December 31, 2014, in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 1 to the consolidated financial statements, in connection with the acquisition of Meridian Waste Services, LLC by Here to Serve Holding Corp. a new basis of accounting was established as of May 15, 2014.
s/ D’Arelli Pruzansky, P.A.
Certified Public Accountants
Boca Raton, Florida
April 13, 2015
F-69
Meridian Waste Solutions, Inc.
Balance Sheet
Successor
Predecessor
December 31,
December 31,
2014
2013
ASSETS
Current Assets
Cash
$
438,907
$
1,461,372
Accounts receivable, trade, net
588,479
440,570
Employee advance
37
2,000
Prepaid expenses
221,999
75,000
Other current assets
41,815
189,521
Total Current Assets
1,291,237
2,168,463
Property and Equipment, net of accumulated
depreciation of $956,315 and $7,780,233 respectively
7,654,765
4,810,603
Other Assets
Loan to member
50,000
Capitalized software
434,532
-
Customer list, net of accumulated
amortization of $1,867,660
12,139,792
-
Deposits
8,303
8,303
Loan fees, net of accumulated
amortization of $11,247
39,365
-
Non-compete, net of accumulated
amortization of $20,000
130,000
-
Website, net of accumlated amortization of $232
13,688
Total Other Assets
12,765,680
58,303
TOTAL ASSETS
$
21,711,682
$
7,037,369
LIABILITIES & SHAREHOLDERS' EQUITY (DEFICIT)
Liabilities
Current Liabilities
Accounts payable
$
449,840
$
239,739
Accrued expenses
67,365
94,620
Notes payable
526,585
-
Deferred compensation
729,000
-
Deferred revenue
1,929,882
1,910,465
Convertible notes due related parties, includes put premiums
302,083
-
Operating line of credit and capital expenditure line of credit
1,675,160
50,000
Current portion - long term debt
1,357,143
1,211,299
Total Current Liabilities
7,037,058
3,506,123
Derivative liability - interest rate swap
40,958
Long-term notes payable
Less: current portion - long term debt
8,826,190
1,991,508
Total Liabilities
15,904,206
5,497,631
Shareholders' Equity (Deficit)
Members' equity
-
1,539,738
Preferred Series A stock, par value $.001, 51 shares authorized, issued and outstanding
-
-
Preferred Series B stock, par value $.001, 71,210 shares authorized, issued and outstanding
71
-
Common stock, par value $.025, 75,000,000 shares authorized, 9,963,418 shares issued and outstanding
249,085
-
Treasury stock, at cost (230,000 shares)
(224,250
)
Additional paid in capital
14,370,296
-
Accumulated deficit
(8,587,726
)
-
Total Shareholders' Equity
5,807,476
1,539,738
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY
$
21,711,682
$
7,037,369
See accompanying footnotes to financial statements
F-70
Meridian Waste Solutions, Inc.
Statement of Operations
Successor
Predecessor
Period from
Period from
Acquisition
January 1,
May 16, 2014 to
2014
Year Ended
December 31,
to May 15,
December 31,
2014
2014
2013
Income
Revenue
Software sales
$
1,864
$
-
$
-
Services
7,951,607
4,248,605
11,349,872
Total Revenue
7,953,471
4,248,605
11,349,872
Cost of Sales/Services
Cost of Sales/Services
5,019,286
2,603,280
6,968,847
Depreciation
932,526
504,515
1,411,440
Total Cost of Sales/Services
5,951,812
3,107,795
8,380,287
Gross Profit
2,001,659
1,140,810
2,969,585
Expenses
Bad debt expense
98,381
-
42,508
Compensation and related expense
751,398
213,391
703,688
Depreciation and amortization
1,932,459
5,748
13,537
Selling, general and administrative
1,397,570
469,593
826,888
Total Expenses
4,179,808
688,732
1,586,621
Other Income (Expenses):
Miscellaneous income (loss)
1,331
2,996
6,995
Interest income
-
-
-
Gain (loss) on disposal of assets
(20,830
)
-
(6,250
)
Unrealized (loss) on interest rate swap
(40,958
)
-
Loss on bad loans
-
(403
)
Recapitalization expense
(70,000
)
Interest expense
(348,136
)
(184,011
)
(146,659
)
Total Other Expenses
(478,593
)
(181,015
)
(146,317
)
Net Income (Loss) before income taxes
(2,656,742
)
271,063
1,236,647
Income tax expense
-
-
-
Net Income (Loss)
$
(2,656,742
)
$
271,063
$
1,236,647
Basic Net Loss Per Share
(0.27
)
Weighted Average Number of Shares Outstanding
(Basic and Diluted)
9,963,418
See accompanying footnotes to financial statements
F-71
Meridian Waste Solutions, Inc.
Statement of Changes in Shareholders' Equity (Deficit)
For The Year Ended December 31, 2014
Common Shares
Common Stock, Par
Preferred Series A Shares
Preferred Series A Stock, Par
Preferred Series B Shares
Preferred Series B Stock, Par
Treasury Stock
Additonal Paid in Capital
Members' Equity
Accumulated Deficit
Total
Predecessor
Balance at December 31, 2012
-
$
-
-
$
-
-
$
-
-
$
-
$
1,278,091
$
-
$
1,278,091
Net income (loss)
-
-
-
-
-
-
-
-
1,236,647
-
1,236,647
Members' distributions
-
-
-
-
-
-
-
-
(975,000
)
-
(975,000
)
Balance at December 31, 2013
-
-
-
-
-
-
-
-
1,539,738
-
1,539,738
Net income, January 1, 2014 - May 15, 2014
-
-
-
-
-
-
-
-
271,063
-
271,063
Members' distributions, January 1, 2014 - May 15, 2014
-
-
-
-
-
-
-
-
(585,000
)
-
(585,000
)
Balance at May 15, 2014
-
$
-
-
$
-
-
$
-
-
$
-
$
1,225,801
$
-
$
1,225,801
Successor
Balance at May 16, 2014
9,054,134
$
226,353
51
$
-
71,210
$
71
$
-
$
12,992,347
$
(5,930,984
)
$
7,287,786
Recapitalization of the Company
1,139,284
28,482
-
-
-
-
-
(28,482
)
-
-
Treasury stock purchased as part of recapitalization
(230,000
)
(5,750
)
-
-
-
-
(224,250
)
-
-
(230,000
)
Capital contributed by related party through foregiveness of debt in connection with recapitalization
-
-
-
-
-
-
-
1,406,431
-
1,406,431
Net loss
(2,656,742
)
(2,656,741
)
Balance December 31, 2014
9,963,418
$
249,085
51
$
-
71,210
$
71
$
(224,250
)
$
14,370,296
$
(8,587,726
)
$
5,807,476
See accompanying footnotes to financial statements
F-72
Meridian Waste Solutions, Inc.
Statement of Cash Flows
Successor
Predecessor
Period from
Period from
Acquisition
January 1,
May 16, 2014 to
2014
Year Ended
December 31,
to May 15,
December 31,
2014
2014
2013
OPERATING ACTIVITIES
Net income (loss) from operations
$
(2,656,742
)
$
271,063
$
1,236,647
Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation & Amortization
2,864,985
510,263
1,424,979
(Gain) Loss on sale of asset
20,830
-
6,250
Changes in working capital items:
Accounts receivable
43,843
(153,443
)
(96,609
)
Employee advance/other receivables
(38
)
200
(126,798
)
Prepaid expenses
(140,270
)
65,976
(72,240
)
Due to Here to Serve Holding Corp.
376,585
-
-
Accounts payable & accrued expenses
431,328
133,219
103,102
Increase in deferred compensation
243,000
-
-
Deferred revenue
51,778
(32,360
)
165,887
Derivative liability
40,958
-
-
Other current liabilities
932,135
-
25,000
Cash flow from operating activities
2,208,392
794,918
2,666,218
INVESTING ACTIVITIES
Proceeds from sale of fixed assets
-
-
12,415
Purchased capitalized software
(60,512
)
-
-
Purchased equipment
(1,407,251
)
(170,886
)
(2,058,359
)
Purchased software
(13,920
)
-
-
Cash flow from investing activities
(1,481,682
)
(170,886
)
(2,045,944
)
FINANCING ACTIVITIES
Proceeds from notes due related parties
123,333
-
-
Member distributions
(585,000
)
(975,000
)
Loan from member
-
-
25,000
Payments for purchase of treasury stock
(230,000
)
-
-
Principle payments on notes payable
(791,667
)
(449,499
)
(1,208,210
)
Proceeds from CAPEX line of credti
590,000
-
1,352,752
Cash flow from financing activities
(308,334
)
(1,034,499
)
(805,458
)
Net change in cash
418,376
(410,467
)
(185,184
)
Beginning cash
20,531
1,461,372
1,646,556
Ending Cash
$
438,907
$
1,050,905
$
1,461,372
Supplemental disclosure of cash flow information:
Cash paid for interest
$
348,136
$
52,559
$
146,659
Supplemental Non-Cash Investing and Financing Information:
Debt foregiveness by related party in connection with recapitalization
$
1,406,431
$
-
$
-
See accompanying footnotes to financial statements
F-73
MERIDIAN WASTE SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
NOTE 1 – NATURE OF OPERATIONS AND ORGANIZATION
Nature of Operations
Meridian Waste Solutions, Inc. (formerly Brooklyn Cheesecake and Desserts Company, Inc.) (the “Company”) is currently operating under three separate Limited Liability Companies; Here To Serve Missouri Waste Division, LLC (“HTSMWD”), a Missouri Limited Liability Company, Here To Serve Technology Division, LLC (“HTST), a Georgia Limited Liability Company and Here To Serve Georgia Waste Division, LLC (“HTSGWD”), a Georgia Limited Liability Company.
In 2014, HTSMWD purchased the assets of a large solid waste disposal company in the St. Louis, MO market. See Explanation of Change in Accounting Basis below. This acquisition is considered the platform company for future acquisitions in the solid waste disposal industry. HTSGWD was created to facilitate expansion in this industry throughout the Southeast. The Company is primarily in the business of residential and commercial waste hauling and has contracts with various cities and municipalities. The majority of the Company’s customers are located in the St. Louis metropolitan area.
Through acquisitions and restructuring, HTST has repositioned the Company’s presence in the software development industry. By acquiring products developed for the mobile app market and by shifting the focus of future development, HTST is anticipating significant expansion into this growing business segment.
Organization
Recapitalization
On October 17, 2014 Here to Serve Missouri Waste Division, LLC, (HTSMWD) a Missouri Limited Liability Company, which is the historical business, entered into a Share Exchange Agreement with the Company and the sole member of HTSMWD whereby the Company agreed to acquire the membership interest of HTSMWD, HTST and HTSGWD in exchange for 9,054,134 shares of the Company’s common stock. This transaction was closed on October 17, 2014 and HTSMWD became wholly-owned by the Company. The Company is deemed to have issued 1,139,284 shares of common stock which represents the outstanding common shares of the Company just prior to the closing of the transaction.
At closing, the Company issued 9,054,134 shares of its common stock to the sole member of HTSMWD and the shareholders of the sole member who obtained approximately 90% control and management control of the Company. The transaction was accounted for as a reverse acquisition and recapitalization of HTSMWD, HTST and HTSGWD whereby HTSMWD is considered the acquirer for accounting purposes. The consolidated financial statements after the acquisition include the balance
F-74
MERIDIAN WASTE SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
NOTE 1 – NATURE OF OPERATIONS AND ORGANIZATION (CONTINUED)
sheets of both companies and HTST and HTSGWD at historical cost, the historical results of HTSMWD, HTST and HTSGWD. All share and per share information in the accompanying consolidated financial statements and footnotes has been retroactively restated to reflect the recapitalization (see Explanation of Membership Interest Purchase Agreement below).
Explanation of Membership Interest Purchase Agreement
On October 17, 2014, (the “Execution Date”), Meridian Waste Solutions, Inc. entered into that certain Membership Interest Purchase Agreement (the “Purchase Agreement”) by and among Here to Serve Holding Corp., a Delaware corporation, as seller (“Here to Serve”), the Company, as parent, Brooklyn Cheesecake & Dessert Acquisition Corp., a wholly-owned subsidiary of the Company, as buyer (the “Acquisition Corp.”), the Chief Executive Officer of the Company (the “Company Executive”), the majority shareholder of the Company (the “Company Majority Shareholder”) and certain shareholders of Seller (the “Seller Shareholders”), pursuant to which the Acquisition Corp shall acquire from Here to Serve all of Here to Serve’s right, title and interest in and to (i) 100% of the membership interests of Here to Serve – Missouri Waste Division, LLC d/b/a Meridian Waste, a Missouri limited liability company (“HTS Waste”); (ii) 100% of the membership interests of Here to Serve Technology, LLC, a Georgia limited liability company (“HTS Tech”); and (iii) 100% of the membership interests of Here to Serve – Georgia Waste Division, LLC, a Georgia limited liability company (“HTS Waste Georgia”, and together with HTS Waste and HTS Tech, collectively, the “Membership Interests”). As consideration for the Membership Interests, (i) the Company shall issue to Here to Serve 9,054,134 shares of the Company’s common stock, (the “Common Stock”); (ii) the Company shall issue to the holder of Class A Preferred Stock of Here to Serve (“Here to Serve’s Class A Preferred Stock”) 51 shares of the Company’s to-be-designated Class A Preferred Stock (the “Class A Preferred Stock”), which Class A Preferred Stock shall have the rights and preferences as described in the Purchase Agreement. See Note 6 below; (iii) the Company shall issue to the holder of Class B Preferred Stock of Here to Serve (Here to Serve’s Class B Preferred Stock”) an aggregate of 71,120 shares of the Company’s to-be-designated Class B Preferred Stock (the “Class B Preferred Stock”), (the Common Stock, the Class A Preferred Stock and the Class B Preferred Stock are referred to as the “Purchase Price Shares;”), and (iv) the Company shall assume certain assumed liabilities (the “Initial Consideration”).
As further consideration, at the closing of the transaction contemplated under the Purchase Agreement, (i) in satisfaction of all accounts payable and shareholder loans, Here to Serve will pay to Company Majority Shareholder $70,000 and (ii) the Company purchased from the then Company Majority Shareholder 230,000 shares of the Company’s common stock for a purchase price of $230,000. Pursuant to the Purchase Agreement, to the extent Purchase Price Shares are issued to individual shareholders of Here to Serve at or upon closing of the Purchase Agreement: (i) shares of common stock of Here to Serve held by the individuals will be
F-75
MERIDIAN WASTE SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
NOTE 1 – NATURE OF OPERATIONS AND ORGANIZATION (CONTINUED)
cancelled (ii) 1,000,000 shares of Here to Serve’s Class A Preferred Stock will be cancelled; and (iii) 71,120 shares of Here to Serve’s Class B Preferred Stock will be cancelled (the “Additional Consideration”).
On October 17, 2014, the directors and majority shareholders of the Company approved the Purchase Agreement and the transactions contemplated under the Purchase Agreement. The directors of Here to Serve and the Here to Serve Shareholders approved the Purchase Agreement and the transactions contemplated thereunder. This closing of the Purchase
Agreement results in a change of control of the Company and the Company changed its business plan to that of HTSMWD.
Explanation of Change in Accounting Basis
The merger of Here to Serve Holding Corp. (Here to Serve), a Delaware Corporation, and Meridian Waste Services, LLC became effective May 15, 2014. The merger was accounted for by Here to Serve using business combination accounting. Under this method, the purchase price paid by the acquirer is allocated to the assets acquired and liabilities assumed as of the acquisition date based on the fair value. By the application of “push-down” accounting, our assets, liabilities and equity were accordingly adjusted to fair value on May 15, 2014. Determining the fair value of certain assets and liabilities assumed is judgmental in nature and often involves the use of significant estimates and assumptions.
At the time of merger Here to Serve was a company with nominal operations whereas Meridian Waste Services, LLC consisted of the active and carry-forward business. Accordingly Meridian Waste Services, LLC is deemed to be the predecessor entity and as such is presented as the comparable financial statements. As such our financial statements are presented in two distinct periods to indicate the application of two different basis of accounting. Periods prior to May 15, 2014 are identified herein as “Predecessor,” while periods subsequent to the Here to Serve merger are identified as “Successor.” As a result of the change in basis of accounting from historical cost to reflect the Here to Serve’s purchase cost, the financial statements for Predecessor periods are not comparable to those of Successor periods.
Also, see Note 4 – Acquisition below.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Basis
The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP” accounting).
F-76
MERIDIAN WASTE SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basis of Consolidation
The consolidated financial statements for the year ended December 31, 2014 include the operations of the Company and its wholly-owned subsidiaries, Here To Serve Missouri Waste Division, LLC and Here To Serve Technology, LLC. The third subsidiary of the Company, Here To Serve Georgia Waste Division, LLC had no operations during the period.
All significant intercompany accounts and transactions have been eliminated in consolidation.
Reclassifications
Certain accounts and financial statement captions in the prior periods have been reclassified to conform to the current period consolidated financial statements.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents.
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, accounts payable, other liabilities, accrued interest, notes payable, and an amount due to a related party. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these consolidated financial statements.
Impairment of long-lived assets
The Company periodically reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less that the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. During the year ending December 31, 2014, the Company experienced no losses due to impairment.
F-77
MERIDIAN WASTE SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
The Company accounts for income taxes pursuant to the provisions of ASC 740-10, “Accounting for Income Taxes,” which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.
The Company follows the provisions of the ASC 740 -10 related to, Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.
The Company has adopted ASC 740-10-25 Definition of Settlement, which provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the completion of an examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. As of December 31, 2014, tax years ended December 31, 2013, 2012, 2011 are still potentially subject to audit by the taxing authorities.
F-78
MERIDIAN WASTE SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Use of Estimates
The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date the consolidated financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Accounts Receivable
At December 31, 2014 the Company had $659,646 of gross trade receivables. Here to Serve – Missouri Waste Division, LLC, primarily owns these trade receivables. At December 31, 2013, Meridian Waste Services, LLC, Predecessor had $483,078 of gross trade receivables.
Allowance for Doubtful Accounts
The Company provides an allowance for doubtful accounts equal to the estimated collection losses that will be incurred in collection of receivables related to residential customers and commercial project invoices. The estimated losses are based on managements’ evaluation of outstanding accounts receivable at the end of the accounting period. At December 31, 2014, an allowance of $71,167 was recorded. At December 31, 2013, Meridian Waste Services, LLC, Predecessor had an allowance of $42,509.
Intangible Assets
Intangible assets consist of assets acquired and costs incurred in connection with the development of the Company’s capitalized software. See note below. The Company also has intangible assets related to the purchase of Meridian Waste Services, LLC. See Note 4 below. These intangibles are amortized over periods between 3 and 5 years.
Capitalized Software
The company acquired a software product that is under further development. This asset will be amortized over a three to five year period using the straight-line method of depreciation for book purposes beginning when the software is completed.
The company capitalizes internal software development costs subsequent to establishing technological feasibility of a software application in accordance with guidelines established by “ASC 985-20-25” Accounting for the Costs of Computer Software to Be Sold, Leased or Otherwise Marketed, requiring certain software development costs to be capitalized upon the establishment of technological feasibility. The establishment of technological feasibility and the ongoing assessment of the recoverability of these costs require considerable judgement by management with respect to certain external factors such as anticipated future revenue, estimated economic life and changes in software and hardware technologies. Amortization of the capitalized software development costs begins when the product is available for general release to customers. Capitalized costs are amortized over the remaining estimated economic life of the product. For the year ended December 31, 2014, the Company has capitalized costs associated with the development of several mobile science technology products and mobile apps that has not been placed into service.
F-79
MERIDIAN WASTE SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Website Development Costs
The Company accounts for website development costs in accordance with Accounting Standards Codification 350-50 “Website Development Costs”. Accordingly, all costs incurred in the planning stage are expensed as incurred, costs incurred in the website application and infrastructure development stage that meet specific criteria are capitalized and costs incurred in the day to day operation of the website are expensed as incurred.
Revenue Recognition
The Company recognizes revenue when there is persuasive evidence of that an arrangement exists, the revenue is fixed or determinable, the products are fully delivered or services have been provided and collection is reasonably assured. The majority of the Company’s revenues are generated from the fees charged for waste collection, transfer, disposal and recycling. The fees charged for our services are generally defined in service agreements and vary based on contract-specific terms such as frequency of service, weight, volume and the general market factors influencing a region’s rate.
Deferred Revenue
The Company’s Missouri Waste Division bills one month in advance for the following three months. The balance in deferred revenue represents amounts billed in October, November and December for services that will be provided during January, February and March.
Cost of Services
Cost of services include all employment costs associated with waste collection, transfer and disposal, damage claims, landfill costs, personal property taxes associated with collection vehicles and other direct cost of the collection and disposal process.
Concentration of Credit Risks
The Company maintains its cash and cash equivalents in bank deposit accounts, which could, at times, exceed federally insured limits. The Company has not experienced any losses in such accounts; however, amounts in excess of the federally insured limit may be at risk if the bank experiences financial difficulties. The Company places its cash with high credit quality financial institutions. The Company’s accounts at these institutions are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000.
Financial instruments which also potentially subject the Company to concentrations of credit risk consist principally of trade accounts receivable; however, concentrations of credit risk with respect to trade accounts receivables is limited due to generally short payment terms.
The Company’s subsidiary, HTSMWD has two municipal contracts that account for a large portion of the Company’s long-term contracted revenue. One contract accounted for 27% and 32% and the other accounted for 19% and 21% of HTS Waste’s long-term contracted revenue for the years ended December 31, 2014 and 2013 respectively.
Basic Income (Loss) Per Share
Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. A diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. At December 31, 2014 the Company had a series of convertible notes outstanding that could be converted into approximately 291,047 common shares. These are not presented in the statement of operations since the company incurred a loss and the effect of these shares is anti- dilutive.
Stock-Based Compensation
Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718. To date, the Company has not adopted a stock option plan and has not granted any stock options.
Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial
F-80
MERIDIAN WASTE SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also require measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.
Pursuant to ASC Topic 505-50, for share based payments to consultants and other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized over the service period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the reporting date. The Company recorded stock based compensation expense of $338,860 and $0 during the years ended December 31, 2014 and 2013, respectively.
Recent Accounting Pronouncements
The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.
NOTE 3 – PROPERTY AND EQUIPMENT
Property and equipment, including purchased and developed software is recorded at cost. The Company has depreciated or amortized these assets using the straight-line method over the useful lives of the asset. The useful lives are estimated to be between 2 and 7 years.
Property and equipment consisted of the following:
Successor
Predecessor
Dec. 31, 2014
Dec. 31, 2013
Furniture & office equipment
$
240,102
$
134,780
Containers
2,847,205
3,568,631
Trucks
5,523,773
8,887,425
Total Property and Equipment
8,611,080
12,590,836
Less: Accumulated Depreciation
(956,315
)
7,780,233
Net Property and Equipment
$
7,654,765
$
4,810,603
Depreciation Expense for December 31, 2014 and 2013 was $965,846 and $1,424,979, respectively.
F-81
MERIDIAN WASTE SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
NOTE 4 – INTANGIBLE ASSETS AND ACQUISITION
On May 15, 2014, the Company, in order to establish a presence in the solid waste disposal industry, entered into an asset purchase agreement by and among the Company, HTSMWD, Meridian Waste Services, LLC (“MWS”) and the members of MWS, pursuant to which HTSMWD acquired certain assets and liabilities of MWS, in exchange for $11,115,000 cash, 13,191,667 shares of Class A Common Stock of HTSHC and 71,210 shares of Series B Cumulative Convertible Preferred Stock of HTSHC.
The merger was accounted for by Here to Serve using business combination accounting. Under this method, the purchase price paid by the acquirer is allocated to the assets acquired and liabilities assumed as of the acquisition date based on the fair value. By the application of “push-down” accounting, our assets, liabilities and equity were accordingly adjusted to fair value on May 15, 2014. Determining the fair value of certain assets and liabilities assumed is judgmental in nature and often involves the use of significant estimates and assumptions.
The purchase of MWS included the acquisition of assets of $22,290,706 and liabilities of $2,075,956. The aggregate purchase price consisted of the following:
Cash
$
11,115,000
Estimated value of common stock issued to sellers
1,978,750
Estimated value of preferred stock issued to sellers
7,121,000
$
20,214,750
The following table summarizes the estimated fair value of MWS assets acquired and liabilities assumed at the date of acquisition:
Accounts receivable
$
632,322
Prepaid expenses
123,544
Deposits
8,303
Containers
2,710,671
Furniture and equipment
414,450
Trucks
4,243,964
Customer lists
14,007,452
Non-compete agreement
150,000
Accounts payable and accrued expenses
(54,387
)
Notes payable
(143,464
)
Deferred revenue
(1,878,105
)
$
20,214,750
Intangible Assets
The following table sets forth the intangible assets, both acquired and developed, including accumulated amortization:
F-82
MERIDIAN WASTE SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
NOTE 4 – INTANGIBLE ASSETS AND ACQUISITION (CONTINUED)
December 31, 2014
Remaining
Accumulated
Net Carrying
Useful Life
Cost
Amortization
Value
C apitalized software
5.0 years
$
434,532
$
-
$
434,532
Customer list
4.5 years
14,007,452
1,867,660
12,139,792
Loan fees
4.5 years
50,613
11,248
39,365
Non compete agreement
4.5 years
150,000
20,000
130,000
Website
2.9 years
13,920
232
13,688
$
14,656,517
$
1,899,140
$
12,757,377
Amortization expense amounted to $1,899,140 for the period ending December 31, 2014. There was no amortization expense for the periods ending May 15, 2014 and December 31, 2013.
NOTE 5 – NOTES PAYABLE AND CONVERTIBLE NOTES
The Company issued two promissory notes to related parties during the year ended December 31, 2014. These notes totaled $125,000 and are generally convertible into common stock of the Company at discounts of 20 % to 25% of the lowest average trading prices for the stock during periods five to one day prior to the conversion date. These notes bears interest at 10% to 12%, are unsecured, and matures within one year of the date issued. The notes were issued to provide working capital for the Company. These notes are considered a stock settled debt in accordance with ASC 480 since any future stock issued upon conversion will have a fixed monetary value. Due to the conversion feature included in the notes, the Company has recorded a premium on the notes totaling $31,250 as of December 31, 2014. This amount has been charged to interest expense by the Company.
In previous periods the Company issued two other notes to other related parties. These notes totaled $110,000 and are generally convertible into common stock of the Company at discounts of 20% to 25% of the lowest average trading prices for the stock during periods five to one day prior to the conversion date. These notes bear interest at 10% to 12%, are unsecured, and mature within one year of the date issued. The notes were issued to provide working capital for the Company. These notes are considered a stock settled debt in accordance with ASC 480 since any future stock issued upon conversion will have a fixed monetary value. Due to the conversion feature included in the notes, the Company has
F-83
MERIDIAN WASTE SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
NOTE 5 – NOTES PAYABLE AND CONVERTIBLE NOTES (CONTINUED)
recorded a premium on the notes totaling $35,833 as of December 31, 2014. This amount has been charged to interest expense by the Company.
At December 31, 2014 the Company had $302,083 in convertible notes to related parties which includes $67,083 in put premiums.
At December 31, 2014 the Company had a short term, non-interest bearing note payable of $150,000 which was incurred in connection with the Membership Interest Purchase Agreement discussed above. The Company also had a loan from Here to Serve Holding Corp. due to expenses paid by Here to Serve on behalf of the Company prior to the recapitalization. This loan totaled $376,585 bringing total notes payable to $526,585.
At December 31, 2014, Here To Serve – Missouri Waste Division, LLC, a subsidiary of the Company, had $10,183,333 in Debt, of which $1,357,143 is current and $8,826,190 is long term. $1,475,000 were notes Payable to the Sellers of Meridian as subordinated debt and $8,708,333 in Long Term Debt payable to Comerica Bank, the Company’s Senior Lender. At close, the notes payable to the sellers were five-year term subordinated debt loans paying interest at 8%. The Company’s Senior Secured Loan has an interest rate LIBOR plus 4.25% with a two-year term based on a seven-year amortization schedule. In addition, the Company has a working capital line of credit of $1,250,000 at 4.75% of which the Company has drawn down $1,085,160 as of December 31, 2014. Finally, there is CAPEX line of credit of $750,000, of which the Company has drawn down $590,000 as of December 31, 2014; again at 4.75% interest.
The Company sometimes borrow at variable rates and uses interest rate swaps as cash flow hedges of future interest payments, which have the economic effect of converting borrowings from floating rates to fixed rates. The interest rate swaps allow the Company to raise long-term borrowings at floating rates and swap them into fixed rates that are lower than those available if it borrowed at fixed rates directly. Under the interest rate swaps, the Company agrees with other parties to exchange, at specified intervals, the difference between fixed contract rates and floating rate interest amounts calculated by reference to the agreed notional principal amounts.
At December 31, 2014, the Company has $5,634,146 of non-amortizing variable rate debt outstanding with interest payments due on a monthly basis. The note accrues interest at the 1-month LIBOR plus 4.25%. In order to hedge interest rate risk, the Company entered into an interest rate swap for a notional amount of $5,634,146 at fixed rate of 4.75%. Under the swap agreement, the Company pays the fixed rate on the $5,634,146 notional amount on a monthly basis, and receives the 1-month LIBOR plus 4.25% on a monthly basis. Payments are settled on a net basis, and the Company has effectively converted its variable-rate debt into fixed-rate debt with an effective interest rate of 4.75%. As of December 31, 2013, the net settlement amount of the interest rate swap was $40,958.
F-84
MERIDIAN WASTE SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
NOTE 5 – NOTES PAYABLE AND CONVERTIBLE NOTES (CONTINUED)
At December 31, 2013, Meridian Waste Services, LLC (Predecessor) had $3,202,807 in Debt, of which $1,211,299 was current and $1,991,508 was long term. This debt was comprised of various notes with maturity dates between one and three years and bearing interest between 4% and 6%. All of this Predecessor debt was paid as a result of the acquisition described in Note 1 above.
NOTE 6 – STOCK HOLDERS’ EQUITY
The Company has 75,000,000 shares of common stock authorized with a par value of $0.025 and 71,261 shares of Preferred stock with a par value of $0.001. As of December 31, 2014 there are 9,963,418 common shares outstanding and 71,261 of Preferred shares outstanding. There are two classes of Preferred stock, Series A and Series B.
There are 51 shares of Series A Preferred stock issued and outstanding as of December 31, 2014. Series A stock has no conversion rights, is senior to any other class or series of capital stock of the Company and special voting rights. Each one (1) share of Series A Preferred Stock shall have voting rights equal to (x) 0.019607 multiplied by the total issued and outstanding Common Stock eligible to vote at the time of the respective vote (the “Numerator”), divided by (y) 0.49, Minus (z) the Numerator.
There are 71,210 shares of Series B Preferred Stock issued and outstanding as of December 31, 2014. Holders of Series B Preferred stock shall be entitled to receive when, as and if declared by the Board of Directors cumulative dividends at the rate of twelve percent (12%) of the Original Issue Price. In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the holders of Series B Preferred stock shall be entitled to receive, immediately prior and in preference to any distribution to holders of the Company’s common stock, an amount per share equal to the sum of $100.00 and any accrued and unpaid dividends of the Series B Preferred Stock. Each share of Series B Preferred Stock may be converted at the option of the holder into the Company’s Common stock. The shares shall be converted using the “Conversion Formula”: divide the Original Issue Price by 75% of the average closing bid price of the Common Stock for the five (5) consecutive trading days ending on the trading day of the receipt by the Company of the notice of conversion.
NOTE 7 – COMMITMENTS AND CONTINGENCIES
The Company has leased office space at 12540 Broadwell Rd., Suite 1203 Milton, GA 30004.
NOTE 8 – INCOME TAXES
The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards (ASC 740) “Accounting for Income Taxes”, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and income tax basis of assets and liabilities that will result in taxable or
F-85
MERIDIAN WASTE SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
NOTE 8 – INCOME TAXES (CONTINUED)
deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.
The Company had a net operating loss carry forward of approximately $4.9 million at December 31, 2014 and had no Federal or State income tax obligations. The Company had no significant tax effects resulting from the temporary differences that give rise to deferred tax assets and deferred tax liabilities for the year ended December 31, 2014 other than net operating losses.
The Company’s loss carry forward of approximately $4.9 million may offset future taxable income through tax year 2034. However, in accordance with IRC Section 382, the availability and utilization of the losses may be severely limited since the business combination that occurred on October 17, 2014 triggered the IRC Section 382 limitations.
Prior to October 17, 2014, the date of the reverse acquisition transaction discussed in Note 1 above, the operating entities were owned by unrelated third party partners/members, and as limited liability companies, the operating companies’ losses for the period January 1, 2014 to October 17,2014 flowed through to such partners/members. Therefore, as there were no tax allocation arrangements with the previous partners/members, the Company has not recorded in these financials statements any current or deferred income tax expense, income tax liabilities or deferred tax assets/liabilities relating to such pre-acquisition activity (losses).
The table below summarizes the differences between the Company’s effective tax rate and the statutory federal rate of 34% as follows for the periods ended December 31, 2014 and 2013:
Years Ended December 31,
2014
2013
Computed "expected" benefit
$
(773,000
)
$
(3,490
)
Effect of state income taxes, net of federal benefit
(136,000
)
-
Effect of change in tax rates
(280,760
)
-
Pre-acquisition losses
640,000
-
Increase in valution allowance
549,760
3,490
$
-
$
-
Deferred tax assets and liabilities are provided for significant income and expense items recognized in different year for tax and financial reporting purposes. The Components of the net deferred tax assets for the years ended December 31, 2014 and 2013 were as follows:
2014
2013
Net operating loss carry forward
$
1,956,000
$
1,406,240
Less: Valuation allowance
(1,956,000
)
(1,406,240
)
$
-
$
-
F-86
MERIDIAN WASTE SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
NOTE 8 – INCOME TAXES (CONTINUED)
The valuation allowance was increased by $549,760 during the year ended December 31, 2014.
NOTE 9 – FAIR VALUE MEASUREMENT
The Company has adopted new guidance under ASC Topic 820, effective January 1, 2009. New authoritative accounting guidance (ASC Topic 820-10-15) under ASC Topic 820, Fair Value Measurement and Disclosures, delayed the effective date of ASC Topic 820-10 for all
non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis, until 2009.
ASC Topic 820 establishes a fair value hierarchy, giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data and requires disclosures for assets and liabilities measured at fair value based on their level in the hierarchy. Further new authoritative accounting guidance (ASU No. 2009-05) under ASC Topic 820, provides clarification that in circumstances in which a quoted price in an active market for the
identical liabilities is not available, a reporting entity is required to measure fair value using one or more of the techniques provided for in this update.
The standard describes a fair value hierarchy based on three levels of input, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:
Level 1 – Quoted prices in active markets for identical assets and liabilities.
Level 2 – Input other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets of liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liabilities.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
The following table sets forth the liabilities at December 31, 2014, which is recorded on the balance sheet at fair value on a recurring basis by level within the fair value hierarchy. As required, these are classified based on the lowest level of input that is significant to the fair value measurement:
F-87
MERIDIAN WASTE SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
NOTE 9 – FAIR VALUE MEASUREMENT (CONTINUED)
Fair Value Measurements at Reporting Date Using
Quoted Prices in
Significant Other
Significant
Active Markets for
Observable
Unobservable
Identical Assets
Inputs
Inputs
Description
12/31/2014
(Level 1)
(Level 2)
(Level 3)
Interest rate swap
$
40,958
$
-
$
-
$
40,958
Stock settled debt
308,083
235,000
-
67,083
Total
$
349,041
$
235,000
$
-
$
108,041
NOTE 10 – LEASES
The Company’s subsidiary Here to Serve Missouri Waste Division, LLC leases its office and warehouse facilities. The lease agreement commenced September 1, 2010 and expires August 30, 2017. This lease was assigned to the Company when the subsidiary purchased Meridian Waste Services, LLC on May 16, 2014. Future minimum lease payments at December 31, 2014 are as follows:
2015
$
271,915
2016
277,915
2017
283,915
Thereafter
-
Total
$
833,745
Rent expense amounted to $177,801 for the year ended December 31, 2014.
NOTE 11 – BONDING
In connection with its normal activities, the Company may be required to acquire a Performance bond on contracts with customers. There were not any performance bonds required for the year ended December 31, 2014.
NOTE 12 – SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to December 31, 2014 through the date these financial statements were issued and has determined that the following would be included as subsequent events.
Spinoff of Here to Serve Technology, LLC
On January 7, 2015, in an effort to give investors a more concentrated presence in the waste industry the Company sold the capitalized software assets of Here to Serve Technology, LLC to Mobile Science Technologies, Inc., a Georgia corporation (MSTI), a related party due to being owned by some of the shareholders of the Company. No gain or loss was recognized on this transaction as the Company received equity equal to book value ($434,532)of the capitalized software in the exchange. This represents approximately 15% of the equity of MSTI. It is management’s expectations that the spinoff will benefit investors by strengthening the Company by becoming more streamlined in the waste industry and maintaining the financial growth potential of the investment in MSTI.
Issuance of Common Stock
During January, 2015, the Company issued 1,164,393 shares of common stock. These shares were issued to employees, employees of subsidiaries and outside vendors for services. The value of these shares was determined to be $1,630,150 using the securities closing price ($1.40) on January 2, 2015.
F-88
MERIDIAN WASTE SOLUTIONS, INC.
1,191,774 SHARES OF COMMON STOCK
PROSPECTUS
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT WE HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS IS NOT AN OFFER TO SELL COMMON STOCK AND IS NOT SOLICITING AN OFFER TO BUY COMMON STOCK IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
The Date of This Prospectus is ____________, 2016
56
PART II - INFORMATION NOT REQUIRED IN THE PROSPECTUS
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Securities and Exchange Commission Registration Fee
$
144.01
Transfer Agent and Miscellaneous Fees
$
5,000
*
Accounting fees and expenses
$
10,000
*
Legal fees and expense
$
50,000
*
Total
$
65,144.01
*
* Estimate
All amounts are estimates other than the Commission’s registration fee. We are paying all expenses of the offering listed above. No portion of these expenses will be borne by the selling shareholders. The selling shareholders, however, will pay any other expenses incurred in selling their common stock, including any brokerage commissions or costs of sale.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
New York Law
The NYBCL permits a corporation to indemnify its current and former directors and officers against expenses, judgments, fines and amounts paid in connection with a legal proceeding. To be indemnified, the person must have acted in good faith and in a manner the person reasonably believed to be in, and not opposed to, the best interests of the corporation. With respect to any criminal action or proceeding, the person must not have had reasonable cause to believe the conduct was unlawful.
Our Charter and By-laws provide that, to the fullest extent permitted by the NYBCL, we will indemnify our present and future directors and officers against all expenses actually and reasonably incurred by them as a result of their being threatened with or otherwise involved in any action, suit or proceeding (other than an action commenced on our own behalf) by virtue of the fact that they are or were one of our officers or directors.
Our by-laws also provide that we may purchase and maintain insurance to indemnify us for any obligation we incur as a result of the indemnification of directors and officers, or to indemnify directors and officers, pursuant to our by-laws and in accordance with the NYBCL.
In addition to the provisions of our Charter and By-laws providing for indemnification of directors and officers, we have entered into an employment agreement with Jeffrey Cosman, our Chief Executive Officer, which provides for us to indemnify Mr. Cosman against all expenses actually and reasonably incurred by him as a result of his being threatened with or otherwise involved in any action, suit or proceeding by virtue of the fact that he is or was one of our officers.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to officers, directors or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
RECENT SALES OF UNREGISTERED SECURITIES
During the last three completed fiscal years and to date in the current fiscal year, we sold the following unregistered securities:
On October 31, 2014, the Company issued 9,054,134 shares of restricted Common Stock to Here to Serve Holding Corp. as consideration for the Company’s purchase of certain limited liability company pursuant to that certain Membership Interest Purchase Agreement.
On January 2, 2015, the Board issued 20,000 shares of restricted Common Stock to two employees (10,000 shares each) as payment of a bonus.
On January 2, 2015, the Board issued 100,000 shares of restricted Common Stock in consideration of legal services.
57
On January 2, 2015, the Board issued 100,000 shares of restricted Common Stock to a consultant in consideration of accounting services.
On January 2, 2015, the Board issued 53,550 shares of restricted Common Stock to an employee as payment of accrued salary and bonus earned in connection with providing information technology services.
On January 2, 2015, the Board issued 890,843 shares of restricted Common Stock to an officer as payment of compensation.
On January 27, 2015, the Board issued 200,833 shares of Common Stock pursuant to the conversion under a convertible note.
On May 28, 2015, the Board issued 4,700,000 shares of restricted Common Stock to an officer as repayment of funds previously advanced and other consideration.
On October 2, 2015, the Board issued 1,000,000 shares of restricted Common Stock in consideration of investment banking and advisory services.
On October 2, 2015, the Board issued 250,000 shares of restricted Common Stock in consideration of legal services.
On October 2, 2015, the Board issued 150,000 shares of restricted Common Stock to an employee as payment of accrued salary and bonus earned in connection with providing information technology services.
On October 13, 2015, the Board issued 260,006 shares of Common Stock pursuant to the conversion under a convertible note.
On December 22, 2015, the Board issued 1,750,000 shares of Common Stock to the Seller of Christian Disposal, LLC as consideration pursuant to the Christian Purchase Agreement.
On December 22, 2015, the Board issued a Purchase Warrant for Common Stock to Goldman, Sachs & Co. in connection with the Credit Agreement.
On December 29, 2015, the Board issued 1,600,000 shares of Common Stock as consideration pursuant to Warrant Cancellation and Stock Issuance Agreement.
On March 7, 2016, the Board issued 500,000 shares of restricted Common Stock in consideration of legal services.
On March 11, 2016, the Board issued 2,000,000 shares of restricted Common Stock to an officer of the Company, pursuant to the terms of an employment agreement entered into with such officer as of such date.
From March 23, 2016 through April 8, 2016, the Board issued an aggregate of 1,428,573 shares of restricted Common Stock pursuant to subscriptions by five accredited investors under a private placement offering of such shares at the price of $1.12 per share.
From March 23, 2016 through April 8, 2016, the Board issued an aggregate of 25,000 shares of restricted Common Stock to the Company’s placement agent and/or its designees, pursuant to subscriptions under a private placement offering during such period.
On June 3, 2016, the Board issued an aggregate of 326,923 shares of restricted Common Stock, together with common stock purchase warrants, pursuant to subscriptions by three accredited investors under a private placement offering of such shares at the price of $1.30 per share.
On June 3, 2016, the Board issued an aggregate of 5,721 shares of restricted Common Stock to the Company’s placement agent and/or its designees, pursuant to subscription under a private placement offering during such period.
The securities issued pursuant to the above offerings were not registered under the Securities Act of 1933, as amended (the “Securities Act”), but qualified for exemption under Section 4(a)(2) of the Securities Act and/or Regulation D. The securities were exempt from registration under Section 4(a)(2) of the Securities Act because the issuance of such securities by the Company did not involve a “public offering,” as defined in Section 4(a)(2) of the Securities Act, due to the insubstantial number of persons involved in the transaction, size of the offering, manner of the offering and number of securities offered. The Company did not undertake an offering in which it sold a high number of securities to a high number of investors. In addition, these shareholders had the necessary investment intent as required by Section 4(a)(2) of the Securities Act since they agreed to, and received, share certificates bearing a legend stating that such securities are restricted pursuant to Rule 144 of the Securities Act. This restriction ensures that these securities would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, the Company has met the requirements to qualify for exemption under Section 4(a)(2) of the Securities Act.
58
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following Exhibits are filed as part of this report.
Exhibit No.
Description
2.1
Purchase Agreement dated October 17, 2014 (incorporated herein by reference to Exhibit 10.1 to the Brooklyn Cheesecake & Desserts Company, Inc. Current Report on Form 8-K filed with the SEC on October 22, 2014)
3.1
Restated Certificate of Incorporation of Brooklyn Cheesecake & Deserts Company, Inc. (incorporated herein by reference to Exhibit 3.1 to the Brooklyn Cheesecake & Desserts Company, Inc. Current Report on Form 8-K filed with the SEC on December 15, 2014)
3.12
Certificate of Incorporation of Brooklyn Cheesecake & Dessert Acquisition Corp. (incorporated herein by reference to Exhibit 3.12 to the Brooklyn Cheesecake & Desserts Company, Inc. Current Report on Form 8-K filed with the SEC on December 15, 2014)
3.123
Certificate of Amendment of the Certificate of Incorporation of Brooklyn Cheesecake and Desserts Company, Inc. (incorporated herein by reference to Exhibit 3.1 to the Brooklyn Cheesecake & Desserts Company, Inc. Annual Report on Form 10-K filed with the SEC on April 15, 2015)
3.2
Amended and Restated By-laws of Brooklyn Cheesecake & Deserts Company, Inc. (incorporated herein by reference to Exhibit 3.2 to the Brooklyn Cheesecake & Desserts Company, Inc. Current Report on Form 8-K filed with the SEC on December 15, 2014)
3.21
By-Laws of Brooklyn Cheesecake & Dessert Acquisition Corp. (incorporated herein by reference to Exhibit 3.21 to the Brooklyn Cheesecake & Desserts Company, Inc. Current Report on Form 8-K filed with the SEC on December 15, 2014)
4.1
First Amendment to Credit and Guaranty Agreement, dated as of March 9, 2016, entered into by and among Here to Serve – Missouri Waste Division, LLC, Here to Serve – Georgia Waste Division, LLC, Brooklyn Cheesecake & Desserts Acquisition Corp., Meridian Land Company, LLC, Christian Disposal, LLC, and FWCD, LLC, Meridian Waste Solutions, Inc. (“Holdings”) and certain subsidiaries of Holdings, as Guarantors, the Lenders party hereto from time to time and Goldman Sachs Specialty Lending Group, L.P., as Administrative Agent, Collateral Agent, and Lead Arranger (incorporated herein by reference to Exhibit 4.1 to the Meridian Waste Solutions, Inc. Current Report on Form 8-K filed with the SEC on March 15, 2016)
4.2
Credit and Guaranty Agreement, dated as of December 22, 2015, entered into by and among Here to Serve – Missouri Waste Division, LLC, Here to Serve – Georgia Waste Division, LLC, Brooklyn Cheesecake & Desserts Acquisition Corp., Meridian Land Company, LLC, Christian Disposal, LLC, and FWCD, LLC, Meridian Waste Solutions, Inc. (“Holdings”) and certain subsidiaries of Holdings, as Guarantors, the Lenders party thereto from time to time and Goldman Sachs Specialty Lending Group, L.P., as Administrative Agent, Collateral Agent, and Lead Arranger (incorporated herein by reference to Exhibit 4.1 to the Meridian Waste Solutions, Inc. Current Report on Form 8-K filed with the SEC on December 29, 2015)
4.3
Tranche A Term Loan Note, issued in favor of Goldman Sachs Specialty Lending Holdings, Inc., in the principal amount of $40,000,000, dated December 22, 2015 (incorporated herein by reference to Exhibit 4.2 to the Meridian Waste Solutions, Inc. Current Report on Form 8-K filed with the SEC on December 29, 2015)
4.4
MDTL Note, issued in favor of Goldman Sachs Specialty Lending Holdings, Inc., in the principal amount of $10,000,000, dated December 22, 2015 (incorporated herein by reference to Exhibit 4.3 to the Meridian Waste Solutions, Inc. Current Report on Form 8-K filed with the SEC on December 29, 2015)
59
4.5
Revolving Loan Note, issued in favor of Goldman Sachs Specialty Lending Holdings, Inc., in the principal amount of $5,000,000, dated December 22, 2015 (incorporated herein by reference to Exhibit 4.4 to the Meridian Waste Solutions, Inc. Current Report on Form 8-K filed with the SEC on December 29, 2015)
4.6
Purchase Warrant for Common Shares issued in favor of Goldman, Sachs & Co., dated December 22, 2015 (incorporated herein by reference to Exhibit 4.5 to the Meridian Waste Solutions, Inc. Current Report on Form 8-K filed with the SEC on December 29, 2015)
4.7
Pledge and Security Agreement between the grantors party thereto and Goldman Sachs Specialty Lending Group, L.P., dated December 22, 2015 (incorporated herein by reference to Exhibit 4.6 to the Meridian Waste Solutions, Inc. Current Report on Form 8-K filed with the SEC on December 29, 2015)
4.8
Note and Warrant Purchase Agreement and Security Agreement, by and among Meridian Waste Solutions, Inc., Here to Serve - Missouri Waste Division, LLC, Here to Serve - Georgia Waste Division, LLC, Meridian Land Company, LLC, certain subsidiaries of the Company, the purchasers from time to time party thereto and Praesidian Capital Opportunity Fund III, LP, dated August 6, 2015 (incorporated herein by reference to Exhibit 4.1 to the Meridian Waste Solutions, Inc. Quarterly Report on Form 10-Q filed with the SEC on November 16, 2015)
4.9
Note A, issued in favor of Praesidiant Capital Opportunity Fund III, LP, in the principal amount of $2,644,812.57, dated August 6, 2015 (incorporated herein by reference to Exhibit 4.2 to the Meridian Waste Solutions, Inc. Quarterly Report on Form 10-Q filed with the SEC on November 16, 2015)
4.10
Note A, issued in favor of Praesidian Capital Opportunity Fund III-a, LP, in the principal amount of $1,025,187.43, dated August 6, 2015 (incorporated herein by reference to Exhibit 4.3 to the Meridian Waste Solutions, Inc. Quarterly Report on Form 10-Q filed with the SEC on November 16, 2015)
4.11
Note B, issued in favor of Praesidian Capital Opportunity Fund III, LP, in the principal amount of $5,170,716.68, dated August 6, 2015 (incorporated herein by reference to Exhibit 4.4 to the Meridian Waste Solutions, Inc. Quarterly Report on Form 10-Q filed with the SEC on November 16, 2015)
4.12
Note B, issued in favor of Praesidian Capital Opportunity Fund III-a, LP, in the principal amount of $2,004,283.32, dated August 6, 2015 (incorporated herein by reference to Exhibit 4.5 to the Meridian Waste Solutions, Inc. Quarterly Report on Form 10-Q filed with the SEC on November 16, 2015)
4.13
Warrant issued in favor of Praesidian Capital Opportunity Fund III, LP, dated August 6, 2015 (incorporated herein by reference to Exhibit 4.6 to the Meridian Waste Solutions, Inc. Quarterly Report on Form 10-Q filed with the SEC on November 16, 2015)
4.14
Warrant issued in favor of Praesidian Capital Opportunity Fund III-a, LP, dated August 6, 2015 (incorporated herein by reference to Exhibit 4.7 to the Meridian Waste Solutions, Inc. Quarterly Report on Form 10-Q filed with the SEC on November 16, 2015)
4.15
Warrant Cancellation and Stock Issuance Agreement made and entered into as of December 22, 2015, by and among Praesidian Capital Opportunity Fund III, LP, Praesidian Capital Opportunity Fund III-A, LP, and Meridian Waste Solutions, Inc. (incorporated herein by reference to Exhibit 4.15 to the Meridian Waste Solutions, Inc. Current Report on Form 8-K filed with the SEC on December 29, 2015)
4.16
Convertible Promissory Note, issued in favor of Timothy Drury, in the principal amount of $1,250,000, dated December 22, 2015 (incorporated herein by reference to Exhibit 4.16 to the Meridian Waste Solutions, Inc. Current Report on Form 8-K filed with the SEC on December 29, 2015)
Employment Agreement by and between Here to Serve Holding Corp. and Jeffrey S. Cosman dated January 1, 2014 (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on November 5, 2014)
10.2
2004 Stock Incentive Plan (incorporated herein by reference to Appendix B of the Definitive 14A filed with the SEC on July 15, 2004)
10.3
Credit Agreement (incorporated herein by reference to Exhibit 10.1 to the Brooklyn Cheesecake & Desserts Company, Inc. Current Report on Form 8-K filed with the SEC on February 17, 2015)
10.4
Solid Waste Municipal Contract by and between the City of Wildwood, Missouri, and Meridian Waste Services LLC (incorporated herein by reference to Exhibit 10.4 to the Brooklyn Cheesecake & Desserts Company, Inc. Current Report on Form 8-K filed with the SEC on February 17, 2015)
10.5
Solid Waste Municipal Contract by and between the City of Florissant, Missouri, and Meridian Waste Services LLC (incorporated herein by reference to Exhibit 10.5 to the Brooklyn Cheesecake & Desserts Company, Inc. Current Report on Form 8-K filed with the SEC on February 17, 2015)
10.6
Form of Subscription Agreement (incorporated herein by reference to Exhibit 10.1 to the Meridian Waste Solutions, Inc. Current Report on Form 8-K filed with the SEC on March 29, 2016)
10.7
Employment Agreement, dated March 11, 2016, by and between the Company and Jeffrey Cosman (incorporated herein by reference to Exhibit 10.1 to the Meridian Waste Solutions, Inc. Current Report on Form 8-K filed with the SEC on March 17, 2016)
10.8
Form of Director Agreement (incorporated herein by reference to Exhibit 10.2 to the Meridian Waste Solutions, Inc. Current Report on Form 8-K filed with the SEC on March 17, 2016)
10.9
Executive Employment Agreement, dated March 11, 2016, by and between the Company and Walter Hall (incorporated herein by reference to Exhibit 10.3 to the Meridian Waste Solutions, Inc. Current Report on Form 8-K filed with the SEC on March 17, 2016)
10.10
Meridian Waste Solutions, Inc, 2016 Equity and Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the Meridian Waste Solutions, Inc. Current Report on Form 8-K filed with the SEC on March 16, 2016)
10.11
Form of Restricted Stock Agreement (incorporated herein by reference to Exhibit 10.2 to the Meridian Waste Solutions, Inc. Current Report on Form 8-K filed with the SEC on March 16, 2016)
10.12
Form of Nonqualified Stock Option Agreement (Non-Employee) (incorporated herein by reference to Exhibit 10.3 to the Meridian Waste Solutions, Inc. Current Report on Form 8-K filed with the SEC on March 16, 2016)
10.13
Form of Nonqualified Stock Option Agreement (Employee) (incorporated herein by reference to Exhibit 10.4 to the Meridian Waste Solutions, Inc. Current Report on Form 8-K filed with the SEC on March 16, 2016)
10.14
Form of Incentive Stock Option Agreement (incorporated herein by reference to Exhibit 10.5 to the Meridian Waste Solutions, Inc. Current Report on Form 8-K filed with the SEC on March 16, 2016)
10.15
Amended and Restated Membership Interest Purchase Agreement made and entered into as of October 16, 2015, by and among Timothy M. Drury; Christian Disposal LLC; FWCD, LLC; Meridian Waste Solutions, Inc.; Here to Serve Missouri Waste Division, LLC; and Here to Serve Georgia Waste Division, LLC(incorporated herein by reference to Exhibit 10.1 to the Meridian Waste Solutions, Inc. Current Report on Form 8-K filed with the SEC on October 22, 2015)
61
10.16
First Amendment to Amended and Restated Membership Interest Purchase Agreement by and among Timothy M. Drury; Christian Disposal LLC; FWCD, LLC; Meridian Waste Solutions, Inc.; Here to Serve Missouri Waste Division, LLC; and Here to Serve Georgia Waste Division, LLC, dated December 4, 2015 (incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the Commission on December 9, 2015)
10.17
Lease Agreement, dated December 22, 2015, by and between 4551 Commerce Holdings LLC and Christian Disposal, LLC (incorporated herein by reference to Exhibit 10.3 to the Meridian Waste Solutions, Inc. Current Report on Form 8-K filed with the SEC on December 29, 2015)
10.18
Employment Agreement, dated December 22, 2015, by and among Christian Disposal, LLC, Meridian Waste Solutions, Inc. and Patrick McLaughlin (incorporated herein by reference to Exhibit 10.4 to the Meridian Waste Solutions, Inc. Current Report on Form 8-K filed with the SEC on December 29, 2015)
10.19
Asset Purchase Agreement made and entered into as of November 13, 2015, by and between Meridian Land Company, LLC and Eagle Ridge Landfill, LLC (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Commission on November 18, 2015)
10.20
First Amendment to Asset Purchase Agreement by and among Meridian Land Company, LLC, Eagle Ridge Landfill, LLC, Meridian Waste Solutions, Inc., and WCA Waste Corporation, dated December 18, 2015 (incorporated herein by reference to Exhibit 10.6 to the Meridian Waste Solutions, Inc. Current Report on Form 8-K filed with the SEC on December 29, 2015)
10.21
Membership Interest Purchase Agreement, dated as of February 12, 2015 (incorporated herein by reference to Exhibit 10.2 to the Meridian Waste Solutions, Inc. Current Report on Form 8-K filed with the SEC on March 2, 2015)
10.22
Form of Business Loan and Security Agreement, dated February 17, 2015, as amended (incorporated herein by reference to Exhibit 10.1 to the Meridian Waste Solutions, Inc. Current Report on Form 8-K filed with the SEC on March 2, 2015)
10.23
Form of Business Loan and Security Agreement, dated February 19, 2015, as amended (incorporated herein by reference to Exhibit 10.2 to the Meridian Waste Solutions, Inc. Current Report on Form 8-K filed with the SEC on March 2, 2015)
10.24
Pledge Agreement by and among Meridian Waste Solutions, Inc., the pledgors party thereto and Praesidian Capital Opportunity Fund III, LP, dated August 6, 2015 (incorporated herein by reference to Exhibit 10.1 to the Meridian Waste Solutions, Inc. Quarterly Report on Form 10-Q filed with the SEC on November 16, 2015)
10.25
Form of First Amendment to Director Agreement dated April 13, 2016 (incorporated herein by reference to Exhibit 10.27 to the Meridian Waste Solutions, Inc. Annual Report on Form 10-K filed with the SEC on April 14, 2016)
Consent of D’Arelli Pruzansky, P.A., dated July 1, 2016
23.2
Consent of Lucosky Brookman LLP (reference is made to Exhibit 5.1)
*Filed herewith
UNDERTAKINGS
(A) The undersigned Registrant hereby undertakes:
62
(1)
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to:
(i)
To include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii)
Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
(iii)
Include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
(2)
That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3)
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4)
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
(B) The issuer is subject to Rule 430C (ss. 230. 430C of this chapter): Each prospectus filed pursuant to Rule 424(b)(ss. 230. 424(b) of this chapter) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A (ss. 230. 430A of this chapter), shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
63
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Milton, State of Georgia, on July 1, 2015.
MERIDIAN WASTE SOLUTIONS, INC.
By:
/s/ Jeffrey Cosman
Name: Jeffrey Cosman
Title: Chief Executive Officer
(Principal Executive Officer)
(Principal Financial Officer)
(Principal Accounting Officer)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY OR ON BEHALF OF THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED:
Signature
Title
Date
/s/ Jeffrey Cosman
Chief Executive Officer, Chairman
July 1, 2016
Jeffrey Cosman
Officer and Co-Chairman
/s/ Walter H. Hall, Jr.
President, Chief Operating Officer, Director
July 1, 2016
Walter H. Hall, Jr.
64
EX-5.1
2
mrdn_ex51.htm
OPINION OF LUCOSKY BROOKMAN LLP
mrdn_ex51.htm
Exhibit 5.1
Meridian Waste Solutions, Inc.
12540 Broadwell Road, Suite 2104
Milton, GA 30004
Re:
Shares to be registered on Form S-1
Gentlemen:
We have acted as counsel to you, Meridian Waste Solutions, Inc., a New York corporation, (the “Company”) in connection with the Company’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission (the “Commission”) pursuant to the Securities Act of 1933, as amended (the “Securities Act”) (File No. 333-212005) (the “Registration Statement”) with respect to 1,191,774 shares (each a “Share” or in the aggregate, the “Shares”) of common stock, $0.025 par value per share (the “Common Stock”). This opinion is being furnished in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Securities Act.
In connection with this opinion, we have examined the originals or copies certified or otherwise identified to our satisfaction of the following: (a) Certificate of Incorporation of the Company, as amended to date, (b) By-laws of the Company, as amended to date, and (c) the Registration Statement and all exhibits thereto. In addition to the foregoing, we also have relied as to matters of fact upon the representations made by the Company and its representatives and we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity to original documents of all documents submitted to us certified or photostatic copies.
Based upon the foregoing and in reliance thereon, and subject to the qualifications, limitations, exceptions and assumptions set forth herein, we are of the opinion that the Shares, having been issued and sold in exchange for payment in full to the Company of all consideration required therefor as applicable, and as described in the Registration Statement, are validly issued, fully paid and non-assessable.
The opinion expressed herein is limited to the laws of the State of New York, including the Constitution of the State of New York, all applicable provisions of the statutory provisions, and reported judicial decisions interpreting those laws. This opinion is limited to the laws in effect as of the date the Registration Statement is declared effective by the Commission and is provided exclusively in connection with the public offering contemplated by the Registration Statement.
This opinion letter speaks only as of the date hereof and we assume no obligation to update or supplement this opinion letter if any applicable laws change after the date of this opinion letter or if we become aware after the date of this opinion letter of any facts, whether existing before or arising after the date hereof, that might change the opinions expressed above.
This opinion letter is furnished in connection with the filing of the Registration Statement and may not be relied upon for any other purpose without our prior written consent in each instance. Further, no portion of this letter may be quoted, circulated or referred to in any other document for any other purpose without our prior written consent.
We hereby consent to the filing of this opinion with the Commission as an exhibit to the Registration Statement and to the use of our name as it appears in the Prospectus included in the Registration Statement. In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission promulgated thereunder. This opinion is expressed as of the date hereof unless otherwise expressly stated, and we disclaim any undertaking to advise you of any subsequent changes in the facts stated or assumed herein or of any subsequent changes in applicable laws.
Very Truly Yours,
/s/ Lucosky Brookman LLP
Lucosky Brookman LLP
EX-23.1
3
mrdn_ex231.htm
CONSENT OF D?ARELLI PRUZANSKY, P.A., DATED JUNE 14, 2016
mrdn_ex231.htm
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation in this Registration Statement on Form S-1A, of our report dated April 13, 2016 and April 13, 2015 relating to the consolidated balance sheet of Meridian Waste Solutions, Inc. and Subsidiaries at December 31, 2015, December 31 2014 and December 31, 2013, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the three years then ended, and the reference to our firm under the heading Experts.
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mrdn-20160331.xml
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<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0">Meridian Waste Solutions, Inc. (the “Company” or
“Meridian”) is currently operating under five separate Limited Liability Companies:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0">(1) Here To Serve Missouri Waste Division, LLC (“HTSMWD”),
a Missouri Limited Liability Company;</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0">(2) Here To Serve Georgia Waste Division, LLC (“HTSGWD”),
a Georgia Limited Liability Company;</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0">(3) Meridian Land Company, LLC (“MLC”), a Georgia
Limited Liability Company;</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0">(4) Here to Serve Technology, LLC (“HTST”), a Georgia
Limited Liability Company; and</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0">(5) Christian Disposal, LLC and subsidiary (“CD”),
a Missouri Limited Liability Company.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0">On January 7, 2015, in an effort to give investors a more concentrated
presence in the waste industry the Company sold the assets of HTST to Mobile Science Technologies, Inc., a Georgia corporation
(MSTI), a related party due to being owned and managed by some of the shareholders of the Company. On this date HTST ceased operations
and became a dormant Limited Liability Company (“LLC”). Currently, Meridian is formalizing plans to dissolve HTST,
in which this LLC will cease to exist.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0">In 2014, HTSMWD purchased the assets of a large solid waste disposal
company in the St. Louis, MO market. This acquisition is considered the platform company for future acquisitions in the solid waste
disposal industry.  HTSGWD was created to facilitate expansion in this industry throughout the Southeast.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0">The Company is primarily in the business of residential and commercial
waste disposal and hauling and has contracts with various cities and municipalities.  The majority of the Company’s
customers are located in the St. Louis metropolitan and surrounding areas.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><u>Acquisition of Christian Disposal, LLC and Eagle Ridge Landfill,
LLC</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0">On December 22, 2015, Meridian Waste Solutions, Inc. and subsidiaries
(the “Company”) completed its acquisition of Christian Disposal LLC, and subsidiary (“Christian Purchase Agreement”).
Pursuant to the Christian Purchase Agreement, the Company acquired 100% of the membership interests of Christian Disposal, which
is integrated into the operations of the Company; refer to intangible assets and acquisition footnote below.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0">Simultaneous with the closing thereof, Christian Disposal LLC,
and subsidiary, entered into a Lease Agreement, in which, the Company leased 4551 Commerce Avenue, High Ridge, Missouri, for a
five-year term at a monthly rent of $6,500. Additionally, the Company entered into an employment agreement with an executive employee
for a term of five years.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0">Concurrently, the Company completed an asset purchase agreement
with WCA Waste Corporation (the “Eagle Purchase Agreement”). The Company acquired all of the assets of Eagle Ridge
Landfill, LLC (“ERL”), its rights and properties related to such business of ERL, which includes certain assets and
operations of the Eagle Ridge Hauling Business (“ERH”) and certain debts, which is now operating under Meridian Land
Company, LLC. Refer to intangible assets and acquisition footnote below.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><u>Recapitalization</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0">On October 17, 2014 Here to Serve Missouri Waste Division, LLC,
(HTSMWD) a Missouri Limited Liability Company, which is the historical business, entered into a Share Exchange Agreement with the
Company and the sole member of HTSMWD whereby the Company agreed to acquire the membership interest of HTSMWD, HTST and HTSGWD
in exchange for 9,054,134 shares of the Company’s common stock.  This transaction was closed on October 17, 2014
and HTSMWD became wholly-owned by the Company.  The Company is deemed to have issued 1,139,284 shares of common stock
which represents the outstanding common shares of the Company just prior to the closing of the transaction.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0">At closing, the Company issued 9,054,134 shares of its common
stock to the sole member of HTSMWD and the shareholders of the sole member who obtained approximately 90% control and management
control of the Company.  The transaction was accounted for as a reverse acquisition and recapitalization of HTSMWD, HTST
and HTSGWD whereby HTSMWD is considered the acquirer for accounting purposes.  The consolidated financial statements
after the acquisition include the balance sheets of both companies and HTST and HTSGWD at historical cost, the historical results
of HTSMWD, HTST and HTSGWD.  All share and per share information in the accompanying consolidated financial statements
and footnotes has been retroactively restated to reflect the recapitalization (see Explanation of Membership Interest Purchase
Agreement below).</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><u>Liquidity and Capital Resources</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0">As of March 31, 2016, the Company had negative working capital
of $4,613,287. This lack of liquidity is mitigated by the Company’s ability to generate positive cash flow from operating
activities. In the three months ended March 31, 2016, cash generated from operating activities, excluding one-time acquisition
and transition expenses of approximately $467,000, was approximately $408,000. In addition, as of March 31, 2016, the Company had
approximately $1,767,000 in cash and cash equivalents and $1,947,000 in short-term investments to cover its short term cash requirements.
Further, the Company has approximately $12,850,000 of borrowing capacity on its multi-draw term loans and revolving commitments.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<p style="margin: 0pt"></p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">Meridian
Waste Solutions, Inc. (formerly Brooklyn Cheesecake and Desserts Company, Inc.) (the “Company” or “Meridian”)
is currently operating under five separate Limited Liability Companies:</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">(1)
Here To Serve Missouri Waste Division, LLC (“HTSMWD”), a Missouri Limited Liability Company;</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">(2)
Here To Serve Georgia Waste Division, LLC (“HTSGWD”), a Georgia Limited Liability Company;</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">(3)
Meridian Land Company, LLC (“MLC”), a Georgia Limited Liability Company;</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">(4)
Here to Serve Technology, LLC (“HTST”), a Georgia Limited Liability Company; and</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">(5)
Christian Disposal, LLC and subsidiary (“CD”), a Missouri Limited Liability Company.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">On
January 7, 2015, in an effort to give investors a more concentrated presence in the waste industry the Company sold the assets
of HTST to Mobile Science Technologies, Inc., a Georgia corporation (MSTI), a related party due to being owned and managed by
some of the shareholders of the Company. On this date HTST ceased operations and became a dormant Limited Liability Company (“LLC”).
Currently, Meridian is formalizing plans to dissolve HTST, in which this LLC will cease to exist.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">In
2014, HTSMWD purchased the assets of a large solid waste disposal company in the St. Louis, MO market. This acquisition is considered
the platform company for future acquisitions in the solid waste disposal industry.  HTSGWD was created to facilitate
expansion in this industry throughout the Southeast.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company is primarily in the business of residential and commercial waste disposal and hauling and has contracts with various cities
and municipalities.  The majority of the Company’s customers are located in the St. Louis metropolitan and surrounding
areas.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif; text-decoration: underline"><font style="font: 8pt Times New Roman, Times, Serif"><u>Acquisition
of Christian Disposal, LLC and Eagle Ridge Landfill, LLC</u></font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">On
December 22, 2015, Meridian Waste Solutions, Inc. and subsidiaries (the “Company”) completed its acquisition of Christian
Disposal LLC, and subsidiary (“Christian Purchase Agreement”). Pursuant to the Christian Purchase Agreement, the Company
acquired 100% of the membership interests of Christian Disposal, which is integrated into the operations of the Company; refer
to intangible assets and acquisition footnote below.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">Simultaneous
with the closing thereof, Christian Disposal LLC, and subsidiary, entered into a Lease Agreement, in which, the Company leased
4551 Commerce Avenue, High Ridge, Missouri, for a five-year term at a monthly rent of $6,500. Additionally, the Company entered
into an employment agreement with an executive employee for a term of five years.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">Concurrently,
the Company completed an asset purchase agreement with WCA Waste Corporation (the “Eagle Purchase Agreement”). The
Company acquired all of the assets of Eagle Ridge Landfill, LLC (“ERL”), its rights and properties related to such
business of ERL, which includes certain assets and operations of the Eagle Ridge Hauling Business (“ERH”) and certain
debts, which is now operating under Meridian Land Company, LLC. Refer to intangible assets and acquisition footnote below.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif; text-decoration: underline"><font style="font: 8pt Times New Roman, Times, Serif"><u>Recapitalization</u></font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">On
October 17, 2014 Here to Serve Missouri Waste Division, LLC, (HTSMWD) a Missouri Limited Liability Company, which is the historical
business, entered into a Share Exchange Agreement with the Company and the sole member of HTSMWD whereby the Company agreed to
acquire the membership interest of HTSMWD, HTST and HTSGWD in exchange for 9,054,134 shares of the Company’s common stock.  This
transaction was closed on October 17, 2014 and HTSMWD became wholly-owned by the Company.  The Company is deemed to
have issued 1,139,284 shares of common stock which represents the outstanding common shares of the Company just prior to the closing
of the transaction.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">At
closing, the Company issued 9,054,134 shares of its common stock to the sole member of HTSMWD and the shareholders of the sole
member who obtained approximately 90% control and management control of the Company.  The transaction was accounted
for as a reverse acquisition and recapitalization of HTSMWD, HTST and HTSGWD whereby HTSMWD is considered the acquirer for accounting
purposes.  The consolidated financial statements after the acquisition include the balance sheets of both companies
and HTST and HTSGWD at historical cost, the historical results of HTSMWD, HTST and HTSGWD.  All share and per share
information in the accompanying consolidated financial statements and footnotes has been retroactively restated to reflect the
recapitalization (see Explanation of Membership Interest Purchase Agreement below).</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Acquisition
of Here to Serve Holding Corporation</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">On
October 17, 2014, (the “Execution Date”), Meridian Waste Solutions, Inc. entered into that certain Membership Interest
Purchase Agreement (the “Purchase Agreement”) by and among Here to Serve Holding Corp., a Delaware corporation, as seller
(“Here to Serve”), the Company, as parent, Brooklyn Cheesecake & Dessert Acquisition Corp., a wholly-owned subsidiary
of the Company, as buyer (the “Acquisition Corp.”), the Chief Executive Officer of the Company (the “Company Executive”),
the majority shareholder of the Company (the “Company Majority Shareholder”) and certain shareholders of Seller (the
“Seller Shareholders”), pursuant to which the Acquisition Corp shall acquire from Here to Serve all of Here to Serve’s
right, title and interest in and to:</font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="width: 48px; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">I.  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">100%
of the membership interests of Here to Serve – Missouri Waste Division, LLC d/b/a Meridian Waste, a Missouri limited
liability company (“HTS Waste”);</font></td></tr>
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">II.  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">100%
of the membership interests of Here to Serve Technology, LLC, a Georgia limited liability company (“HTS Tech”);
and</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">III.  </font></td>
<td colspan="2" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">100%
of the membership interests of Here to Serve - Georgia Waste Division, LLC, a Georgia limited liability company (“HTS
Waste Georgia”, and together with HTS Waste and HTS Tech, collectively, the “Membership Interests”).  As
consideration for the Membership Interests:</font></td></tr>
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td colspan="2" style="font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">i.  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">the
Company shall issue to Here to Serve 9,054,134 shares of the Company’s common stock, (the “Common Stock”);</font></td></tr>
<tr style="font: 8pt Times New Roman, Times, Serif">
<td style="width: 6%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 9%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 85%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="width: 96px; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">ii.  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">the
Company shall issue to the holder of Class A Preferred Stock of Here to Serve (“Here to Serve’s Class A Preferred
Stock”) 51 shares of the Company’s to-be-designated Class A Preferred Stock (the “Class A Preferred Stock”),
which Class A Preferred Stock shall have the rights and preferences as described in the Purchase Agreement.</font></td></tr>
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">iii.  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">the
Company shall issue to the holder of Class B Preferred Stock of Here to Serve (Here to Serve’s Class B Preferred Stock”)
an aggregate of 71,120 shares of the Company’s to-be-designated Class B Preferred Stock (the “Class B Preferred
Stock”), (the Common Stock, the Class A Preferred Stock and the Class B Preferred Stock are referred to as the “Purchase
Price Shares;”), and</font></td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="width: 96px; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">iv.  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">the
Company shall assume certain assumed liabilities (the “Initial Consideration”).</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">As
further consideration, at the closing of the transaction contemplated under the Purchase Agreement:</font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="width: 48px; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">a.  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">in
satisfaction of all accounts payable and shareholder loans, Here to Serve will pay to Company Majority Shareholder $70,000
and</font></td></tr>
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">b.  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">the
Company purchased from the then Company Majority Shareholder 230,000 shares of the Company’s common stock for a purchase
price of $230,000.  Pursuant to the Purchase Agreement, to the extent Purchase Price Shares are issued to individual
shareholders of Here to Serve at or upon closing of the Purchase Agreement:</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="width: 96px; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">a.  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">shares
of common stock of Here to Serve held by the individuals will be cancelled</font></td></tr>
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">b.  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">1,000,000
shares of Here to Serve’s Class A Preferred Stock will be cancelled; and</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="width: 96px; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">c.  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">71,120
shares of Here to Serve’s Class B Preferred Stock will be cancelled (the “Additional Consideration”).</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">On
October 17, 2014, the directors and majority shareholders of the Company approved the Purchase Agreement and the transactions
contemplated under the Purchase Agreement. The directors of Here to Serve and the Here to Serve Shareholders approved the Purchase
Agreement and the transactions contemplated thereunder.  This closing of the Purchase Agreement results in a change
of control of the Company and the Company changed its business plan to that of HTSMWD.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif; text-decoration: underline"><font style="font: 8pt Times New Roman, Times, Serif"><u>Change
in Reporting Entity </u></font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
merger of Here to Serve Holding Corp. (Here to Serve), a Delaware Corporation, and Meridian Waste Services, LLC became effective
May 15, 2014.  The merger was accounted for by the Company using business combination accounting.  Under this
method, the purchase price paid by the acquirer is allocated to the assets acquired and liabilities assumed as of the acquisition
date based on the fair value.  By the application of “pushdown” accounting, our assets, liabilities and equity
were accordingly adjusted to fair value on May 15, 2014.  Determining the fair value of certain assets and liabilities
assumed is judgmental in nature and often involves the use of significant estimates and assumptions.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">At
the time of merger Here to Serve was a company with nominal operations whereas Meridian Waste Services, LLC consisted of the active
and carry-forward business.  Accordingly Meridian Waste Services, LLC is deemed to be the predecessor entity and as
such is presented as the comparable financial statements.  As such our financial statements are presented in two distinct
periods to indicate the application of two different basis of accounting.  Periods prior to May 15, 2014 are identified
herein as “Predecessor,” while periods subsequent to the Here to Serve merger are identified as “Successor.”  As
a result of the change in basis of accounting from historical cost to reflect the Here to Serve’s purchase cost, the financial
statements for Predecessor periods are not comparable to those of Successor periods.</font></p><p style="margin: 0pt"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Basis
of Presentation</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">The
accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles
in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10Q
and Article 803 of Regulation SX.  Accordingly, the unaudited consolidated financial statements do not include all of
the information and footnotes required by US GAAP for complete financial statements.  The unaudited consolidated financial
statements and notes included herein should be read in conjunction with the annual consolidated financial statements and notes
for the year ended December 31, 2015 included in our Annual Report on Form 10K filed with the SEC on April 14, 2016.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">In
the opinion of management, all adjustments (consisting of normal recurring items) necessary to present fairly the Company’s
financial position as of March 31, 2016, and the results of operations and cash flows for the three months ending March 31, 2016
have been made. The results of operations for the three months ended March 31, 2016 are not necessarily indicative of the results
to be expected for a full year.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Basis
of Consolidation</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">The
consolidated financial statements for the three months ending March 31, 2016 include the operations of the Company and its wholly-owned
subsidiaries, Here To Serve Missouri Waste Division, LLC, Meridian Land Company, LLC, Here to Serve Technology, LLC, Here To Serve
Georgia Waste Division, LLC and Christian Disposal, LLC. The following two subsidiaries of the Company, Here To Serve Georgia
Waste Division, LLC and Here to Serve Technology, LLC, a Georgia Limited Liability Company had no operations during the period.
The consolidated financial statements for the three months ending March 31, 2015 include the operations of the Company and its
wholly-owned subsidiaries, Here To Serve Missouri Waste Division, LLC, Here To Serve Georgia Waste Division, LLC and Here to Serve
Technology, LLC, a Georgia Limited Liability Company.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">All
significant intercompany accounts and transactions have been eliminated in consolidation.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Cash
and Cash Equivalents and Short-term Investments</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company considers all highly liquid investments with maturities of three months or less to be cash equivalents. Short-term investments
consist of investments that have a remaining maturity of less than one year as of the date of the balance sheet.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">Management
determines the appropriate classification of short-term investments at the time of purchase and evaluates such designation as
of each balance sheet date. All short-term investments to date have been classified as held-to-maturity and carried at amortized
costs, which approximates fair market value, on our Consolidated Balance Sheets. For the three months ended March 31, 2016 and
2015, interest income of $2,139 and $0, respectively, was recorded related to the held-to-maturity securities. Our short-term
investments’ contractual maturities occur before March 31, 2017.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Fair
Value of Financial Instruments</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company’s financial instruments consist of cash and cash equivalents, accounts receivable, account payable, accrued expenses,
and notes payable. The carrying amount of these financial instruments approximates fair value due either to length of maturity
or interest rates that approximate prevailing market rates unless otherwise disclosed in these consolidated financial statements.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Derivative
Instruments</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company enters into financing arrangements that consist of freestanding derivative instruments or are hybrid instruments that
contain embedded derivative features. The Company accounts for these arrangements in accordance with Accounting Standards Codification
topic 815, Accounting for Derivative Instruments and Hedging Activities (“ASC 815”) as well as related interpretations
of this standard. In accordance with this standard, derivative instruments are recognized as either assets or liabilities in the
balance sheet and are measured at fair values with gains or losses recognized in earnings. Embedded derivatives that are not clearly
and closely related to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized
as either a gain or loss in earnings. The Company determines the fair value of derivative instruments and hybrid instruments based
on available market data using appropriate valuation models, considering of the rights and obligations of each instrument.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company estimates fair values of derivative financial instruments using various techniques (and combinations thereof) that are
considered consistent with the objective measuring fair values. In selecting the appropriate technique, the Company considers,
among other factors, the nature of the instrument, the market risks that it embodies and the expected means of settlement. For
less complex derivative instruments, such as freestanding warrants, the Company generally use the Black Scholes model, adjusted
for the effect of dilution, because it embodies all of the requisite assumptions (including trading volatility, estimated terms,
dilution and risk free rates) necessary to fair value these instruments. Estimating fair values of derivative financial instruments
requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the
instrument with related changes in internal and external market factors. In addition, option-based techniques (such as Black-Scholes
model) are highly volatile and sensitive to changes in the trading market price of our common stock. Since derivative financial
instruments are initially and subsequently carried at fair values, our income (expense) going forward will reflect the volatility
in these estimates and assumption changes. Under the terms of this accounting standard, increases in the trading price of the
Company’s common stock and increases in fair value during a given financial quarter result in the application of non-cash
derivative expense. Conversely, decreases in the trading price of the Company’s common stock and decreases in trading fair
value during a given financial quarter result in the application of non-cash derivative income.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Impairment
of long-lived assets</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company periodically reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be fully recoverable.  The Company recognizes an impairment loss when the sum
of expected undiscounted future cash flows is less that the carrying amount of the asset.  The amount of impairment
is measured as the difference between the asset’s estimated fair value and its book value.  During the three months
ending March 31, 2016, the Company experienced no losses due to impairment.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Income
Taxes</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company accounts for income taxes pursuant to the provisions of ASC 740-10, “Accounting for Income Taxes,” which requires,
among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires
the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between
the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred
tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company follows the provisions of the ASC 740 -10 related to, Accounting for Uncertain Income Tax Positions. When tax returns
are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while
others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately
sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements
in the period during which, based on all available evidence, management believes it is more likely than not that the position
will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are
not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured
as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable
taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described
above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated
interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions
are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company analyzes its tax positions by utilizing ASC 740-10-25 Definition of Settlement, which provides guidance on how an entity
should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits
and provides that a tax position can be effectively settled upon the completion of an examination by a taxing authority without
being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax
benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical
merits and the statute of limitations remains open. As of March 31, 2016, tax years ended December 31, 2015, 2014, and 2013 are
still potentially subject to audit by the taxing authorities.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Use
of Estimates</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">Management
estimates and judgments are an integral part of consolidated financial statements prepared in accordance with accounting principles
generally accepted in the United States of America (GAAP). We believe that the critical accounting policies described in this
section address the more significant estimates required of management when preparing our consolidated financial statements in
accordance with GAAP. We consider an accounting estimate critical if changes in the estimate may have a material impact on our
financial condition or results of operations. We believe that the accounting estimates employed are appropriate and resulting
balances are reasonable; however, actual results could differ from the original estimates, requiring adjustment to these balances
in future periods.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Accounts
Receivable</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">Accounts
receivable are recorded at management’s estimate of net realizable value. At March 31, 2016 and December 31, 2015 the Company
had approximately $2,641,000 and $2,326,000 of gross trade receivables, respectively.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">Our
reported balance of accounts receivable, net of the allowance for doubtful accounts, represents our estimate of the amount that
ultimately will be realized in cash. We review the adequacy and adjust our allowance for doubtful accounts on an ongoing basis,
using historical payment trends and the age of the receivables and knowledge of our individual customers. However, if the financial
condition of our customers were to deteriorate, additional allowances may be required. At March 31, 2016 and December 31, 2015
the Company had approximately $627,000 and $618,000 recorded for the allowance for doubtful accounts, respectively.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Advertising
costs</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">Advertising
costs, except for costs associated with direct-response advertising, are charged to operations when incurred. The costs of direct-response
advertising are capitalized and amortized over the period during which future benefits are expected to be received. The Company
did not capitalize any advertising for the three months ended March 31, 2016. Advertising expenses were approximately $12,000
for the three months ended March 31, 2016.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Property,
plant and equipment</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">The
cost of property, plant, and equipment is depreciated over the estimated useful lives of the related assets utilizing the straight-line
method of depreciation. The cost of leasehold improvements is depreciated (amortized) over the lesser of the length of the related
leases or the estimated useful lives of the assets. Ordinary repairs and maintenance are expensed when incurred and major repairs
will be capitalized and expensed if it benefits future periods.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Intangible
Assets</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">Intangible
assets that are subject to amortization are reviewed for potential impairment whenever events or circumstances indicate that carrying
amounts may not be recoverable. Assets not subject to amortization are tested for impairment at least annually. The Company has
intangible assets related to its purchase of Meridian Waste Services, LLC, Christian Disposal LLC and Eagle Ridge Landfill, LLC,
which are further discussed in the notes below.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Investment
in Related Party Affiliate</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company has an investment in a privately held corporation in the mobile apps industry. As the Company exercises significant influence
on this entity, this investment is recorded using the equity method of accounting. The Company monitors this investment for impairment
and makes appropriate reductions in the carrying value if the Company determines that an impairment charge is required based primarily
on the financial condition and near-term prospect of this entity.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Goodwill</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">Goodwill
is the excess of our purchase cost over the fair value of the net assets of acquired businesses. We do not amortize goodwill,
but as discussed in the impairment of long lived assets section above, we assess our goodwill for impairment at least annually.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Website
Development Costs</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company accounts for website development costs in accordance with Accounting Standards Codification 350-50 “Website Development
Costs”. Accordingly, all costs incurred in the planning stage are expensed as incurred, costs incurred in the website application
and infrastructure development stage that meet specific criteria are capitalized and costs incurred in the day to day operation
of the website are expensed as incurred.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Landfill
Accounting</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Capitalized
landfill costs</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">Cost
basis of landfill assets — We capitalize various costs that we incur to make a landfill ready to accept waste. These costs
generally include expenditures for land (including the landfill footprint and required landfill buffer property); permitting;
excavation; liner material and installation; landfill leachate collection systems; landfill gas collection systems; environmental
monitoring equipment for groundwater and landfill gas; and directly related engineering, capitalized interest, on-site road construction
and other capital infrastructure costs. The cost basis of our landfill assets also includes asset retirement costs, which represent
estimates of future costs associated with landfill final capping, closure and post-closure activities. These costs are discussed
below.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">Final
capping, closure and post-closure costs — Following is a description of our asset retirement activities and our related
accounting:</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 120px; font: 12pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">·</font></td>
<td style="font: 12pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Final
capping — Involves the installation of flexible membrane liners and geosynthetic clay liners, drainage and compacted
soil layers and topsoil over areas of a landfill where total airspace capacity has been consumed. Final capping asset retirement
obligations are recorded on a units-of-consumption basis as airspace is consumed related to the specific final capping event
with a corresponding increase in the landfill asset. The final capping is accounted for as a discrete obligation and recorded
as an asset and a liability based on estimates of the discounted cash flows and capacity associated with the final capping.</font></td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 120px; font: 12pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">·</font></td>
<td style="font: 12pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Closure
— Includes the construction of the final portion of methane gas collection systems (when required), demobilization and
routine maintenance costs. These are costs incurred after the site ceases to accept waste, but before the landfill is certified
as closed by the applicable state regulatory agency. These costs are recorded as an asset retirement obligation as airspace
is consumed over the life of the landfill with a corresponding increase in the landfill asset. Closure obligations are recorded
over the life of the landfill based on estimates of the discounted cash flows associated with performing closure activities.</font></td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 120px; font: 12pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">·</font></td>
<td style="font: 12pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Post-closure
— Involves the maintenance and monitoring of a landfill site that has been certified closed by the applicable regulatory
agency. Generally, we are required to maintain and monitor landfill sites for a 30-year period. These maintenance and monitoring
costs are recorded as an asset retirement obligation as airspace is consumed over the life of the landfill with a corresponding
increase in the landfill asset. Post-closure obligations are recorded over the life of the landfill based on estimates of
the discounted cash flows associated with performing post-closure activities.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">We
develop our estimates of these obligations using input from our operations personnel, engineers and accountants. Our estimates
are based on our interpretation of current requirements and proposed regulatory changes and are intended to approximate fair value.
Absent quoted market prices, the estimate of fair value is based on the best available information, including the results of present
value techniques. In many cases, we contract with third parties to fulfill our obligations for final capping, closure and post
closure. We use historical experience, professional engineering judgment and quoted and actual prices paid for similar work to
determine the fair value of these obligations. We are required to recognize these obligations at market prices whether we plan
to contract with third parties or perform the work ourselves. In those instances where we perform the work with internal resources,
the incremental profit margin realized is recognized as a component of operating income when the work is performed.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">Once
we have determined the final capping, closure and post-closure costs, we inflate those costs to the expected time of payment and
discount those expected future costs back to present value. During the three months ended March 31, 2016 we inflated these costs
in current dollars until the expected time of payment using an inflation rate of 2.5%. Accretion expense was approximately $42,500
for the three months ended March 31, 2016. We discounted these costs to present value using the credit-adjusted, risk-free rate
effective at the time an obligation is incurred, consistent with the expected cash flow approach. Any changes in expectations
that result in an upward revision to the estimated cash flows are treated as a new liability and discounted at the current rate
while downward revisions are discounted at the historical weighted average rate of the recorded obligation. As a result, the credit
adjusted, risk-free discount rate used to calculate the present value of an obligation is specific to each individual asset retirement
obligation. The weighted average rate applicable to our long-term asset retirement obligations at March 31, 2016 is approximately
8.5%.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">We
record the estimated fair value of final capping, closure and post-closure liabilities for our landfills based on the capacity
consumed through the current period. The fair value of final capping obligations is developed based on our estimates of the airspace
consumed to date for the final capping. The fair value of closure and post-closure obligations is developed based on our estimates
of the airspace consumed to date for the entire landfill and the expected timing of each closure and post-closure activity. Because
these obligations are measured at estimated fair value using present value techniques, changes in the estimated cost or timing
of future final capping, closure and post-closure activities could result in a material change in these liabilities, related assets
and results of operations. We assess the appropriateness of the estimates used to develop our recorded balances annually, or more
often if significant facts change.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">Changes
in inflation rates or the estimated costs, timing or extent of future final capping, closure and post-closure activities typically
result in both (i) a current adjustment to the recorded liability and landfill asset and (ii) a change in liability and asset
amounts to be recorded prospectively over either the remaining capacity of the related discrete final capping or the remaining
permitted and expansion airspace (as defined below) of the landfill. Any changes related to the capitalized and future cost of
the landfill assets are then recognized in accordance with our amortization policy, which would generally result in amortization
expense being recognized prospectively over the remaining capacity of the final capping or the remaining permitted and expansion
airspace of the landfill, as appropriate. Changes in such estimates associated with airspace that has been fully utilized result
in an adjustment to the recorded liability and landfill assets with an immediate corresponding adjustment to landfill airspace
amortization expense.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 60px; font: 12pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">·</font></td>
<td style="font: 12pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Remaining
permitted airspace — Our engineers, in consultation with third-party engineering consultants and surveyors, are responsible
for determining remaining permitted airspace at our landfills. The remaining permitted airspace is determined by an annual
survey, which is used to compare the existing landfill topography to the expected final landfill topography.</font></td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 60px; font: 12pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">·</font></td>
<td style="font: 12pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Expansion
airspace — We also include currently unpermitted expansion airspace in our estimate of remaining permitted and expansion
airspace in certain circumstances. First, to include airspace associated with an expansion effort, we must generally expect
the initial expansion permit application to be submitted within one year and the final expansion permit to be received within
five years. Second, we must believe that obtaining the expansion permit is likely, considering the following criteria:</font></td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 120px; font: 12pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">o  </font></td>
<td style="font: 12pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Personnel
are actively working on the expansion of an existing landfill, including efforts to obtain land use and local, state or provincial
approvals;</font></td></tr>
<tr style="vertical-align: top">
<td style="font: 12pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">o  </font></td>
<td style="font: 12pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">We
have a legal right to use or obtain land to be included in the expansion plan;</font></td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 120px; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">o  </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif">There are no significant known technical, legal,
community, business, or political restrictions or similar issues that could negatively affect the success of such expansion;
and</font></td></tr>
<tr style="vertical-align: top">
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">o  </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif">Financial analysis has been completed based on
conceptual design, and the results demonstrate that the expansion meets the Company’s criteria for investment.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">For
unpermitted airspace to be initially included in our estimate of remaining permitted and expansion airspace, the expansion effort
must meet all of the criteria listed above. These criteria are evaluated by our field-based engineers, accountants, managers and
others to identify potential obstacles to obtaining the permits. Once the unpermitted airspace is included, our policy provides
that airspace may continue to be included in remaining permitted and expansion airspace even if certain of these criteria are
no longer met as long as we continue to believe we will ultimately obtain the permit, based on the facts and circumstances of
a specific landfill.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">When
we include the expansion airspace in our calculations of remaining permitted and expansion airspace, we also include the projected
costs for development, as well as the projected asset retirement costs related to the final capping, closure and post-closure
of the expansion in the amortization basis of the landfill.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">Once
the remaining permitted and expansion airspace is determined in cubic yards, an airspace utilization factor (“AUF”)
is established to calculate the remaining permitted and expansion capacity in tons. The AUF is established using the measured
density obtained from previous annual surveys and is then adjusted to account for future settlement. The amount of settlement
that is forecasted will take into account several site-specific factors including current and projected mix of waste type, initial
and projected waste density, estimated number of years of life remaining, depth of underlying waste, anticipated access to moisture
through precipitation or recirculation of landfill leachate, and operating practices. In addition, the initial selection of the
AUF is subject to a subsequent multi-level review by our engineering group, and the AUF used is reviewed on a periodic basis and
revised as necessary. Our historical experience generally indicates that the impact of settlement at a landfill is greater later
in the life of the landfill when the waste placed at the landfill approaches its highest point under the permit requirements.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">After
determining the costs and remaining permitted and expansion capacity at each of our landfill, we determine the per ton rates that
will be expensed as waste is received and deposited at the landfill by dividing the costs by the corresponding number of tons.
We calculate per ton amortization rates for the landfill for assets associated with each final capping, for assets related to
closure and post-closure activities and for all other costs capitalized or to be capitalized in the future. These rates per ton
are updated annually, or more often, as significant facts change.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">It
is possible that actual results, including the amount of costs incurred, the timing of final capping, closure and post-closure
activities, our airspace utilization or the success of our expansion efforts could ultimately turn out to be significantly different
from our estimates and assumptions. To the extent that such estimates, or related assumptions, prove to be significantly different
than actual results, lower profitability may be experienced due to higher amortization rates or higher expenses; or higher profitability
may result if the opposite occurs. Most significantly, if it is determined that expansion capacity should no longer be considered
in calculating the recoverability of a landfill asset, we may be required to recognize an asset impairment or incur significantly
higher amortization expense. If at any time management makes the decision to abandon the expansion effort, the capitalized costs
related to the expansion effort are expensed immediately.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">For
the three months ended March 31, 2016 the Company operations related to its landfill assets and liability are presented in the
tables below:</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Three
Months Ended March 31, 2016 (UNAUDITED)</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Year
Ended December 31, 2015</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 8pt Times New Roman, Times, Serif"><b>Landfill Assets</b></font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font: 8pt Times New Roman, Times, Serif">Beginning balance</font></td>
<td style="width: 1%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">3,393,476</font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">3,396,519</font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 8pt Times New Roman, Times, Serif">Capital additions</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">26,984</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 8pt Times New Roman, Times, Serif">Amortization of landfill assets</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">(51,933</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">(3,043</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif">Asset retirement
adjustments</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">2,685</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">3,371,212</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">3,393,476</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 8pt Times New Roman, Times, Serif"><b>Landfill Asset Retirement Obligation</b></font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 8pt Times New Roman, Times, Serif">Beginning balance</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">200,252</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">196,519</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 8pt Times New Roman, Times, Serif">Obligations incurred and capitalized</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">2,685</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 8pt Times New Roman, Times, Serif">Obligations settled</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 8pt Times New Roman, Times, Serif">Interest accretion</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">42,491</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">3,733</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif">Revisions in estimates
and interest rate assumption</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 3pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">245,428</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">200,252</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Revenue
Recognition</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company recognizes revenue when persuasive evidence of arrangement exists, services have been provided, the seller’s price
to the buyer is fixed or determinable, and collection is reasonably assured. The majority of the Company’s revenues are
generated from the fees charged for waste collection, transfer, disposal and recycling.  The fees charged for our services
are generally defined in service agreements and vary based on contract-specific terms such as frequency of service, weight, volume
and the general market factors influencing a region’s rate.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Deferred
Revenue</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company records deferred revenue for customers that were billed in advance of services. The balance in deferred revenue represents
amounts billed in January, February, and March for services that will be provided during April, May, and June.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Cost
of Services</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">Cost
of services include all employment costs associated with waste collection, transfer and disposal, damage claims, landfill costs,
personal property taxes associated with collection vehicles and other direct cost of the collection and disposal process.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Concentrations</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company maintains its cash and cash equivalents in bank deposit accounts, which could, at times, exceed federally insured limits.
The Company has not experienced any losses in such accounts; however, amounts in excess of the federally insured limit may be
at risk if the bank experiences financial difficulties.  The Company places its cash with high credit quality financial
institutions.  The Company’s accounts at these institutions are insured by the Federal Deposit Insurance Corporation
(FDIC) up to $250,000. At March 31, 2016, the Company had $1,766,569 of cash in United States bank deposits, of which $959,985
was federally insured and $806,583 was not federally insured.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">Financial
instruments which also potentially subject the Company to concentrations of credit risk consist principally of trade accounts
receivable; however, concentrations of credit risk with respect to trade accounts receivables are limited due to generally short
payment terms.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">For
the three months ended March 31, 2016, the Company had one contract that accounted for approximately 12% of the Company's
revenue. For the three months ended March 31, 2015, the Company had two contracts that accounted for approximately 51% of the
Company's revenue, collectively.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Basic
Income (Loss) Per Share</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">Basic
income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted
average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net
income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the year. The
diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive
debt or equity. At March 31, 2016 the Company had two convertible notes outstanding that are not convertible into common stock
until June 2016. Additionally, the Company issued stock warrants for 1,673,559 common shares.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">For
the three months ended March 31, 2016, the Company had 832,859 of weighted-average common shares relating to the convertible debt,
under the if-converted method, however, these shares are not dilutive because the Company recorded a loss during the fiscal year.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">At
March 31, 2016, and December 31, 2015 the Company had a series of convertible notes and warrants outstanding that could be converted
into approximately, 2,506,418 and 2,548,559 common shares, respectively. These are not presented in the consolidated statements
of operations since the company incurred a loss and the effect of these shares is anti- dilutive.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Stock-Based
Compensation</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">Stock-based
compensation is accounted for at fair value in accordance with ASC Topic 718. To date, the Company has not adopted a stock option
plan and has not granted any stock options.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">Stock-based
compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition
in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity
instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively,
the vesting period).  The ASC also require measurement of the cost of employee and director services received in exchange
for an award based on the grant-date fair value of the award.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">Pursuant
to ASC Topic 505-50, for share based payments to consultants and other third-parties, compensation expense is determined at the
“measurement date.”  The expense is recognized over the service period of the award.  Until the
measurement date is reached, the total amount of compensation expense remains uncertain.  The Company initially records
compensation expense based on the fair value of the award at the reporting date.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company recorded stock based compensation expense of $3,545,422 and $1,486,265 during the three months ended March 31, 2016 and
2015, respectively, which is included in compensation and related expense on the statement of operations.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Recent
Accounting Pronouncements</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s
results of operations, financial position or cash flow.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="margin: 0pt"></p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Accounting
Basis</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP”
accounting).</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Basis
of Consolidation</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
consolidated financial statements for the year ended December 31, 2015 include the operations of the Company and its wholly-owned
subsidiaries, Here To Serve Missouri Waste Division, LLC, Meridian Land Company, LLC, Here to Serve Technology, LLC and Christian
Disposal, LLC. The following two subsidiaries of the Company, Here To Serve Georgia Waste Division, LLC and Here to Serve Technology,
LLC, a Georgia Limited Liability Company had no operations during the period.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
consolidated financial statements for the year ended December 31, 2014 include the operations of the Company and its wholly-owned
subsidiaries, Here To Serve Missouri Waste Division, LLC and Here To Serve Technology, LLC.  The following subsidiary
of the Company, Here To Serve Georgia Waste Division, LLC had no operations during the period.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">All
significant intercompany accounts and transactions have been eliminated in consolidation.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Cash
and Cash Equivalents</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company considers all highly liquid investments with maturities of three months or less to be cash equivalents.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Fair
Value of Financial Instruments</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company’s financial instruments consist of cash and cash equivalents, accounts receivable, account payable, accrued expenses,
and notes payable. The carrying amount of these financial instruments approximates fair value due either to length of maturity
or interest rates that approximate prevailing market rates unless otherwise disclosed in these consolidated financial statements.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Derivative
Instruments</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company enters into financing arrangements that consist of freestanding derivative instruments or are hybrid instruments that
contain embedded derivative features. The Company accounts for these arrangements in accordance with Accounting Standards Codification
topic 815, Accounting for Derivative Instruments and Hedging Activities (“ASC 815”) as well as related interpretations
of this standard. In accordance with this standard, derivative instruments are recognized as either assets or liabilities in the
balance sheet and are measured at fair values with gains or losses recognized in earnings. Embedded derivatives that are not clearly
and closely related to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized
as either a gain or loss in earnings. The Company determines the fair value of derivative instruments and hybrid instruments based
on available market data using appropriate valuation models, considering all of the rights and obligations of each instrument.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company estimates fair values of derivative financial instruments using various techniques (and combinations thereof) that are
considered consistent with the objective measuring fair values. In selecting the appropriate technique, the Company considers,
among other factors, the nature of the instrument, the market risks that it embodies and the expected means of settlement. For
less complex derivative instruments, such as freestanding warrants, the Company generally use the Black-Scholes model, adjusted
for the effect of dilution, because it embodies all of the requisite assumptions (including trading volatility, estimated terms,
dilution and risk free rates) necessary to fair value these instruments. Estimating fair values of derivative financial instruments
requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the
instrument with related changes in internal and external market factors. In addition, option-based techniques (such as Black-Scholes
model) are highly volatile and sensitive to changes in the trading market price of our common stock. Since derivative financial
instruments are initially and subsequently carried at fair values, our income (expense) going forward will reflect the volatility
in these estimates and assumption changes. Under the terms of this accounting standard, increases in the trading price of the
Company’s common stock and increases in fair value during a given financial quarter result in the application of non-cash
derivative expense. Conversely, decreases in the trading price of the Company’s common stock and decreases in trading fair
value during a given financial quarter result in the application of non-cash derivative income.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Impairment
of long-lived assets</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company periodically reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be fully recoverable.  The Company recognizes an impairment loss when the sum
of expected undiscounted future cash flows is less that the carrying amount of the asset.  The amount of impairment
is measured as the difference between the asset’s estimated fair value and its book value.  During the year ending
December 31, 2015, the Company experienced no losses due to impairment.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Income
Taxes</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company accounts for income taxes pursuant to the provisions of ASC 740-10, “Accounting for Income Taxes,” which requires,
among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires
the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between
the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred
tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif">The
Company follows the provisions of the ASC 740 -10 related to, Accounting for Uncertain Income Tax Positions. When tax returns
are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while
others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately
sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements
in the period during which, based on all available evidence, management believes it is more likely than not that the position
will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are
not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured
as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable
taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described
above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated
interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions
are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company analyzes its tax positions by utilizing ASC 740-10-25 Definition of Settlement, which provides guidance on how an entity
should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits
and provides that a tax position can be effectively settled upon the completion of an examination by a taxing authority without
being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax
benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical
merits and the statute of limitations remains open. As of December 31, 2015, tax years ended December 31, 2014, 2013, 2012 are
still potentially subject to audit by the taxing authorities.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Use
of Estimates</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">Management
estimates and judgments are an integral part of consolidated financial statements prepared in accordance with accounting principles
generally accepted in the United States of America (GAAP). We believe that the critical accounting policies described in this
section address the more significant estimates required of management when preparing our consolidated financial statements in
accordance with GAAP. We consider an accounting estimate critical if changes in the estimate may have a material impact on our
financial condition or results of operations. We believe that the accounting estimates employed are appropriate and resulting
balances are reasonable; however, actual results could differ from the original estimates, requiring adjustment to these balances
in future periods.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Accounts
Receivable</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">Accounts
receivable are recorded at management’s estimate of net realizable value. At December 31, 2015 and 2014 the Company had approximately
$2,326,000 and $660,000 of gross trade receivables, respectively.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">Our
reported balance of accounts receivable, net of the allowance for doubtful accounts, represents our estimate of the amount that
ultimately will be realized in cash. We review the adequacy and adjust our allowance for doubtful accounts on an ongoing basis,
using historical payment trends and the age of the receivables and knowledge of our individual customers. However, if the financial
condition of our customers were to deteriorate, additional allowances may be required. At December 31, 2015 and 2014 the Company
had approximately $618,000 and $71,000 recorded for the allowance for doubtful accounts, respectively.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Advertising
costs</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif">Advertising
costs, except for costs associated with direct-response advertising, are charged to operations when incurred. The costs of direct-response
advertising are capitalized and amortized over the period during which future benefits are expected to be received. The Company
did not capitalize any advertising for the years ended December 31, 2015 and 2014, respectively. Advertising expenses were approximately
$79,000 and $65,000 for the years ended December 31, 2015 and 2014, respectively.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Property,
plant and equipment</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
cost of property, plant, and equipment is depreciated over the estimated useful lives of the related assets utilizing the straight-line
method of depreciation. The cost of leasehold improvements is depreciated (amortized) over the lesser of the length of the related
leases or the estimated useful lives of the assets. Ordinary repairs and maintenance are expensed when incurred and major repairs
will be capitalized and expensed if it benefits future periods.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Intangible
Assets</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">Intangible
assets that are subject to amortization are reviewed for potential impairment whenever events or circumstances indicate that carrying
amounts may not be recoverable. Assets not subject to amortization are tested for impairment at least annually. The Company has
intangible assets related to its purchase of Meridian Waste</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">Services,
LLC, Christian Disposal LLC and Eagle Ridge Landfill, LLC, which are further discussed in the notes below.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">During
2015 and 2014, the Company assessed its intangible assets, based on estimated future cash flows and concluded that the carrying
amount of its intangible assets did not exceed its fair value.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Investment
in Related Party Affiliate</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company has an investment in a privately held corporation in the mobile apps industry. As the Company exercises significant influence
on this entity, this investment is recorded using the equity method of accounting. The Company monitors this investment for impairment
and makes appropriate reductions in the carrying value if the Company determines that an impairment charge is required based primarily
on the financial condition and near-term prospect of this entity.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Goodwill</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">Goodwill
is the excess of our purchase cost over the fair value of the net assets of acquired businesses. We do not amortize goodwill,
but as discussed in the impairment of long lived assets section above, we assess our goodwill for impairment at least annually.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Capitalized
Software</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company acquired a software product that is under further development. This asset was being amortized over a three to five year
period using the straight-line method of depreciation for book purposes beginning when the software is completed.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company capitalizes internal software development costs subsequent to establishing technological feasibility of a software application
in accordance with guidelines established by “ASC 985-20-25” Accounting for the costs of Computer Software to Be Sold,
Leased or Otherwise Marketed, requiring certain software development costs to be capitalized upon the establishment of technological
feasibility. The establishment of technological feasibility and the ongoing assessment of the recoverability of these costs require
considerable judgement by management with respect to certain external factors such as anticipated future revenue, estimated economic
life and changes in software and hardware technologies. Amortization of the capitalized software development costs begins when
the product is available for general release to customers. Capitalized costs are amortized over the remaining estimated economic
life of the product. For the year ended December 31, 2014, the Company has capitalized costs associated with the development of
several mobile science technology products and mobile apps that has not been placed into service. In 2015, the Company sold the
software to a related party. Refer to the related party note below for further discussion.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Website
Development Costs</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company accounts for website development costs in accordance with Accounting Standards Codification 350-50 “Website Development
Costs”. Accordingly, all costs incurred in the planning stage are expensed as incurred, costs incurred in the website application
and infrastructure development stage that meet specific criteria are capitalized and costs incurred in the day to day operation
of the website are expensed as incurred.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Landfill
Accounting</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Capitalized
landfill costs</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Cost
basis of landfill assets — We capitalize various costs that we incur to make a landfill ready to accept waste. These
costs generally include expenditures for land (including the landfill footprint and required landfill buffer property); permitting;
excavation; liner material and installation; landfill leachate collection systems; landfill gas collection systems; environmental
monitoring equipment for groundwater and landfill gas; and directly related engineering, capitalized interest, on-site road
construction and other capital infrastructure costs. The cost basis of our landfill assets also includes asset retirement
costs, which represent estimates of future costs associated with landfill final capping, closure and post-closure activities.
These costs are discussed below.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Final
capping, closure and post-closure costs — Following is a description of our asset retirement activities and our related
accounting:</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="width: 84px; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">·</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Final
capping — Involves the installation of flexible membrane liners and geosynthetic clay liners, drainage and compacted
soil layers and topsoil over areas of a landfill where total airspace capacity has been consumed. Final capping asset retirement
obligations are recorded on a units-of-consumption basis as airspace is consumed related to the specific final capping event
with a corresponding increase in the landfill asset. The final capping is accounted for as a discrete obligation and recorded
as an asset and a liability based on estimates of the discounted cash flows and capacity associated with the final capping.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="width: 84px; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">·</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Closure
— Includes the construction of the final portion of methane gas collection systems (when required), demobilization and
routine maintenance costs. These are costs incurred after the site ceases to accept waste, but before the landfill is certified
as closed by the applicable state regulatory agency. These costs are recorded as an asset retirement obligation as airspace
is consumed over the life of the landfill with a corresponding increase in the landfill asset. Closure obligations are recorded
over the life of the landfill based on estimates of the discounted cash flows associated with performing closure activities.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="width: 84px; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">·</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Post-closure
— Involves the maintenance and monitoring of a landfill site that has been certified closed by the applicable regulatory
agency. Generally, we are required to maintain and monitor landfill sites for a 30-year period. These maintenance and monitoring
costs are recorded as an asset retirement obligation as airspace is consumed over the life of the landfill with a corresponding
increase in the landfill asset. Post-closure obligations are recorded over the life of the landfill based on estimates of
the discounted cash flows associated with performing post-closure activities.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">We
develop our estimates of these obligations using input from our operations personnel, engineers and accountants. Our estimates
are based on our interpretation of current requirements and proposed regulatory changes and are intended to approximate fair
value. Absent quoted market prices, the estimate of fair value is based on the best available information, including the results
of present value techniques. In many cases, we contract with third parties to fulfill our obligations for final capping, closure
and post closure. We use historical experience, professional engineering judgment and quoted and actual prices paid for similar
work to determine the fair value of these obligations. We are required to recognize these obligations at market prices whether
we plan to contract with third parties or perform the work ourselves. In those instances where we perform the work with internal
resources, the incremental profit margin realized is recognized as a component of operating income when the work is performed.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Once
we have determined the final capping, closure and post-closure costs, we inflate those costs to the expected time of payment
and discount those expected future costs back to present value. During the year ended December 31, 2015 we inflated these
costs in current dollars until the expected time of payment using an inflation rate of 2.5%. We discounted these costs to
present value using the credit-adjusted, risk-free rate effective at the time an obligation is incurred, consistent with the
expected cash flow approach. Any changes in expectations that result in an upward revision to the estimated cash flows are
treated as a new liability and discounted at the current rate while downward revisions are discounted at the historical weighted
average rate of the recorded obligation. As a result, the credit-adjusted, risk-free discount rate used to calculate the present
value of an obligation is specific to each individual asset retirement obligation. The weighted average rate applicable to
our long-term asset retirement obligations at December 31, 2015 is approximately 8.5%.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">We
record the estimated fair value of final capping, closure and post-closure liabilities for our landfills based on the capacity
consumed through the current period. The fair value of final capping obligations is developed based on our estimates of the
airspace consumed to date for the final capping. The fair value of closure and post-closure obligations is developed based
on our estimates of the airspace consumed to date for the entire landfill and the expected timing of each closure and post-closure
activity. Because these obligations are measured at estimated fair value using present value techniques, changes in the estimated
cost or timing of future final capping, closure and post-closure activities could result in a material change in these liabilities,
related assets and results of operations. We assess the appropriateness of the estimates used to develop our recorded balances
annually, or more often if significant facts change.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Changes
in inflation rates or the estimated costs, timing or extent of future final capping, closure and post-closure activities typically
result in both (i) a current adjustment to the recorded liability and landfill asset and (ii) a change in liability
and asset amounts to be recorded prospectively over either the remaining capacity of the related discrete final capping or
the remaining permitted and expansion airspace (as defined below) of the landfill. Any changes related to the capitalized
and future cost of the landfill assets are then recognized in accordance with our amortization policy, which would generally
result in amortization expense being recognized prospectively over the remaining capacity of the final capping or the remaining
permitted and expansion airspace of the landfill, as appropriate. Changes in such estimates associated with airspace that
has been fully utilized result in an adjustment to the recorded liability and landfill assets with an immediate corresponding
adjustment to landfill airspace amortization expense.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="width: 84px; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">·</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Remaining
permitted airspace — Our engineers, in consultation with third-party engineering consultants and surveyors, are responsible
for determining remaining permitted airspace at our landfills. The remaining permitted airspace is determined by an annual
survey, which is used to compare the existing landfill topography to the expected final landfill topography.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="width: 84px; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">·</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Expansion
airspace — We also include currently unpermitted expansion airspace in our estimate of remaining permitted and expansion
airspace in certain circumstances. First, to include airspace associated with an expansion effort, we must generally expect
the initial expansion permit application to be submitted within one year and the final expansion permit to be received within
five years. Second, we must believe that obtaining the expansion permit is likely, considering the following criteria:</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="width: 132px; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">o  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Personnel
are actively working on the expansion of an existing landfill, including efforts to obtain land use and local, state or provincial
approvals;</font></td></tr>
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">o  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">We
have a legal right to use or obtain land to be included in the expansion plan;</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="width: 132px; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">o  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">There
are no significant known technical, legal, community, business, or political restrictions or similar issues that could negatively
affect the success of such expansion; and</font></td></tr>
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">o  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Financial
analysis has been completed based on conceptual design, and the results demonstrate that the expansion meets the Company’s
criteria for investment.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">For
unpermitted airspace to be initially included in our estimate of remaining permitted and expansion airspace, the expansion effort
must meet all of the criteria listed above. These criteria are evaluated by our field-based engineers, accountants, managers and
others to identify potential obstacles to obtaining the permits. Once the unpermitted airspace is included, our policy provides
that airspace may continue to be included in remaining permitted and expansion airspace even if certain of these criteria are
no longer met as long as we continue to believe we will ultimately obtain the permit, based on the facts and circumstances of
a specific landfill.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">When
we include the expansion airspace in our calculations of remaining permitted and expansion airspace, we also include the projected
costs for development, as well as the projected asset retirement costs related to the final capping, closure and post-closure
of the expansion in the amortization basis of the landfill.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">Once
the remaining permitted and expansion airspace is determined in cubic yards, an airspace utilization factor (“AUF”)
is established to calculate the remaining permitted and expansion capacity in tons. The AUF is established using the measured
density obtained from previous annual surveys and is then adjusted to account for future settlement. The amount of settlement
that is forecasted will take into account several site-specific factors including current and projected mix of waste type, initial
and projected waste density, estimated number of years of life remaining, depth of underlying waste, anticipated access to moisture
through precipitation or recirculation of landfill leachate, and operating practices. In addition, the initial selection of the
AUF is subject to a subsequent multi-level review by our engineering group, and the AUF used is reviewed on a periodic basis and
revised as necessary. Our historical experience generally indicates that the impact of settlement at a landfill is greater later
in the life of the landfill when the waste placed at the landfill approaches its highest point under the permit requirements.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">After
determining the costs and remaining permitted and expansion capacity at each of our landfill, we determine the per ton rates that
will be expensed as waste is received and deposited at the landfill by dividing the costs by the corresponding number of tons.
We calculate per ton amortization rates for the landfill for assets associated with each final capping, for assets related to
closure and post-closure activities and for all other costs capitalized or to be capitalized in the future. These rates per ton
are updated annually, or more often, as significant facts change.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">It
is possible that actual results, including the amount of costs incurred, the timing of final capping, closure and post-closure
activities, our airspace utilization or the success of our expansion efforts could ultimately turn out to be significantly different
from our estimates and assumptions. To the extent that such estimates, or related assumptions, prove to be significantly different
than actual results, lower profitability may be experienced due to higher amortization rates or higher expenses; or higher profitability
may result if the opposite occurs. Most significantly, if it is determined that expansion capacity should no longer be considered
in calculating the recoverability of a landfill asset, we may be required to recognize an asset impairment or incur significantly
higher amortization expense. If at any time management makes the decision to abandon the expansion effort, the capitalized costs
related to the expansion effort are expensed immediately.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">For
the year ended December 31, 2015 the Company operations related to its landfill assets and liability are presented in the tables
below:</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; text-decoration: underline; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"><b><u>Landfill
Assets</u></b></font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Year
Ended December 31, 2015</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="width: 89%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">January
1, 2015, Beginning Balance</font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Capital
additions (Landfill acquired on December 22, 2015)</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">3,396,519</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Amortization
of landfill assets</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(3,043</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Asset
retirement adjustments</font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">December
31, 2015, Ending Balance</font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">3,393,476</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="text-decoration: underline; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"><b><u>Landfill
Liability</u></b></font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">January
1, 2015, Beginning Balance</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Obligations
incurred and capitalized (Landfill acquired on December 22, 2015)</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">196,519</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Obligations
settled</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Interest
accretion</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">3,733</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Revisions
in estimates and interest rate assumption</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Acquisition,
divestures and other adjustments</font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">December
31, 2015, Ending Balance</font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">200,252</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Revenue
Recognition</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company recognizes revenue when there is persuasive evidence that services have been provided and a collection is reasonably assured.
The majority of the Company’s revenues are generated from the fees charged for waste collection, transfer, disposal and recycling.  The
fees charged for our services are generally defined in service agreements and vary based on contract-specific terms such as frequency
of service, weight, volume and the general market factors influencing a region’s rate.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Deferred
Revenue</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company records deferred revenue for customers that were billed in advance of services. The balance in deferred revenue represents
amounts billed in October, November and December for services that will be provided during January, February and March.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Cost
of Services</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">Cost
of services include all employment costs associated with waste collection, transfer and disposal, damage claims, landfill costs,
personal property taxes associated with collection vehicles and other direct cost of the collection and disposal process.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Concentrations</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company maintains its cash and cash equivalents in bank deposit accounts, which could, at times, exceed federally insured limits.
The Company has not experienced any losses in such accounts; however, amounts in excess of the federally insured limit may be
at risk if the bank experiences financial difficulties.  The Company places its cash with high credit quality financial
institutions.  The Company’s accounts at these institutions are insured by the Federal Deposit Insurance Corporation
(FDIC) up to $250,000.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">Financial
instruments which also potentially subject the Company to concentrations of credit risk consist principally of trade accounts
receivable; however, concentrations of credit risk with respect to trade accounts receivables are limited due to generally short
payment terms.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company has two contracts that account for a large portion of the Company’s revenue. During the year ended December 31, 2015,
these contracts accounted for approximately 44% of the Company’s revenues and less than 5% of the Company’s accounts
receivable balance at December 31, 2015. During the year ended December 31, 2014, the Company had two customers that accounted
for approximately 46% of the Company’s revenues and approximately 53% of the Company’s accounts receivable balance at
December 31, 2014. The Company did not have any other customers that represented a significant portion of the Company’s revenue
or account receivables for the fiscal years ended December 31, 2015 and 2014, respectively.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Basic
Income (Loss) Per Share</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">Basic
income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted
average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net
income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the year. The
diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive
debt or equity. At December 31, 2015 the Company had two convertible notes outstanding that is not convertible into common stock
until June 2016. Additionally, the Company issued stock warrants for 1,673,559 common shares.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">For
the year ended December 31, 2015, the Company had 1,673,559 of weighted-average common shares relating to the convertible debt,
under the if-converted method, however, these shares are not dilutive because the Company recorded a loss during the fiscal year.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="margin: 0; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">At
December 31, 2015, and 2014 the Company had a series of convertible notes and warrants outstanding that could be converted into
approximately, 2,548,559 and 291,047 common shares, respectively. These are not presented in the consolidated statements of operations
since the company incurred a loss and the effect of these shares is anti- dilutive.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Stock-Based
Compensation</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">Stock-based
compensation is accounted for at fair value in accordance with ASC Topic 718. To date, the Company has not adopted a stock option
plan and has not granted any stock options.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">Stock-based
compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition
in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity
instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively,
the vesting period).  The ASC also require measurement of the cost of employee and director services received in exchange
for an award based on the grant-date fair value of the award.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">Pursuant
to ASC Topic 505-50, for share based payments to consultants and other third-parties, compensation expense is determined at the
“measurement date.”  The expense is recognized over the service period of the award.  Until the
measurement date is reached, the total amount of compensation expense remains uncertain.  The Company initially records
compensation expense based on the fair value of the award at the reporting date.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company recorded stock based compensation expense of $7,356,000 and $339,000 during the years ended December 31, 2015 and 2014,
respectively.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Recent
Accounting Pronouncements</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s
results of operations, financial position or cash flow.</font></p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following is a summary of property, plant,
and equipment—at cost, less accumulated depreciation:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: center"><b>March 31, 2016 (UNAUDITED)</b></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><b>December 31, 2015</b></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%; text-align: left">Land</td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 8%; text-align: right">1,690,000</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 8%; text-align: right">1,690,000</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Buildings & Building Improvements</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">692,156</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">692,156</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Furniture & office equipment</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">288,726</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">258,702</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Containers</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">4,524,382</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">4,453,386</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1pt; text-align: left">Trucks, Machinery, & Equipment</td>
<td style="padding-bottom: 1pt; text-align: right"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td>
<td style="border-bottom: Black 1pt solid; text-align: right">12,209,606</td>
<td nowrap="nowrap" style="padding-bottom: 1pt; text-align: left"> </td>
<td style="padding-bottom: 1pt; text-align: right"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td>
<td style="border-bottom: Black 1pt solid; text-align: right">9,948,686</td>
<td nowrap="nowrap" style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Total cost</td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">19,404,870</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">17,042,930</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1pt; text-align: left">Less accumulated depreciation</td>
<td style="padding-bottom: 1pt; text-align: left"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td>
<td style="border-bottom: Black 1pt solid; text-align: right">(3,364,035</td>
<td nowrap="nowrap" style="padding-bottom: 1pt; text-align: left">)</td>
<td style="padding-bottom: 1pt; text-align: left"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td>
<td style="border-bottom: Black 1pt solid; text-align: right">(2,609,190</td>
<td nowrap="nowrap" style="padding-bottom: 1pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.25pt; text-align: left">Net property and Equipment</td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">16,040,835</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">14,433,740</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of March 31, 2016, the Company has $395,000
of land and building which are held for sale and included in amounts noted above. These held for sale assets were not depreciated
during the three months ended March 31, 2016. Depreciation expense for three months ended March 31, 2016 and 2015 was $780,919
and $394,403, respectively.</p><p style="margin: 0pt"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The following is a summary of property, plant, and equipment—at
cost, less accumulated depreciation:</p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt"><b>2015</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt"><b>2014</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 8pt">Land</font></td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">1,690,000</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Building & Improvements</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">692,156</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Furniture & Office Equipment</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">258,702</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">240,102</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Containers</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">4,453,386</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">2,847,205</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Truck, Machinery & Equipment</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">9,948,686</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">5,523,773</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Total Cost</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">17,042,930</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">8,611,080</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Less accumulated depreciation</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(2,609,190</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(956,315</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Net property, plant and Equipment</font></td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">14,433,740</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">7,654,765</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">As of December 31, 2015 the Company has $395,000 of land
and building which are held for sale and included in amounts noted above. These held for sale assets were not depreciated
during the year ending December 31, 2015. Depreciation expense for the years ended December 31, 2015 and 2014 was $1,683,000
and $965,000, respectively.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">During 2015 and 2014, the Company assessed these long-term assets,
based on estimated future cash flows and concluded that the carrying amount of its long-term assets did not exceed its fair value,
therefore the Company did not record any impairment loss on these assets.</p>
<p style="margin: 0pt"></p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company had the following long-term debt:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: center"><b>March 31, 2016 (UNAUDITED)</b></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>December 31,</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2015</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%; text-align: left">Goldman Sachs - Tranche A Term Loan - LIBOR Interest</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 8%; text-align: right">40,000,000</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 8%; text-align: right">40,000,000</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Goldman Sachs - Revolver</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">2,150,000</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Goldman Sachs - MDTL</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Convertible Notes Payable</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">1,250,000</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">1,250,000</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Capitalized lease - financing company, secured by equipment</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">33,882</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">37,097</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Equipment loans</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">364,764</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">395,118</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Notes payable to seller of Meridian, subordinated debt</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">1,475,000</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">1,475,000</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1pt; text-align: left">Less: debt discount</td>
<td style="padding-bottom: 1pt; text-align: right"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td>
<td style="border-bottom: Black 1pt solid; text-align: right">(2,040,460</td>
<td nowrap="nowrap" style="padding-bottom: 1pt; text-align: left">)</td>
<td style="padding-bottom: 1pt; text-align: right"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td>
<td style="border-bottom: Black 1pt solid; text-align: right">(2,152,603</td>
<td nowrap="nowrap" style="padding-bottom: 1pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 0.25in; text-align: left"><b>Total debt</b></td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">43,233,186</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">41,004,612</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1pt; text-align: left">Less: current portion</td>
<td style="padding-bottom: 1pt; text-align: right"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td>
<td style="border-bottom: Black 1pt solid; text-align: right">(268,994</td>
<td nowrap="nowrap" style="padding-bottom: 1pt; text-align: left">)</td>
<td style="padding-bottom: 1pt; text-align: right"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td>
<td style="border-bottom: Black 1pt solid; text-align: right">(417,119</td>
<td nowrap="nowrap" style="padding-bottom: 1pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.25pt; padding-left: 0.25in; text-align: left"><b>Long term debt less current portion</b></td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">42,964,192</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">40,587,493</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Convertible Notes Payable</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company issued two promissory notes to related
parties during the year ended December 31, 2014. These notes totaled $125,000 and are generally convertible into common stock of
the Company at discounts of 20% to 25% of the lowest average trading prices for the stock during periods five to one day prior
to the conversion date. These notes bear interest at 10% to 12%, are unsecured, and mature within one year of the date issued.
The notes were issued to provide working capital for the Company. These notes are considered a stock settled debt in accordance
with ASC 480 since any future stock issued upon conversion will have a fixed monetary value. Due to the conversion feature included
in the notes, the Company has recorded a premium on the notes totaling $31,250 as of December 31, 2014.  This amount
has been charged to interest expense by the Company.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In 2015, as part of the purchase price consideration
of the Christian Disposal acquisition, the Company issued a convertible promissory note to seller in the amount of $1,250,000.
The note bears interest at 8% and matures on December 31, 2020. The seller may convert all or any part of the outstanding and unpaid
amount of this note into fully paid and non-assessable common stock in accordance with the agreement.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In previous periods the Company issued two other
notes to other related parties. These notes totaled $110,000 and are generally convertible into common stock of the Company at
discounts of 20% to 25% of the lowest average trading prices for the stock during periods five to one day prior to the conversion
date.  These notes bear interest at 10% to 12%, are unsecured, and mature within one year of the date issued. The notes
were issued to provide working capital for the Company.  These  notes are considered a stock settled debt in
accordance with ASC 480 since any future stock issued upon conversion will have a fixed monetary value.  Due to the conversion
feature included in the notes, the Company has recorded a premium on the notes totaling $35,833 as of December 31, 2014.  This
amount has been charged to interest expense by the Company.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In 2015, approximately $225,000 of the issued
promissory notes were converted into approximately 461,000 shares at the contractual conversion price.  At March 31,
2016 the Company had $12,500 remaining in convertible notes to related parties, which includes $2,500 in put premiums.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Notes Payable</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At December 31, 2014 the Company had a short
term, non-interest bearing note payable of $150,000 which was incurred in connection with the Membership Interest Purchase Agreement
discussed above.  The Company also had a loan from Here to Serve Holding Corp. due to expenses paid by Here to Serve
on behalf of the Company prior to the recapitalization. This loan totaled $376,585 bringing total notes payable to $526,585. In
2015, the short term, non-interest bearing note was paid off, and at March 31, 2016, the Company’s loan from Here to Serve
Holding Corp. was $359,891.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Praesidian Notes Payable</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On August 6, 2015, the Company refinanced its
long-term debt payable to Comerica Bank. Proceeds from notes issued by the Company to Praesidian Capital Opportunity Fund III,
LP and Praesidian Capital Opportunity Fund III-A, LP (together referred to as Praesidian) were $10,845,000. These funds were distributed
as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%; text-align: left">Payoff of short term bridge financing</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 8%; text-align: right">432,938</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Payoff of lines of credit with Commerica Bank</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">1,745,799</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Payoff of senior debt to Comerica Bank</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">7,953,433</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 0.95pt; text-align: left">Refinancing fees</td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">712,830</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">10,845,000</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company’s Senior Secured Loan with
Comerica Bank had an interest rate of LIBOR plus 4.25% with a two-year term based on a seven-year amortization schedule. In addition,
the Company had a working capital line of credit with Comerica Bank of $1,250,000 at 4.75% of which the Company had drawn down
$1,185,081 and $1,085,160 as of August 6, 2015 and December 31, 2014, respectively.  There was CAPEX line of credit of
$750,000, of which the Company had drawn down $560,718 and $590,000 as of August 6, 2015 and December 31, 2014, respectively; again
at 4.75% interest. As noted above, these debts were paid off from the proceeds received from Praesidian.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The debt to Praesidian had a maturity date of
August 6, 2020 with interest paid monthly at an annual rate of 14%. In addition to the 14% interest rate, the Company issued to
Praesidian warrants to purchase 1,293,022 shares of Common Stock of the Company. The Company repaid this debt in full. See discussion
below.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Goldman Sachs Credit Agreement</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On December 22, 2015, in connection with the
closing of acquisitions of Christian Disposal, LLC and certain assets of Eagle Ridge Landfill, LLC, the Company was extended certain
credit facilities by Goldman Sachs, consisting of $40,000,000 aggregate principal amount of Tranche A Term Loans, $10,000,000 aggregate
principal amount of Multi- Draw Term Loans and up to $5,000,000 aggregate principal amount of Revolving Commitments.  During
the three months ended March 31, 2016, the Company borrowed $2,150,000 in relation to the Revolving Commitments. At March 31, 2016,
the Company had at total outstanding balance of $42,150,000 consisting of the Tranche A Term Loan and draw of the Revolving Commitments.
The loans are collateralized by the assets of the Company. The debt has a maturity date of December 22, 2020 with interest paid
monthly at an annual rate of 9%. In addition, there is a commitment fee paid monthly on the Mutli-Draw Term Loans and Revolving
Commitments at an annual rate of 0.5%.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The proceeds of the loans were used to partially
fund the acquisitions referenced above and refinance existing debt with Praesidian, among other things. The funds to payoff the
Praesidian notes were distributed as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%; text-align: left">Aggregate outstanding principal balance of the Notes</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 8%; text-align: right">10,845,043</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Aggregate accrued but unpaid interest on the Notes</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">82,844</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Prepayment Premium</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">325,351</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Accrued PIK</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">9,941</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Tax Liability</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">150,000</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 0.95pt; text-align: left">Accrued but unpaid fees and expenses</td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">4,000</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Payoff Amount</td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">11,417,179</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company re-paid in full and terminated its
agreements with Praesidian which effected the cancellation of certain warrants that the Company issued to Fund III for the purchase
of 931,826 shares of the Company’s common stock and to Fund III-A for the purchase of 361,196 shares of the Company’s
common stock. In consideration for the cancellation of the Praesidian Warrants, the Company issued to Praesidian Capital Opportunity
Fund III, LP, 1,153,052 shares of common stock and issued to Praesidian Capital Opportunity Fund III-A, LP, 446,948 shares of common
stock. Due to the early termination of the notes and cancellation of the warrants, the Company recorded a loss on extinguishment
of debt of $1,899,161 in the year ended December 31, 2015.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In addition, in connection with the credit agreement,
the Company issued warrants to Goldman Sachs for the purchase of shares of the Company’s common stock equivalent to a 6.5%
Percentage Interest at a purchase price equal to $449,553, exercisable on or before December 22, 2023. The warrants grant the holder
certain other rights, including registration rights, preemptive rights for certain capital raises, board observation rights and
indemnification. See discussion of warrants below.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Subordinated Debt</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In connection with the acquisition with Meridian
Waste Services, LLC on May 15, 2014, notes payable to the sellers of Meridian issued five-year term subordinated debt loans paying
interest at 8%. At March 31, 2016 and December 31, 2015, the balance on these loans was $1,475,000 and $1,475,000, respectively.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The debt payable to Comerica at December 31,
2015 and the Equipment loans at December 31, 2015 were the debt of Here to Serve- Missouri Waste Division, LLC, a subsidiary of
the Company.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Equipment Loans</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the year ended December 31, 2015, the
Company entered into four long-term loan agreements in connection with the purchase of equipment with rates between 4% and 5%.
At March 31, 2016, the balance of these four loans was $364,764.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Derivative Liability - Warrants</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As indicated above, the Company issued warrants
to Goldman Sachs to purchase shares of common stock.  Due to the put feature contained in the agreement, a derivative
liability was recorded for the warrant.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company’s derivative warrant instrument
related to Goldman Sachs has been measured at fair value at March 31, 2016, using the Black-Scholes model. The liability is revalued
at each reporting period and changes in fair value are recognized currently in the consolidated statement of operations.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The key inputs used in the March 31, 2016 and
December 31, 2015 fair value calculations were as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; padding-bottom: 0.95pt">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>March 31,</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2016</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: center"> </td>
<td style="padding-bottom: 0.95pt; text-align: center"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>December 31,</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2015</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%; text-align: left">Purchase Price</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 8%; text-align: right">450,000</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 8%; text-align: right">450,000</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Time to expiration</td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right">12/22/2023</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right">12/22/2023</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Risk-free interest rate</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">1.60</td>
<td nowrap="nowrap" style="text-align: left">%</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">2.15</td>
<td nowrap="nowrap" style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Estimated volatility</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">45</td>
<td nowrap="nowrap" style="text-align: left">%</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">45</td>
<td nowrap="nowrap" style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Dividend</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td nowrap="nowrap" style="text-align: left">%</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td nowrap="nowrap" style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Stock price on March 31, 2016</td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">1.80</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">1.90</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Expected forfeiture rate</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td nowrap="nowrap" style="text-align: left">%</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td nowrap="nowrap" style="text-align: left">%</td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left">The change in the market value for the period ending
March 31, 2016 is as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%; text-align: left">Fair value of warrants @ December 31, 2015</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 8%; text-align: right">2,820,000</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 0.95pt; text-align: left">Unrealized gain on derivative liability</td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(180,000</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.25pt; text-align: left">Fair value of warrants @ March 31, 2016</td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">2,640,000</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td></tr>
</table><p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company had the following long-term debt:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt"><b>December 31, 2015</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt"><b>December 31, 2014</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 8pt">Debt payable to Comerica Bank, senior debt</font></td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">8,708,333</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Debt payable to Praesidian Capital Opportunity Fund III, senior lender</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Debt payable to Praesidian Capital Opportunity Fund III-A, senior lender</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Goldman Sachs - Tranche A Term Loan - LIBOR Interest</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">40,000,000</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Goldman Sachs - Revolver</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Goldman Sachs - MDTL</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Convertible Notes Payable</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,250,000</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Capitalized lease - financing company, secured by equipment,</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">37,097</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Equipment loans</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">395,118</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Notes payable to seller of Meridian, subordinated debt</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,475,000</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,475,000</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Less: debt discount</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(2,152,603</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 9pt"><font style="font-size: 8pt"><b>Total debt</b></font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">41,004,611</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">10,183,333</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Less: current portion</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(417,119</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(1,357,143</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 3pt; padding-left: 9pt"><font style="font-size: 8pt"><b>Long term debt less current portion</b></font></td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">40,587,493</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">8,826,190</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><u>Convertible Notes Payable</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company issued two promissory notes to related
parties during the year ended December 31, 2014. These notes totaled $125,000 and are generally convertible into common stock of
the Company at discounts of 20% to 25% of the lowest average trading prices for the stock during periods five to one day prior
to the conversion date. These notes bear interest at 10% to 12%, are unsecured, and mature within one year of the date issued.
The notes were issued to provide working capital for the Company. These notes are considered a stock settled debt in accordance
with ASC 480 since any future stock issued upon conversion will have a fixed monetary value. Due to the conversion feature included
in the notes, the Company has recorded a premium on the notes totaling $31,250 as of December 31, 2014.  This amount
has been charged to interest expense by the Company.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In 2015, as part of the purchase price consideration
of the Christian Disposal acquisition, the Company issued a convertible promissory note to seller in the amount of $1,250,000.
The note bears interest at 8% and matures on December 31, 2020. The seller may convert all or any part of the outstanding and unpaid
amount of this note into fully paid and non-assessable common stock in accordance with the agreement.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">In previous periods the Company issued two other notes to other related
parties. These notes totaled $110,000 and are generally convertible into common stock of the Company at discounts of 20% to 25%
of the lowest average trading prices for the stock during periods five to one day prior to the conversion date.  These
notes bear interest at 10% to 12%, are unsecured, and mature within one year of the date issued. The notes were issued to provide
working capital for the Company.   These notes are considered a stock settled debt in accordance with ASC 480 since
any future stock issued upon conversion will have a fixed monetary value.  Due to the conversion feature included in
the notes, the Company has recorded a premium on the notes totaling $35,833 as of December 31, 2014.  This amount has
been charged to interest expense by the Company.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">In 2015, approximately $225,000 of the issued promissory notes were
converted into approximately 461,000 shares at the contractual conversion price.  At December 31, 2015 the Company had
$12,500 remaining in convertible notes to related parties, which includes $2,500 in put premiums.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><u>Notes Payable</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At December 31, 2014 the Company had a short
term, non-interest bearing note payable of $150,000 which was incurred in connection with the Membership Interest Purchase Agreement
discussed above.  The Company also had a loan from Here to Serve Holding Corp. due to expenses paid by Here to Serve
on behalf of the Company prior to the recapitalization. This loan totaled $376,585 bringing total notes payable to $526,585. In
2015, the short term, non-interest bearing note was paid off, and at December 31, 2015, the Company’s loan from Here to Serve
Holding Corp. was $359,891.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><u>Praesidian Notes Payable</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">On August 6, 2015, the Company refinanced its long-term debt payable
to Comerica Bank. Proceeds from notes issued by the Company to Praesidian Capital Opportunity Fund III, LP and Praesidian Capital
Opportunity Fund III-A, LP (together referred to as Praesidian) were $10,845,000. These funds were distributed as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font-size: 8pt">Payoff of short term bridge financing</font></td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">432,938</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Payoff of lines of credit with Commerica Bank</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,745,799</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Payoff of senior debt to Comerica Bank</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">7,953,433</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Refinancing fees</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">712,830</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"> </td>
<td style="text-align: right; padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="text-align: right; border-bottom: Black 2.5pt double"><font style="font-size: 8pt">10,845,000</font></td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company’s Senior Secured Loan with Comerica Bank had an
interest rate of LIBOR plus 4.25% with a two-year term based on a seven-year amortization schedule. In addition, the Company had
a working capital line of credit with Comerica Bank of $1,250,000 at 4.75% of which the Company had drawn down $1,185,081 and $1,085,160
as of August 6, 2015 and December 31, 2014, respectively.  There was CAPEX line of credit of $750,000, of which the Company
had drawn down $560,718 and $590,000 as of August 6, 2015 and December 31, 2014, respectively; again at 4.75% interest. As noted
above, these debts were paid off from the proceeds received from Praesidian.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The debt to Praesidian had a maturity date of August 6, 2020 with
interest paid monthly at an annual rate of 14%. In addition to the 14% interest rate, the Company issued to Praesidian warrants
to purchase 1,293,022 shares of Common Stock of the Company.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><u>Goldman Sachs Credit Agreement</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">On December 22, 2015, in connection with the closing of acquisitions
of Christian Disposal, LLC and certain assets of Eagle Ridge Landfill, LLC, the Company was extended certain credit facilities
by Goldman Sachs, consisting of $40,000,000 aggregate principal amount of Tranche A Term Loans, $10,000,000 aggregate principal
amount of Multi- Draw Term Loans and up to $5,000,000 aggregate principal amount of Revolving Commitments.  At December
31, 2015, only the Tranche A Term Loan was drawn and had an outstanding balance of $40,000,000. <font style="font: 8pt Times New Roman, Times, Serif">It
</font>is collateralized by the assets of the Company. The debt has a maturity date of December 22, 2020 with interest paid monthly
at an annual rate of 9%. In addition, there is a commitment fee paid monthly on the Mutli-Draw Term Loans and Revolving Commitments
at an annual rate of 0.5%.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The proceeds of the loans were used to partially fund the acquisitions
referenced above and refinance existing debt with Praesidian, among other things. The funds to payoff the Praesidian notes were
distributed as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font-size: 8pt">Aggregate outstanding principal balance of the Notes</font></td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">10,845,043</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Aggregate accrued but unpaid interest on the Notes</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">82,844</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Prepayment Premium1</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">325,351</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Accrued PIK</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">9,941</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Tax Liability</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">150,000</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Accrued but unpaid fees and expenses</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">4,000</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 8pt">Payoff Amount</font></td>
<td style="text-align: right; padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="text-align: right; border-bottom: Black 2.5pt double"><font style="font-size: 8pt">11,417,179</font></td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company re-paid in full and terminated its
agreements with Praesidian which effected the cancellation of certain warrants that the Company issued to Fund III for the purchase
of 931,826 shares of the Company’s common stock and to Fund III-A for the purchase of 361,196 shares of the Company’s
common stock. In consideration for the cancellation of the Praesidian Warrants, the Company issued to Praesidian Capital Opportunity
Fund III, LP, 1,153,052 shares of common stock and issued to Praesidian Capital Opportunity Fund III-A, LP, 446,948 shares of common
stock. Due to the early termination of the notes and cancellation of the warrants, the Company recorded a loss on extinguishment
of debt of $1,899,161 in the year ended December 31, 2015.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">In addition, in connection with the credit agreement, the Company
issued warrants to Goldman Sachs for the purchase of shares of the Company’s common stock equivalent to a 6.5% Percentage
Interest at a purchase price equal to $449,553, exercisable on or before December 22, 2023. The warrants grant the holder certain
other rights, including registration rights, preemptive rights for certain capital raises, board observation rights and indemnification.
See discussion of warrants below.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><u>Subordinated Debt</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">In connection with the acquisition with Meridian Waste Services,
LLC on May 15, 2014, notes payable to the sellers of Meridian issued five-year term subordinated debt loans paying interest at
8%. At December 31, 2015 and December 31, 2014, the balance on these loans was $1,475,000 and $1,475,000, respectively.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The debt payable to Comerica at December 31, 2014 and the Equipment
loans at December 31, 2015 were the debt of Here to Serve- Missouri Waste Division, LLC, a subsidiary of the Company.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><u>Equipment Loans</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Finally, during the year ended December 31, 2015, the Company entered
into four long-term loan agreements in connection with the purchase of equipment with rates between 4% and 5%. At December 31,
2015, the balance of these four loans was $425,149.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><u>Derivative Liability - Warrants</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">As indicated above, the Company issued warrants to Praesidian and
Goldman Sachs to purchase shares of common stock.  Due to the put features contained in the agreements, derivative liabilities
were recorded for the warrants.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company’s derivative warrant instruments related to Praesidian
have been measured at fair value at the date of cancellation, December 22, 2015, using the Black-Scholes model. The Back-Scholes
model requires six basic data inputs: the exercise or strike price, time to expiration, the risk free interest rate, the current
stock price, the estimated volatility of the stock price in the future and the dividend rate. The key inputs used in the December
22, 2015 fair value calculations were as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt"><b>December 22, 2015</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font-size: 8pt">Current exercise price</font></td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">0.025</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Time to expiration</font></td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right"><font style="font-size: 8pt">8/6/2016</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Risk-free interest rate</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.33</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Estimated volatility</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">230</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Dividend</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Stock price on December 22, 2015</font></td>
<td style="text-align: right"> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">1.50</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Expected forfeiture rate</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">%</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company’s derivative warrant instruments related to Goldman
Sachs have been measured at fair value at the date of issuance December 22, 2015 and December 31, 2015, using the Black-Scholes
model. The liability is revalued at each reporting period and changes in fair value are recognized currently in the consolidated
statement of operations.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The key inputs used in the December 22, and December 31, 2015 fair
value calculations were as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt"><b>December 22, 2015</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font-size: 8pt">Purchase Price</font></td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">450,000</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Time to expiration</font></td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right"><font style="font-size: 8pt">12/22/2023</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Risk-free interest rate</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">2.11</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Estimated volatility</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">45</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Dividend</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Stock price on December 22, 2015</font></td>
<td style="text-align: right"> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">1.50</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Expected forfeiture rate</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">%</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt"><b>December 31, 2015</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font-size: 8pt">Purchase Price</font></td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">450,000</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Time to expiration</font></td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right"><font style="font-size: 8pt">12/22/2023</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Risk-free interest rate</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">2.15</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Estimated volatility</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">45</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Dividend</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Stock price on December 31, 2015</font></td>
<td style="text-align: right"> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">1.90</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Expected forfeiture rate</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">%</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The change in the market value for the period ending December 31,
2015 is as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font-size: 8pt">Fair value of warrants @ December 31, 2014</font></td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Issuance of Praesdian warrants @ August 6, 2015</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">904,427</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Unrealized loss on derivative liability</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,004,213</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Cancellation of Praesidian warrants @ December 22, 2015</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(1,908,640</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Issuance of Goldman warrants @ December 22, 2015</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">2,160,000</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Unrealized loss on derivative liability</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">660,000</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Fair value of warrants @ December 31, 2015</font></td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2,820,000</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><u>Derivative Liability – Interest Rate Swap</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company sometimes borrows at variable rates and uses interest
rate swaps as cash flow hedges of future interest payments, which have the economic effect of converting borrowings from floating
rates to fixed rates. The interest rate swaps allow the Company to raise long-term borrowings at floating rates and swap them into
fixed rates that are lower than those available if it borrowed at fixed rates directly. Under the interest rate swaps, the Company
agrees with other parties to exchange, at specified intervals, the difference between fixed contract rates and floating rate interest
amounts calculated by reference to the agreed notional principal amounts.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At December 31, 2014, the Company had $5,414,634
of non-amortizing variable rate debt outstanding with interest payments due on a monthly basis. The note accrues interest at the
1-month LIBOR plus 4.25%. In order to hedge interest rate risk, the Company entered into an interest rate swap for a notional amount
of $5,414,634 at fixed rate of 4.75%. Under the swap agreement, the Company pays the fixed rate on the $5,414,634 notional amount
on a monthly basis, and receives the 1-month LIBOR plus 4.25% on a monthly basis. Payments are settled on a net basis, and the
Company has effectively converted its variable-rate debt into fixed-rate debt with an effective interest rate of 4.75%.  As
discussed above, the debts to Comerica were paid off from the funding received from Praesidian. The net settlement amount of the
interest rate swap as of December 31, 2015 and December 31, 2014 was $0 and $40,958, respectively.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Common Stock</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has authorized 75,000,000 shares
of $0.025 par common stock. At March 31, 2016 and December 31, 2015 there were 24,537,982 and 21,038,650 shares issued and outstanding.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Treasury Stock</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During 2014, the Company’s Board of Directors
authorized a stock repurchase of 230,000 shares of its common stock for approximately $230,000 at an average price of $1.00 per
share. As March 31, 2016 and December 31, 2015 the Company holds 230,000 shares of its common stock in its treasury.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Preferred Stock</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has authorized 5,000,000 shares
of Preferred Stock, for which two classes have been designated to date. Series A has 51 shares issued and outstanding and Series
B has 71,210 shares issued and outstanding as of March 31, 2016 and December 31, 2015, respectively.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Each share of Series A Preferred Stock has no
conversion rights, is senior to any other class or series of capital stock of the Company and has special voting rights. Each one
(1) share of Series A Preferred Stock shall have voting rights equal to (x) 0.019607 multiplied by the total issued and outstanding
Common Stock eligible to vote at the time of the respective vote (the “Numerator”), divided by (y)  0.49,
minus (z) the Numerator.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Holders of Series B Preferred Stock shall be
entitled to receive when and if declared by the Board of Directors cumulative dividends at the rate of twelve percent (12%) of
the Original Issue Price.  In the event of any liquidation, dissolution or winding up of the Company, either voluntary
or involuntary, the holders of Series B Preferred Stock shall be entitled to receive, immediately prior and in preference to any
distribution to holders of the Company’s common stock, an amount per share equal to the sum of $100.00 and any accrued and
unpaid dividends of the Series B Preferred Stock.  Each share of Series B Preferred Stock may be converted at the option
of the holder into the Company’s Common stock.  The shares shall be converted using the “Conversion Formula”:
divide the Original Issue Price by 75% of the average closing bid price of the Common Stock for the five (5) consecutive trading
days ending on the trading day of the receipt by the Company of the notice of conversion.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At March 31, 2016 and December 31, 2015, the
Company’s Series B Preferred Stock dividends in arrears on the 12% cumulative preferred stock were approximately $1,246,175
($17.50 per share) and $1,033,000 ($14.50 per share), respectively.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Common Stock Transactions</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the three months ended March 31, 2016
and the year ended December 31, 2015, the Company issued, 3,499,332 and 11,075,232 shares of common stock, respectively.  The
fair values of the shares of common stock were based on the quoted trading price on the date of issuance. Of the 3,499,332 shares
issued for the three months ended March 31, 2016, the Company:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 48px; font: 8pt Times New Roman, Times, Serif; text-align: justify">1.  </td>
<td style="font: 8pt Times New Roman, Times, Serif; text-align: justify">Issued 517,188 of these shares were issued to vendors for services rendered generating a professional fees expense of $778,985;</td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 48px; font: 8pt Times New Roman, Times, Serif; text-align: justify">2.  </td>
<td style="font: 8pt Times New Roman, Times, Serif; text-align: justify">Issued 2,000,000 of these shares to officers and employees as incentive compensation resulting in compensation expense of $3,100,000;</td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 48px; font: 8pt Times New Roman, Times, Serif; text-align: justify">3.  </td>
<td style="font: 8pt Times New Roman, Times, Serif; text-align: justify">Issued 982,144 shares of common stock as part of a private placement offering to accredited investors for aggregate gross proceeds to the Company of $1,100,000. The Company expensed certain issuance costs associated with this offering.</td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has issued and outstanding warrants
of 1,673,559 common shares, as adjusted, with the current exercise price of $0.269, as adjusted, expiring December 31, 2023. A
summary of the status of the Company’s outstanding common stock warrants as of March 31, 2016 and December 31, 2015, with
changes during the years ending on those dates are as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; padding-bottom: 0.95pt">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Number</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>of</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Shares</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: center"><b>Average Exercise Price</b></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; padding-bottom: 0.95pt">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>If</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Exercised</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><b>Expiration Date</b></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%; text-align: left">Granted - Praesidian</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 9%; text-align: right">1,293,022</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 9%; text-align: right">0.025</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 9%; text-align: right">32,326</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 9%; text-align: right">-</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Cancellation - Praesidian</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">(1,293,022</td>
<td nowrap="nowrap" style="text-align: left">)</td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">0.025</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">(32,326</td>
<td nowrap="nowrap" style="text-align: left">)</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Granted - Goldman Sachs</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">1,673,559</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">0.269</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">449,518</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right">December 31, 2023</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Forfeited</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 0.95pt; text-align: left">Exercised</td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.25pt; text-align: left">Outstanding, December 31, 2015</td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: right">1,673,559</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">449,518</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.25pt; text-align: left">Warrants exercisable at December 31, 2015</td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: right">1,673,559</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Granted</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Forfeited</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 0.95pt; text-align: left">Exercised</td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.25pt; text-align: left">Outstanding, MArch 31, 2016</td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: right">1,673,559</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">449,518.00</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.25pt; text-align: left">Warrants exercisable at March 31, 2016</td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: right">1,673,559</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td></tr>
</table><table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif; text-decoration: underline"><font style="font: 8pt Times New Roman, Times, Serif"><u>Common
Stock</u></font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company has authorized 75,000,000 shares of $0.025 par common stock. At December 31, 2015 and 2014 there were 21,038,650 and 9,963,418
shares issued and outstanding.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif; text-decoration: underline"><font style="font: 8pt Times New Roman, Times, Serif"><u>Treasury
Stock</u></font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">During
2014, the Company’s Board of Directors authorized a stock repurchase of 230,000 shares of its common stock for approximately
$230,000 at an average price of $1.00 per share. As of December 31, 2015 and 2014 the Company holds 230,000 shares of its common
stock in its treasury.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif; text-decoration: underline"><font style="font: 8pt Times New Roman, Times, Serif"><u>Preferred
Stock</u></font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company has authorized 5,000,000 shares of Preferred Stock, for which two classes have been designated to date. Series A has
51 shares issued and outstanding and Series B has 71,210 shares issued and outstanding as of December 31, 2015 and
2014, respectively.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">Each
share of Series A Preferred Stock has no conversion rights, is senior to any other class or series of capital stock of the Company
and special voting rights. Each one (1) share of Series A Preferred Stock shall have voting rights equal to (x) 0.019607 multiplied
by the total issued and outstanding Common Stock eligible to vote at the time of the respective vote (the “Numerator”),
divided by (y)  0.49, minus (z) the Numerator.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">Holders
of Series B Preferred Stock shall be entitled to receive when and if declared by the Board of Directors cumulative dividends at
the rate of twelve percent (12%) of the Original Issue Price.  In the event of any liquidation, dissolution or winding
up of the Company, either voluntary or involuntary, the holders of Series B Preferred Stock shall be entitled to receive, immediately
prior and in preference to any distribution to holders of the Company’s common stock, an amount per share equal to the sum
of $100.00 and any accrued and unpaid dividends of the Series B Preferred Stock.  Each share of Series B Preferred Stock
may be converted at the option of the holder into the Company’s Common stock.  The shares shall be converted using
the “Conversion Formula”: divide the Original Issue Price by 75% of the average closing bid price of the Common Stock
for the five (5) consecutive trading days ending on the trading day of the receipt by the Company of the notice of conversion.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="margin: 0; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">At
December 31, 2015 and 2014, the Company’s Series B Preferred Stock dividends in arrears on the 12% cumulative preferred stock
were approximately $1,033,000 ($14.50 per share) and $2.50 ($2.50 per share), respectively.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif; text-decoration: underline"><font style="font: 8pt Times New Roman, Times, Serif"><u>Common
Stock Transactions</u></font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif">During
the years ended December 31, 2015 and 2014, the Company issued, 11,075,232 and 9,054,134 shares of common stock, respectively.  The
fair values of the shares of common stock were based on the quoted trading price on the date of issuance.  Of the 11.1
million shares issued for year ending December 31, 2015, the Company:</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="width: 60px; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">1.  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Issued
1,573,550 of these shares were issued to vendors for services generating a professional fees expense of $830,970;</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="width: 60px; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">2.  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Issued
5,690,843 of these shares to officers and employees as incentive compensation resulting in compensation expense of $7,356,180;</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="width: 60px; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">3.  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Issued
460,839 shares of common stock, due to the conversion of related party debt.  Per the convertible note agreement,
the shares were converted at 75% of the closing bid price on the date of conversion.  The value of the debt and
accrued interest converted was $318,927;</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="width: 60px; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">4.  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Issued
1,750,000 shares as part of the acquisition of Christian Disposal LLC, these shares were record as part of the purchased price
consideration as noted above. These share were valued at market as of the date of the acquisition; and,</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="width: 60px; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">5.  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Issued
1,600,000 shares of common stock, due to the cancellation of Praesidian warrants. As part of this extinguishment of debt the
company recorded a loss of approximately, $1.8 million.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">For
fiscal year ended December 31, 2014, the Company acquired the membership interest of HTSMWD, HTST and HTSGWD in exchange for 9,054,134
shares of the Company’s common stock. This transaction was closed on October 17, 2014 and HTSMWD became wholly-owned by the
Company. The Company is deemed to have issued 1,139,284 shares of common stock which represents the outstanding common shares
of the Company just prior to the closing of the transaction.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company has issued and outstanding warrants of 1,673,559 common shares, as adjusted, with the current exercise price of $0.269,
as adjusted, expiring December 31, 2023. A summary of the status of the Company’s outstanding common stock warrants as of
December 31, 2015 and 2014, with changes during the years ending on those dates are as follows:</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Number</b></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>of</b></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Shares</b></font></p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Average
Exercise Price</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>If</b></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Exercised</b></font></p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Expiration
Date</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="width: 52%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Outstanding,
January 1, 2014</font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 9%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 9%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 9%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Granted</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Forfeited</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Exercised</font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Outstanding,
December 31, 2014</font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Granted
- Praesidian</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">1,293,022</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">0.025</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">32,326</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Forfeited/Cancellation
- Praesidian</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(1,293,022</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">0.025</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(32,326</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Granted
- Goldman Sachs</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">1,673,559</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">0.269</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">449,518</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">December 31, 2023</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Forfeited/Cancellation
- Goldman Sachs</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Exercised</font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Outstanding,
December 31, 2015</font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">1,673,559</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">449,518</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Warrants exercisable
at December 31, 2015</font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">1,673,559</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">ASC Topic 820 establishes a fair value hierarchy,
giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data and requires disclosures
for assets and liabilities measured at fair value based on their level in the hierarchy. Also, ASC Topic 820 provides clarification
that in circumstances, in which a quoted price in an active market for the identical liabilities is not available, a reporting
entity is required to measure fair value using one or more of the techniques provided for in this update.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The standard describes a fair value hierarchy
based on three levels of input, of which the first two are considered observable and the last unobservable, that may be used to
measure fair value, which are the following:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0"><u>Level 1</u> - Quoted
prices in active markets for identical assets and liabilities.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0"><u>Level 2</u> -
Input other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets of liabilities;
quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market
data for substantially the full term of the asset or liabilities.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0"><u>Level 3</u> - Unobservable inputs that
are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our assessment of the significance of a particular
input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table sets forth the liabilities
at March 31, 2016 and 2015, which is recorded on the balance sheet at fair value on a recurring basis by level within the fair
value hierarchy. As required, these are classified based on the lowest level of input that is significant to the fair value measurement:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="10" style="border-bottom: black 1pt solid; text-align: center"><b>Fair Value Measurements at Reporting Date Using</b></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: center"><b>December 31, 2015</b></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; padding-bottom: 0.95pt">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Quoted Prices in</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Active Markets for</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Identical Assets</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(Level 1)</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; padding-bottom: 0.95pt">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Significant Other</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Observable</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Inputs</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(Level 2)</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Signifcant</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Unobservable</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Inputs</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(Level 3)</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%; text-align: left">Derivative liability</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 9%; text-align: right">2,820,000</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 9%; text-align: right">-</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 9%; text-align: right">-</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 9%; text-align: right">2,820,000</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 0.95pt; text-align: left">Stock settled debt</td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: right">12,500</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: right">10,000</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">2,500</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">2,832,500</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">10,000</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">2,822,500</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="10" style="border-bottom: black 1pt solid; text-align: center"><b>Fair Value Measurements at Reporting Date Using</b></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; padding-bottom: 0.95pt">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>March 31, 2016</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(UNAUDITED)</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; padding-bottom: 0.95pt">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Quoted Prices in</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Active Markets for</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Identical Assets</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(Level 1)</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; padding-bottom: 0.95pt">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Significant Other</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Observable</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Inputs</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(Level 2)</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Signifcant</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Unobservable</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Inputs</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(Level 3)</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Derivative liability</td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">2,640,000</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">2,640,000</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%; padding-bottom: 0.95pt; text-align: left">Stock settled debt</td>
<td style="width: 1%; padding-bottom: 0.95pt; text-align: right"> </td>
<td style="width: 1%; border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="width: 9%; border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: right">12,500</td>
<td nowrap="nowrap" style="width: 1%; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="width: 1%; padding-bottom: 0.95pt; text-align: right"> </td>
<td style="width: 1%; border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="width: 9%; border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: right">10,000</td>
<td nowrap="nowrap" style="width: 1%; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="width: 1%; padding-bottom: 0.95pt; text-align: right"> </td>
<td style="width: 1%; border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="width: 9%; border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: right">-</td>
<td nowrap="nowrap" style="width: 1%; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="width: 1%; padding-bottom: 0.95pt; text-align: right"> </td>
<td style="width: 1%; border-bottom: black 1pt solid; text-align: left"> </td>
<td style="width: 9%; border-bottom: black 1pt solid; text-align: right">2,500</td>
<td nowrap="nowrap" style="width: 1%; padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">2,652,500</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">10,000</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">2,642,500</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td></tr>
</table><p style="font: 8pt Times New Roman, Times, Serif; margin: 0">ASC Topic 820 establishes a fair value hierarchy, giving the highest
priority to quoted prices in active markets and the lowest priority to unobservable data and requires disclosures for assets and
liabilities measured at fair value based on their level in the hierarchy. Also, ASC Topic 820 provides clarification that in circumstances,
in which a quoted price in an active market for the identical liabilities is not available, a reporting entity is required to measure
fair value using one or more of the techniques provided for in this update.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The standard describes a fair value hierarchy based on three levels
of input, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which
are the following:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><u>Level 1</u> - Quoted prices in active markets for identical assets
and liabilities.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><u>Level 2</u> - Input other than Level 1 that are observable, either
directly or indirectly, such as quoted prices for similar assets of liabilities; quoted prices in markets that are not active;
or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset
or liabilities.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><u>Level 3</u> - Unobservable inputs that are supported by little
or no market activity and that are significant to the fair value of the assets or liabilities.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Our assessment of the significance of a particular input to the fair
value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The following table sets forth the liabilities at December 31, 2015
and 2014, which is recorded on the balance sheet at fair value on a recurring basis by level within the fair value hierarchy. As
required, these are classified based on the lowest level of input that is significant to the fair value measurement:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="10" style="text-align: center"><font style="font-size: 8pt"><b>Fair Value Measurements at Reporting Date Using</b></font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>December 31, 2015</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Quoted Prices in</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Active Markets for</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Identical Assets</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(Level 1)</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Significant Other</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Observable</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Inputs</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(Level 2)</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Significant Other</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Observable</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Inputs</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(Level 3)</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%"><font style="font-size: 8pt">Derivative liability</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">2,820,000</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">2,820,000</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Stock settled debt premium</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">12,500</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">10,000</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">2,500</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2,832,500</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">10,000</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2,822,500</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="10" style="text-align: center"><font style="font-size: 8pt"><b>Fair Value Measurements at Reporting Date Using</b></font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>December 31, 2014</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Quoted Prices in</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Active Markets for</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Identical Assets</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(Level 1)</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Significant Other</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Observable</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Inputs</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(Level 2)</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Significant Other</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Observable</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Inputs</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(Level 3)</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%"><font style="font-size: 8pt">Interest Rate Swap</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">40,958</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">40,958</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Stock settled debt</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">308,083</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">235,000</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">67,083</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">349,041</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">235,000</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">108,041</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company’s has entered into non-cancellable
leases for its office, warehouse facilities and some equipment.  These lease agreements commence on various dates from
September 1, 2010 to December 2015 and all expires on or before December, 2020.  Future minimum lease payments at March
31, 2016 are as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%; text-align: left">2016</td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 8%; text-align: right">331,806</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">2017</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">448,408</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">2018</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">164,493</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">2019</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">111,103</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">2020</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">71,500</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 0.95pt; text-align: left">Thereafter</td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.25pt; text-align: left">Total</td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">1,127,310</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has also entered into various other
leases on a month to month basis for machinery and equipment. Rent expense amounted to $114,790 and $85,565 for the three
months ended March 31, 2016 and 2015, respectively.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company’s has entered into non-cancellable leases for its
office, warehouse facilities and some equipment.  These lease agreements commence on various dates from September 1,
2010 to December 2015 and all expires on or before December, 2020.  Future minimum lease payments at December 31, 2015
are as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font-size: 8pt">2016</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">442,408</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">2017</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">448,408</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">2018</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">164,493</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">2019</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">111,103</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">2020</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">71,500</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Thereafter</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">1,237,912</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company has also entered into various other leases on a month
to month basis for machinery and equipment. Rent expense amounted to $320,154 and $177,801 for the year ended December 31,
2015 and 2014, respectively.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In connection with normal business activities
of a company in the solid waste disposal industry, Meridian may be required to acquire a performance bond.  As part of
the Company’s December 22, 2015 acquisitions of Christian Disposal, LLC and Eagle Ridge Landfill, LLC, Meridian acquired
a performance bond in the approximate amount of $7,400,000 with annual expenses of $221,000. For the three months ended March 31,
2016, the Company had approximately $29,000 of expenses related to this performance bond and for the three months ended March 31,
2015, the Company was not required to obtain a performance bond.</p><p style="margin: 0pt; font: 8pt Times New Roman, Times, Serif"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">In
connection with normal business activities of a company in the solid waste disposal industry, Meridian may be required to acquire
a performance bond.  As part of the Company’s December 22, 2015 acquisitions of Christian Disposal, LLC and Eagle
Ridge Landfill, LLC, Meridian acquired a performance bond in the approximate amount of $7,400,000 with annual expenses of $221,000.
For fiscal year ended December 31, 2015, the Company had approximately $6,000 of expenses related to this performance bond and
for fiscal year ended December 31, 2014, the Company was not required to obtain a performance bond.</font></p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company is involved in various lawsuits
related to the operations of its subsidiaries.  Management believes that it has adequate insurance coverage and/or
has appropriately accrued for the settlement of these claims.  If applicable, claims that exceed amounts accrued and/or
that are covered by insurance, management believes they are without merit and intends to vigorously defend and resolve with no
material impact on financial condition.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company is involved in various lawsuits related to the operations
of its subsidiaries.  Management believes that it has adequate insurance coverage and/or has appropriately accrued for
the settlement of these claims.  If applicable, claims that exceed amounts accrued and/or that are covered by insurance,
management believes they are without merit and intends to vigorously defend and resolve with no material impact on financial condition.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Sale of Capitalized Software</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 7, 2015, in an effort to give investors
a more concentrated presence in the waste industry the Company sold the capitalized software assets of Here to Serve Technology,
LLC (HTST) to Mobile Science Technologies, Inc., a Georgia corporation (MSTI), a related party due to being owned by some of the
shareholders of the Company. No gain or loss was recognized on this transaction as the Company received equity equal to book value
($434,532) of the capitalized software in the exchange. This represents approximately 15% of the equity of MSTI and is reflected
in the accompanying balance sheet as “investment in related party affiliate”. The Company's investment of 15% of the
common stock of MSTI is accounted for under the equity method because the company exercises significant influence over its operating
and financial activities. Significant influence is exercised because both Companies have a Board Member in common. Accordingly,
the investment in MSTI is carried at cost, adjusted for the Company's proportionate share of earnings or losses.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following presents unaudited summary financial
information for MSTI. Such summary financial information has been provided herein based upon the individual significance of this
unconsolidated equity method investment to the consolidated financial information of the Company.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Following is a summary of financial position
and results of operations of MSTI:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 0.95pt; text-align: left; text-decoration: underline"><u>Summary of Statements of Financial Condition</u></td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="padding-bottom: 0.95pt; text-align: center"><b>Three Months Ended</b></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><b>March 31, 2016</b></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left">Assets</td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%; text-align: left">Current assets</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 8%; text-align: right">3,609</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 0.95pt; text-align: left">Noncurrent assets</td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">2,877,313</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.25pt; text-align: left">Total assets</td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: right">2,880,922</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td colspan="4" style="text-align: left">Liabilities and Equity</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Current liabilities</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">234,362</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Noncurrent liabilities</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 0.95pt; text-align: left">Equity</td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">2,646,560</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.25pt; text-align: left">Total liabilities and equity</td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">2,880,922</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td colspan="4" style="text-align: left">Summary of Statements of Operations</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Revenues</td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">177</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Expense</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">14,210</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Net loss</td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">(14,033</td>
<td nowrap="nowrap" style="text-align: left">)</td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recorded losses from its investment
in MSTI, accounted for under the equity method, of approximately $2,100 for the three months ended March 31, 2016.  The
charge reflected the Company’s share of MSTI losses recorded in that period. While the Company has ongoing agreements with
MSTI relating to the use of MSTI's software technology, the Company has no obligation to otherwise support the activities of MSTI.
As of March 31, 2016, the Company has $133,000 in prepaid expenses related to MSTI.</p><table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif; text-decoration: underline"><font style="font: 8pt Times New Roman, Times, Serif"><u>Sale
of Capitalized Software</u></font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">On
January 7, 2015, in an effort to give investors a more concentrated presence in the waste industry the Company sold the capitalized
software assets of Here to Serve Technology, LLC (HTST) to Mobile Science Technologies, Inc., a Georgia corporation (MSTI), a
related party due to being owned by some of the shareholders of the Company. No gain or loss was recognized on this transaction
as the Company received equity equal to book value ($434,532) of the capitalized software in the exchange. This represents approximately
15% of the equity of MSTI and is reflected in the accompanying balance sheet as “investment in related party affiliate”.
The Company's investment of 15% of the common stock of MSTI is accounted for under the equity method because the company exercises
significant influence, over its operating and financial activities. Significant influence is exercised because both Companies
have a Board Member in common. Accordingly, the investment in MSTI is carried at cost, adjusted for the Company's proportionate
share of earnings or losses.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
following presents unaudited summary financial information for MSTI. Such summary financial information has been provided herein
based upon the individual significance of this unconsolidated equity investment to the consolidated financial information of the
Company.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="width: 100%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Following
is a summary of financial position and results of operations of MSTI:</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; text-decoration: underline; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"><u>Summary
of Statements of Financial Condition</u></font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>2015</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>(UNAUDITED)</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Assets</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="width: 89%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Current
assets</font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">4,481</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Noncurrent
assets</font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">2,869,553</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Total
assets</font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">2,874,034</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td colspan="4" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Liabilities
and Equity</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Current
liabilities</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">213,264</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Noncurrent
liabilities</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Equity</font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">2,660,770</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Total
liabilities and equity</font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">2,874,034</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td colspan="4" style="text-decoration: underline; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"><u>Summary
of Statements of Operations</u></font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Revenues</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">1,364</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Expense</font></td>
<td style="text-align: right; padding-bottom: 1pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; border-bottom: Black 1pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">470,342</font></td>
<td nowrap="nowrap" style="padding-bottom: 1pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 2.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Net
loss</font></td>
<td style="text-align: right; padding-bottom: 2.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; border-bottom: Black 2.5pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(468,978</font></td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company recorded losses from its investment in MSTI, accounted for under the equity method, of approximately $70,000 during fiscal
year ended 2015.  The charge reflected the Company’s share of MSTI losses recorded in that period, as well as the
write-down of the investment and the write-off of certain receivables.  While the Company has ongoing agreements with
MSTI relating to the use of MSTI's software technology, the Company has no obligation to otherwise support the activities of MSTI.
As of December 31, 2015, the Company has $133,000 in prepaid expenses related to MSTI.</font></p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Effective March 10, 2016, the Board of Directors
(the “Board”) of the Company approved, authorized and adopted the 2016 Equity and Incentive Plan (the “ Plan”)
and certain forms of ancillary agreements to be used in connection with the issuance of stock and/or options pursuant to the Plan
(the “Plan Agreements”). The Plan provides for the issuance of up to 7,500,000 shares of common stock, par value $.025
per share (the “Common Stock”), of the Company through the grant of nonqualified options (the “Non-qualified
options”), incentive options (the “Incentive Options” and together with the Non-qualified Options, the “Options”)
and restricted stock (the “Restricted Stock”) to directors, officers, consultants, attorneys, advisors and employees.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Plan shall be administered by a committee
consisting of two or more independent, non-employee and outside directors (the “Committee”). In the absence of such
a Committee, the Board shall administer the Plan. The Plan is currently being administered by the Board.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Options are subject to the following conditions:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 60px; font: 8pt Times New Roman, Times, Serif; text-align: right">i.  </td>
<td style="font: 8pt Times New Roman, Times, Serif; text-align: justify">The Committee determines the strike price of Incentive Options at the time the Incentive Options are granted. The assigned strike price must be no less than 100% of the Fair Market Value (as defined in the Plan) of the Company’s Common Stock. In the event that the recipient is a Ten Percent Owner (as defined in the Plan), the strike price must be no less than 110% of the Fair Market Value of the Company.</td></tr>
<tr style="vertical-align: top">
<td style="font: 8pt Times New Roman, Times, Serif; text-align: right">ii.  </td>
<td style="font: 8pt Times New Roman, Times, Serif; text-align: justify">The strike price of each Non-qualified Option will be at least 100% of the Fair Market Value of such share of the Company’s Common Stock on the date the Non-qualified Option is granted, unless the Committee, in its sole and absolute discretion, elects to set the strike price of such Non-qualified Option below Fair Market Value.</td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 60px; text-align: right">iii.  </td>
<td style="text-align: justify">The Committee fixes the term of Options, provided that Options may not be exercisable more than ten years from the date the Option is granted, and provided further that Incentive Options granted to a Ten Percent Owner may not be exercisable more than five years from the date the Incentive Option is granted.</td></tr>
<tr style="vertical-align: top">
<td style="text-align: right">iv.  </td>
<td style="text-align: justify">The Committee may designate the vesting period of Options. In the event that the Committee does not designate a vesting period for Options, the Options will vest in equal amounts on each fiscal quarter of the Company through the five (5) year anniversary of the date on which the Options were granted. The vesting period accelerates upon the consummation of a Sale Event (as defined in the Plan).</td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 60px; text-align: right">v.  </td>
<td style="text-align: justify">Options are not transferable and Options are exercisable only by the Options’ recipient, except upon the recipient’s death.</td></tr>
<tr style="vertical-align: top">
<td style="text-align: right">vi.  </td>
<td style="text-align: justify">Incentive Options may not be issued in an amount or manner where the amount of Incentive Options exercisable in one year entitles the holder to Common Stock of the Company with an aggregate Fair Market value of greater than $100,000.</td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Awards of Restricted Stock are subject to the
following conditions:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 60px; text-align: right">i.  </td>
<td style="text-align: justify">The Committee grants Restricted Stock Options and determines the restrictions on each Restricted Stock Award (as defined in the Plan). Upon the grant of a Restricted Stock Award and the payment of any applicable purchase price, grantee is considered the record owner of the Restricted Stock and entitled to vote the Restricted Stock if such Restricted Stock is entitled to voting rights.</td></tr>
<tr style="vertical-align: top">
<td style="text-align: right">ii.  </td>
<td style="text-align: justify">Restricted Stock may not be delivered to the grantee until the Restricted Stock has vested.</td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 60px; text-align: right">iii.  </td>
<td style="text-align: justify">Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as provided in the Plan or in the Award Agreement (as defined in the Plan).</td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On March 11, 2016, the Company entered into
a restricted stock agreement with Mr. Jeff Cosman, CEO, (the “Cosman Restricted Stock Agreement”), pursuant to which
4,253,074 shares of the Company's common stock, subject to certain restrictions set forth in the Cosman Restricted Stock Agreement,
were issued to Mr. Cosman pursuant to the Cosman Employment Agreement and the Plan.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The entire 4,253,074 share fully cliff vests
on January 1, 2017 if continuous employment and the Company reaches certain performance goals. As of March 31, 2016, the Company
has recognized approximately $445,000 in compensation expense of a potential total expense of $6,592,000.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During April 2016, the Company issued 446,429
shares of common stock for $500,000 to complete the final closing of the private placement offering.</p><p style="margin: 0pt; font: 8pt Times New Roman, Times, Serif"></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif; text-decoration: underline"><font style="font: 8pt Times New Roman, Times, Serif"><u>EQUITY
AND INCENTIVE PLAN</u></font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">Effective
March 10, 2016, the Board of Directors (the “Board”) of the Company approved, authorized and adopted the 2016 Equity
and Incentive Plan (the “ Plan”) and certain forms of ancillary agreements to be used in connection with the issuance
of stock and/or options pursuant to the Plan (the “Plan Agreements”). The Plan provides for the issuance of up to
7,500,000 shares of common stock, par value $.025 per share (the “Common Stock”), of the Company through the grant
of non-qualified options (the “Non-qualified options”), incentive options (the “Incentive Options” and
together with the Non-qualified Options, the “Options”) and restricted stock (the “Restricted Stock”)
to directors, officers, consultants, attorneys, advisors and employees.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif">  </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Plan shall be administered by a committee consisting of two or more independent, non-employee and outside directors (the “Committee”).
In the absence of such a Committee, the Board shall administer the Plan. The Plan is currently being administered by the Board.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">Options
are subject to the following conditions:</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="width: 75px; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">(i)  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">The
Committee determines the strike price of Incentive Options at the time the Incentive Options are granted. The assigned strike
price must be no less than 100% of the Fair Market Value (as defined in the Plan) of the Company’s Common Stock. In
the event that the recipient is a Ten Percent Owner (as defined in the Plan), the strike price must be no less than 110% of
the Fair Market Value of the Company.</font></td></tr>
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">(ii)  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">The
strike price of each Non-qualified Option will be at least 100% of the Fair Market Value of such share of the Company’s
Common Stock on the date the Non-qualified Option is granted, unless the Committee, in its sole and absolute discretion, elects
to set the strike price of such Non-qualified Option below Fair Market Value.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="width: 75px; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">(iii)  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">The
Committee fixes the term of Options, provided that Options may not be exercisable more than ten years from the date the Option
is granted, and provided further that Incentive Options granted to a Ten Percent Owner may not be exercisable more than five
years from the date the Incentive Option is granted.</font></td></tr>
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">(iv)  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">The
Committee may designate the vesting period of Options. In the event that the Committee does not designate a vesting period
for Options, the Options will vest in equal amounts on each fiscal quarter of the Company through the five (5) year anniversary
of the date on which the Options were granted. The vesting period accelerates upon the consummation of a Sale Event (as defined
in the Plan).</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"></p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="width: 75px; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(v)  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Options
are not transferable and Options are exercisable only by the Options’ recipient, except upon the recipient’s death.</font></td></tr>
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(vi)  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> Incentive
Options may not be issued in an amount or manner where the amount of Incentive Options exercisable in one year entitles the
holder to Common Stock of the Company with an aggregate Fair Market value of greater than $100,000.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Awards
of Restricted Stock are subject to the following conditions:</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="width: 75px; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(i)  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">The
Committee grants Restricted Stock Options and determines the restrictions on each Restricted Stock Award (as defined in the
Plan). Upon the grant of a Restricted Stock Award and the payment of any applicable purchase price, grantee is considered
the record owner of the Restricted Stock and entitled to vote the Restricted Stock if such Restricted Stock is entitled to
voting rights.</font></td></tr>
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(ii)  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Restricted
Stock may not be delivered to the grantee until the Restricted Stock has vested.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"></p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="width: 75px; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(iii)  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Restricted
Stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as provided in the Plan
or in the Award Agreement (as defined in the Plan).</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif">  </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 8pt Times New Roman, Times, Serif">
<tr style="vertical-align: top; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif; text-decoration: underline"><font style="font: 8pt Times New Roman, Times, Serif"><u>EMPLOYMENT
AGREEMENT</u></font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">Jeffrey
Cosman - Employment Agreement, Director Agreement and Restricted Stock Agreement</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">On
March 11, 2016, the Company entered into an employment agreement with Mr. Cosman (the “Cosman Employment Agreement”).
Mr. Cosman is currently the Chief Executive Officer and Chairman of the Board of Directors of the Company and prior to the execution
and delivery of the Cosman Employment Agreement, terms of Mr. Cosman’s employment were governed by that certain previous
employment agreement assumed by the Company in connection with the Company’s purchase of certain membership interests owned
by such previous employer on October 17, 2014. The Cosman Employment Agreement has an initial term from March 11, 2016 through
December 31, 2017 and the term will automatically renew for one (1) year periods unless otherwise terminated in accordance with
the terms therein. Mr. Cosman will receive a base salary of $525,000 and Mr. Cosman’s compensation will increase by 5% on
January 1 of each year. Mr. Cosman may also receive a cash bonus based on the Company’s performance relative to its annual
target performance, as well as an annual equity bonus in the form of restricted common stock, in accordance with the Company’s
2016 Equity and Incentive Plan (the “Plan”) and subject to the restrictions contained therein, equivalent to 6% of
the value of all acquisitions by the Company or its subsidiaries of substantially all the assets of existing businesses or of
controlling interests in existing business entities and equity or debt financings during the preceding year. Upon any termination
of Mr. Cosman’s employment with the Company, except for a termination for Cause, Mr. Cosman shall be entitled to a severance
payment equal to the greater of (i) five years’ worth of the then existing base salary and (ii) the last year’s bonus.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">On
March 11, 2016, the Company entered into a director agreement with the Company’s Chairman of the Board and Chief Executive
Officer, Jeffrey Cosman, as amended by the First Amendment to Director Agreement entered into by the parties on April
13, 2016 (the "Cosman Director Agreement").</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">On
March 11, 2016, the Company entered into a restricted stock agreement with Mr. Cosman (the “Cosman Restricted Stock Agreement”),
pursuant to which 4,253,074 shares of the Company's common stock, subject to certain restrictions set forth in the Cosman Restricted
Stock Agreement, were issued to Mr. Cosman pursuant to the Cosman Employment Agreement and the Plan.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">Walter
H. Hall, Jr. - Director Agreement and Employment Agreement</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">On
March 11, 2016, the Company entered into a director agreement with Mr. Walter H. Hall, Jr., as amended by the First Amendment
to Director Agreement entered into by the parties on April 13, 2016 (the “Hall Director Agreement”), concurrent with
Mr. Hall’s appointment to the Board of Directors of the Company (the “Board”) effective March 11, 2016 (the
“Effective Date”).</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">On
March 11, 2016, the Company entered into an executive employment agreement with Mr. Hall (the “Hall Employment Agreement”).
Mr. Hall will have the title of President and Chief Operating Officer. The Hall Employment Agreement has an initial term of thirty-six
(36) months and the term will automatically renew for one (1) year periods, unless otherwise terminated pursuant to the terms
contained therein. Mr. Hall will receive a base salary of $300,000 beginning upon the Company’s closing of acquisitions
in the aggregate amount of $35,000,000 from the date the Hall Employment Agreement is executed. Mr. Hall may also receive an annual
bonus of up to $175,000, or such larger amount approved by the Board, as well as an annual equity bonus (in the form of restricted
common stock, in accordance with the Plan and subject to the restrictions contained therein) equivalent to 2% of the value of
all acquisitions by the Company or its subsidiaries of substantially all the assets of existing businesses or of controlling interests
in existing business entities and equity or debt financings during the preceding year. Additionally, Mr. Hall received two million
(2,000,000) restricted shares of the Company’s common stock upon the execution of the Hall Employment Agreement</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>EQUITY
SUBSCRIPTION AGREEMENT</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">On
April 8, 2016, the Company completed the final closing (the “the Closing”) of a private placement offering to
accredited investors (the “Offering”) of up to $1,600,000 of the Company’s restricted common stock, par value
$0.025 per share.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">In
connection with the Closing, the Company entered into definitive subscription agreements (the “Subscription Agreements”)
with five (5) accredited investors (the “Investors”) and issued an aggregate of 1,428,573 shares of Common Stock
for aggregate gross proceeds to the Company of $1,600,000.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Subscription Agreements provide that the Company shall issue additional shares of Common Stock in the event that, prior to the
first anniversary of the Subscription Agreement, such Investor sells all of the Common Stock purchased under the Subscription
Agreement and receives less than the full amount of the purchase price paid under the Subscription Agreement, and the Subscription
Agreements contain typical representations and warranties. </font></p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US
GAAP”) for interim financial information and with the instructions to Form 10Q and Article 803 of Regulation SX.  Accordingly,
the unaudited consolidated financial statements do not include all of the information and footnotes required by US GAAP for complete
financial statements.  The unaudited consolidated financial statements and notes included herein should be read in conjunction
with the annual consolidated financial statements and notes for the year ended December 31, 2015 included in our Annual Report
on Form 10K filed with the SEC on April 14, 2016.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In the opinion of management, all adjustments
(consisting of normal recurring items) necessary to present fairly the Company’s financial position as of March 31, 2016,
and the results of operations and cash flows for the three months ending March 31, 2016 are not necessarily indicative of the results
to be expected for a full year.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company uses the accrual basis of accounting and accounting principles
generally accepted in the United States of America (“GAAP” accounting).</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The consolidated financial statements for the
three months ending March 31, 2016 include the operations of the Company and its wholly-owned subsidiaries, Here To Serve Missouri
Waste Division, LLC, Meridian Land Company, LLC, Here to Serve Technology, LLC, Here To Serve Georgia Waste Division, LLC and Christian
Disposal, LLC. The following two subsidiaries of the Company, Here To Serve Georgia Waste Division, LLC and Here to Serve Technology,
LLC, a Georgia Limited Liability Company had no operations during the period. The consolidated financial statements for the three
months ending March 31, 2015 include the operations of the Company and its wholly-owned subsidiaries, Here To Serve Missouri Waste
Division, LLC, Here To Serve Georgia Waste Division, LLC and Here to Serve Technology, LLC, a Georgia Limited Liability Company.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">All significant intercompany accounts and transactions
have been eliminated in consolidation.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The consolidated financial statements for the year ended December
31, 2015 include the operations of the Company and its wholly-owned subsidiaries, Here To Serve Missouri Waste Division, LLC, Meridian
Land Company, LLC, Here to Serve Technology, LLC and Christian Disposal, LLC. The following two subsidiaries of the Company, Here
To Serve Georgia Waste Division, LLC and Here to Serve Technology, LLC, a Georgia Limited Liability Company had no operations during
the period.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The consolidated financial statements for the year ended December
31, 2014 include the operations of the Company and its wholly-owned subsidiaries, Here To Serve Missouri Waste Division, LLC and
Here To Serve Technology, LLC.  The following subsidiary of the Company, Here To Serve Georgia Waste Division, LLC had
no operations during the period.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">All significant intercompany accounts and transactions have been
eliminated in consolidation.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company considers all highly liquid investments
with maturities of three months or less to be cash equivalents. Short-term investments consist of investments that have a remaining
maturity of less than one year as of the date of the balance sheet.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Management determines the appropriate classification
of short-term investments at the time of purchase and evaluates such designation as of each balance sheet date. All short-term
investments to date have been classified as held-to-maturity and carried at amortized costs, which approximates fair market value,
on our Consolidated Balance Sheets. For the three months ended March 31, 2016 and 2015, interest income of $2,139 and $0, respectively,
was recorded related to the held-to-maturity securities. Our short-term investments’ contractual maturities occur before
March 31, 2017.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company considers all highly liquid investments with maturities
of three months or less to be cash equivalents.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company’s financial instruments consist
of cash and cash equivalents, accounts receivable, account payable, accrued expenses, and notes payable. The carrying amount of
these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing
market rates unless otherwise disclosed in these consolidated financial statements.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company’s financial instruments consist of cash and cash
equivalents, accounts receivable, account payable, accrued expenses, and notes payable. The carrying amount of these financial
instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates
unless otherwise disclosed in these consolidated financial statements.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company enters into financing arrangements
that consist of freestanding derivative instruments or are hybrid instruments that contain embedded derivative features. The Company
accounts for these arrangements in accordance with Accounting Standards Codification topic 815, Accounting for Derivative Instruments
and Hedging Activities (“ASC 815”) as well as related interpretations of this standard. In accordance with this standard,
derivative instruments are recognized as either assets or liabilities in the balance sheet and are measured at fair values with
gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely related to the host contract are
bifurcated and are recognized at fair value with changes in fair value recognized as either a gain or loss in earnings. The Company
determines the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation
models, considering of the rights and obligations of each instrument.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company estimates fair values of
derivative financial instruments using various techniques (and combinations thereof) that are considered consistent with the
objective measuring fair values. In selecting the appropriate technique, the Company considers, among other factors, the
nature of the instrument, the market risks that it embodies and the expected means of settlement. For less complex derivative
instruments, such as freestanding warrants, the Company generally use the Black Scholes model, adjusted for the effect of
dilution, because it embodies all of the requisite assumptions (including trading volatility, estimated terms, dilution and
risk free rates) necessary to fair value these instruments. Estimating fair values of derivative financial instruments
requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the
instrument with related changes in internal and external market factors. In addition, option-based techniques (such as
Black-Scholes model) are highly volatile and sensitive to changes in the trading market price of our common stock. Since
derivative financial instruments are initially and subsequently carried at fair values, our income (expense) going forward
will reflect the volatility in these estimates and assumption changes. Under the terms of this accounting standard, increases
in the trading price of the Company’s common stock and increases in fair value during a given financial quarter result
in the application of non-cash derivative expense. Conversely, decreases in the trading price of the Company’s common
stock and decreases in trading fair value during a given financial quarter result in the application of non-cash derivative
income.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company enters into financing arrangements that consist of freestanding
derivative instruments or are hybrid instruments that contain embedded derivative features. The Company accounts for these arrangements
in accordance with Accounting Standards Codification topic 815, Accounting for Derivative Instruments and Hedging Activities (“ASC
815”) as well as related interpretations of this standard. In accordance with this standard, derivative instruments are recognized
as either assets or liabilities in the balance sheet and are measured at fair values with gains or losses recognized in earnings.
Embedded derivatives that are not clearly and closely related to the host contract are bifurcated and are recognized at fair value
with changes in fair value recognized as either a gain or loss in earnings. The Company determines the fair value of derivative
instruments and hybrid instruments based on available market data using appropriate valuation models, considering all of the rights
and obligations of each instrument.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company estimates fair values of derivative financial instruments
using various techniques (and combinations thereof) that are considered consistent with the objective measuring fair values. In
selecting the appropriate technique, the Company considers, among other factors, the nature of the instrument, the market risks
that it embodies and the expected means of settlement. For less complex derivative instruments, such as freestanding warrants,
the Company generally use the Black-Scholes model, adjusted for the effect of dilution, because it embodies all of the requisite
assumptions (including trading volatility, estimated terms, dilution and risk free rates) necessary to fair value these instruments.
Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that
may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors.
In addition, option-based techniques (such as Black-Scholes model) are highly volatile and sensitive to changes in the trading
market price of our common stock. Since derivative financial instruments are initially and subsequently carried at fair values,
our income (expense) going forward will reflect the volatility in these estimates and assumption changes. Under the terms of this
accounting standard, increases in the trading price of the Company’s common stock and increases in fair value during a given
financial quarter result in the application of non-cash derivative expense. Conversely, decreases in the trading price of the Company’s
common stock and decreases in trading fair value during a given financial quarter result in the application of non-cash derivative
income.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company periodically reviews its long-lived
assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully
recoverable.  The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less
that the carrying amount of the asset.  The amount of impairment is measured as the difference between the asset’s
estimated fair value and its book value.  During the three months ending March 31, 2016, the Company experienced no losses
due to impairment.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company periodically reviews its long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable.  The
Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less that the carrying amount
of the asset.  The amount of impairment is measured as the difference between the asset’s estimated fair value
and its book value.  During the year ending December 31, 2015, the Company experienced no losses due to impairment.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for income taxes pursuant
to the provisions of ASC 740-10, “Accounting for Income Taxes,” which requires, among other things, an asset and liability
approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets
and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases
of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes
it is more likely than not that the net deferred asset will not be realized.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company follows the provisions of the ASC
740 -10 related to, Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain that some positions
taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of
the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10,
the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence,
management believes it is more likely than not that the position will be sustained upon examination, including the resolution of
appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that
meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent
likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax
positions taken that exceeds the amount measured as described above should be reflected as a liability for uncertain tax benefits
in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities
upon examination. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the
Company has not recorded a liability for uncertain tax benefits.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company analyzes its tax positions by utilizing
ASC 740-10-25 Definition of Settlement, which provides guidance on how an entity should determine whether a tax position is effectively
settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively
settled upon the completion of an examination by a taxing authority without being legally extinguished. For tax positions considered
effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more
likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open.
As of March 31, 2016, tax years ended December 31, 2015, 2014, and 2013 are still potentially subject to audit by the taxing authorities.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company accounts for income taxes pursuant to the provisions
of ASC 740-10, “Accounting for Income Taxes,” which requires, among other things, an asset and liability approach to
calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and
liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely
than not that the net deferred asset will not be realized.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company follows the provisions of the ASC
740 -10 related to, Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain that some positions
taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of
the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10,
the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence,
management believes it is more likely than not that the position will be sustained upon examination, including the resolution of
appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that
meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent
likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax
positions taken that exceeds the amount measured as described above should be reflected as a liability for uncertain tax benefits
in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities
upon examination. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the
Company has not recorded a liability for uncertain tax benefits.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company analyzes its tax positions by utilizing ASC 740-10-25
Definition of Settlement, which provides guidance on how an entity should determine whether a tax position is effectively settled
for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled
upon the completion of an examination by a taxing authority without being legally extinguished. For tax positions considered effectively
settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than
not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. As of December
31, 2015, tax years ended December 31, 2014, 2013, 2012 are still potentially subject to audit by the taxing authorities.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Management estimates and judgments are an integral
part of consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States
of America (GAAP). We believe that the critical accounting policies described in this section address the more significant estimates
required of management when preparing our consolidated financial statements in accordance with GAAP. We consider an accounting
estimate critical if changes in the estimate may have a material impact on our financial condition or results of operations. We
believe that the accounting estimates employed are appropriate and resulting balances are reasonable; however, actual results could
differ from the original estimates, requiring adjustment to these balances in future periods.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Management estimates and judgments are an integral part of consolidated
financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).
We believe that the critical accounting policies described in this section address the more significant estimates required of management
when preparing our consolidated financial statements in accordance with GAAP. We consider an accounting estimate critical if changes
in the estimate may have a material impact on our financial condition or results of operations. We believe that the accounting
estimates employed are appropriate and resulting balances are reasonable; however, actual results could differ from the original
estimates, requiring adjustment to these balances in future periods.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Accounts receivable are recorded at management’s
estimate of net realizable value. At March 31, 2016 and December 31, 2015 the Company had approximately $2,641,000 and $2,326,000
of gross trade receivables, respectively.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our reported balance of accounts receivable,
net of the allowance for doubtful accounts, represents our estimate of the amount that ultimately will be realized in cash. We
review the adequacy and adjust our allowance for doubtful accounts on an ongoing basis, using historical payment trends and the
age of the receivables and knowledge of our individual customers. However, if the financial condition of our customers were to
deteriorate, additional allowances may be required. At March 31, 2016 and December 31, 2015 the Company had approximately $627,000
and $618,000 recorded for the allowance for doubtful accounts, respectively.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Accounts receivable are recorded at management’s estimate of
net realizable value. At December 31, 2015 and 2014 the Company had approximately $2,326,000 and $660,000 of gross trade receivables,
respectively.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Our reported balance of accounts receivable, net of the allowance
for doubtful accounts, represents our estimate of the amount that ultimately will be realized in cash. We review the adequacy and
adjust our allowance for doubtful accounts on an ongoing basis, using historical payment trends and the age of the receivables
and knowledge of our individual customers. However, if the financial condition of our customers were to deteriorate, additional
allowances may be required. At December 31, 2015 and 2014 the Company had approximately $618,000 and $71,000 recorded for the allowance
for doubtful accounts, respectively.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Advertising costs, except for costs associated
with direct-response advertising, are charged to operations when incurred. The costs of direct-response advertising are capitalized
and amortized over the period during which future benefits are expected to be received. The Company did not capitalize any advertising
for the three months ended March 31, 2016. Advertising expenses were approximately $12,000 for the three months ended March
31, 2016.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Advertising costs, except for costs associated
with direct-response advertising, are charged to operations when incurred. The costs of direct-response advertising are capitalized
and amortized over the period during which future benefits are expected to be received. The Company did not capitalize any advertising
for the years ended December 31, 2015 and 2014, respectively. Advertising expenses were approximately $79,000 and $65,000 for the
years ended December 31, 2015 and 2014, respectively.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The cost of property, plant, and equipment is
depreciated over the estimated useful lives of the related assets utilizing the straight-line method of depreciation. The cost
of leasehold improvements is depreciated (amortized) over the lesser of the length of the related leases or the estimated useful
lives of the assets. Ordinary repairs and maintenance are expensed when incurred and major repairs will be capitalized and expensed
if it benefits future periods.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The cost of property, plant, and equipment is depreciated over the
estimated useful lives of the related assets utilizing the straight-line method of depreciation. The cost of leasehold improvements
is depreciated (amortized) over the lesser of the length of the related leases or the estimated useful lives of the assets. Ordinary
repairs and maintenance are expensed when incurred and major repairs will be capitalized and expensed if it benefits future periods.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Intangible assets that are subject to amortization
are reviewed for potential impairment whenever events or circumstances indicate that carrying amounts may not be recoverable. Assets
not subject to amortization are tested for impairment at least annually. The Company has intangible assets related to its purchase
of Meridian Waste Services, LLC, Christian Disposal LLC and Eagle Ridge Landfill, LLC, which are further discussed in the notes
below.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Intangible assets that are subject to amortization are reviewed for
potential impairment whenever events or circumstances indicate that carrying amounts may not be recoverable. Assets not subject
to amortization are tested for impairment at least annually. The Company has intangible assets related to its purchase of Meridian
Waste</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Services, LLC, Christian Disposal LLC and Eagle Ridge Landfill, LLC,
which are further discussed in the notes below.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">During 2015 and 2014, the Company assessed its intangible assets,
based on estimated future cash flows and concluded that the carrying amount of its intangible assets did not exceed its fair value.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has an investment in a privately
held corporation in the mobile apps industry. As the Company exercises significant influence on this entity, this investment is
recorded using the equity method of accounting. The Company monitors this investment for impairment and makes appropriate reductions
in the carrying value if the Company determines that an impairment charge is required based primarily on the financial condition
and near-term prospect of this entity.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company has an investment in a privately held corporation in
the mobile apps industry. As the Company exercises significant influence on this entity, this investment is recorded using the
equity method of accounting. The Company monitors this investment for impairment and makes appropriate reductions in the carrying
value if the Company determines that an impairment charge is required based primarily on the financial condition and near-term
prospect of this entity.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Goodwill is the excess of our purchase cost
over the fair value of the net assets of acquired businesses. We do not amortize goodwill, but as discussed in the impairment of
long lived assets section above, we assess our goodwill for impairment at least annually.</p><p style="margin: 0pt; font: 8pt Times New Roman, Times, Serif"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">Goodwill
is the excess of our purchase cost over the fair value of the net assets of acquired businesses. We do not amortize goodwill,
but as discussed in the impairment of long lived assets section above, we assess our goodwill for impairment at least annually.</font></p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for website development
costs in accordance with Accounting Standards Codification 350-50 “Website Development Costs”. Accordingly, all costs
incurred in the planning stage are expensed as incurred, costs incurred in the website application and infrastructure development
stage that meet specific criteria are capitalized and costs incurred in the day to day operation of the website are expensed as
incurred.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company accounts for website development costs in accordance
with Accounting Standards Codification 350-50 “Website Development Costs”. Accordingly, all costs incurred in the planning
stage are expensed as incurred, costs incurred in the website application and infrastructure development stage that meet specific
criteria are capitalized and costs incurred in the day to day operation of the website are expensed as incurred.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Capitalized landfill costs</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Cost basis of landfill assets — We capitalize
various costs that we incur to make a landfill ready to accept waste. These costs generally include expenditures for land (including
the landfill footprint and required landfill buffer property); permitting; excavation; liner material and installation; landfill
leachate collection systems; landfill gas collection systems; environmental monitoring equipment for groundwater and landfill gas;
and directly related engineering, capitalized interest, on-site road construction and other capital infrastructure costs. The cost
basis of our landfill assets also includes asset retirement costs, which represent estimates of future costs associated with landfill
final capping, closure and post-closure activities. These costs are discussed below.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Final capping, closure and post-closure costs
— Following is a description of our asset retirement activities and our related accounting:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 96px; font: 8pt Times New Roman, Times, Serif; text-align: center">•</td>
<td style="font: 8pt Times New Roman, Times, Serif; text-align: justify">Final capping — Involves the installation of flexible membrane liners and geosynthetic clay liners, drainage and compacted soil layers and topsoil over areas of a landfill where total airspace capacity has been consumed. Final capping asset retirement obligations are recorded on a units-of-consumption basis as airspace is consumed related to the specific final capping event with a corresponding increase in the landfill asset. The final capping is accounted for as a discrete obligation and recorded as an asset and a liability based on estimates of the discounted cash flows and capacity associated with the final capping.</td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 96px; font: 8pt Times New Roman, Times, Serif; text-align: center">•</td>
<td style="font: 8pt Times New Roman, Times, Serif; text-align: justify">Closure — Includes the construction of the final portion of methane gas collection systems (when required), demobilization and routine maintenance costs. These are costs incurred after the site ceases to accept waste, but before the landfill is certified as closed by the applicable state regulatory agency. These costs are recorded as an asset retirement obligation as airspace is consumed over the life of the landfill with a corresponding increase in the landfill asset. Closure obligations are recorded over the life of the landfill based on estimates of the discounted cash flows associated with performing closure activities.</td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 96px; font: 8pt Times New Roman, Times, Serif; text-align: center">•</td>
<td style="font: 8pt Times New Roman, Times, Serif; text-align: justify">Post-closure — Involves the maintenance and monitoring of a landfill site that has been certified closed by the applicable regulatory agency. Generally, we are required to maintain and monitor landfill sites for a 30-year period. These maintenance and monitoring costs are recorded as an asset retirement obligation as airspace is consumed over the life of the landfill with a corresponding increase in the landfill asset. Post-closure obligations are recorded over the life of the landfill based on estimates of the discounted cash flows associated with performing post-closure activities.</td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We develop our estimates of these obligations
using input from our operations personnel, engineers and accountants. Our estimates are based on our interpretation of current
requirements and proposed regulatory changes and are intended to approximate fair value. Absent quoted market prices, the estimate
of fair value is based on the best available information, including the results of present value techniques. In many cases, we
contract with third parties to fulfill our obligations for final capping, closure and post closure. We use historical experience,
professional engineering judgment and quoted and actual prices paid for similar work to determine the fair value of these obligations.
We are required to recognize these obligations at market prices whether we plan to contract with third parties or perform the work
ourselves. In those instances where we perform the work with internal resources, the incremental profit margin realized is recognized
as a component of operating income when the work is performed.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Once we have determined the final capping, closure
and post-closure costs, we inflate those costs to the expected time of payment and discount those expected future costs back to
present value. During the three months ended March 31, 2016 we inflated these costs in current dollars until the expected time
of payment using an inflation rate of 2.5%. Accretion expense was approximately $42,500 for the three months ended March 31, 2016.
We discounted these costs to present value using the credit-adjusted, risk-free rate effective at the time an obligation is incurred,
consistent with the expected cash flow approach. Any changes in expectations that result in an upward revision to the estimated
cash flows are treated as a new liability and discounted at the current rate while downward revisions are discounted at the historical
weighted average rate of the recorded obligation. As a result, the credit adjusted, risk-free discount rate used to calculate the
present value of an obligation is specific to each individual asset retirement obligation. The weighted average rate applicable
to our long-term asset retirement obligations at March 31, 2016 is approximately 8.5%.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We record the estimated fair value of final
capping, closure and post-closure liabilities for our landfills based on the capacity consumed through the current period. The
fair value of final capping obligations is developed based on our estimates of the airspace consumed to date for the final capping.
The fair value of closure and post-closure obligations is developed based on our estimates of the airspace consumed to date for
the entire landfill and the expected timing of each closure and post-closure activity. Because these obligations are measured at
estimated fair value using present value techniques, changes in the estimated cost or timing of future final capping, closure and
post-closure activities could result in a material change in these liabilities, related assets and results of operations. We assess
the appropriateness of the estimates used to develop our recorded balances annually, or more often if significant facts change.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Changes in inflation rates or the estimated
costs, timing or extent of future final capping, closure and post-closure activities typically result in both (i) a current adjustment
to the recorded liability and landfill asset and (ii) a change in liability and asset amounts to be recorded prospectively over
either the remaining capacity of the related discrete final capping or the remaining permitted and expansion airspace (as defined
below) of the landfill. Any changes related to the capitalized and future cost of the landfill assets are then recognized in accordance
with our amortization policy, which would generally result in amortization expense being recognized prospectively over the remaining
capacity of the final capping or the remaining permitted and expansion airspace of the landfill, as appropriate. Changes in such
estimates associated with airspace that has been fully utilized result in an adjustment to the recorded liability and landfill
assets with an immediate corresponding adjustment to landfill airspace amortization expense.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 48px; font: 8pt Times New Roman, Times, Serif; text-align: center">•</td>
<td style="font: 8pt Times New Roman, Times, Serif; text-align: justify">Remaining permitted airspace — Our engineers, in consultation with third-party engineering consultants and surveyors, are responsible for determining remaining permitted airspace at our landfills. The remaining permitted airspace is determined by an annual survey, which is used to compare the existing landfill topography to the expected final landfill topography.</td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 48px; font: 8pt Times New Roman, Times, Serif; text-align: center">•</td>
<td style="font: 8pt Times New Roman, Times, Serif; text-align: justify">Expansion airspace — We also include currently unpermitted expansion airspace in our estimate of remaining permitted and expansion airspace in certain circumstances. First, to include airspace associated with an expansion effort, we must generally expect the initial expansion permit application to be submitted within one year and the final expansion permit to be received within five years. Second, we must believe that obtaining the expansion permit is likely, considering the following criteria:</td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 80px; font: 8pt Times New Roman, Times, Serif; text-align: right">o  </td>
<td style="font: 8pt Times New Roman, Times, Serif; text-align: justify">Personnel are actively working on the expansion of an existing landfill, including efforts to obtain land use and local, state or provincial approvals;</td></tr>
<tr style="vertical-align: top">
<td style="font: 8pt Times New Roman, Times, Serif; text-align: right">o  </td>
<td style="font: 8pt Times New Roman, Times, Serif; text-align: justify">We have a legal right to use or obtain land to be included in the expansion plan;</td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 80px; text-align: right">o  </td>
<td style="text-align: justify">There are no significant known technical, legal, community, business, or political restrictions or similar issues that could negatively affect the success of such expansion; and</td></tr>
<tr style="vertical-align: top">
<td style="text-align: right">o  </td>
<td style="text-align: justify">Financial analysis has been completed based on conceptual design, and the results demonstrate that the expansion meets the Company’s criteria for investment.</td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For unpermitted airspace to be initially included
in our estimate of remaining permitted and expansion airspace, the expansion effort must meet all of the criteria listed above.
These criteria are evaluated by our field-based engineers, accountants, managers and others to identify potential obstacles to
obtaining the permits. Once the unpermitted airspace is included, our policy provides that airspace may continue to be included
in remaining permitted and expansion airspace even if certain of these criteria are no longer met as long as we continue to believe
we will ultimately obtain the permit, based on the facts and circumstances of a specific landfill.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">When we include the expansion airspace in our
calculations of remaining permitted and expansion airspace, we also include the projected costs for development, as well as the
projected asset retirement costs related to the final capping, closure and post-closure of the expansion in the amortization basis
of the landfill.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Once the remaining permitted and expansion airspace
is determined in cubic yards, an airspace utilization factor (“AUF”) is established to calculate the remaining permitted
and expansion capacity in tons. The AUF is established using the measured density obtained from previous annual surveys and is
then adjusted to account for future settlement. The amount of settlement that is forecasted will take into account several site-specific
factors including current and projected mix of waste type, initial and projected waste density, estimated number of years of life
remaining, depth of underlying waste, anticipated access to moisture through precipitation or recirculation of landfill leachate,
and operating practices. In addition, the initial selection of the AUF is subject to a subsequent multi-level review by our engineering
group, and the AUF used is reviewed on a periodic basis and revised as necessary. Our historical experience generally indicates
that the impact of settlement at a landfill is greater later in the life of the landfill when the waste placed at the landfill
approaches its highest point under the permit requirements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">After determining the costs and remaining permitted
and expansion capacity at each of our landfill, we determine the per ton rates that will be expensed as waste is received and deposited
at the landfill by dividing the costs by the corresponding number of tons. We calculate per ton amortization rates for the landfill
for assets associated with each final capping, for assets related to closure and post-closure activities and for all other costs
capitalized or to be capitalized in the future. These rates per ton are updated annually, or more often, as significant facts change.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">It is possible that actual results, including
the amount of costs incurred, the timing of final capping, closure and post-closure activities, our airspace utilization or the
success of our expansion efforts could ultimately turn out to be significantly different from our estimates and assumptions. To
the extent that such estimates, or related assumptions, prove to be significantly different than actual results, lower profitability
may be experienced due to higher amortization rates or higher expenses; or higher profitability may result if the opposite occurs.
Most significantly, if it is determined that expansion capacity should no longer be considered in calculating the recoverability
of a landfill asset, we may be required to recognize an asset impairment or incur significantly higher amortization expense. If
at any time management makes the decision to abandon the expansion effort, the capitalized costs related to the expansion effort
are expensed immediately.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the three months ended March 31, 2016 the
Company operations related to its landfill assets and liability are presented in the tables below:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: center"><b>Three Months Ended March 31, 2016 (UNAUDITED)</b></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><b>Year Ended December 31, 2015</b></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"><b>Landfill Assets</b></td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%; text-align: left">Beginning balance</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 8%; text-align: right">3,393,476</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 8%; text-align: right">3,396,519</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Capital additions</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">26,984</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Amortization of landfill assets</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">(51,933</td>
<td nowrap="nowrap" style="text-align: left">)</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">(3,043</td>
<td nowrap="nowrap" style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 0.95pt; text-align: left">Asset retirement adjustments</td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: right">2,685</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">3,371,212</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">3,393,476</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left"><b>Landfill Asset Retirement Obligation</b></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Beginning balance</td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">200,252</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">196,519</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Obligations incurred and capitalized</td>
<td style="text-align: right"> </td>
<td style="text-align: left"></td>
<td style="text-align: right">2,685</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Obligations settled</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Interest accretion</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">42,491</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">3,733</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 0.95pt; text-align: left">Revisions in estimates and interest rate assumption</td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">245,428</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">200,252</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td></tr>
</table><p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><u>Capitalized landfill costs</u></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">Cost basis of landfill assets — We capitalize various costs that we incur to make a landfill ready to accept waste. These costs generally include expenditures for land (including the landfill footprint and required landfill buffer property); permitting; excavation; liner material and installation; landfill leachate collection systems; landfill gas collection systems; environmental monitoring equipment for groundwater and landfill gas; and directly related engineering, capitalized interest, on-site road construction and other capital infrastructure costs. The cost basis of our landfill assets also includes asset retirement costs, which represent estimates of future costs associated with landfill final capping, closure and post-closure activities. These costs are discussed below.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">Final capping, closure and post-closure costs — Following is a description of our asset retirement activities and our related accounting:</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 84px; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font-size: 8pt">·</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">Final capping — Involves the installation of flexible membrane liners and geosynthetic clay liners, drainage and compacted soil layers and topsoil over areas of a landfill where total airspace capacity has been consumed. Final capping asset retirement obligations are recorded on a units-of-consumption basis as airspace is consumed related to the specific final capping event with a corresponding increase in the landfill asset. The final capping is accounted for as a discrete obligation and recorded as an asset and a liability based on estimates of the discounted cash flows and capacity associated with the final capping.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 84px; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font-size: 8pt">·</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">Closure — Includes the construction of the final portion of methane gas collection systems (when required), demobilization and routine maintenance costs. These are costs incurred after the site ceases to accept waste, but before the landfill is certified as closed by the applicable state regulatory agency. These costs are recorded as an asset retirement obligation as airspace is consumed over the life of the landfill with a corresponding increase in the landfill asset. Closure obligations are recorded over the life of the landfill based on estimates of the discounted cash flows associated with performing closure activities.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 84px; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font-size: 8pt">·</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">Post-closure — Involves the maintenance and monitoring of a landfill site that has been certified closed by the applicable regulatory agency. Generally, we are required to maintain and monitor landfill sites for a 30-year period. These maintenance and monitoring costs are recorded as an asset retirement obligation as airspace is consumed over the life of the landfill with a corresponding increase in the landfill asset. Post-closure obligations are recorded over the life of the landfill based on estimates of the discounted cash flows associated with performing post-closure activities.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">We develop our estimates of these obligations using input from our operations personnel, engineers and accountants. Our estimates are based on our interpretation of current requirements and proposed regulatory changes and are intended to approximate fair value. Absent quoted market prices, the estimate of fair value is based on the best available information, including the results of present value techniques. In many cases, we contract with third parties to fulfill our obligations for final capping, closure and post closure. We use historical experience, professional engineering judgment and quoted and actual prices paid for similar work to determine the fair value of these obligations. We are required to recognize these obligations at market prices whether we plan to contract with third parties or perform the work ourselves. In those instances where we perform the work with internal resources, the incremental profit margin realized is recognized as a component of operating income when the work is performed.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">Once we have determined the final capping, closure and post-closure costs, we inflate those costs to the expected time of payment and discount those expected future costs back to present value. During the year ended December 31, 2015 we inflated these costs in current dollars until the expected time of payment using an inflation rate of 2.5%. We discounted these costs to present value using the credit-adjusted, risk-free rate effective at the time an obligation is incurred, consistent with the expected cash flow approach. Any changes in expectations that result in an upward revision to the estimated cash flows are treated as a new liability and discounted at the current rate while downward revisions are discounted at the historical weighted average rate of the recorded obligation. As a result, the credit-adjusted, risk-free discount rate used to calculate the present value of an obligation is specific to each individual asset retirement obligation. The weighted average rate applicable to our long-term asset retirement obligations at December 31, 2015 is approximately 8.5%.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">We record the estimated fair value of final capping, closure and post-closure liabilities for our landfills based on the capacity consumed through the current period. The fair value of final capping obligations is developed based on our estimates of the airspace consumed to date for the final capping. The fair value of closure and post-closure obligations is developed based on our estimates of the airspace consumed to date for the entire landfill and the expected timing of each closure and post-closure activity. Because these obligations are measured at estimated fair value using present value techniques, changes in the estimated cost or timing of future final capping, closure and post-closure activities could result in a material change in these liabilities, related assets and results of operations. We assess the appropriateness of the estimates used to develop our recorded balances annually, or more often if significant facts change.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">Changes in inflation rates or the estimated costs, timing or extent of future final capping, closure and post-closure activities typically result in both (i) a current adjustment to the recorded liability and landfill asset and (ii) a change in liability and asset amounts to be recorded prospectively over either the remaining capacity of the related discrete final capping or the remaining permitted and expansion airspace (as defined below) of the landfill. Any changes related to the capitalized and future cost of the landfill assets are then recognized in accordance with our amortization policy, which would generally result in amortization expense being recognized prospectively over the remaining capacity of the final capping or the remaining permitted and expansion airspace of the landfill, as appropriate. Changes in such estimates associated with airspace that has been fully utilized result in an adjustment to the recorded liability and landfill assets with an immediate corresponding adjustment to landfill airspace amortization expense.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 84px; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font-size: 8pt">·</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">Remaining permitted airspace — Our engineers, in consultation with third-party engineering consultants and surveyors, are responsible for determining remaining permitted airspace at our landfills. The remaining permitted airspace is determined by an annual survey, which is used to compare the existing landfill topography to the expected final landfill topography.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 84px; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font-size: 8pt">·</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">Expansion airspace — We also include currently unpermitted expansion airspace in our estimate of remaining permitted and expansion airspace in certain circumstances. First, to include airspace associated with an expansion effort, we must generally expect the initial expansion permit application to be submitted within one year and the final expansion permit to be received within five years. Second, we must believe that obtaining the expansion permit is likely, considering the following criteria:</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 132px; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font-size: 8pt">o  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">Personnel are actively working on the expansion of an existing landfill, including efforts to obtain land use and local, state or provincial approvals;</font></td></tr>
<tr style="vertical-align: top">
<td style="font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font-size: 8pt">o  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">We have a legal right to use or obtain land to be included in the expansion plan;</font></td></tr>
</table>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 132px; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font-size: 8pt">o  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">There are no significant known technical, legal, community, business, or political restrictions or similar issues that could negatively affect the success of such expansion; and</font></td></tr>
<tr style="vertical-align: top">
<td style="font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font-size: 8pt">o  </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font-size: 8pt">Financial analysis has been completed based on conceptual design, and the results demonstrate that the expansion meets the Company’s criteria for investment.</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">For unpermitted airspace to be initially included in our estimate
of remaining permitted and expansion airspace, the expansion effort must meet all of the criteria listed above. These criteria
are evaluated by our field-based engineers, accountants, managers and others to identify potential obstacles to obtaining the permits.
Once the unpermitted airspace is included, our policy provides that airspace may continue to be included in remaining permitted
and expansion airspace even if certain of these criteria are no longer met as long as we continue to believe we will ultimately
obtain the permit, based on the facts and circumstances of a specific landfill.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">When we include the expansion airspace in our calculations of remaining
permitted and expansion airspace, we also include the projected costs for development, as well as the projected asset retirement
costs related to the final capping, closure and post-closure of the expansion in the amortization basis of the landfill.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Once the remaining permitted and expansion airspace is determined
in cubic yards, an airspace utilization factor (“AUF”) is established to calculate the remaining permitted and expansion
capacity in tons. The AUF is established using the measured density obtained from previous annual surveys and is then adjusted
to account for future settlement. The amount of settlement that is forecasted will take into account several site-specific factors
including current and projected mix of waste type, initial and projected waste density, estimated number of years of life remaining,
depth of underlying waste, anticipated access to moisture through precipitation or recirculation of landfill leachate, and operating
practices. In addition, the initial selection of the AUF is subject to a subsequent multi-level review by our engineering group,
and the AUF used is reviewed on a periodic basis and revised as necessary. Our historical experience generally indicates that the
impact of settlement at a landfill is greater later in the life of the landfill when the waste placed at the landfill approaches
its highest point under the permit requirements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">After determining the costs and remaining permitted and expansion
capacity at each of our landfill, we determine the per ton rates that will be expensed as waste is received and deposited at the
landfill by dividing the costs by the corresponding number of tons. We calculate per ton amortization rates for the landfill for
assets associated with each final capping, for assets related to closure and post-closure activities and for all other costs capitalized
or to be capitalized in the future. These rates per ton are updated annually, or more often, as significant facts change.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">It is possible that actual results, including the amount of costs
incurred, the timing of final capping, closure and post-closure activities, our airspace utilization or the success of our expansion
efforts could ultimately turn out to be significantly different from our estimates and assumptions. To the extent that such estimates,
or related assumptions, prove to be significantly different than actual results, lower profitability may be experienced due to
higher amortization rates or higher expenses; or higher profitability may result if the opposite occurs. Most significantly, if
it is determined that expansion capacity should no longer be considered in calculating the recoverability of a landfill asset,
we may be required to recognize an asset impairment or incur significantly higher amortization expense. If at any time management
makes the decision to abandon the expansion effort, the capitalized costs related to the expansion effort are expensed immediately.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">For the year ended December 31, 2015 the Company operations related
to its landfill assets and liability are presented in the tables below:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt; text-decoration: underline"><font style="font-size: 8pt"><b><u>Landfill Assets</u></b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt"><b>Year Ended December 31, 2015</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 89%"><font style="font-size: 8pt">January 1, 2015, Beginning Balance</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Capital additions (Landfill acquired on December 22, 2015)</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">3,396,519</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Amortization of landfill assets</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(3,043</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Asset retirement adjustments</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">December 31, 2015, Ending Balance</font></td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">3,393,476</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-decoration: underline"><font style="font-size: 8pt"><b><u>Landfill Liability</u></b></font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">January 1, 2015, Beginning Balance</font></td>
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Obligations incurred and capitalized (Landfill acquired on December 22, 2015)</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">196,519</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Obligations settled</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Interest accretion</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">3,733</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Revisions in estimates and interest rate assumption</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Acquisition, divestures and other adjustments</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">December 31, 2015, Ending Balance</font></td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">200,252</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recognizes revenue when
persuasive evidence of arrangement exists, services have been provided, the seller’s price to the buyer is fixed or
determinable, and collection is reasonably assured. The majority of the Company’s revenues are generated from the fees charged
for waste collection, transfer, disposal and recycling.  The fees charged for our services are generally defined in service
agreements and vary based on contract-specific terms such as frequency of service, weight, volume and the general market factors
influencing a region’s rate.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company recognizes revenue when there is persuasive evidence
that services have been provided and a collection is reasonably assured. The majority of the Company’s revenues are generated
from the fees charged for waste collection, transfer, disposal and recycling.  The fees charged for our services are
generally defined in service agreements and vary based on contract-specific terms such as frequency of service, weight, volume
and the general market factors influencing a region’s rate.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company records deferred revenue for customers
that were billed in advance of services. The balance in deferred revenue represents amounts billed in January, February, and March
for services that will be provided during April, May, and June.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company records deferred revenue for customers that were billed
in advance of services. The balance in deferred revenue represents amounts billed in October, November and December for services
that will be provided during January, February and March.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Cost of services include all employment costs
associated with waste collection, transfer and disposal, damage claims, landfill costs, personal property taxes associated with
collection vehicles and other direct cost of the collection and disposal process.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Cost of services include all employment costs associated with waste
collection, transfer and disposal, damage claims, landfill costs, personal property taxes associated with collection vehicles and
other direct cost of the collection and disposal process.</p><p style="margin: 0pt"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0">The Company maintains its cash and cash equivalents in bank deposit
accounts, which could, at times, exceed federally insured limits. The Company has not experienced any losses in such accounts;
however, amounts in excess of the federally insured limit may be at risk if the bank experiences financial difficulties.  The
Company places its cash with high credit quality financial institutions.  The Company’s accounts at these institutions
are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. At March 31, 2016, the Company had $1,766,569 of
cash in United States bank deposits, of which $959,985 was federally insured and $806,583 was not federally insured.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0">Financial instruments which also potentially subject the Company
to concentrations of credit risk consist principally of trade accounts receivable; however, concentrations of credit risk with
respect to trade accounts receivables are limited due to generally short payment terms.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0">For the three months ended March 31, 2016, the Company had one contract
that accounted for approximately 12% of the Company's revenue. For the three months ended March 31, 2015, the Company had two contracts
that accounted for approximately 51% of the Company's revenue, collectively.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>
<p style="margin: 0pt"></p><p style="margin: 0pt; font: 8pt Times New Roman, Times, Serif"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company maintains its cash and cash equivalents in bank deposit accounts, which could, at times, exceed federally insured limits.
The Company has not experienced any losses in such accounts; however, amounts in excess of the federally insured limit may be
at risk if the bank experiences financial difficulties.  The Company places its cash with high credit quality financial
institutions.  The Company’s accounts at these institutions are insured by the Federal Deposit Insurance Corporation
(FDIC) up to $250,000.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">Financial
instruments which also potentially subject the Company to concentrations of credit risk consist principally of trade accounts
receivable; however, concentrations of credit risk with respect to trade accounts receivables are limited due to generally short
payment terms.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company has two contracts that account for a large portion of the Company’s revenue. During the year ended December 31,
2015, these contracts accounted for approximately 44% of the Company’s revenues and less than 5% of the Company’s
accounts receivable balance at December 31, 2015. During the year ended December 31, 2014, the Company had two customers that
accounted for approximately 46% of the Company’s revenues and approximately 53% of the Company’s accounts receivable
balance at December 31, 2014. The Company did not have any other customers that represented a significant portion of the Company’s
revenue or account receivables for the fiscal years ended December 31, 2015 and 2014, respectively.</font></p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Basic income (loss) per share is calculated
by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during
the period. Diluted earnings per share is calculated by dividing the Company’s net income (loss) available to common shareholders
by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding
is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. At March 31, 2016 the Company had
two convertible notes outstanding that are not convertible into common stock until June 2016. Additionally, the Company issued
stock warrants for 1,673,559 common shares.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the three months ended March 31, 2016, the
Company had 832,859 of weighted-average common shares relating to the convertible debt, under the if-converted method, however,
these shares are not dilutive because the Company recorded a loss during the fiscal year.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At March 31, 2016, and December 31, 2015 the
Company had a series of convertible notes and warrants outstanding that could be converted into approximately, 2,506,418 and 2,548,559
common shares, respectively. These are not presented in the consolidated statements of operations since the company incurred a
loss and the effect of these shares is anti- dilutive.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">Basic
income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted
average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net
income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the year. The
diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive
debt or equity. At December 31, 2015 the Company had two convertible notes outstanding that is not convertible into common stock
until June 2016. Additionally, the Company issued stock warrants for 1,673,559 common shares.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">For
the year ended December 31, 2015, the Company had 1,673,559 of weighted-average common shares relating to the convertible debt,
under the if-converted method, however, these shares are not dilutive because the Company recorded a loss during the fiscal year.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="margin: 0; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">At
December 31, 2015, and 2014 the Company had a series of convertible notes and warrants outstanding that could be converted into
approximately, 2,548,559 and 291,047 common shares, respectively. These are not presented in the consolidated statements of operations
since the company incurred a loss and the effect of these shares is anti- dilutive.</font></p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Stock-based compensation is accounted for at
fair value in accordance with ASC Topic 718. To date, the Company has not adopted a stock option plan and has not granted any stock
options.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Stock-based compensation is accounted for based
on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements
of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee
or director is required to perform the services in exchange for the award (presumptively, the vesting period).  The ASC
also require measurement of the cost of employee and director services received in exchange for an award based on the grant-date
fair value of the award.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Pursuant to ASC Topic 505-50, for share based
payments to consultants and other third-parties, compensation expense is determined at the “measurement date.”  The
expense is recognized over the service period of the award.  Until the measurement date is reached, the total amount
of compensation expense remains uncertain.  The Company initially records compensation expense based on the fair value
of the award at the reporting date.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recorded stock based compensation
expense of $3,545,422 and $1,486,265 during the three months ended March 31, 2016 and 2015, respectively, which is included in
compensation and related expense on the statement of operations.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Stock-based compensation is accounted for at fair value in accordance
with ASC Topic 718. To date, the Company has not adopted a stock option plan and has not granted any stock options.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Stock-based compensation is accounted for based on the requirements
of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements of the cost of
employee and director services received in exchange for an award of equity instruments over the period the employee or director
is required to perform the services in exchange for the award (presumptively, the vesting period).  The ASC also require
measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value
of the award.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Pursuant to ASC Topic 505-50, for share based payments to consultants
and other third-parties, compensation expense is determined at the “measurement date.”  The expense is recognized
over the service period of the award.  Until the measurement date is reached, the total amount of compensation expense
remains uncertain.  The Company initially records compensation expense based on the fair value of the award at the reporting
date.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company recorded stock based compensation expense of $7,356,000
and $339,000 during the years ended December 31, 2015 and 2014, respectively.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company does not expect the adoption of
recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial
position or cash flow.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.</p><table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: center"><b>Three Months Ended March 31, 2016 (UNAUDITED)</b></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><b>Year Ended December 31, 2015</b></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"><b>Landfill Assets</b></td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%; text-align: left">Beginning balance</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 8%; text-align: right">3,393,476</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 8%; text-align: right">3,396,519</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Capital additions</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">26,984</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Amortization of landfill assets</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">(51,933</td>
<td nowrap="nowrap" style="text-align: left">)</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">(3,043</td>
<td nowrap="nowrap" style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 0.95pt; text-align: left">Asset retirement adjustments</td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: right">2,685</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">3,371,212</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">3,393,476</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left"><b>Landfill Asset Retirement Obligation</b></td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Beginning balance</td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">200,252</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">196,519</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Obligations incurred and capitalized</td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">2,685</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Obligations settled</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Interest accretion</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">42,491</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">3,733</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 0.95pt; text-align: left">Revisions in estimates and interest rate assumption</td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">245,428</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">200,252</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td></tr>
</table><table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt; text-decoration: underline"><font style="font-size: 8pt"><b><u>Landfill Assets</u></b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt"><b>Year Ended December 31, 2015</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 89%"><font style="font-size: 8pt">January 1, 2015, Beginning Balance</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Capital additions (Landfill acquired on December 22, 2015)</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">3,396,519</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Amortization of landfill assets</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(3,043</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Asset retirement adjustments</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">December 31, 2015, Ending Balance</font></td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">3,393,476</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-decoration: underline"><font style="font-size: 8pt"><b><u>Landfill Liability</u></b></font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">January 1, 2015, Beginning Balance</font></td>
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Obligations incurred and capitalized (Landfill acquired on December 22, 2015)</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">196,519</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Obligations settled</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Interest accretion</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">3,733</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Revisions in estimates and interest rate assumption</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Acquisition, divestures and other adjustments</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">December 31, 2015, Ending Balance</font></td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">200,252</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table><table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: center"><b>March 31, 2016 (UNAUDITED)</b></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><b>December 31, 2015</b></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%; text-align: left">Land</td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 8%; text-align: right">1,690,000</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 8%; text-align: right">1,690,000</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Buildings & Building Improvements</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">692,156</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">692,156</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Furniture & office equipment</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">288,726</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">258,702</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Containers</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">4,524,382</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">4,453,386</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1pt; text-align: left">Trucks, Machinery, & Equipment</td>
<td style="padding-bottom: 1pt; text-align: right"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td>
<td style="border-bottom: Black 1pt solid; text-align: right">12,209,606</td>
<td nowrap="nowrap" style="padding-bottom: 1pt; text-align: left"> </td>
<td style="padding-bottom: 1pt; text-align: right"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td>
<td style="border-bottom: Black 1pt solid; text-align: right">9,948,686</td>
<td nowrap="nowrap" style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Total cost</td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">19,404,870</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">17,042,930</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1pt; text-align: left">Less accumulated depreciation</td>
<td style="padding-bottom: 1pt; text-align: left"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td>
<td style="border-bottom: Black 1pt solid; text-align: right">(3,364,035</td>
<td nowrap="nowrap" style="padding-bottom: 1pt; text-align: left">)</td>
<td style="padding-bottom: 1pt; text-align: left"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td>
<td style="border-bottom: Black 1pt solid; text-align: right">(2,609,190</td>
<td nowrap="nowrap" style="padding-bottom: 1pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.25pt; text-align: left">Net property and Equipment</td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">16,040,835</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">14,433,740</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td></tr>
</table><table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt"><b>2015</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt"><b>2014</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 8pt">Land</font></td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">1,690,000</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Building & Improvements</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">692,156</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Furniture & Office Equipment</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">258,702</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">240,102</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Containers</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">4,453,386</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">2,847,205</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Truck, Machinery & Equipment</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">9,948,686</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">5,523,773</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Total Cost</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">17,042,930</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">8,611,080</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Less accumulated depreciation</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(2,609,190</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(956,315</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Net property, plant and Equipment</font></td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">14,433,740</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">7,654,765</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table><table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: left; text-decoration: underline"><b><i><u></u></i></b></td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%; text-align: left">Cash consideration</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 8%; text-align: right">13,008,109</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Restricted stock consideration</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">2,625,000</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Convertible Promissory Note</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">1,250,000</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 0.95pt; text-align: left">Contingent additional purchase price</td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">1,000,000</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Total</td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">17,883,109</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
</table><table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font-size: 8pt">Cash consideration</font></td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">13,008,109</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Restricted stock consideration</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">2,625,000</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Convertible Promissory Note</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,250,000</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Contingent additional purchase price</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">1,000,000</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 8pt">Total</font></td>
<td style="text-align: right; padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="text-align: right; border-bottom: Black 2.5pt double"><font style="font-size: 8pt">17,883,109</font></td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt"> </td></tr>
</table><table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font-size: 8pt">Cash consideration</font></td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">11,000,000</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Estimated value of common stock issued to sellers</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,978,750</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Estimated value of preferred stock issued to sellers</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">7,121,000</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 8pt">Total</font></td>
<td style="text-align: right; padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="text-align: right; border-bottom: Black 2.5pt double"><font style="font-size: 8pt">20,099,750</font></td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt"> </td></tr>
</table><table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%; text-align: left">Cash</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 8%; text-align: right">442,395</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Accounts receivable</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">974,538</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Prepaid expense</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">84,196</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Other current assets</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">53,810</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Customer lists intangible assets</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">8,180,000</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Non-competition agreement intangible asset</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">56,000</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Goodwill</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">5,604,110</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Property, Plant, and Equipment</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">4,640,798</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Account payable</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">(1,001,721</td>
<td nowrap="nowrap" style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Deferred revenue</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">(1,007,525</td>
<td nowrap="nowrap" style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Accrued expenses</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">(106,396</td>
<td nowrap="nowrap" style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 0.95pt; text-align: left">Capital lease</td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(37,096</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Total</td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">17,883,109</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
</table><table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%; text-align: left">Cash</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 8%; text-align: right">470</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Accounts receivable</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">272,480</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Prepaid expense</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">6,870</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Customer lists intangible assets</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">2,000,000</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Landfill permit (including ARO)</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">3,396,519</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Goodwill</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">1,630,310</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Land</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">1,550,000</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Property, Plant, and Equipment</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">1,090,575</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Deferred revenue</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">(87,218</td>
<td nowrap="nowrap" style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 0.95pt; text-align: left">Asset retirement obligation - permits</td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(196,519</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Total</td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">9,663,487</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
</table><p style="margin: 0pt; font: 8pt Times New Roman, Times, Serif"></p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="width: 89%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Cash</font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">197,173</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Accounts
receivable</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">974,538</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Prepaid
expense</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">84,196</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Other
current assets</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">53,810</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Customer
lists intangible assets</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">8,180,000</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Non-competition
agreement intangible asset</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">56,000</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Goodwill</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">5,849,332</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Property,
plant, and equipment</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">4,640,798</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Account
payable</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(1,001,721</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Deferred
revenue</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(1,007,525</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Accrued
expenses</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(106,396</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Capital
lease</font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">(37,096</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Total</font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">17,883,109</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="margin: 0pt; font: 8pt Times New Roman, Times, Serif"></p><p style="margin: 0pt; font: 8pt Times New Roman, Times, Serif"></p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="width: 89%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Cash</font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">470</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Accounts
receivable</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">272,480</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Prepaid
expense</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">6,870</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Customer
lists intangible assets</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">2,000,000</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Landfill
permit (including ARO)</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">3,396,519</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Goodwill</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">1,630,310</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Land</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">1,550,000</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Property,
Plant, and Equipment</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">1,090,575</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Deferred
revenue</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(87,218</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Asset
retirement obligation - permits</font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">(196,519</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Total</font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">9,663,487</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="margin: 0pt; font: 8pt Times New Roman, Times, Serif"></p><table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font-size: 8pt">Accounts receivable</font></td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">632,322</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Prepaid expenses</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">123,544</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Deposits</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">8,303</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Containers</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">2,710,671</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Furniture and equipment</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">299,450</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Trucks</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">4,243,964</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Customer lists</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">14,007,452</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Non-compete agreement</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">150,000</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Accounts payable and accrued expenses</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(54,387</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Notes payable</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(143,464</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Deferred revenue</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(1,878,105</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"><font style="font-size: 8pt">Total</font></td>
<td style="text-align: right; padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="text-align: right; border-bottom: Black 2.5pt double"><font style="font-size: 8pt">20,099,750</font></td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt"> </td></tr>
</table><table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="12" style="border-bottom: black 1pt solid; text-align: center"><b>March 31, 2016</b></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: center"><b>Remaining</b></td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: center"><b>Accumulated</b></td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: center"><b>Net Carrying</b></td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: center"><b>Useful Life</b></td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: center"><b>Cost</b></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: center"><b>Amortization</b></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><b>Value</b></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 43%; text-align: left">Customer lists</td>
<td style="width: 24%; text-align: left">13.4 years</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 8%; text-align: right">24,187,452</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 8%; text-align: right">5,550,708</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 8%; text-align: right">18,636,744</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Non compete agreement</td>
<td style="text-align: left">3.9 years</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">206,000</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">60,541</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">145,459</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 0.95pt; text-align: left">Website</td>
<td style="padding-bottom: 0.95pt; text-align: left">3.7 years</td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: right">13,920</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: right">3,712</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">10,208</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">24,407,372</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">5,614,961</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">18,792,411</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td></tr>
</table><table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="12" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>December
31, 2015</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: center; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"><b>Remaining</b></font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="text-align: center; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"><b>Accumulated</b></font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="text-align: center; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"><b>Net
Carrying</b></font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Useful
Life</b></font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Cost</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Amortization</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Value</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="width: 41%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Customer
lists</font></td>
<td style="width: 26%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">13.7
years</font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">24,187,452</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">4,687,090</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">19,500,362</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Non
compete agreement</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">4.2
years</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">206,000</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">50,301</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">155,699</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Website</font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">3.9
years</font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">13,920</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">3,016</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">10,904</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">24,407,372</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">4,740,407</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">19,666,965</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="12" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>December
31, 2014</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: center; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"><b>Remaining</b></font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="text-align: center; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"><b>Accumulated</b></font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="text-align: center; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"><b>Net
Carrying</b></font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Useful
Life</b></font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Cost</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Amortization</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Value</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="width: 41%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Capitalized
software</font></td>
<td style="width: 26%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">5.0
years</font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">434,532</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">434,532</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Customer
list</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">4.5
years</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">14,007,452</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">1,867,660</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">12,139,792</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Loan
fees</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">4.5
years</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">50,613</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">11,248</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">39,365</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Non
compete agreement</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">4.5
years</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">150,000</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">20,000</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">130,000</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Website</font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">4.9
years</font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">13,920</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">232</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">13,688</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">14,656,517</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">1,899,140</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">12,757,377</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p><table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" nowrap="nowrap" style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: center"><b>March 31, 2016 (UNAUDITED)</b></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" nowrap="nowrap" style="border-bottom: black 1pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>December 31,</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2015</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%; text-align: left">Goldman Sachs - Tranche A Term Loan - LIBOR Interest</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 8%; text-align: right">40,000,000</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 8%; text-align: right">40,000,000</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Goldman Sachs - Revolver</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">2,150,000</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Goldman Sachs - MDTL</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Convertible Notes Payable</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">1,250,000</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">1,250,000</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Capitalized lease - financing company, secured by equipment</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">33,882</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">37,097</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Equipment loans</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">364,764</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">395,118</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Notes payable to seller of Meridian, subordinated debt</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">1,475,000</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">1,475,000</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1pt; text-align: left">Less: debt discount</td>
<td style="padding-bottom: 1pt; text-align: right"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td>
<td style="border-bottom: Black 1pt solid; text-align: right">(2,040,460</td>
<td nowrap="nowrap" style="padding-bottom: 1pt; text-align: left">)</td>
<td style="padding-bottom: 1pt; text-align: right"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td>
<td style="border-bottom: Black 1pt solid; text-align: right">(2,152,603</td>
<td nowrap="nowrap" style="padding-bottom: 1pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 0.25in; text-align: left"><b>Total debt</b></td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">43,233,186</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">41,004,612</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1pt; text-align: left">Less: current portion</td>
<td style="padding-bottom: 1pt; text-align: right"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td>
<td style="border-bottom: Black 1pt solid; text-align: right">(268,994</td>
<td nowrap="nowrap" style="padding-bottom: 1pt; text-align: left">)</td>
<td style="padding-bottom: 1pt; text-align: right"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td>
<td style="border-bottom: Black 1pt solid; text-align: right">(417,119</td>
<td nowrap="nowrap" style="padding-bottom: 1pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.25pt; padding-left: 0.25in; text-align: left"><b>Long term debt less current portion</b></td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">42,964,192</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">40,587,493</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td></tr>
</table><table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt"><b>December 31, 2015</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt"><b>December 31, 2014</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 8pt">Debt payable to Comerica Bank, senior debt</font></td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">8,708,333</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Debt payable to Praesidian Capital Opportunity Fund III, senior lender</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Debt payable to Praesidian Capital Opportunity Fund III-A, senior lender</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Goldman Sachs - Tranche A Term Loan - LIBOR Interest</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">40,000,000</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Goldman Sachs - Revolver</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Goldman Sachs - MDTL</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Convertible Notes Payable</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,250,000</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Capitalized lease - financing company, secured by equipment,</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">37,097</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Equipment loans</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">395,118</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Notes payable to seller of Meridian, subordinated debt</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,475,000</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,475,000</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Less: debt discount</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(2,152,603</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 9pt"><font style="font-size: 8pt"><b>Total debt</b></font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">41,004,611</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">10,183,333</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Less: current portion</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(417,119</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">(1,357,143</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 3pt; padding-left: 9pt"><font style="font-size: 8pt"><b>Long term debt less current portion</b></font></td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">40,587,493</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">8,826,190</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">These funds were distributed as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%; text-align: left">Payoff of short term bridge financing</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 8%; text-align: right">432,938</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Payoff of lines of credit with Commerica Bank</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">1,745,799</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Payoff of senior debt to Comerica Bank</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">7,953,433</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 0.95pt; text-align: left">Refinancing fees</td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">712,830</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">10,845,000</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The funds to payoff the
Praesidian notes were distributed as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%; text-align: left">Aggregate outstanding principal balance of the Notes</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 8%; text-align: right">10,845,043</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Aggregate accrued but unpaid interest on the Notes</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">82,844</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Prepayment Premium</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">325,351</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Accrued PIK</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">9,941</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Tax Liability</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">150,000</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 0.95pt; text-align: left">Accrued but unpaid fees and expenses</td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">4,000</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Payoff Amount</td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">11,417,179</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
</table>
<p style="margin: 0pt"></p><p style="margin-top: 0; margin-bottom: 0"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">On August 6, 2015, the Company refinanced its long-term debt payable
to Comerica Bank. Proceeds from notes issued by the Company to Praesidian Capital Opportunity Fund III, LP and Praesidian Capital
Opportunity Fund III-A, LP (together referred to as Praesidian) were $10,845,000. These funds were distributed as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font-size: 8pt">Payoff of short term bridge financing</font></td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">432,938</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Payoff of lines of credit with Commerica Bank</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,745,799</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Payoff of senior debt to Comerica Bank</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">7,953,433</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Refinancing fees</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">712,830</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"> </td>
<td style="text-align: right; padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="text-align: right; border-bottom: Black 2.5pt double"><font style="font-size: 8pt">10,845,000</font></td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The proceeds of the loans were used to partially fund the acquisitions
referenced above and refinance existing debt with Praesidian, among other things. The funds to payoff the Praesidian notes were
distributed as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font-size: 8pt">Aggregate outstanding principal balance of the Notes</font></td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">10,845,043</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Aggregate accrued but unpaid interest on the Notes</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">82,844</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Prepayment Premium1</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">325,351</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Accrued PIK</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">9,941</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Tax Liability</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">150,000</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Accrued but unpaid fees and expenses</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">4,000</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt"><font style="font-size: 8pt">Payoff Amount</font></td>
<td style="text-align: right; padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="text-align: right; border-bottom: Black 2.5pt double"><font style="font-size: 8pt">11,417,179</font></td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"></p><table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%; text-align: left">Fair value of warrants @ December 31, 2015</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 8%; text-align: right">2,820,000</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1pt; text-align: left">Unrealized gain on derivative liability</td>
<td style="padding-bottom: 1pt; text-align: right"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td>
<td style="border-bottom: Black 1pt solid; text-align: right">(180,000</td>
<td nowrap="nowrap" style="padding-bottom: 1pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.25pt; text-align: left">Fair value of warrants @ March 31, 2016</td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">2,640,000</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td></tr>
</table><table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font-size: 8pt">Fair value of warrants @ December 31, 2014</font></td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Issuance of Praesdian warrants @ August 6, 2015</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">904,427</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Unrealized loss on derivative liability</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,004,213</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Cancellation of Praesidian warrants @ December 22, 2015</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(1,908,640</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Issuance of Goldman warrants @ December 22, 2015</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">2,160,000</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Unrealized loss on derivative liability</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">660,000</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Fair value of warrants @ December 31, 2015</font></td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2,820,000</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table><table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: right"> </td>
<td colspan="2" nowrap="nowrap" style="border-bottom: black 1pt solid; padding-bottom: 0.95pt">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>March 31,</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2016</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: center"> </td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: center"> </td>
<td colspan="2" nowrap="nowrap" style="border-bottom: black 1pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>December 31,</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2015</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%; text-align: left">Purchase Price</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 8%; text-align: right">450,000</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 8%; text-align: right">450,000</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Time to expiration</td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right">12/22/2023</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right">12/22/2023</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Risk-free interest rate</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">1.60</td>
<td nowrap="nowrap" style="text-align: left">%</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">2.15</td>
<td nowrap="nowrap" style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Estimated volatility</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">45</td>
<td nowrap="nowrap" style="text-align: left">%</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">45</td>
<td nowrap="nowrap" style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Dividend</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td nowrap="nowrap" style="text-align: left">%</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td nowrap="nowrap" style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Stock price on March 31, 2016</td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">1.80</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">1.90</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Expected forfeiture rate</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td nowrap="nowrap" style="text-align: left">%</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td nowrap="nowrap" style="text-align: left">%</td></tr>
</table><p style="margin: 0pt"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The key inputs used in the December 22, 2015 fair value calculations
were as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt"><b>December 22, 2015</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font-size: 8pt">Current exercise price</font></td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">0.025</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Time to expiration</font></td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right"><font style="font-size: 8pt">8/6/2016</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Risk-free interest rate</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0.33</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Estimated volatility</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">230</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Dividend</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Stock price on December 22, 2015</font></td>
<td style="text-align: right"> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">1.50</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Expected forfeiture rate</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">%</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="margin: 0pt"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The key inputs used in the December 22, and December 31, 2015 fair
value calculations were as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt"><b>December 22, 2015</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font-size: 8pt">Purchase Price</font></td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">450,000</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Time to expiration</font></td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right"><font style="font-size: 8pt">12/22/2023</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Risk-free interest rate</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">2.11</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Estimated volatility</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">45</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Dividend</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Stock price on December 22, 2015</font></td>
<td style="text-align: right"> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">1.50</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Expected forfeiture rate</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">%</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt"><b>December 31, 2015</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font-size: 8pt">Purchase Price</font></td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">450,000</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Time to expiration</font></td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right"><font style="font-size: 8pt">12/22/2023</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Risk-free interest rate</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">2.15</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Estimated volatility</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">45</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Dividend</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Stock price on December 31, 2015</font></td>
<td style="text-align: right"> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">1.90</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Expected forfeiture rate</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">0</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">%</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="margin: 0pt"></p><table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; padding-bottom: 0.95pt">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Number</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>of</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Shares</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: center"><b>Average Exercise Price</b></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; padding-bottom: 0.95pt">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>If</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Exercised</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><b>Expiration Date</b></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%; text-align: left">Granted - Praesidian</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 9%; text-align: right">1,293,022</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 9%; text-align: right">0.025</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 9%; text-align: right">32,326</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 9%; text-align: right">-</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Cancellation - Praesidian</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">(1,293,022</td>
<td nowrap="nowrap" style="text-align: left">)</td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">0.025</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">(32,326</td>
<td nowrap="nowrap" style="text-align: left">)</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Granted - Goldman Sachs</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">1,673,559</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">0.269</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">449,518</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: right">December 31, 2023</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Forfeited</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 0.95pt; text-align: left">Exercised</td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.25pt; text-align: left">Outstanding, December 31, 2015</td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: right">1,673,559</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">449,518</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.25pt; text-align: left">Warrants exercisable at December 31, 2015</td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: right">1,673,559</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Granted</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Forfeited</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 0.95pt; text-align: left">Exercised</td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.25pt; text-align: left">Outstanding, March 31, 2016</td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: right">1,673,559</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">449,518.00</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.25pt; text-align: left">Warrants exercisable at March 31, 2016</td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: right">1,673,559</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td></tr>
</table><table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Number</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>of</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Shares</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt"><b>Average Exercise Price</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>If</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Exercised</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt"><b>Expiration Date</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%"><font style="font-size: 8pt">Outstanding, January 1, 2014</font></td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Granted</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Forfeited</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Exercised</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Outstanding, December 31, 2014</font></td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Granted - Praesidian</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,293,022</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">0.025</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">32,326</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Forfeited/Cancellation - Praesidian</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(1,293,022</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td>
<td style="text-align: right"> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">0.025</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">(32,326</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Granted - Goldman Sachs</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">1,673,559</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">0.269</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">449,518</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right"><font style="font-size: 8pt">December 31, 2023</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Forfeited/Cancellation - Goldman Sachs</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Exercised</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Outstanding, December 31, 2015</font></td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">1,673,559</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">449,518</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td> </td>
<td style="padding-bottom: 3pt; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Warrants exercisable at December 31, 2015</font></td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">1,673,559</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table><table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="10" style="border-bottom: black 1pt solid; text-align: center"><b>Fair Value Measurements at Reporting Date Using</b></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" nowrap="nowrap" style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: center"><b>December 31, 2015</b></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" nowrap="nowrap" style="border-bottom: black 1pt solid; padding-bottom: 0.95pt">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Quoted Prices in</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Active Markets for</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Identical Assets</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(Level 1)</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" nowrap="nowrap" style="border-bottom: black 1pt solid; padding-bottom: 0.95pt">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Significant Other</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Observable</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Inputs</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(Level 2)</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" nowrap="nowrap" style="border-bottom: black 1pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Signifcant</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Unobservable</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Inputs</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(Level 3)</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%; text-align: left">Derivative liability</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 9%; text-align: right">2,820,000</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 9%; text-align: right">-</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 9%; text-align: right">-</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 9%; text-align: right">2,820,000</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 0.95pt; text-align: left">Stock settled debt</td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: right">12,500</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: right">10,000</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">2,500</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">2,832,500</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">10,000</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">2,822,500</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="10" style="border-bottom: black 1pt solid; text-align: center"><b>Fair Value Measurements at Reporting Date Using</b></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" nowrap="nowrap" style="border-bottom: black 1pt solid; padding-bottom: 0.95pt">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>March 31, 2016</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(UNAUDITED)</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" nowrap="nowrap" style="border-bottom: black 1pt solid; padding-bottom: 0.95pt">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Quoted Prices in</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Active Markets for</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Identical Assets</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(Level 1)</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" nowrap="nowrap" style="border-bottom: black 1pt solid; padding-bottom: 0.95pt">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Significant Other</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Observable</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Inputs</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(Level 2)</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" nowrap="nowrap" style="border-bottom: black 1pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Signifcant</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Unobservable</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Inputs</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(Level 3)</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Derivative liability</td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">2,640,000</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">2,640,000</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%; padding-bottom: 0.95pt; text-align: left">Stock settled debt</td>
<td style="width: 1%; padding-bottom: 0.95pt; text-align: right"> </td>
<td style="width: 1%; border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="width: 9%; border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: right">12,500</td>
<td nowrap="nowrap" style="width: 1%; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="width: 1%; padding-bottom: 0.95pt; text-align: right"> </td>
<td style="width: 1%; border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="width: 9%; border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: right">10,000</td>
<td nowrap="nowrap" style="width: 1%; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="width: 1%; padding-bottom: 0.95pt; text-align: right"> </td>
<td style="width: 1%; border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="width: 9%; border-bottom: black 1pt solid; padding-bottom: 0.95pt; text-align: right">-</td>
<td nowrap="nowrap" style="width: 1%; padding-bottom: 0.95pt; text-align: left"> </td>
<td style="width: 1%; padding-bottom: 0.95pt; text-align: right"> </td>
<td style="width: 1%; border-bottom: black 1pt solid; text-align: left"> </td>
<td style="width: 9%; border-bottom: black 1pt solid; text-align: right">2,500</td>
<td nowrap="nowrap" style="width: 1%; padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">2,652,500</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">10,000</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">2,642,500</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td></tr>
</table><table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="10" style="text-align: center"><font style="font-size: 8pt"><b>Fair Value Measurements at Reporting Date Using</b></font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>December 31, 2015</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Quoted Prices in</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Active Markets for</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Identical Assets</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(Level 1)</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Significant Other</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Observable</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Inputs</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(Level 2)</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Significant Other</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Observable</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Inputs</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(Level 3)</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%"><font style="font-size: 8pt">Derivative liability</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">2,820,000</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">2,820,000</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Stock settled debt premium</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">12,500</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">10,000</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">2,500</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2,832,500</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">10,000</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2,822,500</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="10" style="text-align: center"><font style="font-size: 8pt"><b>Fair Value Measurements at Reporting Date Using</b></font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>December 31, 2014</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Quoted Prices in</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Active Markets for</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Identical Assets</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(Level 1)</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Significant Other</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Observable</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Inputs</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(Level 2)</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Significant Other</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Observable</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Inputs</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(Level 3)</b></p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%"><font style="font-size: 8pt">Interest Rate Swap</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">40,958</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">40,958</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Stock settled debt</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">308,083</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">235,000</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">67,083</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">349,041</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">235,000</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">108,041</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table><table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%; text-align: left">2016</td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 8%; text-align: right">331,806</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">2017</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">448,408</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">2018</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">164,493</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">2019</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">111,103</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">2020</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">71,500</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 0.95pt; text-align: left">Thereafter</td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.25pt; text-align: left">Total</td>
<td style="padding-bottom: 2.25pt; text-align: left"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">1,127,310</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td></tr>
</table><table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font-size: 8pt">2016</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">442,408</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">2017</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">448,408</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">2018</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">164,493</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">2019</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">111,103</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">2020</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">71,500</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Thereafter</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">1,237,912</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table><table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 0.95pt; text-align: left; text-decoration: underline"><u>Summary of Statements of Financial Condition</u></td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: center"><b>Three Months Ended</b></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td style="padding-bottom: 0.95pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><b>March 31, 2016</b></td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left">Assets</td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%; text-align: left">Current assets</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 8%; text-align: right">3,609</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 0.95pt; text-align: left">Noncurrent assets</td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">2,877,313</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.25pt; text-align: left">Total assets</td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: right">2,880,922</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td colspan="4" style="text-align: left">Liabilities and Equity</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Current liabilities</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">234,362</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Noncurrent liabilities</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 0.95pt; text-align: left">Equity</td>
<td style="padding-bottom: 0.95pt; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">2,646,560</td>
<td nowrap="nowrap" style="padding-bottom: 0.95pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.25pt; text-align: left">Total liabilities and equity</td>
<td style="padding-bottom: 2.25pt; text-align: right"> </td>
<td style="border-bottom: Black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: Black 2.25pt double; text-align: right">2,880,922</td>
<td nowrap="nowrap" style="padding-bottom: 2.25pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td colspan="4" style="text-align: left">Summary of Statements of Operations</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Revenues</td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">177</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Expense</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">14,210</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Net loss</td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">(14,033</td>
<td nowrap="nowrap" style="text-align: left">)</td></tr>
</table><table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt; text-decoration: underline"><font style="font-size: 8pt"><u>Summary of Statements of Financial Condition</u></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt"><b>2015</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 8pt"><b>(UNAUDITED)</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Assets</font></td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 89%"><font style="font-size: 8pt">Current assets</font></td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 8pt">4,481</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Noncurrent assets</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">2,869,553</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Total assets</font></td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2,874,034</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td colspan="4"><font style="font-size: 8pt">Liabilities and Equity</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Current liabilities</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">213,264</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Noncurrent liabilities</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">-</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">Equity</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 8pt">2,660,770</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">Total liabilities and equity</font></td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2,874,034</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td colspan="4" style="text-decoration: underline"><font style="font-size: 8pt"><u>Summary of Statements of Operations</u></font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Revenues</font></td>
<td style="text-align: right"> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">1,364</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Expense</font></td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">470,342</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 8pt">Net loss</font></td>
<td style="text-align: right"> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">(468,978</font></td>
<td nowrap="nowrap"><font style="font-size: 8pt">)</font></td></tr>
</table>337121233934763396519269840-51933-3043268502454282002521965192685000424913733001200079000650006270006180007100035454221486265735600033900046700040800017665692729795438907194712700128500002139000017665699599858065832500000.200.512506418254855946132878328591604083514433740765476533640352609190956315194048701704293086110801690000169000001550000155000069215669215602887262587022401024524382445338628472051220960699486865523773757089381576161422593252650451513008109130081091100000026250002625000125000012500001000000100000017883109178831092009975044239547019717347097453827248097453827248063232284196687084196687012354481800002000000818000020000001400745256000560001500005604110163031058493321630310464079810905754640798109057510017211001721543871007525872181007525872181878105-106396-1063963709637096-196519-19651917883109966348717883109966348720099750339651933965192440737224187452206000139201465651724187452206000139204345321400745250613150000139204740407555070860541371218991404687090503013016018676601124820000232196669651863674414545910208127573771950036215569910904434532121397923936513000013688P13Y4M24DP3Y10M24DP3Y8M12DP13Y8M12DP4Y2M12DP3Y10M24DP5YP4Y6MP4Y6MP4Y6MP4Y10M24D42964192405874938826190268994417119135714343209620410046128867148-2040460-215260301475000147500014750003647643951180338823709701250000125000000002150000004000000040000000043293843293817457991745799795343379534337128307128301084500010845000282000001800000-166421300264000028200002023-12-222023-12-220.000.000.01600.02150.450.451.801.900.000.00450000450000114171791141717940004000150000150000994199413253513253518284482844108450431084504326400002820000002640000000282000000012500125001000002500308083100000250023500006708326525002832500100000264250034904110000028225002350000108041114790855653201541778011127310123791233180644240844840844840816449316449311110311110371500715000074882393035819135060971777953471424860513644469898183305885213791421050192862603280470342-6426866-2752646-19231890-14033-2656742271063-4689786209894491758712912373609448130886277323319191276568028773132869553531370065168324621711682288092228740341082318010788838703705823436221326400531370065168324621711682288092228740342646560266077001293022167355901673559167355900000000-12930220.000.0250.2690.000.02544951844951800032326449518000000-32326Meridian Waste Solutions, Inc.0000949721YesNoNo--12-31Smaller Reporting CompanyS-1false2016-03-312013933170781858847939372842761522199988537523594185236208036418501095410954830311152001416697393657234420747964203371212339347601863674419500362121397921454591556991300001020810904136881981859198805044984047480628006967365359891359891526585103663099638072900030459352912264192988215065150653020831000000100000002640000282000002454282002520540328005157658315904206007171071613449525966249085224250224250224250329614182762449214370296-34246482-27819616-8587726-895794106663580747651517121071210517121051517121071210517121051517121071210517121075000000750000007500000024537982210386509963418245379822103865099634180001864052269872214634101356045951812310779522612528211853370493200165911408104458927383746798381042307682145907910749775139821339195031772561229407241932459574821915715136665555207139757046959374172453387923176408954179808688732670010972762313312996-14510-21851-2083000307140958-40958000-189916100-21050-7034700000-7000000000014561561900761374497348136184011-1270873-185908-4961488-478593-181015-0.3-0.25-1.33-0.272168001911114873144685769963418-6426866-2752646-19231890-2656742271063170740611071894554949286498551026341363900007789852603258309700035454221486265735618000-14510-21851-208300306115-143253-325322-4384315344322918998971247140307-6617618854612227664279743132813321940250170000267380243000013367130927-11236151778-323600-34004409321350-58621134484-182593722083927949184697507973700-4121038-295913-23868136-1481682-1708861100000000033567489286210169077916674494990750000-16751605900000321643326071427984961-308334-1034499-963226992852290888418376-410467176656927297954389075381922053143890714613721050905997341272840137449734813652559000000434532000-2452220000451760000296690243643929591312800111407251170886194712700000307240958001800000-1664213002300002300002300000.0250.0250.0250.0010.0010.0010.0010.0010.001395000167355916735590.000.000.000.000.000.000.000.000.000.00<p style="margin: 0pt"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Christian
Disposal Acquisition</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">On
December 22, 2015, the Company, in order to expand into new markets and maximize the rate of waste internalization, acquired 100%
of the membership interests of Christian Disposal LLC pursuant to that certain Amended and Restated Membership Interest Purchase
Agreement, dated October 16, 2015, as amended by that certain First Amendment thereto, dated December 4, 2015.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">The
acquisition was accounted for by the Company using acquisition method under business combination accounting. Under this method,
the purchase price paid by the acquirer is allocated to the assets acquired and liabilities assumed as of the acquisition date
based on the fair value. By the application of “push-down” accounting, our assets, liabilities and equity were accordingly
adjusted to fair value on December 22, 2015. Determining the fair value of certain assets and liabilities assumed is judgmental
in nature and often involves the use of significant estimates and assumptions.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">The
purchase of Christian Disposal, LLC included the acquisition of assets of $20,035,847 and liabilities of $2,152,738. The aggregate
purchase price consisted of the following:</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font: 8pt Times New Roman, Times, Serif">Cash consideration</font></td>
<td style="width: 1%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">13,008,109</font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 8pt Times New Roman, Times, Serif">Restricted stock consideration</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">2,625,000</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 8pt Times New Roman, Times, Serif">Convertible Promissory Note</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">1,250,000</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif">Contingent additional
purchase price</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">1,000,000</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 8pt Times New Roman, Times, Serif">Total</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">17,883,109</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">As
noted in the table above, the purchase price could be increased by a maximum amount of $2,000,000 depending upon the extension
of certain contracts to which Christian Disposal, LLC is a party. At March 31, 2016, the fair value of the additional purchase
price was determined to be $1,000,000. Also, the Company issued 1,750,000 restricted shares of common stock as consideration which
was valued at market at the date of the closing.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">The
following table summarizes the estimated fair value of Christian Disposal LLC, and subsidiary, assets acquired and liabilities
assumed at the date of acquisition:</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font: 8pt Times New Roman, Times, Serif">Cash</font></td>
<td style="width: 1%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">442,395</font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 8pt Times New Roman, Times, Serif">Accounts receivable</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">974,538</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 8pt Times New Roman, Times, Serif">Prepaid expense</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">84,196</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 8pt Times New Roman, Times, Serif">Other current assets</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">53,810</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 8pt Times New Roman, Times, Serif">Customer lists intangible assets</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">8,180,000</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 8pt Times New Roman, Times, Serif">Non-competition agreement intangible asset</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">56,000</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 8pt Times New Roman, Times, Serif">Goodwill</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">5,604,110</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 8pt Times New Roman, Times, Serif">Property, Plant, and Equipment</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">4,640,798</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 8pt Times New Roman, Times, Serif">Account payable</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">(1,001,721</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 8pt Times New Roman, Times, Serif">Deferred revenue</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">(1,007,525</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 8pt Times New Roman, Times, Serif">Accrued expenses</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">(106,396</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif">Capital lease</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">(37,096</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 8pt Times New Roman, Times, Serif">Total</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">17,883,109</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Eagle
Ridge Landfill, LLC and Eagle Ridge Hauling Business</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">On
December 22, 2015, the Company, in order to expand into new markets and maximize the rate of waste internalization, consummated
the closing of the certain Asset Purchase Agreement dated November 13, 2015, by and between the Company and Eagle Ridge Landfill,
LLC, as amended by the certain Amendment to Asset Purchase Agreement, dated December 18, 2015, to which the Company and WCA Waste
Corporation are also party. Pursuant to the Eagle Ridge Purchase Agreement, Meridian Land acquired a landfill located in Pike
County, Missouri and certain assets, rights, and properties related to such business of Eagle Ridge, including certain debts.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">The
acquisition was accounted for by the Company using the acquisition method under business combination accounting. Under this method,
the purchase price paid by the acquirer is allocated to the assets acquired and liabilities assumed as of the acquisition date
based on the fair value. By the application of “push-down” accounting, our assets, liabilities and equity were accordingly
adjusted to fair value on December 22, 2015. Determining the fair value of certain assets and liabilities assumed is judgmental
in nature and often involves the use of significant estimates and assumptions.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">The
purchase of Eagle Ridge Landfill, LLC and certain assets included the acquisition of assets of $9,947,224 and liabilities of $283,737.
The aggregate purchase price consisted of a cash consideration of $9,663,487.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">The
following table summarizes the estimated fair value of Eagle Ridge Landfill LLC., assets acquired and liabilities assumed at the
date of acquisition:</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font: 8pt Times New Roman, Times, Serif">Cash</font></td>
<td style="width: 1%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">470</font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 8pt Times New Roman, Times, Serif">Accounts receivable</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">272,480</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 8pt Times New Roman, Times, Serif">Prepaid expense</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">6,870</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 8pt Times New Roman, Times, Serif">Customer lists intangible assets</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">2,000,000</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 8pt Times New Roman, Times, Serif">Landfill permit (including ARO)</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">3,396,519</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 8pt Times New Roman, Times, Serif">Goodwill</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">1,630,310</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 8pt Times New Roman, Times, Serif">Land</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">1,550,000</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 8pt Times New Roman, Times, Serif">Property, Plant, and Equipment</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">1,090,575</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 8pt Times New Roman, Times, Serif">Deferred revenue</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">(87,218</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif">Asset retirement
obligation - permits</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">(196,519</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 8pt Times New Roman, Times, Serif">Total</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">9,663,487</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">The
following unaudited pro forma consolidated results of operations have been prepared as if the acquisitions of Christian Disposal
and Eagle Ridge occurred at January 1, 2014:</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid"><p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Three
months ended</b></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>March
31,</b></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>2015</b></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>(UNAUDITED)</b></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font: 8pt Times New Roman, Times, Serif">Total Revenue</font></td>
<td style="width: 1%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">6,921,168</font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 8pt Times New Roman, Times, Serif">Net (loss) income</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">(2,412,011</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 8pt Times New Roman, Times, Serif">Basic net loss per share</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">(0.22</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font: 8pt Times New Roman, Times, Serif">Shares outstanding</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">11,114,873</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">The
following tables set forth the intangible assets, both acquired and developed, including accumulated amortization for the three
months ended March 31, 2016:</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="12" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>March
31, 2016</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Remaining</b></font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Accumulated</b></font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Net
Carrying</b></font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Useful
Life</b></font></td>
<td style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Cost</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Amortization</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Value</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 43%"><font style="font: 8pt Times New Roman, Times, Serif">Customer lists</font></td>
<td style="width: 24%"><font style="font: 8pt Times New Roman, Times, Serif">13.4 years</font></td>
<td style="width: 1%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 8%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">24,187,452</font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 8%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">5,550,708</font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 8%; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">18,636,744</font></td>
<td nowrap="nowrap" style="width: 1%"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font: 8pt Times New Roman, Times, Serif">Non compete agreement</font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif">3.9 years</font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">206,000</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">60,541</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">145,459</font></td>
<td nowrap="nowrap"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif">Website</font></td>
<td style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif">3.7 years</font></td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">13,920</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">3,712</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">10,208</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 3pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">24,407,372</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">5,614,961</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">18,792,411</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif">  </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif">In
the three months ended March 31, 2016, customer lists include the intangible assets related to customer relationships acquired
through the acquisition of Christian Disposal and Eagle Ridge with a cost basis of $10,180,000. The customer list intangible assets
are amortized over their useful life which ranged from 5 to 20 years. Amortization expense, excluding amortization of landfill
assets of $51,933, amounted to $874,554 and $712,786 for the three months ended March 31, 2016 and 2015 respectively.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="margin: 0pt"></p><p style="margin: 0pt; font: 8pt Times New Roman, Times, Serif"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Christian
Disposal Acquisition</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">On
December 22, 2015, the Company, in order to expand into new markets and maximize the rate of waste internalization, acquired
100% of the membership interests of Christian Disposal LLC pursuant to that certain Amended and Restated Membership Interest
Purchase Agreement, dated October 16, 2015, as amended by that certain First Amendment thereto, dated December 4,
2015.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif">The
acquisition was accounted for by the Company using acquisition method under business combination accounting. Under this method,
the purchase price paid by the acquirer is allocated to the assets acquired and liabilities assumed as of the acquisition date
based on the fair value. By the application of “push-down” accounting, our assets, liabilities and equity were accordingly
adjusted to fair value on December 22, 2015. Determining the fair value of certain assets and liabilities assumed is judgmental
in nature and often involves the use of significant estimates and assumptions.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif">The
purchase of Christian Disposal, LLC included the acquisition of assets of $20,035,847 and liabilities of $2,152,738. The aggregate
purchase price consisted of the following:</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="width: 89%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Cash
consideration</font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">13,008,109</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Restricted
stock consideration</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">2,625,000</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Convertible
Promissory Note</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">1,250,000</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Contingent
additional purchase price</font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">1,000,000</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif; padding-bottom: 2.5pt"><font style="font: 8pt Times New Roman, Times, Serif">Total</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif; padding-bottom: 2.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif; border-bottom: Black 2.5pt double"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif; border-bottom: Black 2.5pt double"><font style="font: 8pt Times New Roman, Times, Serif">17,883,109</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif; padding-bottom: 2.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">As
noted in the table above, the purchase price could be increased by a maximum amount of $2,000,000 depending upon the extension
of certain contracts to which Christian Disposal, LLC is a party. At December 31, 2015, the fair value of the additional purchase
price was determined to be $1,000,000. Also, the Company issued 1,750,000 restricted shares of common stock as consideration which
was valued at market at the date of the closing.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif">  </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
following table summarizes the estimated fair value of Christian Disposal LLC, and subsidiary, assets acquired and liabilities
assumed at the date of acquisition: </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="width: 89%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Cash</font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">197,173</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Accounts
receivable</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">974,538</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Prepaid
expense</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">84,196</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Other
current assets</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">53,810</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Customer
lists intangible assets</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">8,180,000</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Non-competition
agreement intangible asset</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">56,000</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Goodwill</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">5,849,332</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Property,
plant, and equipment</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">4,640,798</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Account
payable</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(1,001,721</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Deferred
revenue</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(1,007,525</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Accrued
expenses</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(106,396</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Capital
lease</font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">(37,096</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Total</font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">17,883,109</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Eagle
Ridge Landfill, LLC and Hauling Acquisition</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">On
December 22, 2015, the Company, in order to expand into new markets and maximize the rate of waste internalization,
consummated the closing of the certain Asset Purchase Agreement dated November 13, 2015, by and between the Company
and Eagle Ridge Landfill, LLC, as amended by the certain Amendment to Asset Purchase Agreement, dated December 18, 2015, to
which the Company and WCA Waste Corporation are also party. Pursuant to the Eagle Ridge Purchase Agreement, Meridian Land
acquired a landfill located in Pike County, Missouri and certain assets, rights, and properties related to such business of
Eagle Ridge, including certain debts.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
acquisition was accounted for by the Company using business combination accounting. Under this method, the purchase price paid
by the acquirer is allocated to the assets acquired and liabilities assumed as of the acquisition date based on the fair value.
By the application of “push-down” accounting, our assets, liabilities and equity were accordingly adjusted to fair
value on December 22, 2015. Determining the fair value of certain assets and liabilities assumed is judgmental in nature and often
involves the use of significant estimates and assumptions.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif">  </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif">The
purchase of Eagle Ridge Landfill, LLC and certain assets included the acquisition of assets of $9,947,224 and liabilities of $283,737.
The aggregate purchase price consisted of a cash consideration of $9,663,487.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif">The
following table summarizes the estimated fair value of Eagle Ridge Landfill LLC., assets acquired and liabilities assumed at the
date of acquisition:</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="width: 89%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Cash</font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">470</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Accounts
receivable</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">272,480</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Prepaid
expense</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">6,870</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Customer
lists intangible assets</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">2,000,000</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Landfill
permit (including ARO)</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">3,396,519</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Goodwill</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">1,630,310</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Land</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">1,550,000</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Property,
Plant, and Equipment</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">1,090,575</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Deferred
revenue</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(87,218</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Asset
retirement obligation - permits</font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">(196,519</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Total</font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">9,663,487</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
following unaudited pro forma consolidated results of operations have been prepared as if the acquisitions of Christian
Disposal and Eagle Ridge occurred at January 1, 2014:</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Successor</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Predecessor</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Year
Ended December 31, 2015</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Period
from Acquisition May 16, 2014 to December 31, 2014</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Period
from January 1, 2014 to May 15, 2014</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="width: 67%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Total
Revenue</font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">28,861,001</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">17,872,328</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">10,199,328</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Net
(loss) income</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(17,763,377</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">) </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(1,581,195</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">916,391</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Basic
net loss per share</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(1.23</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">) </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(0.16</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><u>Meridian
Waste Services, LLC Acquisition</u></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif">In
2014, the Company, in order to establish a presence in the solid waste disposal industry, entered into an asset purchase agreement
by and among the Company, HTSMWD, Meridian Waste Services, LLC (“MWS”) and the members of MWS, pursuant to which HTSMWD
acquired certain assets and liabilities of MWS, in exchange for $11,115,000 cash, 13,191,667 shares of Class A Common Stock of
HTSHC and 71,210 shares of Series B Cumulative Convertible Preferred Stock of HTSHC.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif">  </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif">The
acquisition was accounted for by the Company using the acquisition method under business combination accounting. Under this method,
the purchase price paid by the acquirer is allocated to the assets acquired and liabilities assumed as of the acquisition date
based on the fair value. By the application of “push-down” accounting, our assets, liabilities and equity were accordingly
adjusted to fair value on May 15, 2014. Determining the fair value of certain assets and liabilities assumed is judgmental in
nature and often involves the use of significant estimates and assumptions.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
purchase of MWS included the acquisition of assets of $22,175,706 and liabilities of $2,075,956. The aggregate purchase price
consisted of the following:</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="width: 89%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Cash
consideration</font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">11,000,000</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Estimated
value of common stock issued to sellers</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">1,978,750</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Estimated
value of preferred stock issued to sellers</font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">7,121,000</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Total</font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">20,099,750</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
following table summarizes the estimated fair value of MWS assets acquired and liabilities assumed at the date of acquisition:</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="width: 89%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Accounts
receivable</font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">632,322</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Prepaid
expenses</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">123,544</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Deposits</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">8,303</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Containers</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">2,710,671</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Furniture
and equipment</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">299,450</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Trucks</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">4,243,964</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Customer
lists</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">14,007,452</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Non-compete
agreement</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">150,000</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Accounts
payable and accrued expenses</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(54,387</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Notes
payable</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(143,464</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Deferred
revenue</font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">(1,878,105</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Total</font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">20,099,750</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">  </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
following tables set forth the intangible assets, both acquired and developed, including accumulated amortization for the years
ended December 31, 2015 and December 31, 2014:</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="12" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>December
31, 2015</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: center; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"><b>Remaining</b></font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="text-align: center; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"><b>Accumulated</b></font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="text-align: center; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"><b>Net
Carrying</b></font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Useful
Life</b></font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Cost</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Amortization</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Value</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="width: 41%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Customer
lists</font></td>
<td style="width: 26%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">13.7
years</font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">24,187,452</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">4,687,090</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">19,500,362</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Non
compete agreement</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">4.2
years</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">206,000</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">50,301</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">155,699</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Website</font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">3.9
years</font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">13,920</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">3,016</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">10,904</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">24,407,372</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">4,740,407</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">19,666,965</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="12" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>December
31, 2014</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: center; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"><b>Remaining</b></font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="text-align: center; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"><b>Accumulated</b></font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="text-align: center; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"><b>Net
Carrying</b></font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Useful
Life</b></font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Cost</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Amortization</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Value</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="width: 41%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Capitalized
software</font></td>
<td style="width: 26%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">5.0
years</font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">434,532</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">434,532</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Customer
list</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">4.5
years</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">14,007,452</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">1,867,660</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">12,139,792</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Loan
fees</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">4.5
years</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">50,613</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">11,248</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">39,365</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Non
compete agreement</font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">4.5
years</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">150,000</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">20,000</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">130,000</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Website</font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">4.9
years</font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">13,920</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">232</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">13,688</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">14,656,517</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">1,899,140</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">12,757,377</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif">  </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif">In
the year ended December 31, 2015, customer lists include the intangible assets related to customer relationships acquired through
the acquisition of Christian Disposal and Eagle Ridge with a cost basis of $10,180,000. The customer list intangible assets are
amortized over their useful life which ranged from 5 to 20 years. Amortization expense, excluding amortization of landfill assets
of $3,043, amounted to $2,869,385 and $1,899,140 for the period ending December 31, 2015 and 2014 respectively.</font></p>00434532167516000409587488239303581913506097795160742486050018991610003765850265100040958000-2266786200000605120000139200000058500021500000522077160000-134785123333000023000000013959030000262500000002400000000031892700001000000000001406431000125000000<p style="margin: 0pt; font: 8pt Times New Roman, Times, Serif"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company accounts for income taxes in accordance with Accounting Standards Codification (ASC-740) “Accounting for Income
Taxes”, which requires an asset and liability approach to financial accounting and reporting for income taxes.  Deferred
income tax assets and liabilities are computed annually for differences between the financial statement and income tax basis of
assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable
to the periods in which the differences are expected to affect taxable income.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company had a net operating loss carry forward of approximately $12.3 million at December 31, 2015 and had no Federal or State
income tax obligations.  The Company had no significant tax effects resulting from the temporary differences that give
rise to deferred tax assets and deferred tax liabilities for the years ended December 31, 2015 and 2014 other than net operating
losses.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
Company’s loss carry forward of approximately $12.3 may offset future taxable income through tax year 2035.  However,
in accordance with IRC Section 382, the availability and utilization of the losses may be severely limited since the business
combination that occurred on October 17, 2014 triggered the IRC Section 382 limitations.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">Prior
to October 17, 2014, the date of the reverse acquisition transaction discussed in Note 1 above, the operating entities were owned
by unrelated third party partners/members, and as limited liability companies, the operating companies’ losses for the period
January 1, 2014 to October 17,2014 flowed through to such partners/members.  Therefore, as there were no tax allocation
arrangements with the previous partners/members, the Company has not recorded in these financials statements any current or deferred
income tax expense, income tax liabilities or deferred tax assets/liabilities relating to such pre-acquisition activity (losses).</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
table below summarizes the differences between the Company’s effective tax rate and the statutory federal rate of 34% as
follows for the periods ended December 31, 2015 and 2014:</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="6" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Years
Ended December 31,</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>2015</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>2014</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="width: 78%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Computed
"expected" benefit</font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(6,538,843</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(773,000</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Effect
of state income taxes, net of federal benefit</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(769,276</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(136,000</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Effect
of change in tax rates</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(280,760</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Pre-acquisition
losses</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">640,000</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Stock
based compensation and other permanent differences</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">4,577,831</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Increase
in valution allowance</font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">2,730,288</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">549,760</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">Deferred
tax assets and liabilities are provided for significant income and expense items recognized in different year for tax and financial
reporting purposes.  The Components of the net deferred tax assets for the years ended December 31, 2015 and 2014 were
as follows:</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="6" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Years
Ended December 31,</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>2015</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>2014</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="width: 78%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Net
operating loss carry forward</font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">4,686,288</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">1,956,000</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Less:  Valuation
allowance</font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">(4,686,288</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">(1,956,000</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><font style="font: 8pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">The
valuation allowance was increased by approximately $2,730,288 and $550,000 during the years ended December 31, 2015 and 2014.</font></p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Pursuant to the Christian Disposal, LLC and subsidiary purchase,
the company has entered into an employment contract with its Area Vice President of Business Development and Marketing through
2020 that provides for a minimum annual salary, cash and stock option bonuses. At December 31, 2015, the total commitment, excluding
incentives, was approximately $1,500,000.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company acquired a software product that is under further development.
This asset was being amortized over a three to five year period using the straight-line method of depreciation for book purposes
beginning when the software is completed.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">The Company capitalizes internal software development costs subsequent
to establishing technological feasibility of a software application in accordance with guidelines established by “ASC 985-20-25”
Accounting for the costs of Computer Software to Be Sold, Leased or Otherwise Marketed, requiring certain software development
costs to be capitalized upon the establishment of technological feasibility. The establishment of technological feasibility and
the ongoing assessment of the recoverability of these costs require considerable judgement by management with respect to certain
external factors such as anticipated future revenue, estimated economic life and changes in software and hardware technologies.
Amortization of the capitalized software development costs begins when the product is available for general release to customers.
Capitalized costs are amortized over the remaining estimated economic life of the product. For the year ended December 31, 2014,
the Company has capitalized costs associated with the development of several mobile science technology products and mobile apps
that has not been placed into service. In 2015, the Company sold the software to a related party. Refer to the related party note
below for further discussion.</p><p style="margin: 0pt; font: 8pt Times New Roman, Times, Serif"></p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Successor</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Predecessor</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Year
Ended December 31, 2015</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Period
from Acquisition May 16, 2014 to December 31, 2014</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Period
from January 1, 2014 to May 15, 2014</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="width: 67%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Total
Revenue</font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">28,861,001</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">17,872,328</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">10,199,328</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Net
(loss) income</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(17,763,377</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">) </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(1,581,195</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">916,391</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Basic
net loss per share</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(1.23</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">) </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(0.16</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="margin: 0pt; font: 8pt Times New Roman, Times, Serif"></p><p style="margin: 0pt; font: 8pt Times New Roman, Times, Serif"></p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="6" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Years
Ended December 31,</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>2015</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>2014</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="width: 78%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Computed
"expected" benefit</font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(6,538,843</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(773,000</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Effect
of state income taxes, net of federal benefit</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(769,276</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(136,000</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Effect
of change in tax rates</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">(280,760</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Pre-acquisition
losses</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">640,000</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Stock
based compensation and other permanent differences</font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">4,577,831</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Increase
in valution allowance</font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">2,730,288</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">549,760</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="margin: 0pt; font: 8pt Times New Roman, Times, Serif"></p><p style="margin: 0pt; font: 8pt Times New Roman, Times, Serif"></p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="6" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Years
Ended December 31,</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>2015</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>2014</b></font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="width: 78%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Net
operating loss carry forward</font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">4,686,288</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 8%; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">1,956,000</font></td>
<td nowrap="nowrap" style="width: 1%; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: white; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">Less:  Valuation
allowance</font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">(4,686,288</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td>
<td style="padding-bottom: 1.5pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">(1,956,000</font></td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF; font: 8pt Times New Roman, Times, Serif">
<td style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 3pt; text-align: right; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 8pt Times New Roman, Times, Serif">-</font></td>
<td nowrap="nowrap" style="padding-bottom: 3pt; font: 8pt Times New Roman, Times, Serif"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="margin: 0pt; font: 8pt Times New Roman, Times, Serif"></p>197875071210005381053810830327106712994504243964143464288610011787232810199328-17763377-1581195916391-1.23-0.160.0000870833309044270-190864002160000-6538843-773000-769276-1360000-28076006400004577831027302885497600046862881956000468628819560000000000409580000040958Expiration Date: December 31, 2023EX-101.SCH
9
mrdn-20160331.xsd
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mrdn-20160331_cal.xml
EX-101.DEF
11
mrdn-20160331_def.xml
EX-101.LAB
12
mrdn-20160331_lab.xml
Level 1Fair Value, Hierarchy [Axis]Level 2Level 3Preferred Series AClass of Stock [Axis]Preferred Series BCustomer listFinite-Lived Intangible Assets by Major Class [Axis]Loan feesNon compete agreementWebsiteBridge Financing 1Debt Instrument [Axis]Bridge Financing 2Christian Disposal LLCBusiness Acquisition [Axis]Ridge Landfill LLC [Member]Eagle Ridge Landfill LLC [Member]MSTI MemberRelated Party [Axis]Praesidian MemberFinancial Instrument [Axis]Goldman Sachs MemberSuccessorScenario [Axis]PredecessorEagle RidgeMWSCapitalized SoftwareLicense Agreement Fee Charged Percent Of SalesEntity Registrant NameEntity Central Index KeyEntity Current Reporting StatusEntity Voluntary FilersIs Entity a Well-known Seasoned Issuer?Current Fiscal Year End DateEntity Filer CategoryEntity Common Stock, Shares OutstandingPublic FloatDocument TypeAmendment FlagDocument Period End DateDocument Fiscal Year FocusDocument Fiscal Period FocusStatement [Table]Statement [Line Items]ASSETSCurrent assets:Cash and cash equivalentsShort-term investmentsAccounts receivable, net of allowancePrepaid expensesOther current assetsTotal current assetsProperty, plant and equipment, at cost net of accumulated depreciationOther assets:Investment in related party affiliateDepositsCapitalized softwareLoan fees, net of accumulated amortizationGoodwillLandfill assets, net of accumulated amortizationCustomer list, net of accumulated amortizationNon-compete, net of accumulated amortizationWebsite, net of accumulated amortizationTotal other assetsTotal assetsLiabilities and Shareholders' (Deficit) EquityCurrent liabilities:Accounts payableAccrued expensesNotes payable, related partyDeferred compensationDeferred revenueConvertible notes due related parties, includes put premiumsOperating line of credit and capital expenditure line of creditContingent liabilityDerivative liability - stock warrantsCurrent portion - long term debtTotal current liabilitiesLong term liabilities:Derivative liability - interest rate swapAsset retirement obligationLong term debt, net of currentTotal long term liabilitiesTotal LiabilitiesShareholders' equity:Preferred StockCommon stock, par value $.025, 75,000,000 shares authorized, 24,537,982 and 21,038,650 and 9,963,618 share issued and outstanding, respectivelyTreasury stock, at cost, 230,000 sharesAdditional paid in capitalAccumulated deficitTotal shareholders' (deficit) equityTotal liabilities and shareholders' equityPreferred stock, par value (in dollars per share)Preferred stock, shares authorized (in shares)Preferred stock, shares issued (in shares)Preferred stock, shares outstanding (in shares)Common stock par value (in dollars per share)Common stock, shares authorized (in shares)Common stock, shares issued (in shares)Common stock, shares outstanding (in shares)Treasury stock, sharesRevenueSoftware salesServicesTotal RevenueCost of sales and servicesCost of sales and servicesDepreciationTotal cost of sales and servicesGross ProfitExpensesBad debt expenseCompensation and related expenseDepreciation and amortizationSelling, general and administrativeTotal ExpensesOther Income (Expenses):Miscellaneous incomeLoss on disposal of assetsUnrealized gain (loss) on interest rate swapUnrealized gain on change in fair value of derivative liabilityLoss on extinguishment of debtLoss from proportionate share of equity method investmentRecapitalization expenseUnrealized gain on investmentInterest incomeInterest expenseTotal Other ExpensesNet LossBasic Net Loss Per ShareWeighted Average Number of Shares Outstanding (Basic and Diluted)Cash flows from operating activities:Net lossAdjustments to reconcile net loss to net cash (used in) provided from operating activities:Depreciation and AmortizationInterest accretion on landfill liabilitiesAmortization of capitalized loan fees & debt discountUnrealized gain on swap agreementUnrealized gain on derivativesStock issued to vendors for servicesStock issued to employees as incentive compensationLoss on extinguishment of debtLoss from proportionate share of equity investmentLoss on disposal of equipmentChanges in working capital items net of acquisitions:Accounts receivable, net of allowancePrepaid expenses and other current assetsDue to Here to Serve Holding Corp.DepositsAccounts payable and accrued expensesDeferred compensationDeferred revenueDerivative liabilityOther current liabilitiesNet cash (used in) provided from operating activitiesCash flows from investing activities:Landfill additions / ARO adjustmentsCash portion paid for acquisitionPurchased capitalized softwareAcquisition of property, plant and equipmentPurchased softwarePurchases of short-term investmentsTrue up related to acquisitionProceeds from sale of property, plant and equipmentNet cash used in investing activitiesCash flows from financing activities:(Repayments) borrowings on notes due related partiesMember distributionsProceeds from loansPayments for purchase of treasury stockIncrease in capitalized loan feesProceeds from issuance of common stockPrinciple payments on notes payableProceeds from line of creditNet cash provided from financing activitiesNet change in cashBeginning cashEnding CashSupplemental Disclosures of Cash Flow Information:Cash paid for interestCash paid for taxesSupplemental Non-Cash Investing and Financing Information:Disposition of capitalized software in exchange for equal value of equity in acquiring entityStock as consideration in acquisitionStock for cancellation of warrantsStock in exchange for forgiveness of debtContingent liability in conjunction with acquisitionDebt forgiveness by related party in connection with recapitalizationConvertible promissory note issued for acquisitionOrganization, Consolidation and Presentation of Financial Statements [Abstract]1. NATURE OF OPERATIONS AND ORGANIZATIONAccounting Policies [Abstract]2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESProperty, Plant and Equipment [Abstract]3. PROPERTY, PLANT AND EQUIPMENTGoodwill and Intangible Assets Disclosure [Abstract]4. INTANGIBLE ASSETS AND ACQUISITIONDebt Disclosure [Abstract]5. NOTES PAYABLE AND CONVERTIBLE NOTESEquity [Abstract]6. SHAREHOLDERS' EQUITYA. Income Taxes6a. INCOME TAXESFair Value Disclosures [Abstract]7. FAIR VALUE MEASUREMENTLeases [Abstract]8. LEASESBonding9. BONDINGA. Employment Contract9a. EMPLOYMENT CONTRACTLitigation10. LITIGATIONRelated Party Transactions [Abstract]11. RELATED PARTY TRANSACTIONSEmployee Benefits and Share-based Compensation [Abstract]12. EQUITY AND INCENTIVE PLANSSubsequent Events [Abstract]13. SUBSEQUENT EVENTSBasis of PresentationBasis of ConsolidationCash and Cash Equivalents and Short-term InvestmentsFair Value of Financial InstrumentsDerivative InstrumentsImpairment of long-lived assetsIncome TaxesUse of EstimatesAccounts ReceivableAdvertising costsProperty, plant and equipmentIntangible AssetsInvestment in Related Party AffiliateGoodwillCapitalized SoftwareWebsite Development CostsLandfill AccountingRevenue RecognitionDeferred RevenueCost of ServicesConcentrationsBasic Income (Loss) Per ShareStock-Based CompensationRecent Accounting PronouncementsOperations related to its landfill assets and liabilityProperty, plant and equipmentAggregate purchase price and assets acquired and liabilities assumedEstimated fiar valueIntangible AssetsPro forma resultsLong term debtSchedule of fund distributionSchedule of Fair value calculationSchedule of Change in the market valueWarrant activityA. Income Taxes TablesEffective tax rateDeferred tax assets and liabilitiesSchedule of fair value by hierarchyFuture minimum lease paymentsSummary of financial position and results of operations of MSTIWorking capital deficitAcquisitionTransition expensesBorrowing capacityLandfill AssetsBeginning balanceCapital additionsAmortization of landfill assetsAsset retirement adjustmentsEnding balanceLandfill Asset Retirement ObligationBeginning balanceObligations incurred and capitalizedObligations settledInterest accretionRevisions in estimates and interest rate assumptionEnding balanceAllowance for doubtful accountsAdvertising costsFDIC limitUnited States bank depositsFederally insuredNot federally insuredContracts accounted for Company's revenuesWeighted-average common shares relating to the convertible debtOutstanding warrants converted into common sharesStock based compensation expenseLandBuildings & Building ImprovementsFurniture & office equipmentContainersTrucks, Machinery, & EquipmentTotal costLess accumulated depreciationNet property and EquipmentLand and building held for saleDepreciation expenseCash considerationEstimated value of common stock issued to sellersEstimated value of preferred stock issued to sellersRestricted stock considerationConvertible Promissory NoteContingent additional purchase priceTotalCashAccounts receivableOther current assetsPrepaid expenseDepositsContainersFurniture and equipmentTrucksCustomer lists intangible assetsNon-competition agreement intangible assetLandfill permit (including ARO)GoodwillProperty, Plant, and EquipmentAccount payableDeferred revenueAccrued expensesCapital leaseNotes payableAsset retirement obligation - permitsTotalTotal RevenueNet (loss) incomeBasic net loss per shareCostAccumulated AmortizationNet Carrying ValueRemaining Useful LifeDebt payable to Comerica Bank, senior debtGoldman Sachs - Tranche A Term Loan - LIBOR InterestGoldman Sachs - RevolverGoldman Sachs - MDTLConvertible Notes PayableCapitalized lease - financing company, secured by equipmentEquipment loansNotes payable to seller of Meridian, subordinated debtLess: debt discountTotal debtLess: current portionLong term debt less current portionPayoff of short term bridge financingPayoff of lines of credit with Commerica BankPayoff of senior debt to Comerica BankRefinancing feesTotalAggregate outstanding principal balance of the NotesAggregate accrued but unpaid interest on the NotesPrepayment PremiumAccrued PIKTax LiabilityAccrued but unpaid fees and expensesPayoff AmountPurchase PriceTime to expirationRisk-free interest rateEstimated volatilityDividendStock price on March 31, 2016Expected forfeiture rateFair value of warrants beginningIssuance of Praesdian warrantsCancellation of Praesidian warrantsIssuance of Goldman warrantsUnrealized gain on derivative liabilityFair value of warrants endingNumber of WarrantsBalance, beginningGrantedCancellationForfeitedExercisedBalance, endingExercisableAverage Exercise PriceBalance, beginningGrantedCancellationForfeitedExercisedBalance, endingIf ExercisedBalance, beginningGrantedCancellationForfeitedExercisedBalance, endingA. Income Taxes DetailsComputed "expected" benefitEffect of state income taxes, net of federal benefitEffect of change in tax ratesPre-acquisition lossesStock based compensation and other permanent differencesIncrease in valuation allowanceTotalA. Income Taxes Details 1Net operating loss carry forwardLess: Valuation allowanceTotalInterest rate swapDerivative liabilityStock settled debtTotal20162017201820192020ThereafterTotalRent expenseAssetsCurrent assetsNoncurrent assetsTotal assetsLiabilities and EquityCurrent liabilitiesNoncurrent liabilitiesEquityTotal liabilities and equitySummary of Statements of OperationsRevenuesExpenseNet lossCustom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Document and Entity Information [Abstract]Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Schedule of fund distribution.Schedule of Change in the market value.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Tag.Custom Tag.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.Custom Element.LiabilitiesTreasury Stock, ValueCost of RevenueGross ProfitInterest ExpenseUnrealized Gain on SecuritiesUnrealized Gain (Loss) on DerivativesLossOnExtinguishmentOfDebtGain (Loss) on Disposition of Property Plant Equipment, Excluding Oil and Gas Property and Timber PropertyIncrease (Decrease) in Accounts ReceivableIncrease (Decrease) in Prepaid ExpenseIncrease (Decrease) in Other Current AssetsIncrease (Decrease) in Deferred CompensationIncrease (Decrease) in Deferred RevenueNet Cash Provided by (Used in) Operating Activities, Continuing OperationsPayments to Acquire Productive AssetsPayments for SoftwarePayments to Acquire Property, Plant, and EquipmentPayments to Acquire SoftwarePayments to Acquire Short-term InvestmentsTrueUpRelatedToAcquisitionPayments of Distributions to AffiliatesPayments for Repurchase of Convertible Preferred StockIncreaseInCapitalizedLoanFeesRepayments of Notes PayableNet Cash Provided by (Used in) Financing Activities, Continuing OperationsCash and Cash Equivalents, Period Increase (Decrease)Cash [Default Label]Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block]CapitalizedSoftwarePolicyTextblockProperty, Plant and Equipment [Table Text Block]Schedule of Finite-Lived Intangible Assets [Table Text Block]LandfillAssetsLandfillLiabilityAdvertising Revenue CostAccumulated Depreciation, Depletion and Amortization, Property, Plant, and EquipmentBusiness Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Assets, OtherBusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedDepositsBusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedCurrentAssetsContainersBusiness Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Indefinite-Lived Intangible AssetsBusiness Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Liabilities, Accounts PayableBusiness Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Liabilities, Deferred RevenueBusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedCurrentLiabilitiesAccruedExpensesBusiness Combination, 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Exercise PriceShare-based Compensation Arrangements by Share-based Payment Award, Options, Exercises in Period, Weighted Average Exercise PriceShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingIfExercisedShareBasedCompensationArrangementsByShareBasedPaymentAwardOptionsGrantsInPeriodIfExercisedShareBasedCompensationArrangementsByShareBasedPaymentAwardOptionsGrantsInPeriodCancellationShareBasedCompensationArrangementsByShareBasedPaymentAwardOptionsForfeituresInPeriodIfExercisedShareBasedCompensationArrangementsByShareBasedPaymentAwardOptionsExercisesInPeriodIfExercisedIncome Tax Expense (Benefit)Deferred Tax Assets, Valuation AllowanceDeferred Tax Assets, Net of Valuation AllowanceDerivative Liability, CurrentFinancial and Nonfinancial Liabilities, Fair Value DisclosureOperating Leases, Future Minimum Payments DueEX-101.PRE
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The end date of the period reflected on the cover page if a periodic report. For all other reports and registration statements containing historical data, it is the date up through which that historical data is presented. If there is no historical data in the report, use the filing date. The format of the date is CCYY-MM-DD.
The type of document being provided (such as 10-K, 10-Q, 485BPOS, etc). The document type is limited to the same value as the supporting SEC submission type, or the word "Other".
Indicate "Yes" or "No" whether registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. This information should be based on the registrant's current or most recent filing containing the related disclosure.
Indicate whether the registrant is one of the following: (1) Large Accelerated Filer, (2) Accelerated Filer, (3) Non-accelerated Filer, (4) Smaller Reporting Company (Non-accelerated) or (5) Smaller Reporting Accelerated Filer. Definitions of these categories are stated in Rule 12b-2 of the Exchange Act. This information should be based on the registrant's current or most recent filing containing the related disclosure.
Indicate "Yes" or "No" if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Is used on Form Type: 10-K, 10-Q, 8-K, 20-F, 6-K, 10-K/A, 10-Q/A, 20-F/A, 6-K/A, N-CSR, N-Q, N-1A.
Carrying value as of the balance sheet date of liabilities incurred (and for which invoices have typically been received) and payable to vendors for goods and services received that are used in an entity's business. Used to reflect the current portion of the liabilities (due within one year or within the normal operating cycle if longer).
Amount due from customers or clients, within one year of the balance sheet date (or the normal operating cycle, whichever is longer), for goods or services (including trade receivables) that have been delivered or sold in the normal course of business, reduced to the estimated net realizable fair value by an allowance established by the entity of the amount it deems uncertain of collection.
Carrying value as of the balance sheet date of obligations incurred and payable, pertaining to costs that are statutory in nature, are incurred on contractual obligations, or accumulate over time and for which invoices have not yet been received or will not be rendered. Examples include taxes, interest, rent and utilities. Used to reflect the current portion of the liabilities (due within one year or within the normal operating cycle if longer).
Excess of issue price over par or stated value of the entity's capital stock and amounts received from other transactions involving the entity's stock or stockholders. Includes adjustments to additional paid in capital. Some examples of such adjustments include recording the issuance of debt with a beneficial conversion feature and certain tax consequences of equity instruments awarded to employees. Use this element for the aggregate amount of additional paid-in capital associated with common and preferred stock. For additional paid-in capital associated with only common stock, use the element additional paid in capital, common stock. For additional paid-in capital associated with only preferred stock, use the element additional paid in capital, preferred stock.
The carrying amount of a liability for an asset retirement obligation. An asset retirement obligation is a legal obligation associated with the disposal or retirement of a tangible long-lived asset that results from the acquisition, construction or development, or the normal operations of a long-lived asset, except for certain obligations of lessees.
Sum of the carrying amounts as of the balance sheet date of all assets that are recognized. Assets are probable future economic benefits obtained or controlled by an entity as a result of past transactions or events.
Sum of the carrying amounts as of the balance sheet date of all assets that are expected to be realized in cash, sold, or consumed within one year (or the normal operating cycle, if longer). Assets are probable future economic benefits obtained or controlled by an entity as a result of past transactions or events.
Sum of the carrying amounts as of the balance sheet date of all assets that are expected to be realized in cash, sold or consumed after one year or beyond the normal operating cycle, if longer.
Amount of liability recognized arising from contingent consideration in a business combination, expected to be settled within one year or the normal operating cycle, if longer.
Amount before accumulated amortization of capitalized costs for computer software, including but not limited to, acquired and internally developed computer software.
Amount of currency on hand as well as demand deposits with banks or financial institutions. Includes other kinds of accounts that have the general characteristics of demand deposits. Also includes short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Excludes cash and cash equivalents within disposal group and discontinued operation.
Aggregate par or stated value of issued nonredeemable common stock (or common stock redeemable solely at the option of the issuer). This item includes treasury stock repurchased by the entity. Note: elements for number of nonredeemable common shares, par value and other disclosure concepts are in another section within stockholders' equity.
Aggregate carrying value as of the balance sheet date of the liabilities for all deferred compensation arrangements payable within one year (or the operating cycle, if longer). Represents currently earned compensation under compensation arrangements that is not actually paid until a later date.
Amount of deferred revenue as of balance sheet date. Deferred revenue represents collections of cash or other assets related to a revenue producing activity for which revenue has not yet been recognized. Generally, an entity records deferred revenue when it receives consideration from a customer before achieving certain criteria that must be met for revenue to be recognized in conformity with GAAP.
Carrying value of amounts transferred to third parties for security purposes that are expected to be returned or applied towards payment after one year or beyond the operating cycle, if longer.
Fair value, after the effects of master netting arrangements, of a financial liability or contract with one or more underlyings, notional amount or payment provision or both, and the contract can be net settled by means outside the contract or delivery of an asset. Includes liabilities not subject to a master netting arrangement and not elected to be offset.
Fair value, after the effects of master netting arrangements, of a financial liability or contract with one or more underlyings, notional amount or payment provision or both, and the contract can be net settled by means outside the contract or delivery of an asset, expected to be settled after one year or the normal operating cycle, if longer. Includes assets not subject to a master netting arrangement and not elected to be offset.
Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.
Total investments in (A) an entity in which the entity has significant influence, but does not have control, (B) subsidiaries that are not required to be consolidated and are accounted for using the equity and or cost method, and (C) an entity in which the reporting entity shares control of the entity with another party or group. Includes long-term advances receivable from a party that is affiliated with the reporting entity by means of direct or indirect ownership.
Sum of the carrying amounts as of the balance sheet date of all liabilities that are recognized. Liabilities are probable future sacrifices of economic benefits arising from present obligations of an entity to transfer assets or provide services to other entities in the future.
Total obligations incurred as part of normal operations that are expected to be paid during the following twelve months or within one business cycle, if longer.
The carrying value as of the balance sheet date of the current portion of long-term obligations drawn from a line of credit, which is a bank's commitment to make loans up to a specific amount. Examples of items that might be included in the application of this element may consist of letters of credit, standby letters of credit, and revolving credit arrangements, under which borrowings can be made up to a maximum amount as of any point in time conditional on satisfaction of specified terms before, as of and after the date of drawdowns on the line. Includes short-term obligations that would normally be classified as current liabilities but for which (a) postbalance sheet date issuance of a long term obligation to refinance the short term obligation on a long term basis, or (b) the enterprise has entered into a financing agreement that clearly permits the enterprise to refinance the short-term obligation on a long term basis and the following conditions are met (1) the agreement does not expire within 1 year and is not cancelable by the lender except for violation of an objectively determinable provision, (2) no violation exists at the BS date, and (3) the lender has entered into the financing agreement is expected to be financially capable of honoring the agreement.
Carrying amount of long-term debt, net of unamortized discount or premium, including current and noncurrent amounts. Includes, but not limited to, notes payable, bonds payable, debentures, mortgage loans and commercial paper. Excludes capital lease obligations.
Amount of long-term debt, after unamortized discount or premium, scheduled to be repaid within one year or the normal operating cycle, if longer. Includes, but not limited to, notes payable, bonds payable, debentures, mortgage loans and commercial paper. Excludes capital lease obligations.
Carrying amount of long-term debt, net of unamortized discount or premium, excluding amounts to be repaid within one year or the normal operating cycle, if longer (current maturities). Includes, but not limited to, notes payable, bonds payable, debentures, mortgage loans and commercial paper. Excludes capital lease obligations.
Sum of the carrying values as of the balance sheet date of the portions of long-term notes payable due within one year or the operating cycle if longer.
Aggregate carrying amount, as of the balance sheet date, of current assets not separately disclosed in the balance sheet. Current assets are expected to be realized or consumed within one year (or the normal operating cycle, if longer).
Aggregate par or stated value of issued nonredeemable preferred stock (or preferred stock redeemable solely at the option of the issuer). This item includes treasury stock repurchased by the entity. Note: elements for number of nonredeemable preferred shares, par value and other disclosure concepts are in another section within stockholders' equity.
Amount of asset related to consideration paid in advance for costs that provide economic benefits within a future period of one year or the normal operating cycle, if longer.
Amount after accumulated depreciation, depletion and amortization of physical assets used in the normal conduct of business to produce goods and services and not intended for resale. Examples include, but are not limited to, land, buildings, machinery and equipment, office equipment, and furniture and fixtures.
Investments which are intended to be sold in the short term (usually less than one year or the normal operating cycle, whichever is longer) including trading securities, available-for-sale securities, held-to-maturity securities, and other short-term investments not otherwise listed in the existing taxonomy.
Total of all stockholders' equity (deficit) items, net of receivables from officers, directors, owners, and affiliates of the entity which are attributable to the parent. The amount of the economic entity's stockholders' equity attributable to the parent excludes the amount of stockholders' equity which is allocable to that ownership interest in subsidiary equity which is not attributable to the parent (noncontrolling interest, minority interest). This excludes temporary equity and is sometimes called permanent equity.
The amount allocated to treasury stock. Treasury stock is common and preferred shares of an entity that were issued, repurchased by the entity, and are held in its treasury.
Total number of common shares of an entity that have been sold or granted to shareholders (includes common shares that were issued, repurchased and remain in the treasury). These shares represent capital invested by the firm's shareholders and owners, and may be all or only a portion of the number of shares authorized. Shares issued include shares outstanding and shares held in the treasury.
The maximum number of nonredeemable preferred shares (or preferred stock redeemable solely at the option of the issuer) permitted to be issued by an entity's charter and bylaws.
Total number of nonredeemable preferred shares (or preferred stock redeemable solely at the option of the issuer) issued to shareholders (includes related preferred shares that were issued, repurchased, and remain in the treasury). May be all or portion of the number of preferred shares authorized. Excludes preferred shares that are classified as debt.
Aggregate share number for all nonredeemable preferred stock (or preferred stock redeemable solely at the option of the issuer) held by stockholders. Does not include preferred shares that have been repurchased.
Number of common and preferred shares that were previously issued and that were repurchased by the issuing entity and held in treasury on the financial statement date. This stock has no voting rights and receives no dividends.
The aggregate costs related to goods produced and sold and services rendered by an entity during the reporting period. This excludes costs incurred during the reporting period related to financial services rendered and other revenue generating activities.
The amount of expense recognized in the current period that reflects the allocation of the cost of tangible assets over the assets' useful lives. Includes production and non-production related depreciation.
The current period expense charged against earnings on long-lived, physical assets not used in production, and which are not intended for resale, to allocate or recognize the cost of such assets over their useful lives; or to record the reduction in book value of an intangible asset over the benefit period of such asset; or to reflect consumption during the period of an asset that is not used in production.
The difference between the reacquisition price and the net carrying amount of the extinguished debt recognized currently as a component of income in the period of extinguishment, net of tax.
Amount of unrealized gain (loss) recognized in the income statement for a financial instrument classified as derivative asset (liability) after deduction of derivative liability (asset), measured using unobservable inputs that reflect the entity's own assumption about the assumptions market participants would use in pricing.
Amount of gain (loss) on sale or disposal of assets, including but not limited to property plant and equipment, intangible assets and equity in securities of subsidiaries or equity method investee.
This item represents the entity's proportionate share for the period of the net income (loss) of its investee (such as unconsolidated subsidiaries and joint ventures) to which the equity method of accounting is applied. This item includes income or expense related to stock-based compensation based on the investor's grant of stock to employees of an equity method investee.
The aggregate amount of expenditures for salaries, wages, profit sharing and incentive compensation, and other employee benefits, including equity-based compensation, and pension and other postretirement benefit expense.
Generally recurring costs associated with normal operations except for the portion of these expenses which can be clearly related to production and included in cost of sales or services. Includes selling, general and administrative expense.
The net amount of other income and expense amounts, the components of which are not separately disclosed on the income statement, resulting from ancillary business-related activities (that is, excluding major activities considered part of the normal operations of the business) also known as other nonoperating income (expense) recognized for the period. Such amounts may include: (a) dividends, (b) interest on securities, (c) net gains or losses on securities, (d) unusual costs, (e) gains or losses on foreign exchange transactions, and (f) miscellaneous other income and expense items.
Amount of expense related to write-down of receivables to the amount expected to be collected. Includes, but is not limited to, accounts receivable and notes receivable.
Amount of revenue recognized from goods sold, services rendered, insurance premiums, or other activities that constitute an earning process. Includes, but is not limited to, investment and interest income before deduction of interest expense when recognized as a component of revenue, and sales and trading gain (loss).
The aggregate total costs related to selling a firm's product and services, as well as all other general and administrative expenses. Direct selling expenses (for example, credit, warranty, and advertising) are expenses that can be directly linked to the sale of specific products. Indirect selling expenses are expenses that cannot be directly linked to the sale of specific products, for example telephone expenses, Internet, and postal charges. General and administrative expenses include salaries of non-sales personnel, rent, utilities, communication, etc.
The net change in the difference between the fair value and the carrying value, or in the comparative fair values, of investments, not including unrealized gains or losses on securities separately or otherwise categorized as trading, available-for-sale, or held-to-maturity, held at each balance sheet date and included in earnings for the period.
Amount recognized for the passage of time, typically for liabilities, that have been discounted to their net present values. Excludes accretion associated with asset retirement obligations.
Amount of noncash expense included in interest expense to amortize debt discount and premium associated with the related debt instruments. Excludes amortization of financing costs. Alternate captions include noncash interest expense.
Amount of currency on hand as well as demand deposits with banks or financial institutions. Includes other kinds of accounts that have the general characteristics of demand deposits. Excludes cash and cash equivalents within disposal group and discontinued operation.
Amount of increase (decrease) in cash and cash equivalents. Cash and cash equivalents are the amount of currency on hand as well as demand deposits with banks or financial institutions. Includes other kinds of accounts that have the general characteristics of demand deposits. Also includes short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Includes effect from exchange rate changes.
The aggregate expense recognized in the current period that allocates the cost of tangible assets, intangible assets, or depleting assets to periods that benefit from use of the assets.
This item represents the entity's proportionate share for the period of the net income (loss) of its investee (such as unconsolidated subsidiaries and joint ventures) to which the equity method of accounting is applied. This item includes income or expense related to stock-based compensation based on the investor's grant of stock to employees of an equity method investee.
The increase (decrease) during the reporting period in the amounts payable to vendors for goods and services received and the amount of obligations and expenses incurred but not paid.
The increase (decrease) during the reporting period in amount due within one year (or one business cycle) from customers for the credit sale of goods and services.
The increase (decrease) during the reporting period in the obligation created by employee agreements whereby earned compensation will be paid in the future.
The increase (decrease) during the reporting period, excluding the portion taken into income, in the liability reflecting revenue yet to be earned for which cash or other forms of consideration was received or recorded as a receivable.
The increase (decrease) during the period in the carrying value of derivative instruments reported as liabilities that are due to be disposed of within one year (or the normal operating cycle, if longer).
The increase (decrease) in obligations owed to an entity that is controlling, under the control of, or within the same control group as the reporting entity by means of direct or indirect ownership.
The increase (decrease) during the reporting period in the amount of outstanding money paid in advance for goods or services that bring economic benefits for future periods.
Amount of cash inflow (outflow) of financing activities, excluding discontinued operations. Financing activity cash flows include obtaining resources from owners and providing them with a return on, and a return of, their investment; borrowing money and repaying amounts borrowed, or settling the obligation; and obtaining and paying for other resources obtained from creditors on long-term credit.
Amount of cash inflow (outflow) from investing activities, including discontinued operations. Investing activity cash flows include making and collecting loans and acquiring and disposing of debt or equity instruments and property, plant, and equipment and other productive assets.
Amount of cash inflow (outflow) from operating activities, excluding discontinued operations. Operating activity cash flows include transactions, adjustments, and changes in value not defined as investing or financing activities.
The cash outflow to reacquire preferred stock originally issued and identified as a security that can be exchanged for another type of financial security. This repurchased stock is held in treasury.
The cash outflow associated with the development, modification or acquisition of software programs or applications for internal use (that is, not to be sold, leased or otherwise marketed to others) that qualify for capitalization.
The cash outflow for purchases of and capital improvements on property, plant and equipment (capital expenditures), software, and other intangible assets.
The cash outflow associated with the acquisition of long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale; includes cash outflows to pay for construction of self-constructed assets.
The cash outflow for securities or other assets acquired, which qualify for treatment as an investing activity and are to be liquidated, if necessary, within the current operating cycle. Includes cash flows from securities classified as trading securities that were acquired for reasons other than sale in the short-term.
The cash outflow associated with the acquisition from vendors of software programs or applications for internal use (that is, not to be sold, leased or otherwise marketed to others) that qualify for capitalization.
The cash inflow associated with security instrument that either represents a creditor or an ownership relationship with the holder of the investment security with a maturity of beyond one year or normal operating cycle, if longer. Includes proceeds from (a) debt, (b) capital lease obligations, (c) mandatory redeemable capital securities, and (d) any combination of (a), (b), or (c).
Amount of cash inflow from contractual arrangement with the lender, including but not limited to, letter of credit, standby letter of credit and revolving credit arrangements.
The cash inflow from the sale of long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale.
The net change in the difference between the fair value and the carrying value, or in the comparative fair values, of derivative instruments, including options, swaps, futures, and forward contracts, held at each balance sheet date, that was included in earnings for the period.
The increase (decrease), resulting in a gain, in the difference between the fair value and the carrying value, or in the comparative fair values, of securities held at each balance sheet date, that was included in earnings for the period.
Meridian Waste Solutions, Inc. (the Company or
Meridian) is currently operating under five separate Limited Liability Companies:
(1) Here To Serve Missouri Waste Division, LLC (HTSMWD),
a Missouri Limited Liability Company;
(2) Here To Serve Georgia Waste Division, LLC (HTSGWD),
a Georgia Limited Liability Company;
(3) Meridian Land Company, LLC (MLC), a Georgia
Limited Liability Company;
(4) Here to Serve Technology, LLC (HTST), a Georgia
Limited Liability Company; and
(5) Christian Disposal, LLC and subsidiary (CD),
a Missouri Limited Liability Company.
On January 7, 2015, in an effort to give investors a more concentrated
presence in the waste industry the Company sold the assets of HTST to Mobile Science Technologies, Inc., a Georgia corporation
(MSTI), a related party due to being owned and managed by some of the shareholders of the Company. On this date HTST ceased operations
and became a dormant Limited Liability Company (LLC). Currently, Meridian is formalizing plans to dissolve HTST,
in which this LLC will cease to exist.
In 2014, HTSMWD purchased the assets of a large solid waste disposal
company in the St. Louis, MO market. This acquisition is considered the platform company for future acquisitions in the solid waste
disposal industry. HTSGWD was created to facilitate expansion in this industry throughout the Southeast.
The Company is primarily in the business of residential and commercial
waste disposal and hauling and has contracts with various cities and municipalities. The majority of the Companys
customers are located in the St. Louis metropolitan and surrounding areas.
Acquisition of Christian Disposal, LLC and Eagle Ridge Landfill,
LLC
On December 22, 2015, Meridian Waste Solutions, Inc. and subsidiaries
(the Company) completed its acquisition of Christian Disposal LLC, and subsidiary (Christian Purchase Agreement).
Pursuant to the Christian Purchase Agreement, the Company acquired 100% of the membership interests of Christian Disposal, which
is integrated into the operations of the Company; refer to intangible assets and acquisition footnote below.
Simultaneous with the closing thereof, Christian Disposal LLC,
and subsidiary, entered into a Lease Agreement, in which, the Company leased 4551 Commerce Avenue, High Ridge, Missouri, for a
five-year term at a monthly rent of $6,500. Additionally, the Company entered into an employment agreement with an executive employee
for a term of five years.
Concurrently, the Company completed an asset purchase agreement
with WCA Waste Corporation (the Eagle Purchase Agreement). The Company acquired all of the assets of Eagle Ridge
Landfill, LLC (ERL), its rights and properties related to such business of ERL, which includes certain assets and
operations of the Eagle Ridge Hauling Business (ERH) and certain debts, which is now operating under Meridian Land
Company, LLC. Refer to intangible assets and acquisition footnote below.
Recapitalization
On October 17, 2014 Here to Serve Missouri Waste Division, LLC,
(HTSMWD) a Missouri Limited Liability Company, which is the historical business, entered into a Share Exchange Agreement with the
Company and the sole member of HTSMWD whereby the Company agreed to acquire the membership interest of HTSMWD, HTST and HTSGWD
in exchange for 9,054,134 shares of the Companys common stock. This transaction was closed on October 17, 2014
and HTSMWD became wholly-owned by the Company. The Company is deemed to have issued 1,139,284 shares of common stock
which represents the outstanding common shares of the Company just prior to the closing of the transaction.
At closing, the Company issued 9,054,134 shares of its common
stock to the sole member of HTSMWD and the shareholders of the sole member who obtained approximately 90% control and management
control of the Company. The transaction was accounted for as a reverse acquisition and recapitalization of HTSMWD, HTST
and HTSGWD whereby HTSMWD is considered the acquirer for accounting purposes. The consolidated financial statements
after the acquisition include the balance sheets of both companies and HTST and HTSGWD at historical cost, the historical results
of HTSMWD, HTST and HTSGWD. All share and per share information in the accompanying consolidated financial statements
and footnotes has been retroactively restated to reflect the recapitalization (see Explanation of Membership Interest Purchase
Agreement below).
Liquidity and Capital Resources
As of March 31, 2016, the Company had negative working capital
of $4,613,287. This lack of liquidity is mitigated by the Companys ability to generate positive cash flow from operating
activities. In the three months ended March 31, 2016, cash generated from operating activities, excluding one-time acquisition
and transition expenses of approximately $467,000, was approximately $408,000. In addition, as of March 31, 2016, the Company had
approximately $1,767,000 in cash and cash equivalents and $1,947,000 in short-term investments to cover its short term cash requirements.
Further, the Company has approximately $12,850,000 of borrowing capacity on its multi-draw term loans and revolving commitments.
Meridian
Waste Solutions, Inc. (formerly Brooklyn Cheesecake and Desserts Company, Inc.) (the Company or Meridian)
is currently operating under five separate Limited Liability Companies:
(1)
Here To Serve Missouri Waste Division, LLC (HTSMWD), a Missouri Limited Liability Company;
(2)
Here To Serve Georgia Waste Division, LLC (HTSGWD), a Georgia Limited Liability Company;
(3)
Meridian Land Company, LLC (MLC), a Georgia Limited Liability Company;
(4)
Here to Serve Technology, LLC (HTST), a Georgia Limited Liability Company; and
(5)
Christian Disposal, LLC and subsidiary (CD), a Missouri Limited Liability Company.
On
January 7, 2015, in an effort to give investors a more concentrated presence in the waste industry the Company sold the assets
of HTST to Mobile Science Technologies, Inc., a Georgia corporation (MSTI), a related party due to being owned and managed by
some of the shareholders of the Company. On this date HTST ceased operations and became a dormant Limited Liability Company (LLC).
Currently, Meridian is formalizing plans to dissolve HTST, in which this LLC will cease to exist.
In
2014, HTSMWD purchased the assets of a large solid waste disposal company in the St. Louis, MO market. This acquisition is considered
the platform company for future acquisitions in the solid waste disposal industry. HTSGWD was created to facilitate
expansion in this industry throughout the Southeast.
The
Company is primarily in the business of residential and commercial waste disposal and hauling and has contracts with various cities
and municipalities. The majority of the Companys customers are located in the St. Louis metropolitan and surrounding
areas.
Acquisition
of Christian Disposal, LLC and Eagle Ridge Landfill, LLC
On
December 22, 2015, Meridian Waste Solutions, Inc. and subsidiaries (the Company) completed its acquisition of Christian
Disposal LLC, and subsidiary (Christian Purchase Agreement). Pursuant to the Christian Purchase Agreement, the Company
acquired 100% of the membership interests of Christian Disposal, which is integrated into the operations of the Company; refer
to intangible assets and acquisition footnote below.
Simultaneous
with the closing thereof, Christian Disposal LLC, and subsidiary, entered into a Lease Agreement, in which, the Company leased
4551 Commerce Avenue, High Ridge, Missouri, for a five-year term at a monthly rent of $6,500. Additionally, the Company entered
into an employment agreement with an executive employee for a term of five years.
Concurrently,
the Company completed an asset purchase agreement with WCA Waste Corporation (the Eagle Purchase Agreement). The
Company acquired all of the assets of Eagle Ridge Landfill, LLC (ERL), its rights and properties related to such
business of ERL, which includes certain assets and operations of the Eagle Ridge Hauling Business (ERH) and certain
debts, which is now operating under Meridian Land Company, LLC. Refer to intangible assets and acquisition footnote below.
Recapitalization
On
October 17, 2014 Here to Serve Missouri Waste Division, LLC, (HTSMWD) a Missouri Limited Liability Company, which is the historical
business, entered into a Share Exchange Agreement with the Company and the sole member of HTSMWD whereby the Company agreed to
acquire the membership interest of HTSMWD, HTST and HTSGWD in exchange for 9,054,134 shares of the Companys common stock. This
transaction was closed on October 17, 2014 and HTSMWD became wholly-owned by the Company. The Company is deemed to
have issued 1,139,284 shares of common stock which represents the outstanding common shares of the Company just prior to the closing
of the transaction.
At
closing, the Company issued 9,054,134 shares of its common stock to the sole member of HTSMWD and the shareholders of the sole
member who obtained approximately 90% control and management control of the Company. The transaction was accounted
for as a reverse acquisition and recapitalization of HTSMWD, HTST and HTSGWD whereby HTSMWD is considered the acquirer for accounting
purposes. The consolidated financial statements after the acquisition include the balance sheets of both companies
and HTST and HTSGWD at historical cost, the historical results of HTSMWD, HTST and HTSGWD. All share and per share
information in the accompanying consolidated financial statements and footnotes has been retroactively restated to reflect the
recapitalization (see Explanation of Membership Interest Purchase Agreement below).
Acquisition
of Here to Serve Holding Corporation
On
October 17, 2014, (the Execution Date), Meridian Waste Solutions, Inc. entered into that certain Membership Interest
Purchase Agreement (the Purchase Agreement) by and among Here to Serve Holding Corp., a Delaware corporation, as seller
(Here to Serve), the Company, as parent, Brooklyn Cheesecake & Dessert Acquisition Corp., a wholly-owned subsidiary
of the Company, as buyer (the Acquisition Corp.), the Chief Executive Officer of the Company (the Company Executive),
the majority shareholder of the Company (the Company Majority Shareholder) and certain shareholders of Seller (the
Seller Shareholders), pursuant to which the Acquisition Corp shall acquire from Here to Serve all of Here to Serves
right, title and interest in and to:
I.
100%
of the membership interests of Here to Serve Missouri Waste Division, LLC d/b/a Meridian Waste, a Missouri limited
liability company (HTS Waste);
II.
100%
of the membership interests of Here to Serve Technology, LLC, a Georgia limited liability company (HTS Tech);
and
III.
100%
of the membership interests of Here to Serve - Georgia Waste Division, LLC, a Georgia limited liability company (HTS
Waste Georgia, and together with HTS Waste and HTS Tech, collectively, the Membership Interests). As
consideration for the Membership Interests:
i.
the
Company shall issue to Here to Serve 9,054,134 shares of the Companys common stock, (the Common Stock);
ii.
the
Company shall issue to the holder of Class A Preferred Stock of Here to Serve (Here to Serves Class A Preferred
Stock) 51 shares of the Companys to-be-designated Class A Preferred Stock (the Class A Preferred Stock),
which Class A Preferred Stock shall have the rights and preferences as described in the Purchase Agreement.
iii.
the
Company shall issue to the holder of Class B Preferred Stock of Here to Serve (Here to Serves Class B Preferred Stock)
an aggregate of 71,120 shares of the Companys to-be-designated Class B Preferred Stock (the Class B Preferred
Stock), (the Common Stock, the Class A Preferred Stock and the Class B Preferred Stock are referred to as the Purchase
Price Shares;), and
iv.
the
Company shall assume certain assumed liabilities (the Initial Consideration).
As
further consideration, at the closing of the transaction contemplated under the Purchase Agreement:
a.
in
satisfaction of all accounts payable and shareholder loans, Here to Serve will pay to Company Majority Shareholder $70,000
and
b.
the
Company purchased from the then Company Majority Shareholder 230,000 shares of the Companys common stock for a purchase
price of $230,000. Pursuant to the Purchase Agreement, to the extent Purchase Price Shares are issued to individual
shareholders of Here to Serve at or upon closing of the Purchase Agreement:
a.
shares
of common stock of Here to Serve held by the individuals will be cancelled
b.
1,000,000
shares of Here to Serves Class A Preferred Stock will be cancelled; and
c.
71,120
shares of Here to Serves Class B Preferred Stock will be cancelled (the Additional Consideration).
On
October 17, 2014, the directors and majority shareholders of the Company approved the Purchase Agreement and the transactions
contemplated under the Purchase Agreement. The directors of Here to Serve and the Here to Serve Shareholders approved the Purchase
Agreement and the transactions contemplated thereunder. This closing of the Purchase Agreement results in a change
of control of the Company and the Company changed its business plan to that of HTSMWD.
Change
in Reporting Entity
The
merger of Here to Serve Holding Corp. (Here to Serve), a Delaware Corporation, and Meridian Waste Services, LLC became effective
May 15, 2014. The merger was accounted for by the Company using business combination accounting. Under this
method, the purchase price paid by the acquirer is allocated to the assets acquired and liabilities assumed as of the acquisition
date based on the fair value. By the application of pushdown accounting, our assets, liabilities and equity
were accordingly adjusted to fair value on May 15, 2014. Determining the fair value of certain assets and liabilities
assumed is judgmental in nature and often involves the use of significant estimates and assumptions.
At
the time of merger Here to Serve was a company with nominal operations whereas Meridian Waste Services, LLC consisted of the active
and carry-forward business. Accordingly Meridian Waste Services, LLC is deemed to be the predecessor entity and as
such is presented as the comparable financial statements. As such our financial statements are presented in two distinct
periods to indicate the application of two different basis of accounting. Periods prior to May 15, 2014 are identified
herein as Predecessor, while periods subsequent to the Here to Serve merger are identified as Successor. As
a result of the change in basis of accounting from historical cost to reflect the Here to Serves purchase cost, the financial
statements for Predecessor periods are not comparable to those of Successor periods.
The entire disclosure for the business description and basis of presentation concepts. Business description describes the nature and type of organization including but not limited to organizational structure as may be applicable to holding companies, parent and subsidiary relationships, business divisions, business units, business segments, affiliates and information about significant ownership of the reporting entity. Basis of presentation describes the underlying basis used to prepare the financial statements (for example, US Generally Accepted Accounting Principles, Other Comprehensive Basis of Accounting, IFRS).
The
accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles
in the United States of America (US GAAP) for interim financial information and with the instructions to Form 10Q
and Article 803 of Regulation SX. Accordingly, the unaudited consolidated financial statements do not include all of
the information and footnotes required by US GAAP for complete financial statements. The unaudited consolidated financial
statements and notes included herein should be read in conjunction with the annual consolidated financial statements and notes
for the year ended December 31, 2015 included in our Annual Report on Form 10K filed with the SEC on April 14, 2016.
In
the opinion of management, all adjustments (consisting of normal recurring items) necessary to present fairly the Companys
financial position as of March 31, 2016, and the results of operations and cash flows for the three months ending March 31, 2016
have been made. The results of operations for the three months ended March 31, 2016 are not necessarily indicative of the results
to be expected for a full year.
Basis
of Consolidation
The
consolidated financial statements for the three months ending March 31, 2016 include the operations of the Company and its wholly-owned
subsidiaries, Here To Serve Missouri Waste Division, LLC, Meridian Land Company, LLC, Here to Serve Technology, LLC, Here To Serve
Georgia Waste Division, LLC and Christian Disposal, LLC. The following two subsidiaries of the Company, Here To Serve Georgia
Waste Division, LLC and Here to Serve Technology, LLC, a Georgia Limited Liability Company had no operations during the period.
The consolidated financial statements for the three months ending March 31, 2015 include the operations of the Company and its
wholly-owned subsidiaries, Here To Serve Missouri Waste Division, LLC, Here To Serve Georgia Waste Division, LLC and Here to Serve
Technology, LLC, a Georgia Limited Liability Company.
All
significant intercompany accounts and transactions have been eliminated in consolidation.
Cash
and Cash Equivalents and Short-term Investments
The
Company considers all highly liquid investments with maturities of three months or less to be cash equivalents. Short-term investments
consist of investments that have a remaining maturity of less than one year as of the date of the balance sheet.
Management
determines the appropriate classification of short-term investments at the time of purchase and evaluates such designation as
of each balance sheet date. All short-term investments to date have been classified as held-to-maturity and carried at amortized
costs, which approximates fair market value, on our Consolidated Balance Sheets. For the three months ended March 31, 2016 and
2015, interest income of $2,139 and $0, respectively, was recorded related to the held-to-maturity securities. Our short-term
investments contractual maturities occur before March 31, 2017.
Fair
Value of Financial Instruments
The
Companys financial instruments consist of cash and cash equivalents, accounts receivable, account payable, accrued expenses,
and notes payable. The carrying amount of these financial instruments approximates fair value due either to length of maturity
or interest rates that approximate prevailing market rates unless otherwise disclosed in these consolidated financial statements.
Derivative
Instruments
The
Company enters into financing arrangements that consist of freestanding derivative instruments or are hybrid instruments that
contain embedded derivative features. The Company accounts for these arrangements in accordance with Accounting Standards Codification
topic 815, Accounting for Derivative Instruments and Hedging Activities (ASC 815) as well as related interpretations
of this standard. In accordance with this standard, derivative instruments are recognized as either assets or liabilities in the
balance sheet and are measured at fair values with gains or losses recognized in earnings. Embedded derivatives that are not clearly
and closely related to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized
as either a gain or loss in earnings. The Company determines the fair value of derivative instruments and hybrid instruments based
on available market data using appropriate valuation models, considering of the rights and obligations of each instrument.
The
Company estimates fair values of derivative financial instruments using various techniques (and combinations thereof) that are
considered consistent with the objective measuring fair values. In selecting the appropriate technique, the Company considers,
among other factors, the nature of the instrument, the market risks that it embodies and the expected means of settlement. For
less complex derivative instruments, such as freestanding warrants, the Company generally use the Black Scholes model, adjusted
for the effect of dilution, because it embodies all of the requisite assumptions (including trading volatility, estimated terms,
dilution and risk free rates) necessary to fair value these instruments. Estimating fair values of derivative financial instruments
requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the
instrument with related changes in internal and external market factors. In addition, option-based techniques (such as Black-Scholes
model) are highly volatile and sensitive to changes in the trading market price of our common stock. Since derivative financial
instruments are initially and subsequently carried at fair values, our income (expense) going forward will reflect the volatility
in these estimates and assumption changes. Under the terms of this accounting standard, increases in the trading price of the
Companys common stock and increases in fair value during a given financial quarter result in the application of non-cash
derivative expense. Conversely, decreases in the trading price of the Companys common stock and decreases in trading fair
value during a given financial quarter result in the application of non-cash derivative income.
Impairment
of long-lived assets
The
Company periodically reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be fully recoverable. The Company recognizes an impairment loss when the sum
of expected undiscounted future cash flows is less that the carrying amount of the asset. The amount of impairment
is measured as the difference between the assets estimated fair value and its book value. During the three months
ending March 31, 2016, the Company experienced no losses due to impairment.
Income
Taxes
The
Company accounts for income taxes pursuant to the provisions of ASC 740-10, Accounting for Income Taxes, which requires,
among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires
the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between
the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred
tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.
The
Company follows the provisions of the ASC 740 -10 related to, Accounting for Uncertain Income Tax Positions. When tax returns
are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while
others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately
sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements
in the period during which, based on all available evidence, management believes it is more likely than not that the position
will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are
not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured
as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable
taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described
above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated
interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions
are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.
The
Company analyzes its tax positions by utilizing ASC 740-10-25 Definition of Settlement, which provides guidance on how an entity
should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits
and provides that a tax position can be effectively settled upon the completion of an examination by a taxing authority without
being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax
benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical
merits and the statute of limitations remains open. As of March 31, 2016, tax years ended December 31, 2015, 2014, and 2013 are
still potentially subject to audit by the taxing authorities.
Use
of Estimates
Management
estimates and judgments are an integral part of consolidated financial statements prepared in accordance with accounting principles
generally accepted in the United States of America (GAAP). We believe that the critical accounting policies described in this
section address the more significant estimates required of management when preparing our consolidated financial statements in
accordance with GAAP. We consider an accounting estimate critical if changes in the estimate may have a material impact on our
financial condition or results of operations. We believe that the accounting estimates employed are appropriate and resulting
balances are reasonable; however, actual results could differ from the original estimates, requiring adjustment to these balances
in future periods.
Accounts
Receivable
Accounts
receivable are recorded at managements estimate of net realizable value. At March 31, 2016 and December 31, 2015 the Company
had approximately $2,641,000 and $2,326,000 of gross trade receivables, respectively.
Our
reported balance of accounts receivable, net of the allowance for doubtful accounts, represents our estimate of the amount that
ultimately will be realized in cash. We review the adequacy and adjust our allowance for doubtful accounts on an ongoing basis,
using historical payment trends and the age of the receivables and knowledge of our individual customers. However, if the financial
condition of our customers were to deteriorate, additional allowances may be required. At March 31, 2016 and December 31, 2015
the Company had approximately $627,000 and $618,000 recorded for the allowance for doubtful accounts, respectively.
Advertising
costs
Advertising
costs, except for costs associated with direct-response advertising, are charged to operations when incurred. The costs of direct-response
advertising are capitalized and amortized over the period during which future benefits are expected to be received. The Company
did not capitalize any advertising for the three months ended March 31, 2016. Advertising expenses were approximately $12,000
for the three months ended March 31, 2016.
Property,
plant and equipment
The
cost of property, plant, and equipment is depreciated over the estimated useful lives of the related assets utilizing the straight-line
method of depreciation. The cost of leasehold improvements is depreciated (amortized) over the lesser of the length of the related
leases or the estimated useful lives of the assets. Ordinary repairs and maintenance are expensed when incurred and major repairs
will be capitalized and expensed if it benefits future periods.
Intangible
Assets
Intangible
assets that are subject to amortization are reviewed for potential impairment whenever events or circumstances indicate that carrying
amounts may not be recoverable. Assets not subject to amortization are tested for impairment at least annually. The Company has
intangible assets related to its purchase of Meridian Waste Services, LLC, Christian Disposal LLC and Eagle Ridge Landfill, LLC,
which are further discussed in the notes below.
Investment
in Related Party Affiliate
The
Company has an investment in a privately held corporation in the mobile apps industry. As the Company exercises significant influence
on this entity, this investment is recorded using the equity method of accounting. The Company monitors this investment for impairment
and makes appropriate reductions in the carrying value if the Company determines that an impairment charge is required based primarily
on the financial condition and near-term prospect of this entity.
Goodwill
Goodwill
is the excess of our purchase cost over the fair value of the net assets of acquired businesses. We do not amortize goodwill,
but as discussed in the impairment of long lived assets section above, we assess our goodwill for impairment at least annually.
Website
Development Costs
The
Company accounts for website development costs in accordance with Accounting Standards Codification 350-50 Website Development
Costs. Accordingly, all costs incurred in the planning stage are expensed as incurred, costs incurred in the website application
and infrastructure development stage that meet specific criteria are capitalized and costs incurred in the day to day operation
of the website are expensed as incurred.
Landfill
Accounting
Capitalized
landfill costs
Cost
basis of landfill assets We capitalize various costs that we incur to make a landfill ready to accept waste. These costs
generally include expenditures for land (including the landfill footprint and required landfill buffer property); permitting;
excavation; liner material and installation; landfill leachate collection systems; landfill gas collection systems; environmental
monitoring equipment for groundwater and landfill gas; and directly related engineering, capitalized interest, on-site road construction
and other capital infrastructure costs. The cost basis of our landfill assets also includes asset retirement costs, which represent
estimates of future costs associated with landfill final capping, closure and post-closure activities. These costs are discussed
below.
Final
capping, closure and post-closure costs Following is a description of our asset retirement activities and our related
accounting:
·
Final
capping Involves the installation of flexible membrane liners and geosynthetic clay liners, drainage and compacted
soil layers and topsoil over areas of a landfill where total airspace capacity has been consumed. Final capping asset retirement
obligations are recorded on a units-of-consumption basis as airspace is consumed related to the specific final capping event
with a corresponding increase in the landfill asset. The final capping is accounted for as a discrete obligation and recorded
as an asset and a liability based on estimates of the discounted cash flows and capacity associated with the final capping.
·
Closure
Includes the construction of the final portion of methane gas collection systems (when required), demobilization and
routine maintenance costs. These are costs incurred after the site ceases to accept waste, but before the landfill is certified
as closed by the applicable state regulatory agency. These costs are recorded as an asset retirement obligation as airspace
is consumed over the life of the landfill with a corresponding increase in the landfill asset. Closure obligations are recorded
over the life of the landfill based on estimates of the discounted cash flows associated with performing closure activities.
·
Post-closure
Involves the maintenance and monitoring of a landfill site that has been certified closed by the applicable regulatory
agency. Generally, we are required to maintain and monitor landfill sites for a 30-year period. These maintenance and monitoring
costs are recorded as an asset retirement obligation as airspace is consumed over the life of the landfill with a corresponding
increase in the landfill asset. Post-closure obligations are recorded over the life of the landfill based on estimates of
the discounted cash flows associated with performing post-closure activities.
We
develop our estimates of these obligations using input from our operations personnel, engineers and accountants. Our estimates
are based on our interpretation of current requirements and proposed regulatory changes and are intended to approximate fair value.
Absent quoted market prices, the estimate of fair value is based on the best available information, including the results of present
value techniques. In many cases, we contract with third parties to fulfill our obligations for final capping, closure and post
closure. We use historical experience, professional engineering judgment and quoted and actual prices paid for similar work to
determine the fair value of these obligations. We are required to recognize these obligations at market prices whether we plan
to contract with third parties or perform the work ourselves. In those instances where we perform the work with internal resources,
the incremental profit margin realized is recognized as a component of operating income when the work is performed.
Once
we have determined the final capping, closure and post-closure costs, we inflate those costs to the expected time of payment and
discount those expected future costs back to present value. During the three months ended March 31, 2016 we inflated these costs
in current dollars until the expected time of payment using an inflation rate of 2.5%. Accretion expense was approximately $42,500
for the three months ended March 31, 2016. We discounted these costs to present value using the credit-adjusted, risk-free rate
effective at the time an obligation is incurred, consistent with the expected cash flow approach. Any changes in expectations
that result in an upward revision to the estimated cash flows are treated as a new liability and discounted at the current rate
while downward revisions are discounted at the historical weighted average rate of the recorded obligation. As a result, the credit
adjusted, risk-free discount rate used to calculate the present value of an obligation is specific to each individual asset retirement
obligation. The weighted average rate applicable to our long-term asset retirement obligations at March 31, 2016 is approximately
8.5%.
We
record the estimated fair value of final capping, closure and post-closure liabilities for our landfills based on the capacity
consumed through the current period. The fair value of final capping obligations is developed based on our estimates of the airspace
consumed to date for the final capping. The fair value of closure and post-closure obligations is developed based on our estimates
of the airspace consumed to date for the entire landfill and the expected timing of each closure and post-closure activity. Because
these obligations are measured at estimated fair value using present value techniques, changes in the estimated cost or timing
of future final capping, closure and post-closure activities could result in a material change in these liabilities, related assets
and results of operations. We assess the appropriateness of the estimates used to develop our recorded balances annually, or more
often if significant facts change.
Changes
in inflation rates or the estimated costs, timing or extent of future final capping, closure and post-closure activities typically
result in both (i) a current adjustment to the recorded liability and landfill asset and (ii) a change in liability and asset
amounts to be recorded prospectively over either the remaining capacity of the related discrete final capping or the remaining
permitted and expansion airspace (as defined below) of the landfill. Any changes related to the capitalized and future cost of
the landfill assets are then recognized in accordance with our amortization policy, which would generally result in amortization
expense being recognized prospectively over the remaining capacity of the final capping or the remaining permitted and expansion
airspace of the landfill, as appropriate. Changes in such estimates associated with airspace that has been fully utilized result
in an adjustment to the recorded liability and landfill assets with an immediate corresponding adjustment to landfill airspace
amortization expense.
·
Remaining
permitted airspace Our engineers, in consultation with third-party engineering consultants and surveyors, are responsible
for determining remaining permitted airspace at our landfills. The remaining permitted airspace is determined by an annual
survey, which is used to compare the existing landfill topography to the expected final landfill topography.
·
Expansion
airspace We also include currently unpermitted expansion airspace in our estimate of remaining permitted and expansion
airspace in certain circumstances. First, to include airspace associated with an expansion effort, we must generally expect
the initial expansion permit application to be submitted within one year and the final expansion permit to be received within
five years. Second, we must believe that obtaining the expansion permit is likely, considering the following criteria:
o
Personnel
are actively working on the expansion of an existing landfill, including efforts to obtain land use and local, state or provincial
approvals;
o
We
have a legal right to use or obtain land to be included in the expansion plan;
o
There are no significant known technical, legal,
community, business, or political restrictions or similar issues that could negatively affect the success of such expansion;
and
o
Financial analysis has been completed based on
conceptual design, and the results demonstrate that the expansion meets the Companys criteria for investment.
For
unpermitted airspace to be initially included in our estimate of remaining permitted and expansion airspace, the expansion effort
must meet all of the criteria listed above. These criteria are evaluated by our field-based engineers, accountants, managers and
others to identify potential obstacles to obtaining the permits. Once the unpermitted airspace is included, our policy provides
that airspace may continue to be included in remaining permitted and expansion airspace even if certain of these criteria are
no longer met as long as we continue to believe we will ultimately obtain the permit, based on the facts and circumstances of
a specific landfill.
When
we include the expansion airspace in our calculations of remaining permitted and expansion airspace, we also include the projected
costs for development, as well as the projected asset retirement costs related to the final capping, closure and post-closure
of the expansion in the amortization basis of the landfill.
Once
the remaining permitted and expansion airspace is determined in cubic yards, an airspace utilization factor (AUF)
is established to calculate the remaining permitted and expansion capacity in tons. The AUF is established using the measured
density obtained from previous annual surveys and is then adjusted to account for future settlement. The amount of settlement
that is forecasted will take into account several site-specific factors including current and projected mix of waste type, initial
and projected waste density, estimated number of years of life remaining, depth of underlying waste, anticipated access to moisture
through precipitation or recirculation of landfill leachate, and operating practices. In addition, the initial selection of the
AUF is subject to a subsequent multi-level review by our engineering group, and the AUF used is reviewed on a periodic basis and
revised as necessary. Our historical experience generally indicates that the impact of settlement at a landfill is greater later
in the life of the landfill when the waste placed at the landfill approaches its highest point under the permit requirements.
After
determining the costs and remaining permitted and expansion capacity at each of our landfill, we determine the per ton rates that
will be expensed as waste is received and deposited at the landfill by dividing the costs by the corresponding number of tons.
We calculate per ton amortization rates for the landfill for assets associated with each final capping, for assets related to
closure and post-closure activities and for all other costs capitalized or to be capitalized in the future. These rates per ton
are updated annually, or more often, as significant facts change.
It
is possible that actual results, including the amount of costs incurred, the timing of final capping, closure and post-closure
activities, our airspace utilization or the success of our expansion efforts could ultimately turn out to be significantly different
from our estimates and assumptions. To the extent that such estimates, or related assumptions, prove to be significantly different
than actual results, lower profitability may be experienced due to higher amortization rates or higher expenses; or higher profitability
may result if the opposite occurs. Most significantly, if it is determined that expansion capacity should no longer be considered
in calculating the recoverability of a landfill asset, we may be required to recognize an asset impairment or incur significantly
higher amortization expense. If at any time management makes the decision to abandon the expansion effort, the capitalized costs
related to the expansion effort are expensed immediately.
For
the three months ended March 31, 2016 the Company operations related to its landfill assets and liability are presented in the
tables below:
Three
Months Ended March 31, 2016 (UNAUDITED)
Year
Ended December 31, 2015
Landfill Assets
Beginning balance
$
3,393,476
$
3,396,519
Capital additions
26,984
-
Amortization of landfill assets
(51,933
)
(3,043
)
Asset retirement
adjustments
2,685
$
3,371,212
$
3,393,476
Landfill Asset Retirement Obligation
Beginning balance
$
200,252
$
196,519
Obligations incurred and capitalized
2,685
Obligations settled
-
-
Interest accretion
42,491
3,733
Revisions in estimates
and interest rate assumption
-
-
$
245,428
$
200,252
Revenue
Recognition
The
Company recognizes revenue when persuasive evidence of arrangement exists, services have been provided, the sellers price
to the buyer is fixed or determinable, and collection is reasonably assured. The majority of the Companys revenues are
generated from the fees charged for waste collection, transfer, disposal and recycling. The fees charged for our services
are generally defined in service agreements and vary based on contract-specific terms such as frequency of service, weight, volume
and the general market factors influencing a regions rate.
Deferred
Revenue
The
Company records deferred revenue for customers that were billed in advance of services. The balance in deferred revenue represents
amounts billed in January, February, and March for services that will be provided during April, May, and June.
Cost
of Services
Cost
of services include all employment costs associated with waste collection, transfer and disposal, damage claims, landfill costs,
personal property taxes associated with collection vehicles and other direct cost of the collection and disposal process.
Concentrations
The
Company maintains its cash and cash equivalents in bank deposit accounts, which could, at times, exceed federally insured limits.
The Company has not experienced any losses in such accounts; however, amounts in excess of the federally insured limit may be
at risk if the bank experiences financial difficulties. The Company places its cash with high credit quality financial
institutions. The Companys accounts at these institutions are insured by the Federal Deposit Insurance Corporation
(FDIC) up to $250,000. At March 31, 2016, the Company had $1,766,569 of cash in United States bank deposits, of which $959,985
was federally insured and $806,583 was not federally insured.
Financial
instruments which also potentially subject the Company to concentrations of credit risk consist principally of trade accounts
receivable; however, concentrations of credit risk with respect to trade accounts receivables are limited due to generally short
payment terms.
For
the three months ended March 31, 2016, the Company had one contract that accounted for approximately 12% of the Company's
revenue. For the three months ended March 31, 2015, the Company had two contracts that accounted for approximately 51% of the
Company's revenue, collectively.
Basic
Income (Loss) Per Share
Basic
income (loss) per share is calculated by dividing the Companys net loss applicable to common shareholders by the weighted
average number of common shares during the period. Diluted earnings per share is calculated by dividing the Companys net
income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the year. The
diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive
debt or equity. At March 31, 2016 the Company had two convertible notes outstanding that are not convertible into common stock
until June 2016. Additionally, the Company issued stock warrants for 1,673,559 common shares.
For
the three months ended March 31, 2016, the Company had 832,859 of weighted-average common shares relating to the convertible debt,
under the if-converted method, however, these shares are not dilutive because the Company recorded a loss during the fiscal year.
At
March 31, 2016, and December 31, 2015 the Company had a series of convertible notes and warrants outstanding that could be converted
into approximately, 2,506,418 and 2,548,559 common shares, respectively. These are not presented in the consolidated statements
of operations since the company incurred a loss and the effect of these shares is anti- dilutive.
Stock-Based
Compensation
Stock-based
compensation is accounted for at fair value in accordance with ASC Topic 718. To date, the Company has not adopted a stock option
plan and has not granted any stock options.
Stock-based
compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition
in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity
instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively,
the vesting period). The ASC also require measurement of the cost of employee and director services received in exchange
for an award based on the grant-date fair value of the award.
Pursuant
to ASC Topic 505-50, for share based payments to consultants and other third-parties, compensation expense is determined at the
measurement date. The expense is recognized over the service period of the award. Until the
measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records
compensation expense based on the fair value of the award at the reporting date.
The
Company recorded stock based compensation expense of $3,545,422 and $1,486,265 during the three months ended March 31, 2016 and
2015, respectively, which is included in compensation and related expense on the statement of operations.
Recent
Accounting Pronouncements
The
Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Companys
results of operations, financial position or cash flow.
Accounting
Basis
The
Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (GAAP
accounting).
Basis
of Consolidation
The
consolidated financial statements for the year ended December 31, 2015 include the operations of the Company and its wholly-owned
subsidiaries, Here To Serve Missouri Waste Division, LLC, Meridian Land Company, LLC, Here to Serve Technology, LLC and Christian
Disposal, LLC. The following two subsidiaries of the Company, Here To Serve Georgia Waste Division, LLC and Here to Serve Technology,
LLC, a Georgia Limited Liability Company had no operations during the period.
The
consolidated financial statements for the year ended December 31, 2014 include the operations of the Company and its wholly-owned
subsidiaries, Here To Serve Missouri Waste Division, LLC and Here To Serve Technology, LLC. The following subsidiary
of the Company, Here To Serve Georgia Waste Division, LLC had no operations during the period.
All
significant intercompany accounts and transactions have been eliminated in consolidation.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with maturities of three months or less to be cash equivalents.
Fair
Value of Financial Instruments
The
Companys financial instruments consist of cash and cash equivalents, accounts receivable, account payable, accrued expenses,
and notes payable. The carrying amount of these financial instruments approximates fair value due either to length of maturity
or interest rates that approximate prevailing market rates unless otherwise disclosed in these consolidated financial statements.
Derivative
Instruments
The
Company enters into financing arrangements that consist of freestanding derivative instruments or are hybrid instruments that
contain embedded derivative features. The Company accounts for these arrangements in accordance with Accounting Standards Codification
topic 815, Accounting for Derivative Instruments and Hedging Activities (ASC 815) as well as related interpretations
of this standard. In accordance with this standard, derivative instruments are recognized as either assets or liabilities in the
balance sheet and are measured at fair values with gains or losses recognized in earnings. Embedded derivatives that are not clearly
and closely related to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized
as either a gain or loss in earnings. The Company determines the fair value of derivative instruments and hybrid instruments based
on available market data using appropriate valuation models, considering all of the rights and obligations of each instrument.
The
Company estimates fair values of derivative financial instruments using various techniques (and combinations thereof) that are
considered consistent with the objective measuring fair values. In selecting the appropriate technique, the Company considers,
among other factors, the nature of the instrument, the market risks that it embodies and the expected means of settlement. For
less complex derivative instruments, such as freestanding warrants, the Company generally use the Black-Scholes model, adjusted
for the effect of dilution, because it embodies all of the requisite assumptions (including trading volatility, estimated terms,
dilution and risk free rates) necessary to fair value these instruments. Estimating fair values of derivative financial instruments
requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the
instrument with related changes in internal and external market factors. In addition, option-based techniques (such as Black-Scholes
model) are highly volatile and sensitive to changes in the trading market price of our common stock. Since derivative financial
instruments are initially and subsequently carried at fair values, our income (expense) going forward will reflect the volatility
in these estimates and assumption changes. Under the terms of this accounting standard, increases in the trading price of the
Companys common stock and increases in fair value during a given financial quarter result in the application of non-cash
derivative expense. Conversely, decreases in the trading price of the Companys common stock and decreases in trading fair
value during a given financial quarter result in the application of non-cash derivative income.
Impairment
of long-lived assets
The
Company periodically reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be fully recoverable. The Company recognizes an impairment loss when the sum
of expected undiscounted future cash flows is less that the carrying amount of the asset. The amount of impairment
is measured as the difference between the assets estimated fair value and its book value. During the year ending
December 31, 2015, the Company experienced no losses due to impairment.
Income
Taxes
The
Company accounts for income taxes pursuant to the provisions of ASC 740-10, Accounting for Income Taxes, which requires,
among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires
the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between
the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred
tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.
The
Company follows the provisions of the ASC 740 -10 related to, Accounting for Uncertain Income Tax Positions. When tax returns
are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while
others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately
sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements
in the period during which, based on all available evidence, management believes it is more likely than not that the position
will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are
not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured
as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable
taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described
above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated
interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions
are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.
The
Company analyzes its tax positions by utilizing ASC 740-10-25 Definition of Settlement, which provides guidance on how an entity
should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits
and provides that a tax position can be effectively settled upon the completion of an examination by a taxing authority without
being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax
benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical
merits and the statute of limitations remains open. As of December 31, 2015, tax years ended December 31, 2014, 2013, 2012 are
still potentially subject to audit by the taxing authorities.
Use
of Estimates
Management
estimates and judgments are an integral part of consolidated financial statements prepared in accordance with accounting principles
generally accepted in the United States of America (GAAP). We believe that the critical accounting policies described in this
section address the more significant estimates required of management when preparing our consolidated financial statements in
accordance with GAAP. We consider an accounting estimate critical if changes in the estimate may have a material impact on our
financial condition or results of operations. We believe that the accounting estimates employed are appropriate and resulting
balances are reasonable; however, actual results could differ from the original estimates, requiring adjustment to these balances
in future periods.
Accounts
Receivable
Accounts
receivable are recorded at managements estimate of net realizable value. At December 31, 2015 and 2014 the Company had approximately
$2,326,000 and $660,000 of gross trade receivables, respectively.
Our
reported balance of accounts receivable, net of the allowance for doubtful accounts, represents our estimate of the amount that
ultimately will be realized in cash. We review the adequacy and adjust our allowance for doubtful accounts on an ongoing basis,
using historical payment trends and the age of the receivables and knowledge of our individual customers. However, if the financial
condition of our customers were to deteriorate, additional allowances may be required. At December 31, 2015 and 2014 the Company
had approximately $618,000 and $71,000 recorded for the allowance for doubtful accounts, respectively.
Advertising
costs
Advertising
costs, except for costs associated with direct-response advertising, are charged to operations when incurred. The costs of direct-response
advertising are capitalized and amortized over the period during which future benefits are expected to be received. The Company
did not capitalize any advertising for the years ended December 31, 2015 and 2014, respectively. Advertising expenses were approximately
$79,000 and $65,000 for the years ended December 31, 2015 and 2014, respectively.
Property,
plant and equipment
The
cost of property, plant, and equipment is depreciated over the estimated useful lives of the related assets utilizing the straight-line
method of depreciation. The cost of leasehold improvements is depreciated (amortized) over the lesser of the length of the related
leases or the estimated useful lives of the assets. Ordinary repairs and maintenance are expensed when incurred and major repairs
will be capitalized and expensed if it benefits future periods.
Intangible
Assets
Intangible
assets that are subject to amortization are reviewed for potential impairment whenever events or circumstances indicate that carrying
amounts may not be recoverable. Assets not subject to amortization are tested for impairment at least annually. The Company has
intangible assets related to its purchase of Meridian Waste
Services,
LLC, Christian Disposal LLC and Eagle Ridge Landfill, LLC, which are further discussed in the notes below.
During
2015 and 2014, the Company assessed its intangible assets, based on estimated future cash flows and concluded that the carrying
amount of its intangible assets did not exceed its fair value.
Investment
in Related Party Affiliate
The
Company has an investment in a privately held corporation in the mobile apps industry. As the Company exercises significant influence
on this entity, this investment is recorded using the equity method of accounting. The Company monitors this investment for impairment
and makes appropriate reductions in the carrying value if the Company determines that an impairment charge is required based primarily
on the financial condition and near-term prospect of this entity.
Goodwill
Goodwill
is the excess of our purchase cost over the fair value of the net assets of acquired businesses. We do not amortize goodwill,
but as discussed in the impairment of long lived assets section above, we assess our goodwill for impairment at least annually.
Capitalized
Software
The
Company acquired a software product that is under further development. This asset was being amortized over a three to five year
period using the straight-line method of depreciation for book purposes beginning when the software is completed.
The
Company capitalizes internal software development costs subsequent to establishing technological feasibility of a software application
in accordance with guidelines established by ASC 985-20-25 Accounting for the costs of Computer Software to Be Sold,
Leased or Otherwise Marketed, requiring certain software development costs to be capitalized upon the establishment of technological
feasibility. The establishment of technological feasibility and the ongoing assessment of the recoverability of these costs require
considerable judgement by management with respect to certain external factors such as anticipated future revenue, estimated economic
life and changes in software and hardware technologies. Amortization of the capitalized software development costs begins when
the product is available for general release to customers. Capitalized costs are amortized over the remaining estimated economic
life of the product. For the year ended December 31, 2014, the Company has capitalized costs associated with the development of
several mobile science technology products and mobile apps that has not been placed into service. In 2015, the Company sold the
software to a related party. Refer to the related party note below for further discussion.
Website
Development Costs
The
Company accounts for website development costs in accordance with Accounting Standards Codification 350-50 Website Development
Costs. Accordingly, all costs incurred in the planning stage are expensed as incurred, costs incurred in the website application
and infrastructure development stage that meet specific criteria are capitalized and costs incurred in the day to day operation
of the website are expensed as incurred.
Landfill
Accounting
Capitalized
landfill costs
Cost
basis of landfill assets We capitalize various costs that we incur to make a landfill ready to accept waste. These
costs generally include expenditures for land (including the landfill footprint and required landfill buffer property); permitting;
excavation; liner material and installation; landfill leachate collection systems; landfill gas collection systems; environmental
monitoring equipment for groundwater and landfill gas; and directly related engineering, capitalized interest, on-site road
construction and other capital infrastructure costs. The cost basis of our landfill assets also includes asset retirement
costs, which represent estimates of future costs associated with landfill final capping, closure and post-closure activities.
These costs are discussed below.
Final
capping, closure and post-closure costs Following is a description of our asset retirement activities and our related
accounting:
·
Final
capping Involves the installation of flexible membrane liners and geosynthetic clay liners, drainage and compacted
soil layers and topsoil over areas of a landfill where total airspace capacity has been consumed. Final capping asset retirement
obligations are recorded on a units-of-consumption basis as airspace is consumed related to the specific final capping event
with a corresponding increase in the landfill asset. The final capping is accounted for as a discrete obligation and recorded
as an asset and a liability based on estimates of the discounted cash flows and capacity associated with the final capping.
·
Closure
Includes the construction of the final portion of methane gas collection systems (when required), demobilization and
routine maintenance costs. These are costs incurred after the site ceases to accept waste, but before the landfill is certified
as closed by the applicable state regulatory agency. These costs are recorded as an asset retirement obligation as airspace
is consumed over the life of the landfill with a corresponding increase in the landfill asset. Closure obligations are recorded
over the life of the landfill based on estimates of the discounted cash flows associated with performing closure activities.
·
Post-closure
Involves the maintenance and monitoring of a landfill site that has been certified closed by the applicable regulatory
agency. Generally, we are required to maintain and monitor landfill sites for a 30-year period. These maintenance and monitoring
costs are recorded as an asset retirement obligation as airspace is consumed over the life of the landfill with a corresponding
increase in the landfill asset. Post-closure obligations are recorded over the life of the landfill based on estimates of
the discounted cash flows associated with performing post-closure activities.
We
develop our estimates of these obligations using input from our operations personnel, engineers and accountants. Our estimates
are based on our interpretation of current requirements and proposed regulatory changes and are intended to approximate fair
value. Absent quoted market prices, the estimate of fair value is based on the best available information, including the results
of present value techniques. In many cases, we contract with third parties to fulfill our obligations for final capping, closure
and post closure. We use historical experience, professional engineering judgment and quoted and actual prices paid for similar
work to determine the fair value of these obligations. We are required to recognize these obligations at market prices whether
we plan to contract with third parties or perform the work ourselves. In those instances where we perform the work with internal
resources, the incremental profit margin realized is recognized as a component of operating income when the work is performed.
Once
we have determined the final capping, closure and post-closure costs, we inflate those costs to the expected time of payment
and discount those expected future costs back to present value. During the year ended December 31, 2015 we inflated these
costs in current dollars until the expected time of payment using an inflation rate of 2.5%. We discounted these costs to
present value using the credit-adjusted, risk-free rate effective at the time an obligation is incurred, consistent with the
expected cash flow approach. Any changes in expectations that result in an upward revision to the estimated cash flows are
treated as a new liability and discounted at the current rate while downward revisions are discounted at the historical weighted
average rate of the recorded obligation. As a result, the credit-adjusted, risk-free discount rate used to calculate the present
value of an obligation is specific to each individual asset retirement obligation. The weighted average rate applicable to
our long-term asset retirement obligations at December 31, 2015 is approximately 8.5%.
We
record the estimated fair value of final capping, closure and post-closure liabilities for our landfills based on the capacity
consumed through the current period. The fair value of final capping obligations is developed based on our estimates of the
airspace consumed to date for the final capping. The fair value of closure and post-closure obligations is developed based
on our estimates of the airspace consumed to date for the entire landfill and the expected timing of each closure and post-closure
activity. Because these obligations are measured at estimated fair value using present value techniques, changes in the estimated
cost or timing of future final capping, closure and post-closure activities could result in a material change in these liabilities,
related assets and results of operations. We assess the appropriateness of the estimates used to develop our recorded balances
annually, or more often if significant facts change.
Changes
in inflation rates or the estimated costs, timing or extent of future final capping, closure and post-closure activities typically
result in both (i) a current adjustment to the recorded liability and landfill asset and (ii) a change in liability
and asset amounts to be recorded prospectively over either the remaining capacity of the related discrete final capping or
the remaining permitted and expansion airspace (as defined below) of the landfill. Any changes related to the capitalized
and future cost of the landfill assets are then recognized in accordance with our amortization policy, which would generally
result in amortization expense being recognized prospectively over the remaining capacity of the final capping or the remaining
permitted and expansion airspace of the landfill, as appropriate. Changes in such estimates associated with airspace that
has been fully utilized result in an adjustment to the recorded liability and landfill assets with an immediate corresponding
adjustment to landfill airspace amortization expense.
·
Remaining
permitted airspace Our engineers, in consultation with third-party engineering consultants and surveyors, are responsible
for determining remaining permitted airspace at our landfills. The remaining permitted airspace is determined by an annual
survey, which is used to compare the existing landfill topography to the expected final landfill topography.
·
Expansion
airspace We also include currently unpermitted expansion airspace in our estimate of remaining permitted and expansion
airspace in certain circumstances. First, to include airspace associated with an expansion effort, we must generally expect
the initial expansion permit application to be submitted within one year and the final expansion permit to be received within
five years. Second, we must believe that obtaining the expansion permit is likely, considering the following criteria:
o
Personnel
are actively working on the expansion of an existing landfill, including efforts to obtain land use and local, state or provincial
approvals;
o
We
have a legal right to use or obtain land to be included in the expansion plan;
o
There
are no significant known technical, legal, community, business, or political restrictions or similar issues that could negatively
affect the success of such expansion; and
o
Financial
analysis has been completed based on conceptual design, and the results demonstrate that the expansion meets the Companys
criteria for investment.
For
unpermitted airspace to be initially included in our estimate of remaining permitted and expansion airspace, the expansion effort
must meet all of the criteria listed above. These criteria are evaluated by our field-based engineers, accountants, managers and
others to identify potential obstacles to obtaining the permits. Once the unpermitted airspace is included, our policy provides
that airspace may continue to be included in remaining permitted and expansion airspace even if certain of these criteria are
no longer met as long as we continue to believe we will ultimately obtain the permit, based on the facts and circumstances of
a specific landfill.
When
we include the expansion airspace in our calculations of remaining permitted and expansion airspace, we also include the projected
costs for development, as well as the projected asset retirement costs related to the final capping, closure and post-closure
of the expansion in the amortization basis of the landfill.
Once
the remaining permitted and expansion airspace is determined in cubic yards, an airspace utilization factor (AUF)
is established to calculate the remaining permitted and expansion capacity in tons. The AUF is established using the measured
density obtained from previous annual surveys and is then adjusted to account for future settlement. The amount of settlement
that is forecasted will take into account several site-specific factors including current and projected mix of waste type, initial
and projected waste density, estimated number of years of life remaining, depth of underlying waste, anticipated access to moisture
through precipitation or recirculation of landfill leachate, and operating practices. In addition, the initial selection of the
AUF is subject to a subsequent multi-level review by our engineering group, and the AUF used is reviewed on a periodic basis and
revised as necessary. Our historical experience generally indicates that the impact of settlement at a landfill is greater later
in the life of the landfill when the waste placed at the landfill approaches its highest point under the permit requirements.
After
determining the costs and remaining permitted and expansion capacity at each of our landfill, we determine the per ton rates that
will be expensed as waste is received and deposited at the landfill by dividing the costs by the corresponding number of tons.
We calculate per ton amortization rates for the landfill for assets associated with each final capping, for assets related to
closure and post-closure activities and for all other costs capitalized or to be capitalized in the future. These rates per ton
are updated annually, or more often, as significant facts change.
It
is possible that actual results, including the amount of costs incurred, the timing of final capping, closure and post-closure
activities, our airspace utilization or the success of our expansion efforts could ultimately turn out to be significantly different
from our estimates and assumptions. To the extent that such estimates, or related assumptions, prove to be significantly different
than actual results, lower profitability may be experienced due to higher amortization rates or higher expenses; or higher profitability
may result if the opposite occurs. Most significantly, if it is determined that expansion capacity should no longer be considered
in calculating the recoverability of a landfill asset, we may be required to recognize an asset impairment or incur significantly
higher amortization expense. If at any time management makes the decision to abandon the expansion effort, the capitalized costs
related to the expansion effort are expensed immediately.
For
the year ended December 31, 2015 the Company operations related to its landfill assets and liability are presented in the tables
below:
Landfill
Assets
Year
Ended December 31, 2015
January
1, 2015, Beginning Balance
$
-
Capital
additions (Landfill acquired on December 22, 2015)
3,396,519
Amortization
of landfill assets
(3,043
)
Asset
retirement adjustments
-
December
31, 2015, Ending Balance
$
3,393,476
Landfill
Liability
January
1, 2015, Beginning Balance
$
-
Obligations
incurred and capitalized (Landfill acquired on December 22, 2015)
196,519
Obligations
settled
-
Interest
accretion
3,733
Revisions
in estimates and interest rate assumption
-
Acquisition,
divestures and other adjustments
-
December
31, 2015, Ending Balance
$
200,252
Revenue
Recognition
The
Company recognizes revenue when there is persuasive evidence that services have been provided and a collection is reasonably assured.
The majority of the Companys revenues are generated from the fees charged for waste collection, transfer, disposal and recycling. The
fees charged for our services are generally defined in service agreements and vary based on contract-specific terms such as frequency
of service, weight, volume and the general market factors influencing a regions rate.
Deferred
Revenue
The
Company records deferred revenue for customers that were billed in advance of services. The balance in deferred revenue represents
amounts billed in October, November and December for services that will be provided during January, February and March.
Cost
of Services
Cost
of services include all employment costs associated with waste collection, transfer and disposal, damage claims, landfill costs,
personal property taxes associated with collection vehicles and other direct cost of the collection and disposal process.
Concentrations
The
Company maintains its cash and cash equivalents in bank deposit accounts, which could, at times, exceed federally insured limits.
The Company has not experienced any losses in such accounts; however, amounts in excess of the federally insured limit may be
at risk if the bank experiences financial difficulties. The Company places its cash with high credit quality financial
institutions. The Companys accounts at these institutions are insured by the Federal Deposit Insurance Corporation
(FDIC) up to $250,000.
Financial
instruments which also potentially subject the Company to concentrations of credit risk consist principally of trade accounts
receivable; however, concentrations of credit risk with respect to trade accounts receivables are limited due to generally short
payment terms.
The
Company has two contracts that account for a large portion of the Companys revenue. During the year ended December 31, 2015,
these contracts accounted for approximately 44% of the Companys revenues and less than 5% of the Companys accounts
receivable balance at December 31, 2015. During the year ended December 31, 2014, the Company had two customers that accounted
for approximately 46% of the Companys revenues and approximately 53% of the Companys accounts receivable balance at
December 31, 2014. The Company did not have any other customers that represented a significant portion of the Companys revenue
or account receivables for the fiscal years ended December 31, 2015 and 2014, respectively.
Basic
Income (Loss) Per Share
Basic
income (loss) per share is calculated by dividing the Companys net loss applicable to common shareholders by the weighted
average number of common shares during the period. Diluted earnings per share is calculated by dividing the Companys net
income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the year. The
diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive
debt or equity. At December 31, 2015 the Company had two convertible notes outstanding that is not convertible into common stock
until June 2016. Additionally, the Company issued stock warrants for 1,673,559 common shares.
For
the year ended December 31, 2015, the Company had 1,673,559 of weighted-average common shares relating to the convertible debt,
under the if-converted method, however, these shares are not dilutive because the Company recorded a loss during the fiscal year.
At
December 31, 2015, and 2014 the Company had a series of convertible notes and warrants outstanding that could be converted into
approximately, 2,548,559 and 291,047 common shares, respectively. These are not presented in the consolidated statements of operations
since the company incurred a loss and the effect of these shares is anti- dilutive.
Stock-Based
Compensation
Stock-based
compensation is accounted for at fair value in accordance with ASC Topic 718. To date, the Company has not adopted a stock option
plan and has not granted any stock options.
Stock-based
compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition
in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity
instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively,
the vesting period). The ASC also require measurement of the cost of employee and director services received in exchange
for an award based on the grant-date fair value of the award.
Pursuant
to ASC Topic 505-50, for share based payments to consultants and other third-parties, compensation expense is determined at the
measurement date. The expense is recognized over the service period of the award. Until the
measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records
compensation expense based on the fair value of the award at the reporting date.
The
Company recorded stock based compensation expense of $7,356,000 and $339,000 during the years ended December 31, 2015 and 2014,
respectively.
Recent
Accounting Pronouncements
The
Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Companys
results of operations, financial position or cash flow.
The following is a summary of property, plant,
and equipmentat cost, less accumulated depreciation:
March 31, 2016 (UNAUDITED)
December 31, 2015
Land
$
1,690,000
$
1,690,000
Buildings & Building Improvements
692,156
692,156
Furniture & office equipment
288,726
258,702
Containers
4,524,382
4,453,386
Trucks, Machinery, & Equipment
12,209,606
9,948,686
Total cost
19,404,870
17,042,930
Less accumulated depreciation
(3,364,035
)
(2,609,190
)
Net property and Equipment
$
16,040,835
$
14,433,740
As of March 31, 2016, the Company has $395,000
of land and building which are held for sale and included in amounts noted above. These held for sale assets were not depreciated
during the three months ended March 31, 2016. Depreciation expense for three months ended March 31, 2016 and 2015 was $780,919
and $394,403, respectively.
The following is a summary of property, plant, and equipmentat
cost, less accumulated depreciation:
2015
2014
Land
$
1,690,000
$
-
Building & Improvements
692,156
-
Furniture & Office Equipment
258,702
240,102
Containers
4,453,386
2,847,205
Truck, Machinery & Equipment
9,948,686
5,523,773
Total Cost
17,042,930
8,611,080
Less accumulated depreciation
(2,609,190
)
(956,315
)
Net property, plant and Equipment
$
14,433,740
$
7,654,765
As of December 31, 2015 the Company has $395,000 of land
and building which are held for sale and included in amounts noted above. These held for sale assets were not depreciated
during the year ending December 31, 2015. Depreciation expense for the years ended December 31, 2015 and 2014 was $1,683,000
and $965,000, respectively.
During 2015 and 2014, the Company assessed these long-term assets,
based on estimated future cash flows and concluded that the carrying amount of its long-term assets did not exceed its fair value,
therefore the Company did not record any impairment loss on these assets.
The entire disclosure for long-lived, physical assets used in the normal conduct of business and not intended for resale. Includes, but is not limited to, accounting policies and methodology, roll forwards, depreciation, depletion and amortization expense, including composite depreciation, accumulated depreciation, depletion and amortization expense, useful lives and method used, income statement disclosures, assets held for sale and public utility disclosures.
On
December 22, 2015, the Company, in order to expand into new markets and maximize the rate of waste internalization, acquired 100%
of the membership interests of Christian Disposal LLC pursuant to that certain Amended and Restated Membership Interest Purchase
Agreement, dated October 16, 2015, as amended by that certain First Amendment thereto, dated December 4, 2015.
The
acquisition was accounted for by the Company using acquisition method under business combination accounting. Under this method,
the purchase price paid by the acquirer is allocated to the assets acquired and liabilities assumed as of the acquisition date
based on the fair value. By the application of push-down accounting, our assets, liabilities and equity were accordingly
adjusted to fair value on December 22, 2015. Determining the fair value of certain assets and liabilities assumed is judgmental
in nature and often involves the use of significant estimates and assumptions.
The
purchase of Christian Disposal, LLC included the acquisition of assets of $20,035,847 and liabilities of $2,152,738. The aggregate
purchase price consisted of the following:
Cash consideration
$
13,008,109
Restricted stock consideration
2,625,000
Convertible Promissory Note
1,250,000
Contingent additional
purchase price
1,000,000
Total
$
17,883,109
As
noted in the table above, the purchase price could be increased by a maximum amount of $2,000,000 depending upon the extension
of certain contracts to which Christian Disposal, LLC is a party. At March 31, 2016, the fair value of the additional purchase
price was determined to be $1,000,000. Also, the Company issued 1,750,000 restricted shares of common stock as consideration which
was valued at market at the date of the closing.
The
following table summarizes the estimated fair value of Christian Disposal LLC, and subsidiary, assets acquired and liabilities
assumed at the date of acquisition:
Cash
$
442,395
Accounts receivable
974,538
Prepaid expense
84,196
Other current assets
53,810
Customer lists intangible assets
8,180,000
Non-competition agreement intangible asset
56,000
Goodwill
5,604,110
Property, Plant, and Equipment
4,640,798
Account payable
(1,001,721
)
Deferred revenue
(1,007,525
)
Accrued expenses
(106,396
)
Capital lease
(37,096
)
Total
$
17,883,109
Eagle
Ridge Landfill, LLC and Eagle Ridge Hauling Business
On
December 22, 2015, the Company, in order to expand into new markets and maximize the rate of waste internalization, consummated
the closing of the certain Asset Purchase Agreement dated November 13, 2015, by and between the Company and Eagle Ridge Landfill,
LLC, as amended by the certain Amendment to Asset Purchase Agreement, dated December 18, 2015, to which the Company and WCA Waste
Corporation are also party. Pursuant to the Eagle Ridge Purchase Agreement, Meridian Land acquired a landfill located in Pike
County, Missouri and certain assets, rights, and properties related to such business of Eagle Ridge, including certain debts.
The
acquisition was accounted for by the Company using the acquisition method under business combination accounting. Under this method,
the purchase price paid by the acquirer is allocated to the assets acquired and liabilities assumed as of the acquisition date
based on the fair value. By the application of push-down accounting, our assets, liabilities and equity were accordingly
adjusted to fair value on December 22, 2015. Determining the fair value of certain assets and liabilities assumed is judgmental
in nature and often involves the use of significant estimates and assumptions.
The
purchase of Eagle Ridge Landfill, LLC and certain assets included the acquisition of assets of $9,947,224 and liabilities of $283,737.
The aggregate purchase price consisted of a cash consideration of $9,663,487.
The
following table summarizes the estimated fair value of Eagle Ridge Landfill LLC., assets acquired and liabilities assumed at the
date of acquisition:
Cash
$
470
Accounts receivable
272,480
Prepaid expense
6,870
Customer lists intangible assets
2,000,000
Landfill permit (including ARO)
3,396,519
Goodwill
1,630,310
Land
1,550,000
Property, Plant, and Equipment
1,090,575
Deferred revenue
(87,218
)
Asset retirement
obligation - permits
(196,519
)
Total
$
9,663,487
The
following unaudited pro forma consolidated results of operations have been prepared as if the acquisitions of Christian Disposal
and Eagle Ridge occurred at January 1, 2014:
Three
months ended
March
31,
2015
(UNAUDITED)
Total Revenue
$
6,921,168
Net (loss) income
(2,412,011
)
Basic net loss per share
$
(0.22
)
Shares outstanding
11,114,873
The
following tables set forth the intangible assets, both acquired and developed, including accumulated amortization for the three
months ended March 31, 2016:
March
31, 2016
Remaining
Accumulated
Net
Carrying
Useful
Life
Cost
Amortization
Value
Customer lists
13.4 years
24,187,452
5,550,708
18,636,744
Non compete agreement
3.9 years
206,000
60,541
145,459
Website
3.7 years
13,920
3,712
10,208
$
24,407,372
$
5,614,961
$
18,792,411
In
the three months ended March 31, 2016, customer lists include the intangible assets related to customer relationships acquired
through the acquisition of Christian Disposal and Eagle Ridge with a cost basis of $10,180,000. The customer list intangible assets
are amortized over their useful life which ranged from 5 to 20 years. Amortization expense, excluding amortization of landfill
assets of $51,933, amounted to $874,554 and $712,786 for the three months ended March 31, 2016 and 2015 respectively.
Christian
Disposal Acquisition
On
December 22, 2015, the Company, in order to expand into new markets and maximize the rate of waste internalization, acquired
100% of the membership interests of Christian Disposal LLC pursuant to that certain Amended and Restated Membership Interest
Purchase Agreement, dated October 16, 2015, as amended by that certain First Amendment thereto, dated December 4,
2015.
The
acquisition was accounted for by the Company using acquisition method under business combination accounting. Under this method,
the purchase price paid by the acquirer is allocated to the assets acquired and liabilities assumed as of the acquisition date
based on the fair value. By the application of push-down accounting, our assets, liabilities and equity were accordingly
adjusted to fair value on December 22, 2015. Determining the fair value of certain assets and liabilities assumed is judgmental
in nature and often involves the use of significant estimates and assumptions.
The
purchase of Christian Disposal, LLC included the acquisition of assets of $20,035,847 and liabilities of $2,152,738. The aggregate
purchase price consisted of the following:
Cash
consideration
$
13,008,109
Restricted
stock consideration
2,625,000
Convertible
Promissory Note
1,250,000
Contingent
additional purchase price
1,000,000
Total
$
17,883,109
As
noted in the table above, the purchase price could be increased by a maximum amount of $2,000,000 depending upon the extension
of certain contracts to which Christian Disposal, LLC is a party. At December 31, 2015, the fair value of the additional purchase
price was determined to be $1,000,000. Also, the Company issued 1,750,000 restricted shares of common stock as consideration which
was valued at market at the date of the closing.
The
following table summarizes the estimated fair value of Christian Disposal LLC, and subsidiary, assets acquired and liabilities
assumed at the date of acquisition:
Cash
$
197,173
Accounts
receivable
974,538
Prepaid
expense
84,196
Other
current assets
53,810
Customer
lists intangible assets
8,180,000
Non-competition
agreement intangible asset
56,000
Goodwill
5,849,332
Property,
plant, and equipment
4,640,798
Account
payable
(1,001,721
)
Deferred
revenue
(1,007,525
)
Accrued
expenses
(106,396
)
Capital
lease
(37,096
)
Total
$
17,883,109
Eagle
Ridge Landfill, LLC and Hauling Acquisition
On
December 22, 2015, the Company, in order to expand into new markets and maximize the rate of waste internalization,
consummated the closing of the certain Asset Purchase Agreement dated November 13, 2015, by and between the Company
and Eagle Ridge Landfill, LLC, as amended by the certain Amendment to Asset Purchase Agreement, dated December 18, 2015, to
which the Company and WCA Waste Corporation are also party. Pursuant to the Eagle Ridge Purchase Agreement, Meridian Land
acquired a landfill located in Pike County, Missouri and certain assets, rights, and properties related to such business of
Eagle Ridge, including certain debts.
The
acquisition was accounted for by the Company using business combination accounting. Under this method, the purchase price paid
by the acquirer is allocated to the assets acquired and liabilities assumed as of the acquisition date based on the fair value.
By the application of push-down accounting, our assets, liabilities and equity were accordingly adjusted to fair
value on December 22, 2015. Determining the fair value of certain assets and liabilities assumed is judgmental in nature and often
involves the use of significant estimates and assumptions.
The
purchase of Eagle Ridge Landfill, LLC and certain assets included the acquisition of assets of $9,947,224 and liabilities of $283,737.
The aggregate purchase price consisted of a cash consideration of $9,663,487.
The
following table summarizes the estimated fair value of Eagle Ridge Landfill LLC., assets acquired and liabilities assumed at the
date of acquisition:
Cash
$
470
Accounts
receivable
272,480
Prepaid
expense
6,870
Customer
lists intangible assets
2,000,000
Landfill
permit (including ARO)
3,396,519
Goodwill
1,630,310
Land
1,550,000
Property,
Plant, and Equipment
1,090,575
Deferred
revenue
(87,218
)
Asset
retirement obligation - permits
(196,519
)
Total
$
9,663,487
The
following unaudited pro forma consolidated results of operations have been prepared as if the acquisitions of Christian
Disposal and Eagle Ridge occurred at January 1, 2014:
Successor
Predecessor
Year
Ended December 31, 2015
Period
from Acquisition May 16, 2014 to December 31, 2014
Period
from January 1, 2014 to May 15, 2014
Total
Revenue
$
28,861,001
$
17,872,328
$
10,199,328
Net
(loss) income
(17,763,377
)
(1,581,195
)
916,391
Basic
net loss per share
$
(1.23
)
$
(0.16
)
$
-
Meridian
Waste Services, LLC Acquisition
In
2014, the Company, in order to establish a presence in the solid waste disposal industry, entered into an asset purchase agreement
by and among the Company, HTSMWD, Meridian Waste Services, LLC (MWS) and the members of MWS, pursuant to which HTSMWD
acquired certain assets and liabilities of MWS, in exchange for $11,115,000 cash, 13,191,667 shares of Class A Common Stock of
HTSHC and 71,210 shares of Series B Cumulative Convertible Preferred Stock of HTSHC.
The
acquisition was accounted for by the Company using the acquisition method under business combination accounting. Under this method,
the purchase price paid by the acquirer is allocated to the assets acquired and liabilities assumed as of the acquisition date
based on the fair value. By the application of push-down accounting, our assets, liabilities and equity were accordingly
adjusted to fair value on May 15, 2014. Determining the fair value of certain assets and liabilities assumed is judgmental in
nature and often involves the use of significant estimates and assumptions.
The
purchase of MWS included the acquisition of assets of $22,175,706 and liabilities of $2,075,956. The aggregate purchase price
consisted of the following:
Cash
consideration
$
11,000,000
Estimated
value of common stock issued to sellers
1,978,750
Estimated
value of preferred stock issued to sellers
7,121,000
Total
$
20,099,750
The
following table summarizes the estimated fair value of MWS assets acquired and liabilities assumed at the date of acquisition:
Accounts
receivable
$
632,322
Prepaid
expenses
123,544
Deposits
8,303
Containers
2,710,671
Furniture
and equipment
299,450
Trucks
4,243,964
Customer
lists
14,007,452
Non-compete
agreement
150,000
Accounts
payable and accrued expenses
(54,387
)
Notes
payable
(143,464
)
Deferred
revenue
(1,878,105
)
Total
$
20,099,750
The
following tables set forth the intangible assets, both acquired and developed, including accumulated amortization for the years
ended December 31, 2015 and December 31, 2014:
December
31, 2015
Remaining
Accumulated
Net
Carrying
Useful
Life
Cost
Amortization
Value
Customer
lists
13.7
years
$
24,187,452
$
4,687,090
$
19,500,362
Non
compete agreement
4.2
years
206,000
50,301
155,699
Website
3.9
years
13,920
3,016
10,904
$
24,407,372
$
4,740,407
$
19,666,965
December
31, 2014
Remaining
Accumulated
Net
Carrying
Useful
Life
Cost
Amortization
Value
Capitalized
software
5.0
years
$
434,532
$
-
$
434,532
Customer
list
4.5
years
14,007,452
1,867,660
12,139,792
Loan
fees
4.5
years
50,613
11,248
39,365
Non
compete agreement
4.5
years
150,000
20,000
130,000
Website
4.9
years
13,920
232
13,688
$
14,656,517
$
1,899,140
$
12,757,377
In
the year ended December 31, 2015, customer lists include the intangible assets related to customer relationships acquired through
the acquisition of Christian Disposal and Eagle Ridge with a cost basis of $10,180,000. The customer list intangible assets are
amortized over their useful life which ranged from 5 to 20 years. Amortization expense, excluding amortization of landfill assets
of $3,043, amounted to $2,869,385 and $1,899,140 for the period ending December 31, 2015 and 2014 respectively.
Goldman Sachs - Tranche A Term Loan - LIBOR Interest
$
40,000,000
$
40,000,000
Goldman Sachs - Revolver
2,150,000
-
Goldman Sachs - MDTL
-
-
Convertible Notes Payable
1,250,000
1,250,000
Capitalized lease - financing company, secured by equipment
33,882
37,097
Equipment loans
364,764
395,118
Notes payable to seller of Meridian, subordinated debt
1,475,000
1,475,000
Less: debt discount
(2,040,460
)
(2,152,603
)
Total debt
43,233,186
41,004,612
Less: current portion
(268,994
)
(417,119
)
Long term debt less current portion
$
42,964,192
$
40,587,493
Convertible Notes Payable
The Company issued two promissory notes to related
parties during the year ended December 31, 2014. These notes totaled $125,000 and are generally convertible into common stock of
the Company at discounts of 20% to 25% of the lowest average trading prices for the stock during periods five to one day prior
to the conversion date. These notes bear interest at 10% to 12%, are unsecured, and mature within one year of the date issued.
The notes were issued to provide working capital for the Company. These notes are considered a stock settled debt in accordance
with ASC 480 since any future stock issued upon conversion will have a fixed monetary value. Due to the conversion feature included
in the notes, the Company has recorded a premium on the notes totaling $31,250 as of December 31, 2014. This amount
has been charged to interest expense by the Company.
In 2015, as part of the purchase price consideration
of the Christian Disposal acquisition, the Company issued a convertible promissory note to seller in the amount of $1,250,000.
The note bears interest at 8% and matures on December 31, 2020. The seller may convert all or any part of the outstanding and unpaid
amount of this note into fully paid and non-assessable common stock in accordance with the agreement.
In previous periods the Company issued two other
notes to other related parties. These notes totaled $110,000 and are generally convertible into common stock of the Company at
discounts of 20% to 25% of the lowest average trading prices for the stock during periods five to one day prior to the conversion
date. These notes bear interest at 10% to 12%, are unsecured, and mature within one year of the date issued. The notes
were issued to provide working capital for the Company. These notes are considered a stock settled debt in
accordance with ASC 480 since any future stock issued upon conversion will have a fixed monetary value. Due to the conversion
feature included in the notes, the Company has recorded a premium on the notes totaling $35,833 as of December 31, 2014. This
amount has been charged to interest expense by the Company.
In 2015, approximately $225,000 of the issued
promissory notes were converted into approximately 461,000 shares at the contractual conversion price. At March 31,
2016 the Company had $12,500 remaining in convertible notes to related parties, which includes $2,500 in put premiums.
Notes Payable
At December 31, 2014 the Company had a short
term, non-interest bearing note payable of $150,000 which was incurred in connection with the Membership Interest Purchase Agreement
discussed above. The Company also had a loan from Here to Serve Holding Corp. due to expenses paid by Here to Serve
on behalf of the Company prior to the recapitalization. This loan totaled $376,585 bringing total notes payable to $526,585. In
2015, the short term, non-interest bearing note was paid off, and at March 31, 2016, the Companys loan from Here to Serve
Holding Corp. was $359,891.
Praesidian Notes Payable
On August 6, 2015, the Company refinanced its
long-term debt payable to Comerica Bank. Proceeds from notes issued by the Company to Praesidian Capital Opportunity Fund III,
LP and Praesidian Capital Opportunity Fund III-A, LP (together referred to as Praesidian) were $10,845,000. These funds were distributed
as follows:
Payoff of short term bridge financing
$
432,938
Payoff of lines of credit with Commerica Bank
1,745,799
Payoff of senior debt to Comerica Bank
7,953,433
Refinancing fees
712,830
$
10,845,000
The Companys Senior Secured Loan with
Comerica Bank had an interest rate of LIBOR plus 4.25% with a two-year term based on a seven-year amortization schedule. In addition,
the Company had a working capital line of credit with Comerica Bank of $1,250,000 at 4.75% of which the Company had drawn down
$1,185,081 and $1,085,160 as of August 6, 2015 and December 31, 2014, respectively. There was CAPEX line of credit of
$750,000, of which the Company had drawn down $560,718 and $590,000 as of August 6, 2015 and December 31, 2014, respectively; again
at 4.75% interest. As noted above, these debts were paid off from the proceeds received from Praesidian.
The debt to Praesidian had a maturity date of
August 6, 2020 with interest paid monthly at an annual rate of 14%. In addition to the 14% interest rate, the Company issued to
Praesidian warrants to purchase 1,293,022 shares of Common Stock of the Company. The Company repaid this debt in full. See discussion
below.
Goldman Sachs Credit Agreement
On December 22, 2015, in connection with the
closing of acquisitions of Christian Disposal, LLC and certain assets of Eagle Ridge Landfill, LLC, the Company was extended certain
credit facilities by Goldman Sachs, consisting of $40,000,000 aggregate principal amount of Tranche A Term Loans, $10,000,000 aggregate
principal amount of Multi- Draw Term Loans and up to $5,000,000 aggregate principal amount of Revolving Commitments. During
the three months ended March 31, 2016, the Company borrowed $2,150,000 in relation to the Revolving Commitments. At March 31, 2016,
the Company had at total outstanding balance of $42,150,000 consisting of the Tranche A Term Loan and draw of the Revolving Commitments.
The loans are collateralized by the assets of the Company. The debt has a maturity date of December 22, 2020 with interest paid
monthly at an annual rate of 9%. In addition, there is a commitment fee paid monthly on the Mutli-Draw Term Loans and Revolving
Commitments at an annual rate of 0.5%.
The proceeds of the loans were used to partially
fund the acquisitions referenced above and refinance existing debt with Praesidian, among other things. The funds to payoff the
Praesidian notes were distributed as follows:
Aggregate outstanding principal balance of the Notes
$
10,845,043
Aggregate accrued but unpaid interest on the Notes
82,844
Prepayment Premium
325,351
Accrued PIK
9,941
Tax Liability
150,000
Accrued but unpaid fees and expenses
4,000
Payoff Amount
$
11,417,179
The Company re-paid in full and terminated its
agreements with Praesidian which effected the cancellation of certain warrants that the Company issued to Fund III for the purchase
of 931,826 shares of the Companys common stock and to Fund III-A for the purchase of 361,196 shares of the Companys
common stock. In consideration for the cancellation of the Praesidian Warrants, the Company issued to Praesidian Capital Opportunity
Fund III, LP, 1,153,052 shares of common stock and issued to Praesidian Capital Opportunity Fund III-A, LP, 446,948 shares of common
stock. Due to the early termination of the notes and cancellation of the warrants, the Company recorded a loss on extinguishment
of debt of $1,899,161 in the year ended December 31, 2015.
In addition, in connection with the credit agreement,
the Company issued warrants to Goldman Sachs for the purchase of shares of the Companys common stock equivalent to a 6.5%
Percentage Interest at a purchase price equal to $449,553, exercisable on or before December 22, 2023. The warrants grant the holder
certain other rights, including registration rights, preemptive rights for certain capital raises, board observation rights and
indemnification. See discussion of warrants below.
Subordinated Debt
In connection with the acquisition with Meridian
Waste Services, LLC on May 15, 2014, notes payable to the sellers of Meridian issued five-year term subordinated debt loans paying
interest at 8%. At March 31, 2016 and December 31, 2015, the balance on these loans was $1,475,000 and $1,475,000, respectively.
The debt payable to Comerica at December 31,
2015 and the Equipment loans at December 31, 2015 were the debt of Here to Serve- Missouri Waste Division, LLC, a subsidiary of
the Company.
Equipment Loans
During the year ended December 31, 2015, the
Company entered into four long-term loan agreements in connection with the purchase of equipment with rates between 4% and 5%.
At March 31, 2016, the balance of these four loans was $364,764.
Derivative Liability - Warrants
As indicated above, the Company issued warrants
to Goldman Sachs to purchase shares of common stock. Due to the put feature contained in the agreement, a derivative
liability was recorded for the warrant.
The Companys derivative warrant instrument
related to Goldman Sachs has been measured at fair value at March 31, 2016, using the Black-Scholes model. The liability is revalued
at each reporting period and changes in fair value are recognized currently in the consolidated statement of operations.
The key inputs used in the March 31, 2016 and
December 31, 2015 fair value calculations were as follows:
March 31,
2016
December 31,
2015
Purchase Price
$
450,000
$
450,000
Time to expiration
12/22/2023
12/22/2023
Risk-free interest rate
1.60
%
2.15
%
Estimated volatility
45
%
45
%
Dividend
0
%
0
%
Stock price on March 31, 2016
$
1.80
$
1.90
Expected forfeiture rate
0
%
0
%
The change in the market value for the period ending
March 31, 2016 is as follows:
Fair value of warrants @ December 31, 2015
$
2,820,000
Unrealized gain on derivative liability
(180,000
)
Fair value of warrants @ March 31, 2016
$
2,640,000
The Company had the following long-term debt:
December 31, 2015
December 31, 2014
Debt payable to Comerica Bank, senior debt
$
-
$
8,708,333
Debt payable to Praesidian Capital Opportunity Fund III, senior lender
-
-
Debt payable to Praesidian Capital Opportunity Fund III-A, senior lender
-
-
Goldman Sachs - Tranche A Term Loan - LIBOR Interest
40,000,000
-
Goldman Sachs - Revolver
-
-
Goldman Sachs - MDTL
-
-
Convertible Notes Payable
1,250,000
-
Capitalized lease - financing company, secured by equipment,
37,097
Equipment loans
395,118
-
Notes payable to seller of Meridian, subordinated debt
1,475,000
1,475,000
Less: debt discount
(2,152,603
)
-
Total debt
41,004,611
10,183,333
Less: current portion
(417,119
)
(1,357,143
)
Long term debt less current portion
$
40,587,493
$
8,826,190
Convertible Notes Payable
The Company issued two promissory notes to related
parties during the year ended December 31, 2014. These notes totaled $125,000 and are generally convertible into common stock of
the Company at discounts of 20% to 25% of the lowest average trading prices for the stock during periods five to one day prior
to the conversion date. These notes bear interest at 10% to 12%, are unsecured, and mature within one year of the date issued.
The notes were issued to provide working capital for the Company. These notes are considered a stock settled debt in accordance
with ASC 480 since any future stock issued upon conversion will have a fixed monetary value. Due to the conversion feature included
in the notes, the Company has recorded a premium on the notes totaling $31,250 as of December 31, 2014. This amount
has been charged to interest expense by the Company.
In 2015, as part of the purchase price consideration
of the Christian Disposal acquisition, the Company issued a convertible promissory note to seller in the amount of $1,250,000.
The note bears interest at 8% and matures on December 31, 2020. The seller may convert all or any part of the outstanding and unpaid
amount of this note into fully paid and non-assessable common stock in accordance with the agreement.
In previous periods the Company issued two other notes to other related
parties. These notes totaled $110,000 and are generally convertible into common stock of the Company at discounts of 20% to 25%
of the lowest average trading prices for the stock during periods five to one day prior to the conversion date. These
notes bear interest at 10% to 12%, are unsecured, and mature within one year of the date issued. The notes were issued to provide
working capital for the Company. These notes are considered a stock settled debt in accordance with ASC 480 since
any future stock issued upon conversion will have a fixed monetary value. Due to the conversion feature included in
the notes, the Company has recorded a premium on the notes totaling $35,833 as of December 31, 2014. This amount has
been charged to interest expense by the Company.
In 2015, approximately $225,000 of the issued promissory notes were
converted into approximately 461,000 shares at the contractual conversion price. At December 31, 2015 the Company had
$12,500 remaining in convertible notes to related parties, which includes $2,500 in put premiums.
Notes Payable
At December 31, 2014 the Company had a short
term, non-interest bearing note payable of $150,000 which was incurred in connection with the Membership Interest Purchase Agreement
discussed above. The Company also had a loan from Here to Serve Holding Corp. due to expenses paid by Here to Serve
on behalf of the Company prior to the recapitalization. This loan totaled $376,585 bringing total notes payable to $526,585. In
2015, the short term, non-interest bearing note was paid off, and at December 31, 2015, the Companys loan from Here to Serve
Holding Corp. was $359,891.
Praesidian Notes Payable
On August 6, 2015, the Company refinanced its long-term debt payable
to Comerica Bank. Proceeds from notes issued by the Company to Praesidian Capital Opportunity Fund III, LP and Praesidian Capital
Opportunity Fund III-A, LP (together referred to as Praesidian) were $10,845,000. These funds were distributed as follows:
Payoff of short term bridge financing
$
432,938
Payoff of lines of credit with Commerica Bank
1,745,799
Payoff of senior debt to Comerica Bank
7,953,433
Refinancing fees
712,830
$
10,845,000
The Companys Senior Secured Loan with Comerica Bank had an
interest rate of LIBOR plus 4.25% with a two-year term based on a seven-year amortization schedule. In addition, the Company had
a working capital line of credit with Comerica Bank of $1,250,000 at 4.75% of which the Company had drawn down $1,185,081 and $1,085,160
as of August 6, 2015 and December 31, 2014, respectively. There was CAPEX line of credit of $750,000, of which the Company
had drawn down $560,718 and $590,000 as of August 6, 2015 and December 31, 2014, respectively; again at 4.75% interest. As noted
above, these debts were paid off from the proceeds received from Praesidian.
The debt to Praesidian had a maturity date of August 6, 2020 with
interest paid monthly at an annual rate of 14%. In addition to the 14% interest rate, the Company issued to Praesidian warrants
to purchase 1,293,022 shares of Common Stock of the Company.
Goldman Sachs Credit Agreement
On December 22, 2015, in connection with the closing of acquisitions
of Christian Disposal, LLC and certain assets of Eagle Ridge Landfill, LLC, the Company was extended certain credit facilities
by Goldman Sachs, consisting of $40,000,000 aggregate principal amount of Tranche A Term Loans, $10,000,000 aggregate principal
amount of Multi- Draw Term Loans and up to $5,000,000 aggregate principal amount of Revolving Commitments. At December
31, 2015, only the Tranche A Term Loan was drawn and had an outstanding balance of $40,000,000. It
is collateralized by the assets of the Company. The debt has a maturity date of December 22, 2020 with interest paid monthly
at an annual rate of 9%. In addition, there is a commitment fee paid monthly on the Mutli-Draw Term Loans and Revolving Commitments
at an annual rate of 0.5%.
The proceeds of the loans were used to partially fund the acquisitions
referenced above and refinance existing debt with Praesidian, among other things. The funds to payoff the Praesidian notes were
distributed as follows:
Aggregate outstanding principal balance of the Notes
$
10,845,043
Aggregate accrued but unpaid interest on the Notes
82,844
Prepayment Premium1
325,351
Accrued PIK
9,941
Tax Liability
150,000
Accrued but unpaid fees and expenses
4,000
Payoff Amount
$
11,417,179
The Company re-paid in full and terminated its
agreements with Praesidian which effected the cancellation of certain warrants that the Company issued to Fund III for the purchase
of 931,826 shares of the Companys common stock and to Fund III-A for the purchase of 361,196 shares of the Companys
common stock. In consideration for the cancellation of the Praesidian Warrants, the Company issued to Praesidian Capital Opportunity
Fund III, LP, 1,153,052 shares of common stock and issued to Praesidian Capital Opportunity Fund III-A, LP, 446,948 shares of common
stock. Due to the early termination of the notes and cancellation of the warrants, the Company recorded a loss on extinguishment
of debt of $1,899,161 in the year ended December 31, 2015.
In addition, in connection with the credit agreement, the Company
issued warrants to Goldman Sachs for the purchase of shares of the Companys common stock equivalent to a 6.5% Percentage
Interest at a purchase price equal to $449,553, exercisable on or before December 22, 2023. The warrants grant the holder certain
other rights, including registration rights, preemptive rights for certain capital raises, board observation rights and indemnification.
See discussion of warrants below.
Subordinated Debt
In connection with the acquisition with Meridian Waste Services,
LLC on May 15, 2014, notes payable to the sellers of Meridian issued five-year term subordinated debt loans paying interest at
8%. At December 31, 2015 and December 31, 2014, the balance on these loans was $1,475,000 and $1,475,000, respectively.
The debt payable to Comerica at December 31, 2014 and the Equipment
loans at December 31, 2015 were the debt of Here to Serve- Missouri Waste Division, LLC, a subsidiary of the Company.
Equipment Loans
Finally, during the year ended December 31, 2015, the Company entered
into four long-term loan agreements in connection with the purchase of equipment with rates between 4% and 5%. At December 31,
2015, the balance of these four loans was $425,149.
Derivative Liability - Warrants
As indicated above, the Company issued warrants to Praesidian and
Goldman Sachs to purchase shares of common stock. Due to the put features contained in the agreements, derivative liabilities
were recorded for the warrants.
The Companys derivative warrant instruments related to Praesidian
have been measured at fair value at the date of cancellation, December 22, 2015, using the Black-Scholes model. The Back-Scholes
model requires six basic data inputs: the exercise or strike price, time to expiration, the risk free interest rate, the current
stock price, the estimated volatility of the stock price in the future and the dividend rate. The key inputs used in the December
22, 2015 fair value calculations were as follows:
December 22, 2015
Current exercise price
$
0.025
Time to expiration
8/6/2016
Risk-free interest rate
0.33
%
Estimated volatility
230
%
Dividend
0
%
Stock price on December 22, 2015
$
1.50
Expected forfeiture rate
0
%
The Companys derivative warrant instruments related to Goldman
Sachs have been measured at fair value at the date of issuance December 22, 2015 and December 31, 2015, using the Black-Scholes
model. The liability is revalued at each reporting period and changes in fair value are recognized currently in the consolidated
statement of operations.
The key inputs used in the December 22, and December 31, 2015 fair
value calculations were as follows:
December 22, 2015
Purchase Price
$
450,000
Time to expiration
12/22/2023
Risk-free interest rate
2.11
%
Estimated volatility
45
%
Dividend
0
%
Stock price on December 22, 2015
$
1.50
Expected forfeiture rate
0
%
December 31, 2015
Purchase Price
$
450,000
Time to expiration
12/22/2023
Risk-free interest rate
2.15
%
Estimated volatility
45
%
Dividend
0
%
Stock price on December 31, 2015
$
1.90
Expected forfeiture rate
0
%
The change in the market value for the period ending December 31,
2015 is as follows:
Fair value of warrants @ December 31, 2014
$
-
Issuance of Praesdian warrants @ August 6, 2015
904,427
Unrealized loss on derivative liability
1,004,213
Cancellation of Praesidian warrants @ December 22, 2015
(1,908,640
)
Issuance of Goldman warrants @ December 22, 2015
2,160,000
Unrealized loss on derivative liability
660,000
Fair value of warrants @ December 31, 2015
$
2,820,000
Derivative Liability Interest Rate Swap
The Company sometimes borrows at variable rates and uses interest
rate swaps as cash flow hedges of future interest payments, which have the economic effect of converting borrowings from floating
rates to fixed rates. The interest rate swaps allow the Company to raise long-term borrowings at floating rates and swap them into
fixed rates that are lower than those available if it borrowed at fixed rates directly. Under the interest rate swaps, the Company
agrees with other parties to exchange, at specified intervals, the difference between fixed contract rates and floating rate interest
amounts calculated by reference to the agreed notional principal amounts.
At December 31, 2014, the Company had $5,414,634
of non-amortizing variable rate debt outstanding with interest payments due on a monthly basis. The note accrues interest at the
1-month LIBOR plus 4.25%. In order to hedge interest rate risk, the Company entered into an interest rate swap for a notional amount
of $5,414,634 at fixed rate of 4.75%. Under the swap agreement, the Company pays the fixed rate on the $5,414,634 notional amount
on a monthly basis, and receives the 1-month LIBOR plus 4.25% on a monthly basis. Payments are settled on a net basis, and the
Company has effectively converted its variable-rate debt into fixed-rate debt with an effective interest rate of 4.75%. As
discussed above, the debts to Comerica were paid off from the funding received from Praesidian. The net settlement amount of the
interest rate swap as of December 31, 2015 and December 31, 2014 was $0 and $40,958, respectively.
The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
The Company has authorized 75,000,000 shares
of $0.025 par common stock. At March 31, 2016 and December 31, 2015 there were 24,537,982 and 21,038,650 shares issued and outstanding.
Treasury Stock
During 2014, the Companys Board of Directors
authorized a stock repurchase of 230,000 shares of its common stock for approximately $230,000 at an average price of $1.00 per
share. As March 31, 2016 and December 31, 2015 the Company holds 230,000 shares of its common stock in its treasury.
Preferred Stock
The Company has authorized 5,000,000 shares
of Preferred Stock, for which two classes have been designated to date. Series A has 51 shares issued and outstanding and Series
B has 71,210 shares issued and outstanding as of March 31, 2016 and December 31, 2015, respectively.
Each share of Series A Preferred Stock has no
conversion rights, is senior to any other class or series of capital stock of the Company and has special voting rights. Each one
(1) share of Series A Preferred Stock shall have voting rights equal to (x) 0.019607 multiplied by the total issued and outstanding
Common Stock eligible to vote at the time of the respective vote (the Numerator), divided by (y) 0.49,
minus (z) the Numerator.
Holders of Series B Preferred Stock shall be
entitled to receive when and if declared by the Board of Directors cumulative dividends at the rate of twelve percent (12%) of
the Original Issue Price. In the event of any liquidation, dissolution or winding up of the Company, either voluntary
or involuntary, the holders of Series B Preferred Stock shall be entitled to receive, immediately prior and in preference to any
distribution to holders of the Companys common stock, an amount per share equal to the sum of $100.00 and any accrued and
unpaid dividends of the Series B Preferred Stock. Each share of Series B Preferred Stock may be converted at the option
of the holder into the Companys Common stock. The shares shall be converted using the Conversion Formula:
divide the Original Issue Price by 75% of the average closing bid price of the Common Stock for the five (5) consecutive trading
days ending on the trading day of the receipt by the Company of the notice of conversion.
At March 31, 2016 and December 31, 2015, the
Companys Series B Preferred Stock dividends in arrears on the 12% cumulative preferred stock were approximately $1,246,175
($17.50 per share) and $1,033,000 ($14.50 per share), respectively.
Common Stock Transactions
During the three months ended March 31, 2016
and the year ended December 31, 2015, the Company issued, 3,499,332 and 11,075,232 shares of common stock, respectively. The
fair values of the shares of common stock were based on the quoted trading price on the date of issuance. Of the 3,499,332 shares
issued for the three months ended March 31, 2016, the Company:
1.
Issued 517,188 of these shares were issued to vendors for services rendered generating a professional fees expense of $778,985;
2.
Issued 2,000,000 of these shares to officers and employees as incentive compensation resulting in compensation expense of $3,100,000;
3.
Issued 982,144 shares of common stock as part of a private placement offering to accredited investors for aggregate gross proceeds to the Company of $1,100,000. The Company expensed certain issuance costs associated with this offering.
The Company has issued and outstanding warrants
of 1,673,559 common shares, as adjusted, with the current exercise price of $0.269, as adjusted, expiring December 31, 2023. A
summary of the status of the Companys outstanding common stock warrants as of March 31, 2016 and December 31, 2015, with
changes during the years ending on those dates are as follows:
Number
of
Shares
Average Exercise Price
If
Exercised
Expiration Date
Granted - Praesidian
1,293,022
$
0.025
$
32,326
-
Cancellation - Praesidian
(1,293,022
)
$
0.025
(32,326
)
-
Granted - Goldman Sachs
1,673,559
$
0.269
449,518
December 31, 2023
Forfeited
-
-
-
-
Exercised
-
-
-
-
Outstanding, December 31, 2015
1,673,559
$
-
$
449,518
-
Warrants exercisable at December 31, 2015
1,673,559
Granted
-
-
-
-
Forfeited
-
-
-
-
Exercised
-
-
-
-
Outstanding, MArch 31, 2016
1,673,559
$
-
$
449,518.00
Warrants exercisable at March 31, 2016
1,673,559
Common
Stock
The
Company has authorized 75,000,000 shares of $0.025 par common stock. At December 31, 2015 and 2014 there were 21,038,650 and 9,963,418
shares issued and outstanding.
Treasury
Stock
During
2014, the Companys Board of Directors authorized a stock repurchase of 230,000 shares of its common stock for approximately
$230,000 at an average price of $1.00 per share. As of December 31, 2015 and 2014 the Company holds 230,000 shares of its common
stock in its treasury.
Preferred
Stock
The
Company has authorized 5,000,000 shares of Preferred Stock, for which two classes have been designated to date. Series A has
51 shares issued and outstanding and Series B has 71,210 shares issued and outstanding as of December 31, 2015 and
2014, respectively.
Each
share of Series A Preferred Stock has no conversion rights, is senior to any other class or series of capital stock of the Company
and special voting rights. Each one (1) share of Series A Preferred Stock shall have voting rights equal to (x) 0.019607 multiplied
by the total issued and outstanding Common Stock eligible to vote at the time of the respective vote (the Numerator),
divided by (y) 0.49, minus (z) the Numerator.
Holders
of Series B Preferred Stock shall be entitled to receive when and if declared by the Board of Directors cumulative dividends at
the rate of twelve percent (12%) of the Original Issue Price. In the event of any liquidation, dissolution or winding
up of the Company, either voluntary or involuntary, the holders of Series B Preferred Stock shall be entitled to receive, immediately
prior and in preference to any distribution to holders of the Companys common stock, an amount per share equal to the sum
of $100.00 and any accrued and unpaid dividends of the Series B Preferred Stock. Each share of Series B Preferred Stock
may be converted at the option of the holder into the Companys Common stock. The shares shall be converted using
the Conversion Formula: divide the Original Issue Price by 75% of the average closing bid price of the Common Stock
for the five (5) consecutive trading days ending on the trading day of the receipt by the Company of the notice of conversion.
At
December 31, 2015 and 2014, the Companys Series B Preferred Stock dividends in arrears on the 12% cumulative preferred stock
were approximately $1,033,000 ($14.50 per share) and $2.50 ($2.50 per share), respectively.
Common
Stock Transactions
During
the years ended December 31, 2015 and 2014, the Company issued, 11,075,232 and 9,054,134 shares of common stock, respectively. The
fair values of the shares of common stock were based on the quoted trading price on the date of issuance. Of the 11.1
million shares issued for year ending December 31, 2015, the Company:
1.
Issued
1,573,550 of these shares were issued to vendors for services generating a professional fees expense of $830,970;
2.
Issued
5,690,843 of these shares to officers and employees as incentive compensation resulting in compensation expense of $7,356,180;
3.
Issued
460,839 shares of common stock, due to the conversion of related party debt. Per the convertible note agreement,
the shares were converted at 75% of the closing bid price on the date of conversion. The value of the debt and
accrued interest converted was $318,927;
4.
Issued
1,750,000 shares as part of the acquisition of Christian Disposal LLC, these shares were record as part of the purchased price
consideration as noted above. These share were valued at market as of the date of the acquisition; and,
5.
Issued
1,600,000 shares of common stock, due to the cancellation of Praesidian warrants. As part of this extinguishment of debt the
company recorded a loss of approximately, $1.8 million.
For
fiscal year ended December 31, 2014, the Company acquired the membership interest of HTSMWD, HTST and HTSGWD in exchange for 9,054,134
shares of the Companys common stock. This transaction was closed on October 17, 2014 and HTSMWD became wholly-owned by the
Company. The Company is deemed to have issued 1,139,284 shares of common stock which represents the outstanding common shares
of the Company just prior to the closing of the transaction.
The
Company has issued and outstanding warrants of 1,673,559 common shares, as adjusted, with the current exercise price of $0.269,
as adjusted, expiring December 31, 2023. A summary of the status of the Companys outstanding common stock warrants as of
December 31, 2015 and 2014, with changes during the years ending on those dates are as follows:
The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.
The
Company accounts for income taxes in accordance with Accounting Standards Codification (ASC-740) Accounting for Income
Taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred
income tax assets and liabilities are computed annually for differences between the financial statement and income tax basis of
assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable
to the periods in which the differences are expected to affect taxable income.
The
Company had a net operating loss carry forward of approximately $12.3 million at December 31, 2015 and had no Federal or State
income tax obligations. The Company had no significant tax effects resulting from the temporary differences that give
rise to deferred tax assets and deferred tax liabilities for the years ended December 31, 2015 and 2014 other than net operating
losses.
The
Companys loss carry forward of approximately $12.3 may offset future taxable income through tax year 2035. However,
in accordance with IRC Section 382, the availability and utilization of the losses may be severely limited since the business
combination that occurred on October 17, 2014 triggered the IRC Section 382 limitations.
Prior
to October 17, 2014, the date of the reverse acquisition transaction discussed in Note 1 above, the operating entities were owned
by unrelated third party partners/members, and as limited liability companies, the operating companies losses for the period
January 1, 2014 to October 17,2014 flowed through to such partners/members. Therefore, as there were no tax allocation
arrangements with the previous partners/members, the Company has not recorded in these financials statements any current or deferred
income tax expense, income tax liabilities or deferred tax assets/liabilities relating to such pre-acquisition activity (losses).
The
table below summarizes the differences between the Companys effective tax rate and the statutory federal rate of 34% as
follows for the periods ended December 31, 2015 and 2014:
Years
Ended December 31,
2015
2014
Computed
"expected" benefit
$
(6,538,843
)
$
(773,000
)
Effect
of state income taxes, net of federal benefit
(769,276
)
(136,000
)
Effect
of change in tax rates
-
(280,760
)
Pre-acquisition
losses
-
640,000
Stock
based compensation and other permanent differences
4,577,831
-
Increase
in valution allowance
2,730,288
549,760
$
-
$
-
Deferred
tax assets and liabilities are provided for significant income and expense items recognized in different year for tax and financial
reporting purposes. The Components of the net deferred tax assets for the years ended December 31, 2015 and 2014 were
as follows:
Years
Ended December 31,
2015
2014
Net
operating loss carry forward
$
4,686,288
$
1,956,000
Less: Valuation
allowance
(4,686,288
)
(1,956,000
)
$
-
$
-
The
valuation allowance was increased by approximately $2,730,288 and $550,000 during the years ended December 31, 2015 and 2014.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
ASC Topic 820 establishes a fair value hierarchy,
giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data and requires disclosures
for assets and liabilities measured at fair value based on their level in the hierarchy. Also, ASC Topic 820 provides clarification
that in circumstances, in which a quoted price in an active market for the identical liabilities is not available, a reporting
entity is required to measure fair value using one or more of the techniques provided for in this update.
The standard describes a fair value hierarchy
based on three levels of input, of which the first two are considered observable and the last unobservable, that may be used to
measure fair value, which are the following:
Level 1 - Quoted
prices in active markets for identical assets and liabilities.
Level 2 -
Input other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets of liabilities;
quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market
data for substantially the full term of the asset or liabilities.
Level 3 - Unobservable inputs that
are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Our assessment of the significance of a particular
input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
The following table sets forth the liabilities
at March 31, 2016 and 2015, which is recorded on the balance sheet at fair value on a recurring basis by level within the fair
value hierarchy. As required, these are classified based on the lowest level of input that is significant to the fair value measurement:
Fair Value Measurements at Reporting Date Using
December 31, 2015
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Signifcant
Unobservable
Inputs
(Level 3)
Derivative liability
$
2,820,000
$
-
$
-
$
2,820,000
Stock settled debt
12,500
10,000
-
2,500
$
2,832,500
$
10,000
$
-
$
2,822,500
Fair Value Measurements at Reporting Date Using
March 31, 2016
(UNAUDITED)
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Signifcant
Unobservable
Inputs
(Level 3)
Derivative liability
$
2,640,000
$
-
$
2,640,000
Stock settled debt
12,500
10,000
-
2,500
$
2,652,500
$
10,000
$
-
$
2,642,500
ASC Topic 820 establishes a fair value hierarchy, giving the highest
priority to quoted prices in active markets and the lowest priority to unobservable data and requires disclosures for assets and
liabilities measured at fair value based on their level in the hierarchy. Also, ASC Topic 820 provides clarification that in circumstances,
in which a quoted price in an active market for the identical liabilities is not available, a reporting entity is required to measure
fair value using one or more of the techniques provided for in this update.
The standard describes a fair value hierarchy based on three levels
of input, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which
are the following:
Level 1 - Quoted prices in active markets for identical assets
and liabilities.
Level 2 - Input other than Level 1 that are observable, either
directly or indirectly, such as quoted prices for similar assets of liabilities; quoted prices in markets that are not active;
or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset
or liabilities.
Level 3 - Unobservable inputs that are supported by little
or no market activity and that are significant to the fair value of the assets or liabilities.
Our assessment of the significance of a particular input to the fair
value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
The following table sets forth the liabilities at December 31, 2015
and 2014, which is recorded on the balance sheet at fair value on a recurring basis by level within the fair value hierarchy. As
required, these are classified based on the lowest level of input that is significant to the fair value measurement:
The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.
The Companys has entered into non-cancellable
leases for its office, warehouse facilities and some equipment. These lease agreements commence on various dates from
September 1, 2010 to December 2015 and all expires on or before December, 2020. Future minimum lease payments at March
31, 2016 are as follows:
2016
$
331,806
2017
448,408
2018
164,493
2019
111,103
2020
71,500
Thereafter
-
Total
$
1,127,310
The Company has also entered into various other
leases on a month to month basis for machinery and equipment. Rent expense amounted to $114,790 and $85,565 for the three
months ended March 31, 2016 and 2015, respectively.
The Companys has entered into non-cancellable leases for its
office, warehouse facilities and some equipment. These lease agreements commence on various dates from September 1,
2010 to December 2015 and all expires on or before December, 2020. Future minimum lease payments at December 31, 2015
are as follows:
2016
$
442,408
2017
448,408
2018
164,493
2019
111,103
2020
71,500
Thereafter
-
Total
$
1,237,912
The Company has also entered into various other leases on a month
to month basis for machinery and equipment. Rent expense amounted to $320,154 and $177,801 for the year ended December 31,
2015 and 2014, respectively.
Tabular disclosure of a lessee's leasing arrangements including: (1) the basis on which contingent rental payments are determined, (2) the existence and terms of renewal or purchase options and escalation clauses, (3) restrictions imposed by lease arrangements, such as those concerning dividends, additional debt, and further leasing, (4) rent holidays, rent concessions, or leasehold improvement incentives and unusual provisions or conditions. Disclosure may also include the specific period used to amortize material leasehold improvements made at the inception of the lease or during the lease term. Additionally, for operating leases having initial or remaining noncancelable lease terms in excess of one year: (a) future minimum rental payments required as of the date of the latest balance sheet presented, in the aggregate and for each of the five succeeding fiscal years, (b) the total of minimum rentals to be received in the future under noncancelable subleases as of the date of the latest balance sheet presented, and (c) for all operating leases, rental expense for each period for which an income statement is presented, with separate amounts for minimum rentals, contingent rentals, and sublease rentals. Rental payments under leases with terms of a month or less that were not renewed need not be included.
In connection with normal business activities
of a company in the solid waste disposal industry, Meridian may be required to acquire a performance bond. As part of
the Companys December 22, 2015 acquisitions of Christian Disposal, LLC and Eagle Ridge Landfill, LLC, Meridian acquired
a performance bond in the approximate amount of $7,400,000 with annual expenses of $221,000. For the three months ended March 31,
2016, the Company had approximately $29,000 of expenses related to this performance bond and for the three months ended March 31,
2015, the Company was not required to obtain a performance bond.
In
connection with normal business activities of a company in the solid waste disposal industry, Meridian may be required to acquire
a performance bond. As part of the Companys December 22, 2015 acquisitions of Christian Disposal, LLC and Eagle
Ridge Landfill, LLC, Meridian acquired a performance bond in the approximate amount of $7,400,000 with annual expenses of $221,000.
For fiscal year ended December 31, 2015, the Company had approximately $6,000 of expenses related to this performance bond and
for fiscal year ended December 31, 2014, the Company was not required to obtain a performance bond.
Pursuant to the Christian Disposal, LLC and subsidiary purchase,
the company has entered into an employment contract with its Area Vice President of Business Development and Marketing through
2020 that provides for a minimum annual salary, cash and stock option bonuses. At December 31, 2015, the total commitment, excluding
incentives, was approximately $1,500,000.
The entire disclosure for compensation costs, including compensated absences accruals, compensated absences liability, deferred compensation arrangements and income statement compensation items. Deferred compensation arrangements may include a description of an arrangement with an individual employee, which is generally an employment contract between the entity and a selected officer or key employee containing a promise by the employer to pay certain amounts at designated future dates, usually including a period after retirement, upon compliance with stipulated requirements. This type of arrangement is distinguished from broader based employee benefit plans as it is usually tailored to the employee. Disclosure also typically includes the amount of related compensation expense recognized during the reporting period, the number of shares (units) issued during the period under such arrangements, and the carrying amount as of the balance sheet date of the related liability.
The Company is involved in various lawsuits
related to the operations of its subsidiaries. Management believes that it has adequate insurance coverage and/or
has appropriately accrued for the settlement of these claims. If applicable, claims that exceed amounts accrued and/or
that are covered by insurance, management believes they are without merit and intends to vigorously defend and resolve with no
material impact on financial condition.
The Company is involved in various lawsuits related to the operations
of its subsidiaries. Management believes that it has adequate insurance coverage and/or has appropriately accrued for
the settlement of these claims. If applicable, claims that exceed amounts accrued and/or that are covered by insurance,
management believes they are without merit and intends to vigorously defend and resolve with no material impact on financial condition.
On January 7, 2015, in an effort to give investors
a more concentrated presence in the waste industry the Company sold the capitalized software assets of Here to Serve Technology,
LLC (HTST) to Mobile Science Technologies, Inc., a Georgia corporation (MSTI), a related party due to being owned by some of the
shareholders of the Company. No gain or loss was recognized on this transaction as the Company received equity equal to book value
($434,532) of the capitalized software in the exchange. This represents approximately 15% of the equity of MSTI and is reflected
in the accompanying balance sheet as investment in related party affiliate. The Company's investment of 15% of the
common stock of MSTI is accounted for under the equity method because the company exercises significant influence over its operating
and financial activities. Significant influence is exercised because both Companies have a Board Member in common. Accordingly,
the investment in MSTI is carried at cost, adjusted for the Company's proportionate share of earnings or losses.
The following presents unaudited summary financial
information for MSTI. Such summary financial information has been provided herein based upon the individual significance of this
unconsolidated equity method investment to the consolidated financial information of the Company.
Following is a summary of financial position
and results of operations of MSTI:
Summary of Statements of Financial Condition
Three Months Ended
March 31, 2016
Assets
Current assets
$
3,609
Noncurrent assets
2,877,313
Total assets
2,880,922
Liabilities and Equity
Current liabilities
234,362
Noncurrent liabilities
-
Equity
2,646,560
Total liabilities and equity
$
2,880,922
Summary of Statements of Operations
Revenues
$
177
Expense
14,210
Net loss
$
(14,033
)
The Company recorded losses from its investment
in MSTI, accounted for under the equity method, of approximately $2,100 for the three months ended March 31, 2016. The
charge reflected the Companys share of MSTI losses recorded in that period. While the Company has ongoing agreements with
MSTI relating to the use of MSTI's software technology, the Company has no obligation to otherwise support the activities of MSTI.
As of March 31, 2016, the Company has $133,000 in prepaid expenses related to MSTI.
Sale
of Capitalized Software
On
January 7, 2015, in an effort to give investors a more concentrated presence in the waste industry the Company sold the capitalized
software assets of Here to Serve Technology, LLC (HTST) to Mobile Science Technologies, Inc., a Georgia corporation (MSTI), a
related party due to being owned by some of the shareholders of the Company. No gain or loss was recognized on this transaction
as the Company received equity equal to book value ($434,532) of the capitalized software in the exchange. This represents approximately
15% of the equity of MSTI and is reflected in the accompanying balance sheet as investment in related party affiliate.
The Company's investment of 15% of the common stock of MSTI is accounted for under the equity method because the company exercises
significant influence, over its operating and financial activities. Significant influence is exercised because both Companies
have a Board Member in common. Accordingly, the investment in MSTI is carried at cost, adjusted for the Company's proportionate
share of earnings or losses.
The
following presents unaudited summary financial information for MSTI. Such summary financial information has been provided herein
based upon the individual significance of this unconsolidated equity investment to the consolidated financial information of the
Company.
Following
is a summary of financial position and results of operations of MSTI:
Summary
of Statements of Financial Condition
2015
(UNAUDITED)
Assets
Current
assets
$
4,481
Noncurrent
assets
2,869,553
Total
assets
$
2,874,034
Liabilities
and Equity
Current
liabilities
$
213,264
Noncurrent
liabilities
-
Equity
2,660,770
Total
liabilities and equity
$
2,874,034
Summary
of Statements of Operations
Revenues
$
1,364
Expense
470,342
Net
loss
$
(468,978
)
The
Company recorded losses from its investment in MSTI, accounted for under the equity method, of approximately $70,000 during fiscal
year ended 2015. The charge reflected the Companys share of MSTI losses recorded in that period, as well as the
write-down of the investment and the write-off of certain receivables. While the Company has ongoing agreements with
MSTI relating to the use of MSTI's software technology, the Company has no obligation to otherwise support the activities of MSTI.
As of December 31, 2015, the Company has $133,000 in prepaid expenses related to MSTI.
The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.
Effective March 10, 2016, the Board of Directors
(the Board) of the Company approved, authorized and adopted the 2016 Equity and Incentive Plan (the Plan)
and certain forms of ancillary agreements to be used in connection with the issuance of stock and/or options pursuant to the Plan
(the Plan Agreements). The Plan provides for the issuance of up to 7,500,000 shares of common stock, par value $.025
per share (the Common Stock), of the Company through the grant of nonqualified options (the Non-qualified
options), incentive options (the Incentive Options and together with the Non-qualified Options, the Options)
and restricted stock (the Restricted Stock) to directors, officers, consultants, attorneys, advisors and employees.
The Plan shall be administered by a committee
consisting of two or more independent, non-employee and outside directors (the Committee). In the absence of such
a Committee, the Board shall administer the Plan. The Plan is currently being administered by the Board.
Options are subject to the following conditions:
i.
The Committee determines the strike price of Incentive Options at the time the Incentive Options are granted. The assigned strike price must be no less than 100% of the Fair Market Value (as defined in the Plan) of the Companys Common Stock. In the event that the recipient is a Ten Percent Owner (as defined in the Plan), the strike price must be no less than 110% of the Fair Market Value of the Company.
ii.
The strike price of each Non-qualified Option will be at least 100% of the Fair Market Value of such share of the Companys Common Stock on the date the Non-qualified Option is granted, unless the Committee, in its sole and absolute discretion, elects to set the strike price of such Non-qualified Option below Fair Market Value.
iii.
The Committee fixes the term of Options, provided that Options may not be exercisable more than ten years from the date the Option is granted, and provided further that Incentive Options granted to a Ten Percent Owner may not be exercisable more than five years from the date the Incentive Option is granted.
iv.
The Committee may designate the vesting period of Options. In the event that the Committee does not designate a vesting period for Options, the Options will vest in equal amounts on each fiscal quarter of the Company through the five (5) year anniversary of the date on which the Options were granted. The vesting period accelerates upon the consummation of a Sale Event (as defined in the Plan).
v.
Options are not transferable and Options are exercisable only by the Options recipient, except upon the recipients death.
vi.
Incentive Options may not be issued in an amount or manner where the amount of Incentive Options exercisable in one year entitles the holder to Common Stock of the Company with an aggregate Fair Market value of greater than $100,000.
Awards of Restricted Stock are subject to the
following conditions:
i.
The Committee grants Restricted Stock Options and determines the restrictions on each Restricted Stock Award (as defined in the Plan). Upon the grant of a Restricted Stock Award and the payment of any applicable purchase price, grantee is considered the record owner of the Restricted Stock and entitled to vote the Restricted Stock if such Restricted Stock is entitled to voting rights.
ii.
Restricted Stock may not be delivered to the grantee until the Restricted Stock has vested.
iii.
Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as provided in the Plan or in the Award Agreement (as defined in the Plan).
On March 11, 2016, the Company entered into
a restricted stock agreement with Mr. Jeff Cosman, CEO, (the Cosman Restricted Stock Agreement), pursuant to which
4,253,074 shares of the Company's common stock, subject to certain restrictions set forth in the Cosman Restricted Stock Agreement,
were issued to Mr. Cosman pursuant to the Cosman Employment Agreement and the Plan.
The entire 4,253,074 share fully cliff vests
on January 1, 2017 if continuous employment and the Company reaches certain performance goals. As of March 31, 2016, the Company
has recognized approximately $445,000 in compensation expense of a potential total expense of $6,592,000.
The entire disclosure for accounts comprising shareholders' equity, comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income, and compensation-related costs for equity-based compensation. Includes, but is not limited to, disclosure of policies, compensation plan details, equity-based arrangements to obtain goods and services, deferred compensation arrangements, and employee stock purchase plan details.
During April 2016, the Company issued 446,429
shares of common stock for $500,000 to complete the final closing of the private placement offering.
EQUITY
AND INCENTIVE PLAN
Effective
March 10, 2016, the Board of Directors (the Board) of the Company approved, authorized and adopted the 2016 Equity
and Incentive Plan (the Plan) and certain forms of ancillary agreements to be used in connection with the issuance
of stock and/or options pursuant to the Plan (the Plan Agreements). The Plan provides for the issuance of up to
7,500,000 shares of common stock, par value $.025 per share (the Common Stock), of the Company through the grant
of non-qualified options (the Non-qualified options), incentive options (the Incentive Options and
together with the Non-qualified Options, the Options) and restricted stock (the Restricted Stock)
to directors, officers, consultants, attorneys, advisors and employees.
The
Plan shall be administered by a committee consisting of two or more independent, non-employee and outside directors (the Committee).
In the absence of such a Committee, the Board shall administer the Plan. The Plan is currently being administered by the Board.
Options
are subject to the following conditions:
(i)
The
Committee determines the strike price of Incentive Options at the time the Incentive Options are granted. The assigned strike
price must be no less than 100% of the Fair Market Value (as defined in the Plan) of the Companys Common Stock. In
the event that the recipient is a Ten Percent Owner (as defined in the Plan), the strike price must be no less than 110% of
the Fair Market Value of the Company.
(ii)
The
strike price of each Non-qualified Option will be at least 100% of the Fair Market Value of such share of the Companys
Common Stock on the date the Non-qualified Option is granted, unless the Committee, in its sole and absolute discretion, elects
to set the strike price of such Non-qualified Option below Fair Market Value.
(iii)
The
Committee fixes the term of Options, provided that Options may not be exercisable more than ten years from the date the Option
is granted, and provided further that Incentive Options granted to a Ten Percent Owner may not be exercisable more than five
years from the date the Incentive Option is granted.
(iv)
The
Committee may designate the vesting period of Options. In the event that the Committee does not designate a vesting period
for Options, the Options will vest in equal amounts on each fiscal quarter of the Company through the five (5) year anniversary
of the date on which the Options were granted. The vesting period accelerates upon the consummation of a Sale Event (as defined
in the Plan).
(v)
Options
are not transferable and Options are exercisable only by the Options recipient, except upon the recipients death.
(vi)
Incentive
Options may not be issued in an amount or manner where the amount of Incentive Options exercisable in one year entitles the
holder to Common Stock of the Company with an aggregate Fair Market value of greater than $100,000.
Awards
of Restricted Stock are subject to the following conditions:
(i)
The
Committee grants Restricted Stock Options and determines the restrictions on each Restricted Stock Award (as defined in the
Plan). Upon the grant of a Restricted Stock Award and the payment of any applicable purchase price, grantee is considered
the record owner of the Restricted Stock and entitled to vote the Restricted Stock if such Restricted Stock is entitled to
voting rights.
(ii)
Restricted
Stock may not be delivered to the grantee until the Restricted Stock has vested.
(iii)
Restricted
Stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as provided in the Plan
or in the Award Agreement (as defined in the Plan).
EMPLOYMENT
AGREEMENT
Jeffrey
Cosman - Employment Agreement, Director Agreement and Restricted Stock Agreement
On
March 11, 2016, the Company entered into an employment agreement with Mr. Cosman (the Cosman Employment Agreement).
Mr. Cosman is currently the Chief Executive Officer and Chairman of the Board of Directors of the Company and prior to the execution
and delivery of the Cosman Employment Agreement, terms of Mr. Cosmans employment were governed by that certain previous
employment agreement assumed by the Company in connection with the Companys purchase of certain membership interests owned
by such previous employer on October 17, 2014. The Cosman Employment Agreement has an initial term from March 11, 2016 through
December 31, 2017 and the term will automatically renew for one (1) year periods unless otherwise terminated in accordance with
the terms therein. Mr. Cosman will receive a base salary of $525,000 and Mr. Cosmans compensation will increase by 5% on
January 1 of each year. Mr. Cosman may also receive a cash bonus based on the Companys performance relative to its annual
target performance, as well as an annual equity bonus in the form of restricted common stock, in accordance with the Companys
2016 Equity and Incentive Plan (the Plan) and subject to the restrictions contained therein, equivalent to 6% of
the value of all acquisitions by the Company or its subsidiaries of substantially all the assets of existing businesses or of
controlling interests in existing business entities and equity or debt financings during the preceding year. Upon any termination
of Mr. Cosmans employment with the Company, except for a termination for Cause, Mr. Cosman shall be entitled to a severance
payment equal to the greater of (i) five years worth of the then existing base salary and (ii) the last years bonus.
On
March 11, 2016, the Company entered into a director agreement with the Companys Chairman of the Board and Chief Executive
Officer, Jeffrey Cosman, as amended by the First Amendment to Director Agreement entered into by the parties on April
13, 2016 (the "Cosman Director Agreement").
On
March 11, 2016, the Company entered into a restricted stock agreement with Mr. Cosman (the Cosman Restricted Stock Agreement),
pursuant to which 4,253,074 shares of the Company's common stock, subject to certain restrictions set forth in the Cosman Restricted
Stock Agreement, were issued to Mr. Cosman pursuant to the Cosman Employment Agreement and the Plan.
Walter
H. Hall, Jr. - Director Agreement and Employment Agreement
On
March 11, 2016, the Company entered into a director agreement with Mr. Walter H. Hall, Jr., as amended by the First Amendment
to Director Agreement entered into by the parties on April 13, 2016 (the Hall Director Agreement), concurrent with
Mr. Halls appointment to the Board of Directors of the Company (the Board) effective March 11, 2016 (the
Effective Date).
On
March 11, 2016, the Company entered into an executive employment agreement with Mr. Hall (the Hall Employment Agreement).
Mr. Hall will have the title of President and Chief Operating Officer. The Hall Employment Agreement has an initial term of thirty-six
(36) months and the term will automatically renew for one (1) year periods, unless otherwise terminated pursuant to the terms
contained therein. Mr. Hall will receive a base salary of $300,000 beginning upon the Companys closing of acquisitions
in the aggregate amount of $35,000,000 from the date the Hall Employment Agreement is executed. Mr. Hall may also receive an annual
bonus of up to $175,000, or such larger amount approved by the Board, as well as an annual equity bonus (in the form of restricted
common stock, in accordance with the Plan and subject to the restrictions contained therein) equivalent to 2% of the value of
all acquisitions by the Company or its subsidiaries of substantially all the assets of existing businesses or of controlling interests
in existing business entities and equity or debt financings during the preceding year. Additionally, Mr. Hall received two million
(2,000,000) restricted shares of the Companys common stock upon the execution of the Hall Employment Agreement
EQUITY
SUBSCRIPTION AGREEMENT
On
April 8, 2016, the Company completed the final closing (the the Closing) of a private placement offering to
accredited investors (the Offering) of up to $1,600,000 of the Companys restricted common stock, par value
$0.025 per share.
In
connection with the Closing, the Company entered into definitive subscription agreements (the Subscription Agreements)
with five (5) accredited investors (the Investors) and issued an aggregate of 1,428,573 shares of Common Stock
for aggregate gross proceeds to the Company of $1,600,000.
The
Subscription Agreements provide that the Company shall issue additional shares of Common Stock in the event that, prior to the
first anniversary of the Subscription Agreement, such Investor sells all of the Common Stock purchased under the Subscription
Agreement and receives less than the full amount of the purchase price paid under the Subscription Agreement, and the Subscription
Agreements contain typical representations and warranties.
The entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business.
The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted accounting principles in the United States of America (US
GAAP) for interim financial information and with the instructions to Form 10Q and Article 803 of Regulation SX. Accordingly,
the unaudited consolidated financial statements do not include all of the information and footnotes required by US GAAP for complete
financial statements. The unaudited consolidated financial statements and notes included herein should be read in conjunction
with the annual consolidated financial statements and notes for the year ended December 31, 2015 included in our Annual Report
on Form 10K filed with the SEC on April 14, 2016.
In the opinion of management, all adjustments
(consisting of normal recurring items) necessary to present fairly the Companys financial position as of March 31, 2016,
and the results of operations and cash flows for the three months ending March 31, 2016 are not necessarily indicative of the results
to be expected for a full year.
The Company uses the accrual basis of accounting and accounting principles
generally accepted in the United States of America (GAAP accounting).
The consolidated financial statements for the
three months ending March 31, 2016 include the operations of the Company and its wholly-owned subsidiaries, Here To Serve Missouri
Waste Division, LLC, Meridian Land Company, LLC, Here to Serve Technology, LLC, Here To Serve Georgia Waste Division, LLC and Christian
Disposal, LLC. The following two subsidiaries of the Company, Here To Serve Georgia Waste Division, LLC and Here to Serve Technology,
LLC, a Georgia Limited Liability Company had no operations during the period. The consolidated financial statements for the three
months ending March 31, 2015 include the operations of the Company and its wholly-owned subsidiaries, Here To Serve Missouri Waste
Division, LLC, Here To Serve Georgia Waste Division, LLC and Here to Serve Technology, LLC, a Georgia Limited Liability Company.
All significant intercompany accounts and transactions
have been eliminated in consolidation.
The consolidated financial statements for the year ended December
31, 2015 include the operations of the Company and its wholly-owned subsidiaries, Here To Serve Missouri Waste Division, LLC, Meridian
Land Company, LLC, Here to Serve Technology, LLC and Christian Disposal, LLC. The following two subsidiaries of the Company, Here
To Serve Georgia Waste Division, LLC and Here to Serve Technology, LLC, a Georgia Limited Liability Company had no operations during
the period.
The consolidated financial statements for the year ended December
31, 2014 include the operations of the Company and its wholly-owned subsidiaries, Here To Serve Missouri Waste Division, LLC and
Here To Serve Technology, LLC. The following subsidiary of the Company, Here To Serve Georgia Waste Division, LLC had
no operations during the period.
All significant intercompany accounts and transactions have been
eliminated in consolidation.
The Company considers all highly liquid investments
with maturities of three months or less to be cash equivalents. Short-term investments consist of investments that have a remaining
maturity of less than one year as of the date of the balance sheet.
Management determines the appropriate classification
of short-term investments at the time of purchase and evaluates such designation as of each balance sheet date. All short-term
investments to date have been classified as held-to-maturity and carried at amortized costs, which approximates fair market value,
on our Consolidated Balance Sheets. For the three months ended March 31, 2016 and 2015, interest income of $2,139 and $0, respectively,
was recorded related to the held-to-maturity securities. Our short-term investments contractual maturities occur before
March 31, 2017.
The Company considers all highly liquid investments with maturities
of three months or less to be cash equivalents.
The Companys financial instruments consist
of cash and cash equivalents, accounts receivable, account payable, accrued expenses, and notes payable. The carrying amount of
these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing
market rates unless otherwise disclosed in these consolidated financial statements.
The Companys financial instruments consist of cash and cash
equivalents, accounts receivable, account payable, accrued expenses, and notes payable. The carrying amount of these financial
instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates
unless otherwise disclosed in these consolidated financial statements.
The Company enters into financing arrangements
that consist of freestanding derivative instruments or are hybrid instruments that contain embedded derivative features. The Company
accounts for these arrangements in accordance with Accounting Standards Codification topic 815, Accounting for Derivative Instruments
and Hedging Activities (ASC 815) as well as related interpretations of this standard. In accordance with this standard,
derivative instruments are recognized as either assets or liabilities in the balance sheet and are measured at fair values with
gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely related to the host contract are
bifurcated and are recognized at fair value with changes in fair value recognized as either a gain or loss in earnings. The Company
determines the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation
models, considering of the rights and obligations of each instrument.
The Company estimates fair values of
derivative financial instruments using various techniques (and combinations thereof) that are considered consistent with the
objective measuring fair values. In selecting the appropriate technique, the Company considers, among other factors, the
nature of the instrument, the market risks that it embodies and the expected means of settlement. For less complex derivative
instruments, such as freestanding warrants, the Company generally use the Black Scholes model, adjusted for the effect of
dilution, because it embodies all of the requisite assumptions (including trading volatility, estimated terms, dilution and
risk free rates) necessary to fair value these instruments. Estimating fair values of derivative financial instruments
requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the
instrument with related changes in internal and external market factors. In addition, option-based techniques (such as
Black-Scholes model) are highly volatile and sensitive to changes in the trading market price of our common stock. Since
derivative financial instruments are initially and subsequently carried at fair values, our income (expense) going forward
will reflect the volatility in these estimates and assumption changes. Under the terms of this accounting standard, increases
in the trading price of the Companys common stock and increases in fair value during a given financial quarter result
in the application of non-cash derivative expense. Conversely, decreases in the trading price of the Companys common
stock and decreases in trading fair value during a given financial quarter result in the application of non-cash derivative
income.
The Company enters into financing arrangements that consist of freestanding
derivative instruments or are hybrid instruments that contain embedded derivative features. The Company accounts for these arrangements
in accordance with Accounting Standards Codification topic 815, Accounting for Derivative Instruments and Hedging Activities (ASC
815) as well as related interpretations of this standard. In accordance with this standard, derivative instruments are recognized
as either assets or liabilities in the balance sheet and are measured at fair values with gains or losses recognized in earnings.
Embedded derivatives that are not clearly and closely related to the host contract are bifurcated and are recognized at fair value
with changes in fair value recognized as either a gain or loss in earnings. The Company determines the fair value of derivative
instruments and hybrid instruments based on available market data using appropriate valuation models, considering all of the rights
and obligations of each instrument.
The Company estimates fair values of derivative financial instruments
using various techniques (and combinations thereof) that are considered consistent with the objective measuring fair values. In
selecting the appropriate technique, the Company considers, among other factors, the nature of the instrument, the market risks
that it embodies and the expected means of settlement. For less complex derivative instruments, such as freestanding warrants,
the Company generally use the Black-Scholes model, adjusted for the effect of dilution, because it embodies all of the requisite
assumptions (including trading volatility, estimated terms, dilution and risk free rates) necessary to fair value these instruments.
Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that
may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors.
In addition, option-based techniques (such as Black-Scholes model) are highly volatile and sensitive to changes in the trading
market price of our common stock. Since derivative financial instruments are initially and subsequently carried at fair values,
our income (expense) going forward will reflect the volatility in these estimates and assumption changes. Under the terms of this
accounting standard, increases in the trading price of the Companys common stock and increases in fair value during a given
financial quarter result in the application of non-cash derivative expense. Conversely, decreases in the trading price of the Companys
common stock and decreases in trading fair value during a given financial quarter result in the application of non-cash derivative
income.
The Company periodically reviews its long-lived
assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully
recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less
that the carrying amount of the asset. The amount of impairment is measured as the difference between the assets
estimated fair value and its book value. During the three months ending March 31, 2016, the Company experienced no losses
due to impairment.
The Company periodically reviews its long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. The
Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less that the carrying amount
of the asset. The amount of impairment is measured as the difference between the assets estimated fair value
and its book value. During the year ending December 31, 2015, the Company experienced no losses due to impairment.
The Company accounts for income taxes pursuant
to the provisions of ASC 740-10, Accounting for Income Taxes, which requires, among other things, an asset and liability
approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets
and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases
of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes
it is more likely than not that the net deferred asset will not be realized.
The Company follows the provisions of the ASC
740 -10 related to, Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain that some positions
taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of
the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10,
the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence,
management believes it is more likely than not that the position will be sustained upon examination, including the resolution of
appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that
meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent
likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax
positions taken that exceeds the amount measured as described above should be reflected as a liability for uncertain tax benefits
in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities
upon examination. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the
Company has not recorded a liability for uncertain tax benefits.
The Company analyzes its tax positions by utilizing
ASC 740-10-25 Definition of Settlement, which provides guidance on how an entity should determine whether a tax position is effectively
settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively
settled upon the completion of an examination by a taxing authority without being legally extinguished. For tax positions considered
effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more
likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open.
As of March 31, 2016, tax years ended December 31, 2015, 2014, and 2013 are still potentially subject to audit by the taxing authorities.
The Company accounts for income taxes pursuant to the provisions
of ASC 740-10, Accounting for Income Taxes, which requires, among other things, an asset and liability approach to
calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and
liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely
than not that the net deferred asset will not be realized.
The Company follows the provisions of the ASC
740 -10 related to, Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain that some positions
taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of
the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10,
the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence,
management believes it is more likely than not that the position will be sustained upon examination, including the resolution of
appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that
meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent
likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax
positions taken that exceeds the amount measured as described above should be reflected as a liability for uncertain tax benefits
in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities
upon examination. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the
Company has not recorded a liability for uncertain tax benefits.
The Company analyzes its tax positions by utilizing ASC 740-10-25
Definition of Settlement, which provides guidance on how an entity should determine whether a tax position is effectively settled
for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled
upon the completion of an examination by a taxing authority without being legally extinguished. For tax positions considered effectively
settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than
not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. As of December
31, 2015, tax years ended December 31, 2014, 2013, 2012 are still potentially subject to audit by the taxing authorities.
Management estimates and judgments are an integral
part of consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States
of America (GAAP). We believe that the critical accounting policies described in this section address the more significant estimates
required of management when preparing our consolidated financial statements in accordance with GAAP. We consider an accounting
estimate critical if changes in the estimate may have a material impact on our financial condition or results of operations. We
believe that the accounting estimates employed are appropriate and resulting balances are reasonable; however, actual results could
differ from the original estimates, requiring adjustment to these balances in future periods.
Management estimates and judgments are an integral part of consolidated
financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).
We believe that the critical accounting policies described in this section address the more significant estimates required of management
when preparing our consolidated financial statements in accordance with GAAP. We consider an accounting estimate critical if changes
in the estimate may have a material impact on our financial condition or results of operations. We believe that the accounting
estimates employed are appropriate and resulting balances are reasonable; however, actual results could differ from the original
estimates, requiring adjustment to these balances in future periods.
Accounts receivable are recorded at managements
estimate of net realizable value. At March 31, 2016 and December 31, 2015 the Company had approximately $2,641,000 and $2,326,000
of gross trade receivables, respectively.
Our reported balance of accounts receivable,
net of the allowance for doubtful accounts, represents our estimate of the amount that ultimately will be realized in cash. We
review the adequacy and adjust our allowance for doubtful accounts on an ongoing basis, using historical payment trends and the
age of the receivables and knowledge of our individual customers. However, if the financial condition of our customers were to
deteriorate, additional allowances may be required. At March 31, 2016 and December 31, 2015 the Company had approximately $627,000
and $618,000 recorded for the allowance for doubtful accounts, respectively.
Accounts receivable are recorded at managements estimate of
net realizable value. At December 31, 2015 and 2014 the Company had approximately $2,326,000 and $660,000 of gross trade receivables,
respectively.
Our reported balance of accounts receivable, net of the allowance
for doubtful accounts, represents our estimate of the amount that ultimately will be realized in cash. We review the adequacy and
adjust our allowance for doubtful accounts on an ongoing basis, using historical payment trends and the age of the receivables
and knowledge of our individual customers. However, if the financial condition of our customers were to deteriorate, additional
allowances may be required. At December 31, 2015 and 2014 the Company had approximately $618,000 and $71,000 recorded for the allowance
for doubtful accounts, respectively.
Advertising costs, except for costs associated
with direct-response advertising, are charged to operations when incurred. The costs of direct-response advertising are capitalized
and amortized over the period during which future benefits are expected to be received. The Company did not capitalize any advertising
for the three months ended March 31, 2016. Advertising expenses were approximately $12,000 for the three months ended March
31, 2016.
Advertising costs, except for costs associated
with direct-response advertising, are charged to operations when incurred. The costs of direct-response advertising are capitalized
and amortized over the period during which future benefits are expected to be received. The Company did not capitalize any advertising
for the years ended December 31, 2015 and 2014, respectively. Advertising expenses were approximately $79,000 and $65,000 for the
years ended December 31, 2015 and 2014, respectively.
The cost of property, plant, and equipment is
depreciated over the estimated useful lives of the related assets utilizing the straight-line method of depreciation. The cost
of leasehold improvements is depreciated (amortized) over the lesser of the length of the related leases or the estimated useful
lives of the assets. Ordinary repairs and maintenance are expensed when incurred and major repairs will be capitalized and expensed
if it benefits future periods.
The cost of property, plant, and equipment is depreciated over the
estimated useful lives of the related assets utilizing the straight-line method of depreciation. The cost of leasehold improvements
is depreciated (amortized) over the lesser of the length of the related leases or the estimated useful lives of the assets. Ordinary
repairs and maintenance are expensed when incurred and major repairs will be capitalized and expensed if it benefits future periods.
Intangible assets that are subject to amortization
are reviewed for potential impairment whenever events or circumstances indicate that carrying amounts may not be recoverable. Assets
not subject to amortization are tested for impairment at least annually. The Company has intangible assets related to its purchase
of Meridian Waste Services, LLC, Christian Disposal LLC and Eagle Ridge Landfill, LLC, which are further discussed in the notes
below.
Intangible assets that are subject to amortization are reviewed for
potential impairment whenever events or circumstances indicate that carrying amounts may not be recoverable. Assets not subject
to amortization are tested for impairment at least annually. The Company has intangible assets related to its purchase of Meridian
Waste
Services, LLC, Christian Disposal LLC and Eagle Ridge Landfill, LLC,
which are further discussed in the notes below.
During 2015 and 2014, the Company assessed its intangible assets,
based on estimated future cash flows and concluded that the carrying amount of its intangible assets did not exceed its fair value.
The Company has an investment in a privately
held corporation in the mobile apps industry. As the Company exercises significant influence on this entity, this investment is
recorded using the equity method of accounting. The Company monitors this investment for impairment and makes appropriate reductions
in the carrying value if the Company determines that an impairment charge is required based primarily on the financial condition
and near-term prospect of this entity.
The Company has an investment in a privately held corporation in
the mobile apps industry. As the Company exercises significant influence on this entity, this investment is recorded using the
equity method of accounting. The Company monitors this investment for impairment and makes appropriate reductions in the carrying
value if the Company determines that an impairment charge is required based primarily on the financial condition and near-term
prospect of this entity.
Goodwill is the excess of our purchase cost
over the fair value of the net assets of acquired businesses. We do not amortize goodwill, but as discussed in the impairment of
long lived assets section above, we assess our goodwill for impairment at least annually.
Goodwill
is the excess of our purchase cost over the fair value of the net assets of acquired businesses. We do not amortize goodwill,
but as discussed in the impairment of long lived assets section above, we assess our goodwill for impairment at least annually.
The Company acquired a software product that is under further development.
This asset was being amortized over a three to five year period using the straight-line method of depreciation for book purposes
beginning when the software is completed.
The Company capitalizes internal software development costs subsequent
to establishing technological feasibility of a software application in accordance with guidelines established by ASC 985-20-25
Accounting for the costs of Computer Software to Be Sold, Leased or Otherwise Marketed, requiring certain software development
costs to be capitalized upon the establishment of technological feasibility. The establishment of technological feasibility and
the ongoing assessment of the recoverability of these costs require considerable judgement by management with respect to certain
external factors such as anticipated future revenue, estimated economic life and changes in software and hardware technologies.
Amortization of the capitalized software development costs begins when the product is available for general release to customers.
Capitalized costs are amortized over the remaining estimated economic life of the product. For the year ended December 31, 2014,
the Company has capitalized costs associated with the development of several mobile science technology products and mobile apps
that has not been placed into service. In 2015, the Company sold the software to a related party. Refer to the related party note
below for further discussion.
The Company accounts for website development
costs in accordance with Accounting Standards Codification 350-50 Website Development Costs. Accordingly, all costs
incurred in the planning stage are expensed as incurred, costs incurred in the website application and infrastructure development
stage that meet specific criteria are capitalized and costs incurred in the day to day operation of the website are expensed as
incurred.
The Company accounts for website development costs in accordance
with Accounting Standards Codification 350-50 Website Development Costs. Accordingly, all costs incurred in the planning
stage are expensed as incurred, costs incurred in the website application and infrastructure development stage that meet specific
criteria are capitalized and costs incurred in the day to day operation of the website are expensed as incurred.
Cost basis of landfill assets We capitalize
various costs that we incur to make a landfill ready to accept waste. These costs generally include expenditures for land (including
the landfill footprint and required landfill buffer property); permitting; excavation; liner material and installation; landfill
leachate collection systems; landfill gas collection systems; environmental monitoring equipment for groundwater and landfill gas;
and directly related engineering, capitalized interest, on-site road construction and other capital infrastructure costs. The cost
basis of our landfill assets also includes asset retirement costs, which represent estimates of future costs associated with landfill
final capping, closure and post-closure activities. These costs are discussed below.
Final capping, closure and post-closure costs
Following is a description of our asset retirement activities and our related accounting:
Final capping Involves the installation of flexible membrane liners and geosynthetic clay liners, drainage and compacted soil layers and topsoil over areas of a landfill where total airspace capacity has been consumed. Final capping asset retirement obligations are recorded on a units-of-consumption basis as airspace is consumed related to the specific final capping event with a corresponding increase in the landfill asset. The final capping is accounted for as a discrete obligation and recorded as an asset and a liability based on estimates of the discounted cash flows and capacity associated with the final capping.
Closure Includes the construction of the final portion of methane gas collection systems (when required), demobilization and routine maintenance costs. These are costs incurred after the site ceases to accept waste, but before the landfill is certified as closed by the applicable state regulatory agency. These costs are recorded as an asset retirement obligation as airspace is consumed over the life of the landfill with a corresponding increase in the landfill asset. Closure obligations are recorded over the life of the landfill based on estimates of the discounted cash flows associated with performing closure activities.
Post-closure Involves the maintenance and monitoring of a landfill site that has been certified closed by the applicable regulatory agency. Generally, we are required to maintain and monitor landfill sites for a 30-year period. These maintenance and monitoring costs are recorded as an asset retirement obligation as airspace is consumed over the life of the landfill with a corresponding increase in the landfill asset. Post-closure obligations are recorded over the life of the landfill based on estimates of the discounted cash flows associated with performing post-closure activities.
We develop our estimates of these obligations
using input from our operations personnel, engineers and accountants. Our estimates are based on our interpretation of current
requirements and proposed regulatory changes and are intended to approximate fair value. Absent quoted market prices, the estimate
of fair value is based on the best available information, including the results of present value techniques. In many cases, we
contract with third parties to fulfill our obligations for final capping, closure and post closure. We use historical experience,
professional engineering judgment and quoted and actual prices paid for similar work to determine the fair value of these obligations.
We are required to recognize these obligations at market prices whether we plan to contract with third parties or perform the work
ourselves. In those instances where we perform the work with internal resources, the incremental profit margin realized is recognized
as a component of operating income when the work is performed.
Once we have determined the final capping, closure
and post-closure costs, we inflate those costs to the expected time of payment and discount those expected future costs back to
present value. During the three months ended March 31, 2016 we inflated these costs in current dollars until the expected time
of payment using an inflation rate of 2.5%. Accretion expense was approximately $42,500 for the three months ended March 31, 2016.
We discounted these costs to present value using the credit-adjusted, risk-free rate effective at the time an obligation is incurred,
consistent with the expected cash flow approach. Any changes in expectations that result in an upward revision to the estimated
cash flows are treated as a new liability and discounted at the current rate while downward revisions are discounted at the historical
weighted average rate of the recorded obligation. As a result, the credit adjusted, risk-free discount rate used to calculate the
present value of an obligation is specific to each individual asset retirement obligation. The weighted average rate applicable
to our long-term asset retirement obligations at March 31, 2016 is approximately 8.5%.
We record the estimated fair value of final
capping, closure and post-closure liabilities for our landfills based on the capacity consumed through the current period. The
fair value of final capping obligations is developed based on our estimates of the airspace consumed to date for the final capping.
The fair value of closure and post-closure obligations is developed based on our estimates of the airspace consumed to date for
the entire landfill and the expected timing of each closure and post-closure activity. Because these obligations are measured at
estimated fair value using present value techniques, changes in the estimated cost or timing of future final capping, closure and
post-closure activities could result in a material change in these liabilities, related assets and results of operations. We assess
the appropriateness of the estimates used to develop our recorded balances annually, or more often if significant facts change.
Changes in inflation rates or the estimated
costs, timing or extent of future final capping, closure and post-closure activities typically result in both (i) a current adjustment
to the recorded liability and landfill asset and (ii) a change in liability and asset amounts to be recorded prospectively over
either the remaining capacity of the related discrete final capping or the remaining permitted and expansion airspace (as defined
below) of the landfill. Any changes related to the capitalized and future cost of the landfill assets are then recognized in accordance
with our amortization policy, which would generally result in amortization expense being recognized prospectively over the remaining
capacity of the final capping or the remaining permitted and expansion airspace of the landfill, as appropriate. Changes in such
estimates associated with airspace that has been fully utilized result in an adjustment to the recorded liability and landfill
assets with an immediate corresponding adjustment to landfill airspace amortization expense.
Remaining permitted airspace Our engineers, in consultation with third-party engineering consultants and surveyors, are responsible for determining remaining permitted airspace at our landfills. The remaining permitted airspace is determined by an annual survey, which is used to compare the existing landfill topography to the expected final landfill topography.
Expansion airspace We also include currently unpermitted expansion airspace in our estimate of remaining permitted and expansion airspace in certain circumstances. First, to include airspace associated with an expansion effort, we must generally expect the initial expansion permit application to be submitted within one year and the final expansion permit to be received within five years. Second, we must believe that obtaining the expansion permit is likely, considering the following criteria:
o
Personnel are actively working on the expansion of an existing landfill, including efforts to obtain land use and local, state or provincial approvals;
o
We have a legal right to use or obtain land to be included in the expansion plan;
o
There are no significant known technical, legal, community, business, or political restrictions or similar issues that could negatively affect the success of such expansion; and
o
Financial analysis has been completed based on conceptual design, and the results demonstrate that the expansion meets the Companys criteria for investment.
For unpermitted airspace to be initially included
in our estimate of remaining permitted and expansion airspace, the expansion effort must meet all of the criteria listed above.
These criteria are evaluated by our field-based engineers, accountants, managers and others to identify potential obstacles to
obtaining the permits. Once the unpermitted airspace is included, our policy provides that airspace may continue to be included
in remaining permitted and expansion airspace even if certain of these criteria are no longer met as long as we continue to believe
we will ultimately obtain the permit, based on the facts and circumstances of a specific landfill.
When we include the expansion airspace in our
calculations of remaining permitted and expansion airspace, we also include the projected costs for development, as well as the
projected asset retirement costs related to the final capping, closure and post-closure of the expansion in the amortization basis
of the landfill.
Once the remaining permitted and expansion airspace
is determined in cubic yards, an airspace utilization factor (AUF) is established to calculate the remaining permitted
and expansion capacity in tons. The AUF is established using the measured density obtained from previous annual surveys and is
then adjusted to account for future settlement. The amount of settlement that is forecasted will take into account several site-specific
factors including current and projected mix of waste type, initial and projected waste density, estimated number of years of life
remaining, depth of underlying waste, anticipated access to moisture through precipitation or recirculation of landfill leachate,
and operating practices. In addition, the initial selection of the AUF is subject to a subsequent multi-level review by our engineering
group, and the AUF used is reviewed on a periodic basis and revised as necessary. Our historical experience generally indicates
that the impact of settlement at a landfill is greater later in the life of the landfill when the waste placed at the landfill
approaches its highest point under the permit requirements.
After determining the costs and remaining permitted
and expansion capacity at each of our landfill, we determine the per ton rates that will be expensed as waste is received and deposited
at the landfill by dividing the costs by the corresponding number of tons. We calculate per ton amortization rates for the landfill
for assets associated with each final capping, for assets related to closure and post-closure activities and for all other costs
capitalized or to be capitalized in the future. These rates per ton are updated annually, or more often, as significant facts change.
It is possible that actual results, including
the amount of costs incurred, the timing of final capping, closure and post-closure activities, our airspace utilization or the
success of our expansion efforts could ultimately turn out to be significantly different from our estimates and assumptions. To
the extent that such estimates, or related assumptions, prove to be significantly different than actual results, lower profitability
may be experienced due to higher amortization rates or higher expenses; or higher profitability may result if the opposite occurs.
Most significantly, if it is determined that expansion capacity should no longer be considered in calculating the recoverability
of a landfill asset, we may be required to recognize an asset impairment or incur significantly higher amortization expense. If
at any time management makes the decision to abandon the expansion effort, the capitalized costs related to the expansion effort
are expensed immediately.
For the three months ended March 31, 2016 the
Company operations related to its landfill assets and liability are presented in the tables below:
Three Months Ended March 31, 2016 (UNAUDITED)
Year Ended December 31, 2015
Landfill Assets
Beginning balance
$
3,393,476
$
3,396,519
Capital additions
26,984
-
Amortization of landfill assets
(51,933
)
(3,043
)
Asset retirement adjustments
2,685
$
3,371,212
$
3,393,476
Landfill Asset Retirement Obligation
Beginning balance
$
200,252
$
196,519
Obligations incurred and capitalized
2,685
Obligations settled
-
-
Interest accretion
42,491
3,733
Revisions in estimates and interest rate assumption
-
-
$
245,428
$
200,252
Capitalized landfill costs
Cost basis of landfill assets We capitalize various costs that we incur to make a landfill ready to accept waste. These costs generally include expenditures for land (including the landfill footprint and required landfill buffer property); permitting; excavation; liner material and installation; landfill leachate collection systems; landfill gas collection systems; environmental monitoring equipment for groundwater and landfill gas; and directly related engineering, capitalized interest, on-site road construction and other capital infrastructure costs. The cost basis of our landfill assets also includes asset retirement costs, which represent estimates of future costs associated with landfill final capping, closure and post-closure activities. These costs are discussed below.
Final capping, closure and post-closure costs Following is a description of our asset retirement activities and our related accounting:
·
Final capping Involves the installation of flexible membrane liners and geosynthetic clay liners, drainage and compacted soil layers and topsoil over areas of a landfill where total airspace capacity has been consumed. Final capping asset retirement obligations are recorded on a units-of-consumption basis as airspace is consumed related to the specific final capping event with a corresponding increase in the landfill asset. The final capping is accounted for as a discrete obligation and recorded as an asset and a liability based on estimates of the discounted cash flows and capacity associated with the final capping.
·
Closure Includes the construction of the final portion of methane gas collection systems (when required), demobilization and routine maintenance costs. These are costs incurred after the site ceases to accept waste, but before the landfill is certified as closed by the applicable state regulatory agency. These costs are recorded as an asset retirement obligation as airspace is consumed over the life of the landfill with a corresponding increase in the landfill asset. Closure obligations are recorded over the life of the landfill based on estimates of the discounted cash flows associated with performing closure activities.
·
Post-closure Involves the maintenance and monitoring of a landfill site that has been certified closed by the applicable regulatory agency. Generally, we are required to maintain and monitor landfill sites for a 30-year period. These maintenance and monitoring costs are recorded as an asset retirement obligation as airspace is consumed over the life of the landfill with a corresponding increase in the landfill asset. Post-closure obligations are recorded over the life of the landfill based on estimates of the discounted cash flows associated with performing post-closure activities.
We develop our estimates of these obligations using input from our operations personnel, engineers and accountants. Our estimates are based on our interpretation of current requirements and proposed regulatory changes and are intended to approximate fair value. Absent quoted market prices, the estimate of fair value is based on the best available information, including the results of present value techniques. In many cases, we contract with third parties to fulfill our obligations for final capping, closure and post closure. We use historical experience, professional engineering judgment and quoted and actual prices paid for similar work to determine the fair value of these obligations. We are required to recognize these obligations at market prices whether we plan to contract with third parties or perform the work ourselves. In those instances where we perform the work with internal resources, the incremental profit margin realized is recognized as a component of operating income when the work is performed.
Once we have determined the final capping, closure and post-closure costs, we inflate those costs to the expected time of payment and discount those expected future costs back to present value. During the year ended December 31, 2015 we inflated these costs in current dollars until the expected time of payment using an inflation rate of 2.5%. We discounted these costs to present value using the credit-adjusted, risk-free rate effective at the time an obligation is incurred, consistent with the expected cash flow approach. Any changes in expectations that result in an upward revision to the estimated cash flows are treated as a new liability and discounted at the current rate while downward revisions are discounted at the historical weighted average rate of the recorded obligation. As a result, the credit-adjusted, risk-free discount rate used to calculate the present value of an obligation is specific to each individual asset retirement obligation. The weighted average rate applicable to our long-term asset retirement obligations at December 31, 2015 is approximately 8.5%.
We record the estimated fair value of final capping, closure and post-closure liabilities for our landfills based on the capacity consumed through the current period. The fair value of final capping obligations is developed based on our estimates of the airspace consumed to date for the final capping. The fair value of closure and post-closure obligations is developed based on our estimates of the airspace consumed to date for the entire landfill and the expected timing of each closure and post-closure activity. Because these obligations are measured at estimated fair value using present value techniques, changes in the estimated cost or timing of future final capping, closure and post-closure activities could result in a material change in these liabilities, related assets and results of operations. We assess the appropriateness of the estimates used to develop our recorded balances annually, or more often if significant facts change.
Changes in inflation rates or the estimated costs, timing or extent of future final capping, closure and post-closure activities typically result in both (i) a current adjustment to the recorded liability and landfill asset and (ii) a change in liability and asset amounts to be recorded prospectively over either the remaining capacity of the related discrete final capping or the remaining permitted and expansion airspace (as defined below) of the landfill. Any changes related to the capitalized and future cost of the landfill assets are then recognized in accordance with our amortization policy, which would generally result in amortization expense being recognized prospectively over the remaining capacity of the final capping or the remaining permitted and expansion airspace of the landfill, as appropriate. Changes in such estimates associated with airspace that has been fully utilized result in an adjustment to the recorded liability and landfill assets with an immediate corresponding adjustment to landfill airspace amortization expense.
·
Remaining permitted airspace Our engineers, in consultation with third-party engineering consultants and surveyors, are responsible for determining remaining permitted airspace at our landfills. The remaining permitted airspace is determined by an annual survey, which is used to compare the existing landfill topography to the expected final landfill topography.
·
Expansion airspace We also include currently unpermitted expansion airspace in our estimate of remaining permitted and expansion airspace in certain circumstances. First, to include airspace associated with an expansion effort, we must generally expect the initial expansion permit application to be submitted within one year and the final expansion permit to be received within five years. Second, we must believe that obtaining the expansion permit is likely, considering the following criteria:
o
Personnel are actively working on the expansion of an existing landfill, including efforts to obtain land use and local, state or provincial approvals;
o
We have a legal right to use or obtain land to be included in the expansion plan;
o
There are no significant known technical, legal, community, business, or political restrictions or similar issues that could negatively affect the success of such expansion; and
o
Financial analysis has been completed based on conceptual design, and the results demonstrate that the expansion meets the Companys criteria for investment.
For unpermitted airspace to be initially included in our estimate
of remaining permitted and expansion airspace, the expansion effort must meet all of the criteria listed above. These criteria
are evaluated by our field-based engineers, accountants, managers and others to identify potential obstacles to obtaining the permits.
Once the unpermitted airspace is included, our policy provides that airspace may continue to be included in remaining permitted
and expansion airspace even if certain of these criteria are no longer met as long as we continue to believe we will ultimately
obtain the permit, based on the facts and circumstances of a specific landfill.
When we include the expansion airspace in our calculations of remaining
permitted and expansion airspace, we also include the projected costs for development, as well as the projected asset retirement
costs related to the final capping, closure and post-closure of the expansion in the amortization basis of the landfill.
Once the remaining permitted and expansion airspace is determined
in cubic yards, an airspace utilization factor (AUF) is established to calculate the remaining permitted and expansion
capacity in tons. The AUF is established using the measured density obtained from previous annual surveys and is then adjusted
to account for future settlement. The amount of settlement that is forecasted will take into account several site-specific factors
including current and projected mix of waste type, initial and projected waste density, estimated number of years of life remaining,
depth of underlying waste, anticipated access to moisture through precipitation or recirculation of landfill leachate, and operating
practices. In addition, the initial selection of the AUF is subject to a subsequent multi-level review by our engineering group,
and the AUF used is reviewed on a periodic basis and revised as necessary. Our historical experience generally indicates that the
impact of settlement at a landfill is greater later in the life of the landfill when the waste placed at the landfill approaches
its highest point under the permit requirements.
After determining the costs and remaining permitted and expansion
capacity at each of our landfill, we determine the per ton rates that will be expensed as waste is received and deposited at the
landfill by dividing the costs by the corresponding number of tons. We calculate per ton amortization rates for the landfill for
assets associated with each final capping, for assets related to closure and post-closure activities and for all other costs capitalized
or to be capitalized in the future. These rates per ton are updated annually, or more often, as significant facts change.
It is possible that actual results, including the amount of costs
incurred, the timing of final capping, closure and post-closure activities, our airspace utilization or the success of our expansion
efforts could ultimately turn out to be significantly different from our estimates and assumptions. To the extent that such estimates,
or related assumptions, prove to be significantly different than actual results, lower profitability may be experienced due to
higher amortization rates or higher expenses; or higher profitability may result if the opposite occurs. Most significantly, if
it is determined that expansion capacity should no longer be considered in calculating the recoverability of a landfill asset,
we may be required to recognize an asset impairment or incur significantly higher amortization expense. If at any time management
makes the decision to abandon the expansion effort, the capitalized costs related to the expansion effort are expensed immediately.
For the year ended December 31, 2015 the Company operations related
to its landfill assets and liability are presented in the tables below:
Landfill Assets
Year Ended December 31, 2015
January 1, 2015, Beginning Balance
$
-
Capital additions (Landfill acquired on December 22, 2015)
3,396,519
Amortization of landfill assets
(3,043
)
Asset retirement adjustments
-
December 31, 2015, Ending Balance
$
3,393,476
Landfill Liability
January 1, 2015, Beginning Balance
$
-
Obligations incurred and capitalized (Landfill acquired on December 22, 2015)
196,519
Obligations settled
-
Interest accretion
3,733
Revisions in estimates and interest rate assumption
The Company recognizes revenue when
persuasive evidence of arrangement exists, services have been provided, the sellers price to the buyer is fixed or
determinable, and collection is reasonably assured. The majority of the Companys revenues are generated from the fees charged
for waste collection, transfer, disposal and recycling. The fees charged for our services are generally defined in service
agreements and vary based on contract-specific terms such as frequency of service, weight, volume and the general market factors
influencing a regions rate.
The Company recognizes revenue when there is persuasive evidence
that services have been provided and a collection is reasonably assured. The majority of the Companys revenues are generated
from the fees charged for waste collection, transfer, disposal and recycling. The fees charged for our services are
generally defined in service agreements and vary based on contract-specific terms such as frequency of service, weight, volume
and the general market factors influencing a regions rate.
The Company records deferred revenue for customers
that were billed in advance of services. The balance in deferred revenue represents amounts billed in January, February, and March
for services that will be provided during April, May, and June.
The Company records deferred revenue for customers that were billed
in advance of services. The balance in deferred revenue represents amounts billed in October, November and December for services
that will be provided during January, February and March.
Cost of services include all employment costs
associated with waste collection, transfer and disposal, damage claims, landfill costs, personal property taxes associated with
collection vehicles and other direct cost of the collection and disposal process.
Cost of services include all employment costs associated with waste
collection, transfer and disposal, damage claims, landfill costs, personal property taxes associated with collection vehicles and
other direct cost of the collection and disposal process.
The Company maintains its cash and cash equivalents in bank deposit
accounts, which could, at times, exceed federally insured limits. The Company has not experienced any losses in such accounts;
however, amounts in excess of the federally insured limit may be at risk if the bank experiences financial difficulties. The
Company places its cash with high credit quality financial institutions. The Companys accounts at these institutions
are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. At March 31, 2016, the Company had $1,766,569 of
cash in United States bank deposits, of which $959,985 was federally insured and $806,583 was not federally insured.
Financial instruments which also potentially subject the Company
to concentrations of credit risk consist principally of trade accounts receivable; however, concentrations of credit risk with
respect to trade accounts receivables are limited due to generally short payment terms.
For the three months ended March 31, 2016, the Company had one contract
that accounted for approximately 12% of the Company's revenue. For the three months ended March 31, 2015, the Company had two contracts
that accounted for approximately 51% of the Company's revenue, collectively.
The
Company maintains its cash and cash equivalents in bank deposit accounts, which could, at times, exceed federally insured limits.
The Company has not experienced any losses in such accounts; however, amounts in excess of the federally insured limit may be
at risk if the bank experiences financial difficulties. The Company places its cash with high credit quality financial
institutions. The Companys accounts at these institutions are insured by the Federal Deposit Insurance Corporation
(FDIC) up to $250,000.
Financial
instruments which also potentially subject the Company to concentrations of credit risk consist principally of trade accounts
receivable; however, concentrations of credit risk with respect to trade accounts receivables are limited due to generally short
payment terms.
The
Company has two contracts that account for a large portion of the Companys revenue. During the year ended December 31,
2015, these contracts accounted for approximately 44% of the Companys revenues and less than 5% of the Companys
accounts receivable balance at December 31, 2015. During the year ended December 31, 2014, the Company had two customers that
accounted for approximately 46% of the Companys revenues and approximately 53% of the Companys accounts receivable
balance at December 31, 2014. The Company did not have any other customers that represented a significant portion of the Companys
revenue or account receivables for the fiscal years ended December 31, 2015 and 2014, respectively.
Basic income (loss) per share is calculated
by dividing the Companys net loss applicable to common shareholders by the weighted average number of common shares during
the period. Diluted earnings per share is calculated by dividing the Companys net income (loss) available to common shareholders
by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding
is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. At March 31, 2016 the Company had
two convertible notes outstanding that are not convertible into common stock until June 2016. Additionally, the Company issued
stock warrants for 1,673,559 common shares.
For the three months ended March 31, 2016, the
Company had 832,859 of weighted-average common shares relating to the convertible debt, under the if-converted method, however,
these shares are not dilutive because the Company recorded a loss during the fiscal year.
At March 31, 2016, and December 31, 2015 the
Company had a series of convertible notes and warrants outstanding that could be converted into approximately, 2,506,418 and 2,548,559
common shares, respectively. These are not presented in the consolidated statements of operations since the company incurred a
loss and the effect of these shares is anti- dilutive.
Basic
income (loss) per share is calculated by dividing the Companys net loss applicable to common shareholders by the weighted
average number of common shares during the period. Diluted earnings per share is calculated by dividing the Companys net
income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the year. The
diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive
debt or equity. At December 31, 2015 the Company had two convertible notes outstanding that is not convertible into common stock
until June 2016. Additionally, the Company issued stock warrants for 1,673,559 common shares.
For
the year ended December 31, 2015, the Company had 1,673,559 of weighted-average common shares relating to the convertible debt,
under the if-converted method, however, these shares are not dilutive because the Company recorded a loss during the fiscal year.
At
December 31, 2015, and 2014 the Company had a series of convertible notes and warrants outstanding that could be converted into
approximately, 2,548,559 and 291,047 common shares, respectively. These are not presented in the consolidated statements of operations
since the company incurred a loss and the effect of these shares is anti- dilutive.
Stock-based compensation is accounted for at
fair value in accordance with ASC Topic 718. To date, the Company has not adopted a stock option plan and has not granted any stock
options.
Stock-based compensation is accounted for based
on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements
of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee
or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC
also require measurement of the cost of employee and director services received in exchange for an award based on the grant-date
fair value of the award.
Pursuant to ASC Topic 505-50, for share based
payments to consultants and other third-parties, compensation expense is determined at the measurement date. The
expense is recognized over the service period of the award. Until the measurement date is reached, the total amount
of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value
of the award at the reporting date.
The Company recorded stock based compensation
expense of $3,545,422 and $1,486,265 during the three months ended March 31, 2016 and 2015, respectively, which is included in
compensation and related expense on the statement of operations.
Stock-based compensation is accounted for at fair value in accordance
with ASC Topic 718. To date, the Company has not adopted a stock option plan and has not granted any stock options.
Stock-based compensation is accounted for based on the requirements
of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements of the cost of
employee and director services received in exchange for an award of equity instruments over the period the employee or director
is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also require
measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value
of the award.
Pursuant to ASC Topic 505-50, for share based payments to consultants
and other third-parties, compensation expense is determined at the measurement date. The expense is recognized
over the service period of the award. Until the measurement date is reached, the total amount of compensation expense
remains uncertain. The Company initially records compensation expense based on the fair value of the award at the reporting
date.
The Company recorded stock based compensation expense of $7,356,000
and $339,000 during the years ended December 31, 2015 and 2014, respectively.
The Company does not expect the adoption of
recently issued accounting pronouncements to have a significant impact on the Companys results of operations, financial
position or cash flow.
The Company does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on the Companys results of operations, financial position or cash flow.
Disclosure of accounting policy for advertising costs. For those costs that cannot be capitalized, discloses whether such costs are expensed as incurred or the first period in which the advertising takes place. For direct response advertising costs that are capitalized, describes those assets and the accounting policy used, including a description of the qualifying activity, the types of costs capitalized and the related amortization period. An entity also may disclose its accounting policy for cooperative advertising arrangements.
Disclosure of accounting policy for basis of accounting, or basis of presentation, used to prepare the financial statements (for example, US Generally Accepted Accounting Principles, Other Comprehensive Basis of Accounting, IFRS).
Disclosure of accounting policy for cash and cash equivalents, including the policy for determining which items are treated as cash equivalents. Other information that may be disclosed includes (1) the nature of any restrictions on the entity's use of its cash and cash equivalents, (2) whether the entity's cash and cash equivalents are insured or expose the entity to credit risk, (3) the classification of any negative balance accounts (overdrafts), and (4) the carrying basis of cash equivalents (for example, at cost) and whether the carrying amount of cash equivalents approximates fair value.
Disclosure of accounting policy regarding (1) the principles it follows in consolidating or combining the separate financial statements, including the principles followed in determining the inclusion or exclusion of subsidiaries or other entities in the consolidated or combined financial statements and (2) its treatment of interests (for example, common stock, a partnership interest or other means of exerting influence) in other entities, for example consolidation or use of the equity or cost methods of accounting. The accounting policy may also address the accounting treatment for intercompany accounts and transactions, noncontrolling interest, and the income statement treatment in consolidation for issuances of stock by a subsidiary.
Disclosure of accounting policy for computing basic and diluted earnings or loss per share for each class of common stock and participating security. Addresses all significant policy factors, including any antidilutive items that have been excluded from the computation and takes into account stock dividends, splits and reverse splits that occur after the balance sheet date of the latest reporting period but before the issuance of the financial statements.
Disclosure of accounting policy for goodwill. This accounting policy also may address how an entity assesses and measures impairment of goodwill, how reporting units are determined, how goodwill is allocated to such units, and how the fair values of the reporting units are determined.
Disclosure of accounting policy for recognizing and measuring the impairment of long-lived assets. An entity also may disclose its accounting policy for long-lived assets to be sold. This policy excludes goodwill and intangible assets.
Disclosure of accounting policy for income taxes, which may include its accounting policies for recognizing and measuring deferred tax assets and liabilities and related valuation allowances, recognizing investment tax credits, operating loss carryforwards, tax credit carryforwards, and other carryforwards, methodologies for determining its effective income tax rate and the characterization of interest and penalties in the financial statements.
Disclosure of accounting policy for finite-lived intangible assets. This accounting policy also might address: (1) the amortization method used; (2) the useful lives of such assets; and (3) how the entity assesses and measures impairment of such assets.
Disclosure of accounting policy for investments in financial assets, including marketable securities (debt and equity securities with readily determinable fair values), investments accounted for under the equity method and cost method, securities borrowed and loaned, and repurchase and resale agreements. For marketable securities, the disclosure may include the entity's accounting treatment for transfers between investment categories and how the fair values for such securities are determined. Also, for all investments, an entity may describe its policy for assessing, recognizing and measuring impairment of the investment.
Disclosure of accounting policy pertaining to new accounting pronouncements that may impact the entity's financial reporting. Includes, but is not limited to, quantification of the expected or actual impact.
Disclosure of accounting policy for long-lived, physical assets used in the normal conduct of business and not intended for resale. Includes, but is not limited to, basis of assets, depreciation and depletion methods used, including composite deprecation, estimated useful lives, capitalization policy, accounting treatment for costs incurred for repairs and maintenance, capitalized interest and the method it is calculated, disposals and impairments.
Disclosure of accounting policy for trade and other accounts receivable, and finance, loan and lease receivables, including those classified as held for investment and held for sale. This disclosure may include (1) the basis at which such receivables are carried in the entity's statements of financial position (2) how the level of the valuation allowance for receivables is determined (3) when impairments, charge-offs or recoveries are recognized for such receivables (4) the treatment of origination fees and costs, including the amortization method for net deferred fees or costs (5) the treatment of any premiums or discounts or unearned income (6) the entity's income recognition policies for such receivables, including those that are impaired, past due or placed on nonaccrual status and (7) the treatment of foreclosures or repossessions (8) the nature and amount of any guarantees to repurchase receivables.
Disclosure of accounting policy for recognizing unearned income or deferred revenue related to transactions involving the sale of a product or performance of services.
Disclosure of accounting policy for revenue recognition. If the entity has different policies for different types of revenue transactions, the policy for each material type of transaction is generally disclosed. If a sales transaction has multiple element arrangements (for example, delivery of multiple products, services or the rights to use assets) the disclosure may indicate the accounting policy for each unit of accounting as well as how units of accounting are determined and valued. The disclosure may encompass important judgment as to appropriateness of principles related to recognition of revenue. The disclosure also may indicate the entity's treatment of any unearned or deferred revenue that arises from the transaction.
Disclosure of accounting policy for revenue recognition for sales of a service. The entity also may disclose how it recognizes cost of sales for such a service transaction and its treatment of any unearned or deferred revenue that arises from the transaction.
Disclosure of accounting policy for stock option and stock incentive plans. This disclosure may include (1) the types of stock option or incentive plans sponsored by the entity (2) the groups that participate in (or are covered by) each plan (3) significant plan provisions and (4) how stock compensation is measured, and the methodologies and significant assumptions used to determine that measurement.
Disclosure of accounting policy for the use of estimates in the preparation of financial statements in conformity with generally accepted accounting principles.
Tabular disclosure of physical assets used in the normal conduct of business and not intended for resale. Includes, but is not limited to, balances by class of assets, depreciation and depletion expense and method used, including composite depreciation, and accumulated deprecation.
Tabular disclosure of pro forma results of operations for a material business acquisition or series of individually immaterial business acquisitions that are material in the aggregate.
Tabular disclosure of assets, excluding financial assets and goodwill, lacking physical substance with a finite life, by either major class or business segment.
Tabular disclosure of the amounts recognized as of the acquisition date for each major class of assets acquired and liabilities assumed. May include but not limited to the following: (a) acquired receivables; (b) contingencies recognized at the acquisition date; and (c) the fair value of noncontrolling interests in the acquiree.
The funds to payoff the
Praesidian notes were distributed as follows:
Aggregate outstanding principal balance of the Notes
$
10,845,043
Aggregate accrued but unpaid interest on the Notes
82,844
Prepayment Premium
325,351
Accrued PIK
9,941
Tax Liability
150,000
Accrued but unpaid fees and expenses
4,000
Payoff Amount
$
11,417,179
On August 6, 2015, the Company refinanced its long-term debt payable
to Comerica Bank. Proceeds from notes issued by the Company to Praesidian Capital Opportunity Fund III, LP and Praesidian Capital
Opportunity Fund III-A, LP (together referred to as Praesidian) were $10,845,000. These funds were distributed as follows:
Payoff of short term bridge financing
$
432,938
Payoff of lines of credit with Commerica Bank
1,745,799
Payoff of senior debt to Comerica Bank
7,953,433
Refinancing fees
712,830
$
10,845,000
The proceeds of the loans were used to partially fund the acquisitions
referenced above and refinance existing debt with Praesidian, among other things. The funds to payoff the Praesidian notes were
distributed as follows:
Aggregate outstanding principal balance of the Notes
$
10,845,043
Aggregate accrued but unpaid interest on the Notes
Tabular disclosure of the fair value of assets, by major investment asset category, supporting separate accounts with additional insurance benefits and minimum investment return guarantees as of each date for which a statement of financial position is presented. The taxonomy for investment disclosures is utilized to tag elements that represent more detailed breakdowns of the major investment categories specified in reporting regulations.
Tabular disclosure of warrants or rights issued. Warrants and rights outstanding are derivative securities that give the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame. Warrants are often included in a new debt issue to entice investors by a higher return potential. The main difference between warrants and call options is that warrants are issued and guaranteed by the company, whereas options are exchange instruments and are not issued by the company. Also, the lifetime of a warrant is often measured in years, while the lifetime of a typical option is measured in months. Disclose the title of issue of securities called for by warrants and rights outstanding, the aggregate amount of securities called for by warrants and rights outstanding, the date from which the warrants or rights are exercisable, and the price at which the warrant or right is exercisable.
Tabular disclosure of the components of net deferred tax asset or liability recognized in an entity's statement of financial position, including the following: the total of all deferred tax liabilities, the total of all deferred tax assets, the total valuation allowance recognized for deferred tax assets.
Tabular disclosure of the reconciliation using percentage or dollar amounts of the reported amount of income tax expense attributable to continuing operations for the year to the amount of income tax expense that would result from applying domestic federal statutory tax rates to pretax income from continuing operations.
Tabular disclosure of assets and liabilities, including [financial] instruments measured at fair value that are classified in stockholders' equity, if any, that are measured at fair value on a recurring basis. The disclosures contemplated herein include the fair value measurements at the reporting date by the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3).
Tabular disclosure of future minimum payments required in the aggregate and for each of the five succeeding fiscal years for operating leases having initial or remaining noncancelable lease terms in excess of one year and the total minimum rentals to be received in the future under noncancelable subleases as of the balance sheet date.
Tabular disclosure of related party transactions. Examples of related party transactions include, but are not limited to, transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners and (d) affiliates.
The capitalized costs incurred during the period (excluded from amortization) to purchase, lease or otherwise acquire an unproved property, including costs of lease bonuses and options to purchase or lease properties, the portion of costs applicable to minerals when land including mineral rights is purchased in fee, brokers' fees, recording fees, legal costs, and other costs incurred in acquiring properties.
Amount of currency on hand as well as demand deposits with banks or financial institutions. Includes other kinds of accounts that have the general characteristics of demand deposits. Also includes short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Excludes cash and cash equivalents within disposal group and discontinued operation.
Carrying amount as of the balance sheet date of the regulatory asset that represents capitalized stranded costs that are expected to be recoverable through a competitive transition charge (CTC) to customers after one year or beyond the operating cycle, if longer. A CTC is a charge approved by a regulator that allows deregulated utilities to recover investments in certain assets, such as power plants, over a transition period leading into a deregulated market.
Investments which are intended to be sold in the short term (usually less than one year or the normal operating cycle, whichever is longer) including trading securities, available-for-sale securities, held-to-maturity securities, and other short-term investments not otherwise listed in the existing taxonomy.
The number of shares converted in a noncash (or part noncash) transaction. Noncash is defined as transactions during a period that do not result in cash receipts or cash payments in the period. "Part noncash" refers to that portion of the transaction not resulting in cash receipts or cash payments in the period.
The aggregate amount of noncash, equity-based employee remuneration. This may include the value of stock or unit options, amortization of restricted stock or units, and adjustment for officers' compensation. As noncash, this element is an add back when calculating net cash generated by operating activities using the indirect method.
Amount of accumulated depreciation, depletion and amortization for physical assets used in the normal conduct of business to produce goods and services.
Amount before accumulated depreciation of building structures held for productive use including addition, improvement, or renovation to the structure, including, but not limited to, interior masonry, interior flooring, electrical, and plumbing.
Amount before accumulated depreciation, depletion and amortization of physical assets used in the normal conduct of business and not intended for resale. Examples include, but are not limited to, land, buildings, machinery and equipment, office equipment, and furniture and fixtures.
Amount after accumulated depreciation, depletion and amortization of physical assets used in the normal conduct of business to produce goods and services and not intended for resale. Examples include, but are not limited to, land, buildings, machinery and equipment, office equipment, and furniture and fixtures.
The amount of expense recognized in the current period that reflects the allocation of the cost of tangible assets over the assets' useful lives. Includes production and non-production related depreciation.
Amount of consideration transferred, consisting of acquisition-date fair value of assets transferred by the acquirer, liabilities incurred by the acquirer, and equity interest issued by the acquirer.
Amount of currency on hand as well as demand deposits with banks or financial institutions, acquired at the acquisition date. Includes other kinds of accounts that have the general characteristics of demand deposits. Also includes short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates.
Amount of asset related to consideration paid in advance for costs that provide economic benefits in future periods, and amount of other assets that are expected to be realized or consumed within one year or the normal operating cycle, if longer, acquired at the acquisition date.
Amount due from customers or clients for goods or services, including trade receivables, that have been delivered or sold in the normal course of business, and amounts due from others, including related parties expected to be converted to cash, sold or exchanged within one year or the normal operating cycle, if longer, acquired at the acquisition date.
Amount of liabilities incurred for goods and services received that are used in an entity's business and related party payables, assumed at the acquisition date.
Amount of deferred revenue expected to be recognized as such within one year or the normal operating cycle, if longer, assumed at the acquisition date.
Amount of assets, excluding financial assets and goodwill, that lack physical substance, having a projected indefinite period of benefit, acquired at the acquisition date.
Remaining amortization period of finite-lived intangible assets, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents the reported fact of one year, five months, and thirteen days.
Including the current and noncurrent portions, carrying value as of the balance sheet date of a written promise to pay a note, initially due after one year or beyond the operating cycle if longer, which can be exchanged for a specified amount of one or more securities (typically common stock), at the option of the issuer or the holder.
Carrying amount of long-term debt, net of unamortized discount or premium, including current and noncurrent amounts. Includes, but not limited to, notes payable, bonds payable, debentures, mortgage loans and commercial paper. Excludes capital lease obligations.
Amount of long-term debt, after unamortized discount or premium, scheduled to be repaid within one year or the normal operating cycle, if longer. Includes, but not limited to, notes payable, bonds payable, debentures, mortgage loans and commercial paper. Excludes capital lease obligations.
Carrying amount of long-term debt, net of unamortized discount or premium, excluding amounts to be repaid within one year or the normal operating cycle, if longer (current maturities). Includes, but not limited to, notes payable, bonds payable, debentures, mortgage loans and commercial paper. Excludes capital lease obligations.
Interest paid other than in cash for example by issuing additional debt securities. As a noncash item, it is added to net income when calculating cash provided by or used in operations using the indirect method.
Expected dividends to be paid to holders of the underlying shares or financial instruments (expressed as a percentage of the share or instrument's price).
Amount of unrealized gain (loss) recognized in the income statement for a financial instrument classified as derivative asset (liability) after deduction of derivative liability (asset), measured using unobservable inputs that reflect the entity's own assumption about the assumptions market participants would use in pricing.
The number of shares into which fully or partially vested stock options outstanding as of the balance sheet date can be currently converted under the option plan.
The number of shares under options that were cancelled during the reporting period as a result of occurrence of a terminating event specified in contractual agreements pertaining to the stock option plan.
Number of shares of common stock subject to repurchase or cancellation determined by relating the portion of time within a reporting period that these shares have been outstanding to the total time in that period. Common stock subject to repurchase are outstanding common shares that are contingently returnable (that is, subject to recall).
Amount of the difference between reported income tax expense (benefit) and expected income tax expense (benefit) computed by applying the domestic federal statutory income tax rates to pretax income (loss) from continuing operations attributable to increase (decrease) in the valuation allowance for deferred tax assets.
Amount of the difference between reported income tax expense (benefit) and expected income tax expense (benefit) computed by applying the domestic federal statutory income tax rates to pretax income (loss) from continuing operations, attributable to increase (decrease) in the income tax rates.
The amount of income tax expense or benefit for the period computed by applying the domestic federal statutory tax rates to pretax income from continuing operations.
Amount of the difference between reported income tax expense (benefit) and expected income tax expense (benefit) computed by applying the domestic federal statutory income tax rates to pretax income (loss) from continuing operations attributable to nondeductible equity-based compensation costs.
Amount of the difference between reported income tax expense (benefit) and expected income tax expense (benefit) computed by applying the domestic federal statutory income tax rates to pretax income (loss) from continuing operations attributable to state and local income tax expense (benefit).
Fair value, after the effects of master netting arrangements, of a financial liability or contract with one or more underlyings, notional amount or payment provision or both, and the contract can be net settled by means outside the contract or delivery of an asset, expected to be settled within one year or normal operating cycle, if longer. Includes assets not subject to a master netting arrangement and not elected to be offset.
Amount of required minimum rental payments for operating leases having an initial or remaining non-cancelable lease term in excess of one year due in the next fiscal year following the latest fiscal year. Excludes interim and annual periods when interim periods are reported on a rolling approach, from latest balance sheet date.
Amount of required minimum rental payments for operating leases having an initial or remaining non-cancelable lease term in excess of one year due in the fifth fiscal year following the latest fiscal year. Excludes interim and annual periods when interim periods are reported on a rolling approach, from latest balance sheet date.
Amount of required minimum rental payments for operating leases having an initial or remaining non-cancelable lease term in excess of one year due in the fourth fiscal year following the latest fiscal year. Excludes interim and annual periods when interim periods are reported on a rolling approach, from latest balance sheet date.
Amount of required minimum rental payments for operating leases having an initial or remaining non-cancelable lease term in excess of one year due in the third fiscal year following the latest fiscal year. Excludes interim and annual periods when interim periods are reported on a rolling approach, from latest balance sheet date.
Amount of required minimum rental payments for operating leases having an initial or remaining non-cancelable lease term in excess of one year due in the second fiscal year following the latest fiscal year. Excludes interim and annual periods when interim periods are reported on a rolling approach, from latest balance sheet date.
Amount of required minimum rental payments for operating leases having an initial or remaining non-cancelable lease term in excess of one year due after the fifth fiscal year following the latest fiscal year. Excludes interim and annual periods when interim periods are reported on a rolling approach, from latest balance sheet date.
Rental expense for the reporting period incurred under operating leases, including minimum and any contingent rent expense, net of related sublease income.
Sum of the carrying amounts as of the balance sheet date of all assets that are recognized. Assets are probable future economic benefits obtained or controlled by an entity as a result of past transactions or events.
Sum of the carrying amounts as of the balance sheet date of all assets that are expected to be realized in cash, sold, or consumed within one year (or the normal operating cycle, if longer). Assets are probable future economic benefits obtained or controlled by an entity as a result of past transactions or events.
Sum of the carrying amounts as of the balance sheet date of all assets that are expected to be realized in cash, sold or consumed after one year or beyond the normal operating cycle, if longer.
The aggregate costs related to goods produced and sold and services rendered by an entity during the reporting period. This excludes costs incurred during the reporting period related to financial services rendered and other revenue generating activities.
Total obligations incurred as part of normal operations that are expected to be paid during the following twelve months or within one business cycle, if longer.
Amount of revenue recognized from goods sold, services rendered, insurance premiums, or other activities that constitute an earning process. Includes, but is not limited to, investment and interest income before deduction of interest expense when recognized as a component of revenue, and sales and trading gain (loss).
Amount of stockholders' equity (deficit), net of receivables from officers, directors, owners, and affiliates of the entity, attributable to both the parent and noncontrolling interests. Amount excludes temporary equity. Alternate caption for the concept is permanent equity.