New York
|
|
13-3832215
|
(State
or other jurisdiction of incorporation)
|
|
(IRS
Employer Identification No.)
|
Large
accelerated filer
|
☐
|
|
Accelerated
filer
|
☐
|
|
|
|
|
|
Non-accelerated
filer
|
☐
|
|
Smaller
reporting company
|
☑
|
PART I – FINANCIAL INFORMATION
|
|||||
|
|
|
|
|
|
Item
1.
|
|
Financial
Statements
|
|
3
|
|
|
|
|
|
|
|
|
|
Unaudited
Condensed Consolidated Balance Sheets
|
|
3
|
|
|
|
|
|
|
|
|
|
Unaudited
Condensed Consolidated Statements of Operations
|
|
4
|
|
|
|
|
|
|
|
|
|
Unaudited
Condensed Consolidated Statements of Cash Flows
|
|
6
|
|
|
|
|
|
|
|
|
|
Notes
to the Unaudited Condensed Consolidated Financial
Statements
|
|
7
|
|
|
|
|
|
|
|
Item
2.
|
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
|
26
|
|
|
|
|
|
|
|
Item
3.
|
|
Quantitative
and Qualitative Disclosures About Market Risk
|
|
34
|
|
|
|
|
|
|
|
Item
4.
|
|
Controls
and Procedures
|
|
34
|
|
|
|
|
|
|
|
PART II – OTHER INFORMATION
|
|||||
|
|
|
|
|
|
Item
1.
|
|
Legal
Proceedings
|
|
35
|
|
|
|
|
|
|
|
Item
1A.
|
|
Risk
Factors
|
|
35
|
|
|
|
|
|
|
|
Item
2.
|
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
|
35
|
|
|
|
|
|
|
|
Item
3.
|
|
Defaults
Upon Senior Securities
|
|
35
|
|
|
|
|
|
|
|
Item
4.
|
|
Mine
Safety Disclosures
|
|
35
|
|
|
|
|
|
|
|
Item
5.
|
|
Other
Information
|
|
35
|
|
|
|
|
|
|
|
Item
6.
|
|
Exhibits
|
|
36
|
|
|
|
|
|
|
|
Signatures
|
|
37
|
|
Assets
|
September 30, 2016
(UNAUDITED)
|
December 31, 2015 (UNAUDITED)
|
Current
assets:
|
|
|
|
|
|
Cash
|
$1,247,756
|
$2,729,795
|
Short-term
investments - Restricted
|
1,952,805
|
-
|
Accounts
receivable, net of allowance
|
2,197,701
|
1,707,818
|
Prepaid
expenses
|
444,176
|
427,615
|
Other current
assets
|
95,920
|
52,359
|
|
|
|
Total current
assets
|
5,938,358
|
4,917,587
|
|
|
|
Property,
plant and equipment, at cost net of accumulated
depreciation
|
16,931,444
|
14,433,740
|
|
|
|
Assets held
for sale
|
395,000
|
-
|
|
|
|
Other
assets:
|
|
|
|
|
|
Investment in
related party affiliate
|
362,080
|
364,185
|
Deposits
|
11,454
|
10,954
|
Goodwill
|
7,234,420
|
7,479,642
|
Landfill
assets, net of accumulated amortization
|
3,526,506
|
3,393,476
|
Customer list,
net of accumulated amortization
|
15,673,879
|
19,500,362
|
Non-compete,
net of accumulated amortization
|
124,949
|
155,699
|
Website, net
of accumulated amortization
|
23,816
|
10,904
|
|
|
|
Total other
assets
|
26,957,104
|
30,915,222
|
|
|
|
Total
assets
|
$50,221,906
|
$50,266,549
|
|
|
|
Liabilities and Shareholders' (Deficit)
Equity
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$2,588,904
|
$1,988,050
|
Accrued
expenses
|
598,859
|
280,069
|
Notes payable,
related party
|
359,891
|
359,891
|
Deferred
compensation
|
778,044
|
996,380
|
Deferred
revenue
|
3,394,204
|
2,912,264
|
Convertible
notes due related parties, includes put
premiums
|
11,850
|
15,065
|
Contingent
liability
|
-
|
1,000,000
|
Derivative
liabilities
|
2,650,589
|
2,820,000
|
Current
portion - long-term debt
|
339,178
|
417,119
|
|
|
|
Total current
liabilities
|
10,721,519
|
10,788,838
|
|
|
|
Long-term
liabilities:
|
|
|
Asset
retirement obligation
|
337,930
|
200,252
|
Deferred tax
liability
|
145,000
|
-
|
Long-term
debt, net of current
|
41,698,603
|
39,170,796
|
|
|
|
Total
long-term liabilities
|
42,181,533
|
39,371,048
|
|
|
|
Total
liabilities
|
52,903,052
|
50,159,886
|
|
|
|
Preferred
Series C stock redeemable, cumulative, stated value $100 per share,
par value $.001, 67,361 shares authorized, 35,750 and 0 shares
issued and outstanding, respectively
|
2,644,951
|
-
|
|
|
|
Shareholders'
(deficit) 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, 1,194,051 and
1,051,933 shares issued and 1,182,551 and 1,040,433 shares
outstanding, respectively
|
29,851
|
26,298
|
Treasury
stock, at cost, 11,500 shares
|
(224,250)
|
(224,250)
|
Additional
paid in capital
|
36,995,896
|
28,124,160
|
Accumulated
deficit
|
(42,127,665)
|
(27,819,616)
|
|
|
|
Total
shareholders' (deficit) equity
|
(5,326,097)
|
106,663
|
|
|
|
Total
liabilities and shareholders' (deficit) equity
|
$50,221,906
|
$50,266,549
|
|
Nine months ended
|
|
|
SEPTEMBER 30, 2016 (UNAUDITED)
|
SEPTEMBER 30, 2015 (UNAUDITED)
|
Revenue
|
|
|
Services
|
$23,883,663
|
$9,733,330
|
|
|
|
Cost
of sales and services
|
|
|
Cost
of sales and services
|
14,288,853
|
5,989,174
|
Depreciation
|
2,462,586
|
1,176,561
|
|
|
|
Total
cost of sales and services
|
16,751,439
|
7,165,735
|
|
|
|
Gross
Profit
|
7,132,224
|
2,567,595
|
|
|
|
Expenses
|
|
|
Bad
debt expense
|
168,508
|
2,738
|
Compensation
and related expense
|
10,113,985
|
8,706,809
|
Depreciation
and amortization
|
2,876,333
|
2,214,390
|
Impairment
expense
|
1,255,267
|
-
|
Selling,
general and administrative
|
5,130,079
|
2,539,620
|
|
|
|
Total
expenses
|
19,544,172
|
13,463,557
|
|
|
|
Other
income (expenses):
|
|
|
Miscellaneous
income (loss)
|
(9,090)
|
20,635
|
Gain
on disposal of assets
|
3,053
|
43,433
|
Unrealized
gain on interest rate swap
|
-
|
40,958
|
Unrealized
gain on change in fair value of derivative liability
|
853,031
|
346,963
|
Loss
from proportionate share of equity method investment
|
(2,105)
|
-
|
Unrealized
gain on investment
|
547
|
-
|
Gain
on contingent liability
|
1,000,000
|
-
|
Interest
income
|
7,270
|
-
|
Interest
expense
|
(3,603,807)
|
(865,994)
|
|
|
|
Total
other expenses
|
(1,751,101)
|
(414,005)
|
|
|
|
Loss
before income taxes
|
(14,163,049)
|
(11,309,967)
|
|
|
|
Provision
for income taxes
|
(145,000)
|
-
|
|
|
|
Net
loss
|
$(14,308,049)
|
$(11,309,967)
|
|
|
|
Basic
net loss per share
|
$(11.91)
|
$(19.05)
|
|
|
|
Weighted
average number of shares outstanding
|
|
|
(Basic
and Diluted)
|
1,201,394
|
593,638
|
|
Three months ended
|
|
|
SEPTEMBER 30, 2016 (UNAUDITED)
|
SEPTEMBER 30, 2015 (UNAUDITED)
|
Revenue
|
|
|
Services
|
$8,389,326
|
$3,382,221
|
|
|
|
Cost
of sales and services
|
|
|
Cost
of sales and services
|
5,070,322
|
2,104,701
|
Depreciation
|
895,238
|
398,178
|
|
|
|
Total
cost of sales and services
|
5,965,560
|
2,502,879
|
|
|
|
Gross
Profit
|
2,423,766
|
879,342
|
|
|
|
Expenses
|
|
|
Bad
debt expense
|
112,950
|
-
|
Compensation
and related expense
|
3,117,396
|
326,404
|
Depreciation
and amortization
|
937,841
|
759,865
|
Selling,
general and administrative
|
1,345,379
|
1,185,770
|
|
|
|
Total
expenses
|
5,513,566
|
2,272,039
|
|
|
|
Other
income (expenses):
|
|
|
Miscellaneous
income (loss)
|
(11,354)
|
2,612
|
Gain
on disposal of assets
|
-
|
37,183
|
Unrealized
gain on interest rate swap
|
-
|
30,584
|
Unrealized
gain on change in fair value of derivative liability
|
733,031
|
346,963
|
Unrealized
gain on investment
|
547
|
-
|
Interest
income
|
844
|
-
|
Interest
expense
|
(1,224,217)
|
(454,709)
|
|
|
|
Total
other expenses
|
(501,149)
|
(37,367)
|
|
|
|
Loss
before income taxes
|
(3,590,949)
|
(1,430,064)
|
|
|
|
Provision
for income taxes
|
(145,000)
|
-
|
|
|
|
Net
loss
|
$(3,735,949)
|
$(1,430,064)
|
|
|
|
Basic
net loss per share
|
$(2.96)
|
$(2.22)
|
|
|
|
(Basic
and Diluted)
|
1,261,085
|
644,193
|
|
Nine
months ended
|
|
|
SEPTEMBER
30, 2016 (UNAUDITED)
|
SEPTEMBER
30, 2015 (UNAUDITED)
|
|
|
|
Cash flows from
operating activities:
|
|
|
Net
loss
|
$(14,308,049)
|
$(11,309,967)
|
Adjustments to
reconcile net loss to net cash (used in)
provided
|
|
|
from operating
activities:
|
|
|
Depreciation and
amortization
|
5,338,919
|
3,363,230
|
Interest accretion on
landfill liabilities
|
125,809
|
-
|
Amortization of
capitalized loan fees & debt discount
|
416,128
|
27,720
|
Unrealized gain on swap
agreement
|
-
|
(40,958)
|
Unrealized (gain) loss
on derivatives
|
(853,031)
|
(346,963)
|
Stock issued to vendors
for services
|
778,985
|
242,970
|
Stock issued to
employees as incentive compensation
|
8,071,045
|
7,356,180
|
Impairment
expense
|
1,255,267
|
-
|
Gain on contigent
liability
|
(1,000,000)
|
-
|
Loss from proportionate
share of equity investment
|
2,105
|
-
|
Loss on disposal of
equipment
|
3,053
|
(43,433)
|
|
|
|
Changes in working
capital items net of acquisitions:
|
|
|
Accounts receivable,
net of allowance
|
(489,884)
|
(722)
|
Prepaid expenses and
other current assets
|
(60,122)
|
177,483
|
Deposits
|
(500)
|
-
|
Accounts payable and
accrued expenses
|
916,432
|
469,319
|
Deferred
compensation
|
(218,336)
|
381,167
|
Deferred
revenue
|
481,940
|
87,567
|
Deferred tax
liability
|
145,000
|
-
|
Other current
liabilities
|
-
|
11,807
|
Net cash provided from
operating activities
|
604,761
|
375,400
|
|
|
|
Cash flows from
investing activities:
|
|
|
Landfill
additions
|
(350,699)
|
-
|
Acquisition of
property, plant and equipment
|
(5,397,521)
|
(1,022,968)
|
Purchases of short-term
investments
|
(1,952,805)
|
-
|
True up related to
acquisition
|
245,222
|
-
|
Proceeds from sale of
property, plant and equipment
|
46,975
|
85,987
|
Net cash used in
investing activities
|
(7,408,828)
|
(936,981)
|
|
|
|
Cash flows from
financing activities:
|
|
|
Draw on revolver
loan
|
2,150,000
|
12,258,645
|
Proceeds from issuance
of common stock, net of placement fees of
$143,750
|
2,156,250
|
-
|
Proceeds from issuance
of Series C Preferred Stock, net of placement fees of
$79,688
|
1,195,312
|
-
|
Principal payments on
notes payable
|
(179,534)
|
(11,567,429)
|
Net cash provided from
financing activities
|
5,322,028
|
691,216
|
|
|
|
Net change in
cash
|
(1,482,039)
|
129,635
|
|
|
|
Beginning
cash
|
2,729,795
|
438,907
|
|
|
|
Ending
cash
|
$1,247,756
|
$568,542
|
|
|
|
Supplemental
Disclosures of Cash Flow Information:
|
|
|
|
|
|
Cash paid for
interest
|
$3,050,001
|
$404,691
|
|
|
|
Supplemental
Non-Cash Investing and Financing Information:
|
|
|
|
|
|
Retirement of common
stock and related top off provision through the issuance
of
|
|
|
Preferred Stock C (and
related derivative
liability)
|
$2,673,480
|
$-
|
Disposition of
capitalized software in exchange for equal value of equity in
acquiring entity
|
$-
|
$434,532
|
Common shares issued to placement
agent
|
$58,250
|
$-
|
|
Nine Months Ended
September 30, 2016
(UNAUDITED)
|
Year Ended
December 31, 2015
(UNAUDITED)
|
|
|
|
Landfill Assets
|
|
|
|
|
|
Beginning
Balance
|
$3,393,476
|
$3,396,519
|
Capital
Additions
|
350,699
|
-
|
Amortization
of landfill assets
|
(229,538)
|
(3,043)
|
Asset
retirement adjustments
|
11,869
|
-
|
|
$3,526,506
|
$3,393,476
|
|
|
|
Landfill Asset Retirement Obligation
|
|
|
|
|
|
Beginning
Balance
|
$200,252
|
$196,519
|
Obligations
incurred and capitalized
|
11,869
|
-
|
Obligations
settled
|
-
|
-
|
Interest
accretion
|
125,809
|
3,733
|
Revisions
in estimates and interest rate assumption
|
-
|
-
|
|
$337,930
|
$200,252
|
|
September 30, 2016
(UNAUDITED)
|
December 31, 2015
(UNAUDITED)
|
Land
|
$1,590,000
|
$1,690,000
|
Buildings
& Building Improvements
|
397,156
|
692,156
|
Furniture
& office equipment
|
386,382
|
258,702
|
Containers
|
6,799,566
|
4,453,386
|
Trucks,
Machinery, & Equipment
|
12,844,481
|
9,948,686
|
|
|
|
Total
cost
|
22,017,585
|
17,042,930
|
|
|
|
Less
accumulated depreciation
|
(5,086,141)
|
(2,609,190)
|
|
|
|
Net
property and Equipment
|
$16,931,444
|
$14,433,740
|
|
September 30, 2016
(UNAUDITED)
|
December 31, 2015
(UNAUDITED)
|
|
|
|
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
|
15,898
|
37,096
|
Equipment
loans
|
300,053
|
395,119
|
Notes
payable to seller of Meridian, subordinated debt
|
1,475,000
|
1,475,000
|
Less: debt issuance
cost/fees
|
(1,253,319)
|
(1,416,697)
|
Less:
debt discount
|
(1,899,851)
|
(2,152,603)
|
Total debt
|
42,037,781
|
39,587,915
|
Less:
current portion
|
(339,178)
|
(417,119)
|
Long term debt less current portion
|
$41,698,603
|
$39,170,796
|
|
September 30,
|
|
2016
|
Purchase
Price
|
$450,000
|
Time
to expiration
|
12/22/2023
|
Risk-free
interest rate
|
1.43%
|
Estimated
volatility
|
60%
|
Dividend
|
0%
|
Stock
price on September 30, 2016
|
$0.88
|
Expected
forfeiture rate
|
0%
|
Fair
value of warrants @ December 31, 2015
|
$2,820,000
|
|
|
Unrealized
gain on derivative liability
|
(1,280,000)
|
|
|
Fair
value of warrants @ September 30, 2016
|
$1,540,000
|
|
|
Inception
|
|
9/30/2016
|
|
|
|
|
|
Stock Price
|
|
$0.00 - $3.00
|
|
$0.00 - $1.76
|
Exercise Price
|
|
$1.12
|
|
$1.12
|
Term
|
|
..5 years
|
|
0.3 to 0.42 years
|
Risk Free Interest Rate
|
|
..39% - .47%
|
|
0.29%
|
Volatility
|
|
60%
|
|
60%
|
Dividend Rate
|
|
0%
|
|
0%
|
Balance
– June 30, 2016
|
$-
|
Issuances
of Series C
|
930,048
|
Fair
Value Adjustment
|
180,541
|
Balance
– September 30, 2016
|
$1,110,589
|
|
Number of Shares
|
Average Exercise Price
|
If exercised
|
Expiration Date
|
Outstanding -
December 31, 2015
|
83,678
|
-
|
$449,518
|
-
|
Granted
- Goldman,
Sachs
& Co.
|
20,636
|
$4.31
|
-
|
-
|
Forfeited
|
-
|
-
|
-
|
-
|
Exercised
|
-
|
-
|
-
|
-
|
Outstanding,
September 30, 2016
|
104,314
|
$4.31
|
$449,518
|
|
Warrants
exercisable at September 30, 2016
|
104,314
|
|
|
|
|
|
Fair Value Measurements at Reporting Date
Using
|
||
|
|
Quoted Prices in
|
Significant Other
|
Significant
|
|
December
31,
|
Active Markets for
|
Observable
|
Unobservable
|
|
2015
|
Identical Assets
|
Inputs
|
Inputs
|
|
(UNAUDITED)
|
(Level 1)
|
(Level 2)
|
(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
|
||
|
|
Quoted
Prices in
|
Significant
Other
|
Significant
|
|
|
Active
Markets for
|
Observable
|
Unobservable
|
|
September
30, 2016
|
Identical
Assets
|
Inputs
|
Inputs
|
|
(UNAUDITED)
|
(Level
1)
|
(Level
2)
|
(Level
3)
|
Derivative
liability – stock warrants
|
$1,540,000
|
-
|
-
|
$1,540,000
|
Derivative
liability – Series C Preferred Stock
|
1,110,589
|
-
|
-
|
1,110,589
|
|
$2,650,589
|
-
|
-
|
$2,650,589
|
2016
|
$154,941
|
2017
|
530,551
|
2018
|
250,497
|
2019
|
178,303
|
2020
|
138,700
|
Thereafter
|
151,200
|
Total
|
$1,404,192
|
Summary
of Statements of Financial Condition
|
Nine Months Ended
|
|
September 30, 2016
|
Assets
|
|
Current
assets
|
$3,609
|
Noncurrent
assets
|
2,877,313
|
Total
assets
|
2,880,922
|
|
|
Liabilities and
Equity
|
|
Current
liabilities
|
236,562
|
Noncurrent
liabilities
|
-
|
Equity
|
2,644,360
|
Total
liabilities and equity
|
$2,880,922
|
|
|
Summary
of Statements of Operations
|
|
|
|
Revenues
|
$177
|
Expense
|
16,410
|
Net
loss
|
$(16,233)
|
|
9 Months Ended
September 30, 2016
|
Year-ended
December 31, 2015
|
Year-ended
December 31, 2014
|
|||
|
|
%
|
|
%
|
|
%
|
|
$
|
Increase
|
$
|
increase
|
$
|
Increase
|
Revenue
|
24,000
|
78%
|
13,506
|
11%
|
12,202
|
8%
|
|
Three Months
Ended
|
|
|
September 30,
2016
|
September 30,
2015
|
Revenue
|
$8,389,326
|
$3,382,221
|
Gross
profit
|
$2,423,766
|
$879,342
|
Operating
expenses
|
$5,513,566
|
$2,272,039
|
Other expenses,
net
|
$501,149
|
$37,367
|
Net
loss
|
$3,753,949
|
$1,430,064
|
Basic net loss per
share
|
$2.96
|
$2.22
|
|
Nine Months
Ended
|
|
|
September 30,
2016
|
September 30,
2015
|
Revenue
|
$23,883,663
|
$9,733,330
|
Gross
profit
|
$7,132,224
|
$2,567,595
|
Operating
expenses
|
$19,544,172
|
$13,463,557
|
Other expenses,
net
|
$1,751,101
|
$414,005
|
Net
loss
|
$14,308,049
|
$11,309,967
|
Basic net loss per
share
|
$11.91
|
$19.05
|
|
September 30,
2016
|
December 31,
2015
|
Increase/Decrease
|
Current
Assets
|
$5,938,358
|
$4,917,587
|
$1,020,771
|
Current
Liabilities
|
$10,721,519
|
$10,788,838
|
$67,319
|
Working capital
(Deficit)
|
$(4,783,161)
|
$(5,871,251)
|
$(1,088,090)
|
Exhibit No.
|
|
Description
|
||
|
|
|
||
|
|
|
||
3.1
|
|
Certificate
of Amendment to Certificate of Incorporation (incorporated herein
by reference to Exhibit 3.1 to the Meridian Waste Solutions, Inc.
Current Report on Form 8-K filed with the SEC on July 25,
2016)
|
||
|
|
|
||
4.1
|
|
Form of
Warrant (incorporated herein by reference to Exhibit to the
Meridian Waste Solutions, Inc. Current Report on Form 8-K filed
with the SEC on June 9, 2016)
|
||
|
|
|
||
4.2
|
|
Second
Amendment to Credit and Guaranty Agreement, dated as of July 19,
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 July 25, 2016)
|
||
|
|
|
||
4.3
|
|
Amended
and Restated Purchase Warrant for Common Shares issued in favor of
Goldman, Sachs & Co., dated July 19, 2016 (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 July 25,
2016)
|
||
|
|
|
||
4.4 |
|
Waiver and Amendment Letter, dated as of August 16, 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 Goldman Sachs Specialty Lending Group, L.P., as administrative agent for the Lenders, Collateral Agent, and Lead Arranger* | ||
|
|
|
||
4.5 |
|
Fourth Amendment to Credit and Guaranty Agreement, dated as of November 11, 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, the Lenders party thereto from time to time and Goldman Sachs Specialty Lending Group, L.P., as administrative agent for the Lenders, Collateral Agent, and Lead Arranger* | ||
|
|
|
||
10.1
|
|
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)
|
||
|
|
|
||
10.2
|
|
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 June 9, 2016)
|
||
|
|
|
||
10.3
|
|
Form of
First Amendment to Subscription 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 June 17,
2016)
|
||
|
|
|
||
10.4
|
|
Form of
Subscription Agreement (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 June 17, 2016)
|
||
|
|
|
||
10.5
|
|
Form of
Securities Purchase 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 July 25, 2016)
|
||
|
|
|
||
|
Certification
by the Principal Executive Officer of Registrant pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or
Rule 15d-14(a)).*
|
|||
|
|
|
||
|
Certification
by the Principal Financial Officer of Registrant pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or
Rule 15d-14(a)).*
|
|||
|
|
|
||
|
Certification
by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.*
|
|||
|
|
|
||
|
Certification
by the Principal Financial Officer pursuant to 18 U.S.C. 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.*
|
|||
101.INS
|
|
XBRL
Instance Document*
|
||
101.SCH
|
|
XBRL
Taxonomy Extension Schema Document*
|
||
101.CAL
|
|
XBRL
Taxonomy Extension Calculation Linkbase Document*
|
||
101.DEF
|
|
XBRL
Taxonomy Extension Definition Linkbase Document*
|
||
101.LAB
|
|
XBRL
Taxonomy Extension Label Linkbase Document*
|
||
101.PRE
|
|
XBRL
Taxonomy Extension Presentation Linkbase Document*
|
||
*
|
|
Filed
herewith
|
|
MERIDIAN WASTE SOLUTIONS, INC.
|
|
|
|
|
Date:
November 15, 2016
|
By:
|
/s/ Jeffrey Cosman
|
|
Name:
|
Jeffrey
Cosman
|
|
Title:
|
Chief
Executive Officer
|
|
|
(Principal
Executive Officer)
|
|
|
(Principal
Financial Officer)
|
|
|
(Principal
Accounting Officer)
|
1.
|
I have
reviewed this Form 10-Q of Meridian Waste Solutions,
Inc.;
|
|
|
|
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the
period covered by this report;
|
|
|
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
|
|
|
|
|
4.
|
The
registrant’s other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the
registrant and have:
|
|
|
|
|
|
a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this report is being prepared;
|
|
|
|
|
b)
|
Designed
such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
|
|
|
|
|
c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
|
|
|
|
|
d)
|
Disclosed
in this report any change in the registrant’s internal
control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over
financial reporting; and
|
|
|
|
5.
|
The
registrant’s other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and
the audit committee of the registrant’s board of directors
(or persons performing the equivalent functions):
|
|
|
|
|
|
a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial
information; and
|
|
|
|
|
b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s
internal control over financial reporting.
|
Date:
November 15, 2016
|
By:
|
/s/ Jeffrey
Cosman
|
|
|
|
Jeffrey
Cosman
|
|
|
|
Principal
Executive Officer
Meridian
Waste Solutions, Inc.
|
|
1.
|
I have
reviewed this Form 10-Q of Meridian Waste Solutions,
Inc.;
|
||||
|
|
|
|||
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the
period covered by this report;
|
||||
|
|
|
|||
3.
|
Based
on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
|
||||
|
|
|
|||
4.
|
The
registrant’s other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the
registrant and have:
|
||||
|
|
|
|||
|
a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this report is being prepared;
|
|||
|
|
|
|||
|
b)
|
Designed
such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
|
|||
|
|
|
|||
|
c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
|
|||
|
|
|
|||
|
d)
|
Disclosed
in this report any change in the registrant’s internal
control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over
financial reporting; and
|
|||
|
|
|
|||
5.
|
The
registrant’s other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and
the audit committee of the registrant’s board of directors
(or persons performing the equivalent functions):
|
||||
|
|
|
|||
|
a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial
information; and
|
|||
|
|
|
|||
|
b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s
internal control over financial reporting.
|
|||
Date:
November 15, 2016
|
By:
|
/s/ Jeffrey
Cosman
|
|
||
|
|
Jeffrey
Cosman
|
|
||
|
|
Principal
Financial Officer
Meridian
Waste Solutions, Inc.
|
|
(1)
|
Such
Quarterly Report on Form 10-Q for the period ended September 30,
2016, fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The
information contained in such Quarterly Report on Form 10-Q for the
period ended September 30, 2016, fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
|
|
|
|
|
Date:
November 15, 2016
|
By:
|
/s/ Jeffrey
Cosman
|
|
|
|
Jeffrey
Cosman
|
|
|
|
Principal
Executive Officer
Meridian
Waste Solutions, Inc.
|
|
|
|
|
|
(1)
|
Such
Quarterly Report on Form 10-Q for the period ended September 30,
2016, fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The
information contained in such Quarterly Report on Form 10-Q for the
period ended September 30, 2016, fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
|
|
|
|
|
Date:
November 15, 2016
|
By:
|
/s/ Jeffrey
Cosman
|
|
|
|
Jeffrey
Cosman
|
|
|
|
Principal
Financial Officer
Meridian
Waste Solutions, Inc.
|
|
Fiscal
Year
|
Consolidated Growth Capital Expenditures
|
December 31,
2015
|
$250,000
|
December 31,
2016
|
$4,375,000
|
December 31,
2017
|
$750,000
|
December 31,
2018
|
$750,000
|
December 31,
2019
|
$1,750,000
|
December 31, 2020
and each Fiscal Year ending thereafter
|
$750,000
|
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Nov. 11, 2016 |
|
License Agreement Fee Charged Percent Of Sales | ||
Entity Registrant Name | Meridian Waste Solutions, Inc. | |
Entity Central Index Key | 0000949721 | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Is Entity a Well-known Seasoned Issuer? | No | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 1,698,569 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2016 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q3 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Common stock par value (in dollars per share) | $ 0.025 | $ 0.025 |
Common stock, shares authorized (in shares) | 75,000,000 | 75,000,000 |
Common stock, shares issued (in shares) | 1,194,051 | 1,051,933 |
Common stock, shares outstanding (in shares) | 1,182,551 | 1,040,433 |
Treasury stock, shares | 11,500 | |
Preferred Series A | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized (in shares) | 51 | 51 |
Preferred stock, shares issued (in shares) | 51 | 51 |
Preferred stock, shares outstanding (in shares) | 51 | 51 |
Preferred Series B | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized (in shares) | 71,210 | 71,210 |
Preferred stock, shares issued (in shares) | 71,210 | 71,210 |
Preferred stock, shares outstanding (in shares) | 71,210 | 71,210 |
Preferred Series C | ||
Preferred stock, par value (in dollars per share) | $ 100 | $ 100 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Revenue | ||||
Services Revenue | $ 8,389,326 | $ 3,382,221 | $ 23,883,663 | $ 9,733,330 |
Cost of sales and services | ||||
Cost of sales and services | 5,070,322 | 2,104,701 | 14,288,853 | 5,989,174 |
Depreciation | 895,238 | 398,178 | 2,462,586 | 1,176,561 |
Total cost of sales and services | 5,965,560 | 2,502,879 | 16,751,439 | 7,165,735 |
Gross Profit | 2,423,766 | 879,342 | 7,132,224 | 2,567,595 |
Expenses: | ||||
Bad debt expense | 112,950 | 0 | 168,508 | 2,738 |
Compensation and related expense | 3,117,396 | 326,404 | 10,113,985 | 8,706,809 |
Depreciation and amortization | 937,841 | 759,865 | 2,876,333 | 2,214,390 |
Impairment Expense | 0 | 0 | 1,255,267 | 0 |
Selling, general and administrative | 1,345,379 | 1,185,770 | 5,130,079 | 2,539,620 |
Total Expenses | 5,513,566 | 2,272,039 | 19,544,172 | 13,463,557 |
Other Income (Expenses): | ||||
Miscellaneous income (loss) | (11,354) | 2,612 | (9,090) | 20,635 |
Gain on disposal of assets | 0 | 37,183 | 3,053 | 43,433 |
Unrealized gain on interest rate swap | 0 | 30,584 | 0 | 40,958 |
Unrealized gain on change in fair value of derivative liability | 733,031 | 346,963 | 853,031 | 346,963 |
Loss from proportionate share of equity method investment | 0 | 0 | (2,105) | 0 |
Unrealized gain on investment | 547 | 0 | 547 | 0 |
Gain on contingent liability | 0 | 0 | 1,000,000 | 0 |
Interest income | 844 | 0 | 7,270 | 0 |
Interest expense | (1,224,217) | (454,709) | (3,603,807) | (865,994) |
Total Other Expenses | (501,149) | (37,367) | (1,751,101) | (414,005) |
Loss before income taxes | (3,590,949) | (1,430,064) | (14,163,049) | (11,309,967) |
Provision for income taxes | (145,000) | 0 | (145,000) | 0 |
Net Loss | $ (3,735,949) | $ (1,430,064) | $ (14,308,049) | $ (11,309,967) |
Basic Net Loss Per Share | $ (2.96) | $ (2.22) | $ (11.91) | $ (19.05) |
Weighted Average Number of Shares Outstanding (Basic and Diluted) | 1,261,085 | 644,193 | 1,201,394 | 593,638 |
1. NATURE OF OPERATIONS AND ORGANIZATION |
9 Months Ended |
---|---|
Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
1. NATURE OF OPERATIONS AND ORGANIZATION | Basis of Presentation
The accompanying condensed consolidated financial statements of Meridian Waste Solutions, Inc. and its subsidiaries (collectively called the "Company") included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC"). The unaudited condensed consolidated financial statements do not include all of the information and footnotes required by US GAAP for complete financial statements. The unaudited condensed consolidated financial statements 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 10-K for the Company as filed with the SEC. The consolidated balance sheet at December 31, 2015 contained herein was derived from audited financial statements, but does not include all disclosures included in the Form 10-K for Meridian Waste Solutions, Inc., and applicable under accounting principles generally accepted in the United States of America. Certain information and footnote disclosures normally included in our annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America, but not required for interim reporting purposes, have been omitted or condensed.
In the opinion of management, all adjustments (consisting of normal recurring items) necessary for a fair presentation of the unaudited condensed financial statements as of September 30, 2016, and the results of operations and cash flows for the three and nine months ended September 30, 2016 have been made. The results of operations for the three and nine months ended September 30, 2016 are not necessarily indicative of the results to be expected for a full year.
Reverse Stock Split On November 2, 2016, the Company effected a reverse stock split of the Company’s common stock whereby each 20 shares of common stock was replaced with one share of common stock. The par value and the number of authorized shares of the common stock were not adjusted. All common share and per share amounts for all periods presented in these financial statements have been adjusted retroactively to reflect the reverse stock split. The quantity of common stock equivalents and the conversion and exercise ratios were adjusted for the effect of the reverse stock split.
Basis of Consolidation
The condensed consolidated financial statements for the nine months ended September 30, 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, Brooklyn Cheesecake & Dessert Acquisition Corp, Meridian Waste Missouri, 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 (“HTST”), a Georgia Limited Liability Company had no operations during the period. The condensed consolidated financial statements for the nine months ended September 30, 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, Brooklyn Cheesecake & Acquisition Corp., and Here to Serve Technology, LLC, a Georgia Limited Liability Company.
All significant intercompany accounts and transactions have been eliminated in consolidation.
Meridian Waste Solutions, Inc. (the “Company” or “Meridian”) is currently operating under four 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) 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.
Liquidity and Capital Resources
As of September 30, 2016, the Company had negative working capital of $4,783,161. This lack of liquidity is mitigated by the Company’s ability to generate positive cash flow from operating activities. In the nine months ended September 30, 2016, cash generated from operating activities, was approximately $600,000. In addition, as of September 30, 2016, the Company had approximately $1,200,000 in cash 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. See note 5, under the heading Goldman Sachs Credit Agreement. |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Cash and Cash Equivalents
The Company considers all highly liquid investments with original 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. At September 30, 2016 and 2015 the Company had no cash equivalents.
Short-term Investments
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 cost, which approximates fair market value, on our Consolidated Balance Sheet. Our short-term investments’ contractual maturities occur before March 31, 2017. The short-term investment of $1,952,805 is currently restricted as this amount is collateralizing a letter of credit needed for our performance bond. The letter of credit expires in February of 2017, and the cash is restricted until then.
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, short term investments 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. The Company uses a Monte Carlo simulated put option Black Scholes Merton model. 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 loss. 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 gain.
See Notes 5 and 6 under the heading "Derivative Liabilities" for a description and valuation of the Company's derivative instruments.
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 nine months ended September 30, 2016, the Company experienced impairment expense of its customer lists, see Note 4. No other impairments were noted during the nine months ended September 30, 2016, and September 30, 2015.
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 does have deferred tax liabilities related to its intangible assets, which were $145,000 as of September 30, 2016.
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.
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.
Reclassification
Certain reclassifications have been made to previously reported amounts to conform to 2016 amounts. The reclassifications had no impact on previously reported results of operations or stockholders’ deficit. The changes were as a result of loan fees being shown net of long term debt, which was retrospectively applied, $1,416,697 of net loans were reclassified in the December 31, 2015 balance sheet to be shown net against long-term debt. This is a result of the Company's adoption of ASU 2015-03.
Accounts Receivable
Accounts receivable are recorded at management’s estimate of net realizable value. At September 30, 2016 and December 31, 2015 the Company had approximately $2,368,000 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 September 30, 2016 and December 31, 2015 the Company had approximately $170,000 and $618,000 recorded for the allowance for doubtful accounts, 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. Intangible 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.
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:
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 nine months ended September 30, 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 $126,000 for the nine months ended September 30, 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 September 30, 2016 is approximately 8.5%.
We record the estimated fair value of final capping, closure and post-closure liabilities for our landfill 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.
Interest accretion on final capping, closure and post-closure liabilities is recorded using the effective interest method and is recorded as final capping, closure and post-closure expense, which is included in “operating” expenses within our Consolidated Statements of Operations Amortization of Landfill Assets - The amortizable basis of a landfill includes (i) amounts previously expended and capitalized; (ii) capitalized landfill final capping, closure and post-closure costs, (iii) projections of future purchase and development costs required to develop the landfill site to its remaining permitted and expansion capacity and (iv) projected asset retirement costs related to landfill final capping, closure and post-closure activities.
Amortization is recorded on a units-of-consumption basis, applying expense as a rate per ton. The rate per ton is calculated by dividing each component of the amortizable basis of a landfill by the number of tons needed to fill the corresponding asset’s airspace.
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 nine months ended September 30, 2016 the Company operations related to its landfill assets and liability are presented in the tables below:
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. For example, revenue typically is recognized as waste is collected, or tons are received at our landfills and transfer stations.
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 July, August and September for services that will be provided during October, November and December.
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.
For the nine months ended September 30, 2016, the Company had one contract that accounted for approximately 11% of the Company's revenue. For the nine months ended September 30, 2015, the Company had two contracts that accounted for approximately 49% 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 September 30, 2016 the Company had one convertible note outstanding that is convertible into common shares. Additionally, the Company issued stock warrants for 104,314 common shares. Those are not presented in the condensed consolidated statement of operations since the Company incurred a loss and the effect of these shares is anti-dilutive.
At September 30, 2016, and December 31, 2015 the Company had a series of convertible notes and warrants outstanding that could be converted into approximately, 175,023 and 127,428 common shares, respectively. These are not presented in the condensed consolidated statements of operations since the Company incurred a loss and the effect of these shares is anti- dilutive.
For the nine months ended September 30, 2016, the Company had 70,709 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.
Stock-Based Compensation
Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718.
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 $8,850,030 and $7,599,150 during the nine months ended September 30, 2016 and 2015, respectively, which is included in compensation and related expense on the statement of operations.
Recent Accounting Pronouncements
ASU 2016-09 “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The amendments are effective for public companies for annual periods beginning after December 15, 2016, and interim periods within those annual periods. For private companies, the amendments are effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted for any interim or annual period.
ASU 2016-02 “Leases (Topic 842).” Among other things, in the amendments in ASU 2016-02, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date:
-A lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and
-A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.
Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers.
Effective for Public business entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019, for a calendar year entity). Nonpublic business entities should apply the amendments for fiscal years beginning after December 15, 2019 (i.e., January 1, 2020, for a calendar year entity), and interim periods within fiscal years beginning after December 15, 2020. Early application is permitted for all public business entities and all nonpublic business entities upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach.
ASU 2015-17 “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes.” The amendments in ASU 2015-17 eliminates the current requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organizations will be required to classify all deferred tax assets and liabilities as noncurrent.
Effective for public business entities for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. For all other entities, the amendments are effective for financial statements issued for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. The amendments may be applied prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented.
ASU 2014-15 “Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” The amendments in ASU 2014-15 are intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. Under GAAP, financial statements are prepared under the presumption that the reporting organization will continue to operate as a going concern, except in limited circumstances. The going concern basis of accounting is critical to financial reporting because it establishes the fundamental basis for measuring and classifying assets and liabilities. Currently, GAAP lacks guidance about management’s responsibility to evaluate whether there is substantial doubt about the organization’s ability to continue as a going concern or to provide related footnote disclosures. This ASU provides guidance to an organization’s management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations today in the financial statement footnotes.
Effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early application is permitted for annual or interim reporting periods for which the financial statements have not previously been issued.
Statement of Cash Flows — In August 2016, the FASB issued amended authoritative guidance associated with the classification of certain cash receipts and cash payments on the statement of cash flows. The amended guidance addresses specific cash flow issues with the objective of reducing existing diversity in practice. The amended guidance is effective for the Company on January 1, 2018, with early adoption permitted.
Revenue Recognition — In May 2014, the FASB issued amended authoritative guidance associated with revenue recognition. The amended guidance requires companies to recognize 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. Additionally, the amendments will require enhanced qualitative and quantitative disclosures regarding customer contracts. The amended guidance associated with revenue recognition is effective for the Company on January 1, 2018. The amended guidance may be applied retrospectively for all periods presented or retrospectively with the cumulative effect of initially applying the amended guidance recognized at the date of initial adoption.
The Company is currently assessing the potential impact of the above recent accounting pronouncements. |
3. PROPERTY, PLANT AND EQUIPMENT |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3. PROPERTY, PLANT AND EQUIPMENT | The following is a summary of property, plant, and equipment—at cost, less accumulated depreciation:
As of September 30, 2016, the Company has $395,000 of land and building which are held for sale and not included in amounts noted above. These held for sale assets were not depreciated during the nine months ended September 30, 2016 |
4. INTANGIBLE ASSETS AND ACQUISITION |
9 Months Ended |
---|---|
Sep. 30, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
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.
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.
In the nine months ended September 30, 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 $232,581, amounted to $2,833,590 and $2,138,359 for the nine months ended September 30, 2016 and 2015 respectively. In June of 2016 the Company recorded $1,255,269 of impairment expense against the customer relationships due to the non-renewal of a Christian operating agreement. The Company also wrote off through miscellaneous income the $1,000,000 contingent liability that was recorded in connection with the loss of the potential renewal. |
5. NOTES PAYABLE AND CONVERTIBLE NOTES |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5. NOTES PAYABLE AND CONVERTIBLE NOTES | The Company had the following long-term debt:
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 certain lenders under a credit agreement among the Company, certain of its affiliates, the lenders party thereto and Goldman Sachs Specialty Lending Group, L.P., as administrative agent, collateral agent and lead arranger, consisting of $40,000,000 aggregate principal amount of Tranche A Term Loans, $10,000,000 aggregate principal amount of commitments to make MultiDraw Term Loans and up to $5,000,000 aggregate principal amount of Revolving Commitments. During the nine months ended September 30, 2016, the Company borrowed $2,150,000 in relation to the Revolving Commitments. At September 30, 2016, the Company had a total outstanding balance of $42,150,000 consisting of the Tranche A Term Loan and draw of the Revolving Commitments. The loans are secured by liens on substantially all of the assets of the Company and its subsidiaries. The debt has a maturity date of December 22, 2020 with interest paid monthly at an annual rate of approximately 9% (subject to variation based on changes in LIBOR or another underlying reference rate). In addition, there is a commitment fee paid monthly on the MultiDraw Term Loans and Revolving Commitments at an annual rate of 0.5%. The Company has adopted ASU 2015-03 and is showing loan fees net of longterm debt on the balance sheet. As of September 30, 2016 and at certain times thereafter, the Company was in violation of covenants within its credit agreement with Goldman, Sachs & Co.. The lenders and agents and the Company and its affiliates entered into a waiver and amendment letter on November 11, 2016 whereby the covenant violations were waived. The next measured date of all covenants is December 31, 2016. Should the Company have violations in the future that are not waived, it could materially effect the Company’s operations and ability to fund future operations.
In addition, in connection with the credit agreement, the Company issued warrants to Goldman, Sachs & Co. 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. 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 & Co. has been measured at fair value at September 30, 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. Upon the initial recording of the derivative warrant at fair value the instrument was bifurcated and the Company recorded a debt discount of $2,160,000. This debt discount is being amortized as interest expense using the effective interest rate method over the life of the note, which is 5 years. At September 30, 2016 the balance of the debt discount is $1,899,851. The Company incurred $1,446,515 of issuance cost related to obtaining the notes. These costs are being amortized over the life of the notes using the effective interest rate method. At September 30, 2016, the unamortized balance of the costs was $1,253,319.
The key inputs used in the September 30, 2016 and December 31, 2015 fair value calculations were as follows:
The change in the market value for the period ending September 30, 2016 is as follows:
Convertible Notes Payable
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.
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 September 30, 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%. In May of 2016 one of these equipment loans was paid in full. At September 30, 2016, the balance of the remaining three loans was $300,054.
Other Debts
Convertible notes due related parties
In 2015, approximately $225,000 of the issued promissory notes were converted into approximately 461,000 shares at the contractual conversion price. At September 30, 2016 the Company had $11,850 remaining in convertible notes with an annual interest rate of 6% to related parties, which includes $1,850 in accrued interest and is included in current liabilities on the consolidated balance sheet. The note is no longer convertible as of September 30, 2016 as maturity date has passed. The Company and management have agreed that principal and all accrued interest will be paid back to the related party in the fourth quarter of 2016.
Notes Payable, related party
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 September 30, 2016, the Company’s loan from Here to Serve Holding Corp. was $359,891, and is included in current liabilities on the consolidated balance sheet.
Total interest expense for the three and nine months ended September 30, 2016 was $1,224,217 and $3,603,807, respectively. Amortization of debt discount was $86,913 and $252,751, respectively. Amortization of capitalized loan fees was $56,156 and $163,377, respectively. Interest expense on debt was $1,081,148 and $3,187,679, respectively. |
6. SHAREHOLDERS' EQUITY |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6. SHAREHOLDERS' EQUITY | Common Stock
The Company has authorized 75,000,000 shares of $0.025 par value common stock. At September 30, 2016 and December 31, 2015 there were 1,194,051 and 1,051,933 shares issued and outstanding.
Treasury Stock
During 2014, the Company’s Board of Directors authorized a stock repurchase of 11,500 shares of its common stock for approximately $230,000 at an average price of $20.00 per share. At September 30, 2016 and December 31, 2015 the Company holds 11,500 shares of its common stock in its treasury.
Preferred Stock
The Company has authorized 5,000,000 shares of Preferred Stock, for which three classes have been designated to date. Series A has 51 and 51 shares issued and outstanding, Series B has 71,210 and 71,210 shares issued and outstanding and series C has 35,750 and 0 shares issued and outstanding, as of September 30, 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 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 September 30, 2016 and December 31, 2015, the Company’s Series B Preferred Stock dividends in arrears on the 12% cumulative preferred stock were approximately $1,673,000 ($23.50 per share) and $1,033,000 ($14.50 per share), respectively.
Series C
The Company has authorized for issuance up to 67,361 shares of Series C Preferred Stock (“Series C”). Each share of Series C: (a) has a stated value of equal to $100 per share; (b) has a par value of $0.001 per share; (c) accrues fixed rate dividends at a rate of eight percent per annum; (d) are convertible at the option of the holder into 89.28 shares of common Stock (conversion price of $1.12 per share based off stated value of $100); (e) votes on an ‘as converted’ basis; (f) has liquidation (including deemed liquidations related to certain fundamental transactions) privileges of $1.12 per share. The Series C expire 15 months after issuance.
Further, in the event of a Qualified Offering, the shares of Series C Preferred Stock will be automatically converted at the lower of $1.12 per share or the per share price that reflects a 20% discount to the price of the Common Stock pursuant to such Qualified Offering. A "Qualified Offering" is defined as an underwritten offering by the Company pursuant to which (1) the Company receives aggregate gross proceeds of at least $20,000,000 in consideration of the purchase of shares of Common Stock or (2) (a) the Company receives aggregate gross proceeds of at least $15,000,000 in consideration of the purchase of shares of Common Stock and (b) the Common Stock becomes listed on The Nasdaq Capital Market, the New York Stock Exchange, or the NYSE MKT.
In addition, if after six months from the date of the issuance until the expiration date, the holder converts a Series C security to common stock and sells such common stock for total proceeds that do not equal or exceed such holder’s purchase price, the Company is obligated to issue additional shares of common stock in an amount sufficient such that, when sold and the net proceeds are added to the net proceeds of the initial sale, the holder shall have received funds equal to that of the holder’s initial purchase price (“Shortfall Provision”).
The Company evaluated the Series C in accordance with ASC 815 – Derivatives and Hedging, to discern whether any feature(s) required bifurcation and derivative accounting. The Company noted the Shortfall Provision has variable settlement based upon an item (initial purchase price) that is not an input into a fixed for fixed price model, thus such provision is not considered indexed to the Company’s stock. Accordingly, the Shortfall Provision was bifurcated and accounted for as a derivative liability. In addition, given the Series C has deemed liquidation privileges that could require redemption outside the control of the issuer, the Series C is classified within the mezzanine section of the Condensed Consolidated Balance Sheet.
Third Quarter Series C Offering
During the three months ended September 30, 2016, the Company sold 12,750 shares of Series C for gross proceeds of $1.275 million. These proceeds were allocated between the Shortfall Provision derivative liability ($310,000) and the host Series C instrument ($965,000). After such allocation, the Company noted that the Series C had a beneficial conversion feature of $265,000 which was recognized as a deemed dividend.
Also during the three months ended September 30, 2016, the Company issued 23,000 shares of Series C to repurchase the 2,053,573 shares of common stock and related shortfall provision derivative issued in June 2016. Given the transaction was predominantly the repurchase of common stock that was immediately retired, the Company accounted for this as a treasury stock transaction. The Series C was recorded at a fair value of $2.3 million ($620,000 of which was allocated to the Shortfall Provision), the top off provision (which was $246,000 at the time of exchange) was written off, and a beneficial conversion feature of $373,000 was recognized immediately as a deemed dividend.
Derivative Footnote
As noted above, the common stock issuance during June 2016 included a top off provision that was extinguished in August 2016. Such provision was valued using an intrinsic measurement and such value was $246,000 at the time of extinguishment.
In addition, the Series C included a Shortfall Provision that required bifurcation and to be accounted for as a derivative liability. The fair value of the Shortfall Provision was calculated using a Monte Carlo simulated put option Black Scholes Merton Model. The cumulative fair values at respective date of issuances and September 30, 2016 were $930,000 and $1.1 million, respectively. The key assumptions used in the model at inception and at September 30, 2016 are as follows:
The roll forward of the Shortfall Provision derivative liability is as follows
Common Stock Transactions
During the nine months ended September 30, 2016 and the year ended December 31, 2015, the Company issued, 244,788 and 553,762 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 244,788 shares issued for the nine months ended September 30, 2016, the Company:
The Company has issued and outstanding warrants of 104,314 common shares, as adjusted, with the current exercise price of $4.31, as adjusted, expiring December 31, 2023.
There were no outstanding warrants at September 30, 2015. A summary of the status of the Company's outstanding stock warrants for the period ended September 30, 2016 is as follows:
|
7. FAIR VALUE MEASUREMENT |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 September 30, 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:
|
8. LEASES |
9 Months Ended | |||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||
Leases [Abstract] | ||||||||||||||||||||||||||||||||||||
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, 2023. Future minimum lease payments at September 30, 2016 are as follows:
The Company has also entered into various other leases on a month to month basis for machinery and equipment. Rent expense amounted to $409,007 and $222,869 for the nine months ended September 30, 2016 and 2015, respectively. |
9. BONDING |
9 Months Ended |
---|---|
Sep. 30, 2016 | |
Bonding | |
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 nine months ended September 30, 2016, the Company had approximately $141,000 of expenses related to this performance bond and for the nine months ended September 30, 2015, the Company was not required to obtain a performance bond. |
10. LITIGATION |
9 Months Ended |
---|---|
Sep. 30, 2016 | |
Litigation | |
10. LITIGATION | The Company is involved in various lawsuits related to the operations of its subsidiaries which arise in the normal course of business. 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.
|
11. RELATED PARTY TRANSACTIONS |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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.
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:
The Company recorded losses from its investment in MSTI, accounted for under the equity method, of approximately $2,100 for the nine months ended September 30, 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. |
12. EQUITY AND INCENTIVE PLANS |
9 Months Ended |
---|---|
Sep. 30, 2016 | |
Employee Benefits and Share-based Compensation [Abstract] | |
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.
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 212,654 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 212,654 shares fully cliff vests on January 1, 2017 if continuous employment and the Company reaches certain performance goals. As of September 30, 2016, the Company has recognized approximately $4,500,000 in compensation expense of a potential total expense of $6,592,000. The total expense of $6,592,265 is being expensed ratably from the original agreement date of March 11, 2016 to the end date of January 1, 2017. |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation | The accompanying condensed consolidated financial statements of Meridian Waste Solutions, Inc. and its subsidiaries (collectively called the "Company") included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC"). The unaudited condensed consolidated financial statements do not include all of the information and footnotes required by US GAAP for complete financial statements. The unaudited condensed consolidated financial statements 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 10-K for the Company as filed with the SEC. The consolidated balance sheet at December 31, 2015 contained herein was derived from audited financial statements, but does not include all disclosures included in the Form 10-K for Meridian Waste Solutions, Inc., and applicable under accounting principles generally accepted in the United States of America. Certain information and footnote disclosures normally included in our annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America, but not required for interim reporting purposes, have been omitted or condensed.
In the opinion of management, all adjustments (consisting of normal recurring items) necessary for a fair presentation of the unaudited condensed financial statements as of September 30, 2016, and the results of operations and cash flows for the three and nine months ended September 30, 2016 have been made. The results of operations for the three and nine months ended September 30, 2016 are not necessarily indicative of the results to be expected for a full year. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reverse Stock Split | On November 2, 2016, the Company effected a reverse stock split of the Company’s common stock whereby each 20 shares of common stock was replaced with one share of common stock. The par value and the number of authorized shares of the common stock were not adjusted. All common share and per share amounts for all periods presented in these financial statements have been adjusted retroactively to reflect the reverse stock split. The quantity of common stock equivalents and the conversion and exercise ratios were adjusted for the effect of the reverse stock split. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Consolidation | The condensed consolidated financial statements for the nine months ended September 30, 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, Brooklyn Cheesecake & Dessert Acquisition Corp, Meridian Waste Missouri, 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 (“HTST”), a Georgia Limited Liability Company had no operations during the period. The condensed consolidated financial statements for the nine months ended September 30, 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, Brooklyn Cheesecake & Acquisition Corp., and Here to Serve Technology, LLC, a Georgia Limited Liability Company.
All significant intercompany accounts and transactions have been eliminated in consolidation.
Meridian Waste Solutions, Inc. (the “Company” or “Meridian”) is currently operating under four 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) 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; see (note 4).
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. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 457,707 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 457,707 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 September 30, 2016, the Company had negative working capital of $4,783,161. This lack of liquidity is mitigated by the Company’s ability to generate positive cash flow from operating activities. In the nine months ended September 30, 2016, cash generated from operating activities, was approximately $600,000. In addition, as of September 30, 2016, the Company had approximately $1,200,000 in cash 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. See note 5, under the heading Goldman Sachs Credit Agreement. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and Cash Equivalents | The Company considers all highly liquid investments with original 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. At September 30, 2016 and 2015 the Company had no cash equivalents. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Short-term Investments | 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 cost, which approximates fair market value, on our Consolidated Balance Sheet. Our short-term investments’ contractual maturities occur before March 31, 2017. The short-term investment of $1,952,805 is currently restricted as this amount is collateralizing a letter of credit needed for our performance bond. The letter of credit expires in February of 2017, and the cash is restricted until then. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | The Company’s financial instruments consist of cash and cash equivalents, short term investments 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. The Company uses a Monte Carlo simulated put option Black Scholes Merton model. 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 loss. 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 gain.
See Notes 5 and 6 under the heading "Derivative Liabilities" for a description and valuation of the Company's derivative instruments. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 nine months ended September 30, 2016, the Company experienced impairment expense of its customer lists, see Note 4. No other impairments were noted during the nine months ended September 30, 2016, and September 30, 2015.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 does have deferred tax liabilities related to its intangible assets, which were $145,000 as of September 30, 2016.
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. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reclassifications | Certain reclassifications have been made to previously reported amounts to conform to 2016 amounts. The reclassifications had no impact on previously reported results of operations or stockholders’ deficit. The changes were as a result of loan fees being shown net of long term debt, which was retrospectively applied, $1,416,697 of net loans were reclassified in the December 31, 2015 balance sheet to be shown net against long-term debt. This is a result of the Company's adoption of ASU 2015-03.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable | Accounts receivable are recorded at management’s estimate of net realizable value. At September 30, 2016 and December 31, 2015 the Company had approximately $2,368,000 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 September 30, 2016 and December 31, 2015 the Company had approximately $170,000 and $618,000 recorded for the allowance for doubtful accounts, 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. Intangible 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. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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:
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 nine months ended September 30, 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 $126,000 for the nine months ended September 30, 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 September 30, 2016 is approximately 8.5%.
We record the estimated fair value of final capping, closure and post-closure liabilities for our landfill 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.
Interest accretion on final capping, closure and post-closure liabilities is recorded using the effective interest method and is recorded as final capping, closure and post-closure expense, which is included in “operating” expenses within our Consolidated Statements of Operations Amortization of Landfill Assets - The amortizable basis of a landfill includes (i) amounts previously expended and capitalized; (ii) capitalized landfill final capping, closure and post-closure costs, (iii) projections of future purchase and development costs required to develop the landfill site to its remaining permitted and expansion capacity and (iv) projected asset retirement costs related to landfill final capping, closure and post-closure activities.
Amortization is recorded on a units-of-consumption basis, applying expense as a rate per ton. The rate per ton is calculated by dividing each component of the amortizable basis of a landfill by the number of tons needed to fill the corresponding asset’s airspace.
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 nine months ended September 30, 2016 the Company operations related to its landfill assets and liability are presented in the tables below:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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. For example, revenue typically is recognized as waste is collected, or tons are received at our landfills and transfer stations. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 July, August and September for services that will be provided during October, November and December. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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.
For the nine months ended September 30, 2016, the Company had one contract that accounted for approximately 11% of the Company's revenue. For the nine months ended September 30, 2015, the Company had two contracts that accounted for approximately 49% 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 September 30, 2016 the Company had one convertible note outstanding that is convertible into common shares. Additionally, the Company issued stock warrants for 104,314 common shares. Those are not presented in the condensed consolidated statement of operations since the Company incurred a loss and the effect of these shares is anti-dilutive.
At September 30, 2016, and December 31, 2015 the Company had a series of convertible notes and warrants outstanding that could be converted into approximately, 175,023 and 127,428 common shares, respectively. These are not presented in the condensed consolidated statements of operations since the Company incurred a loss and the effect of these shares is anti- dilutive.
For the nine months ended September 30, 2016, the Company had 70,709 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. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718.
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 $8,850,030 and $7,599,150 during the nine months ended September 30, 2016 and 2015, respectively, which is included in compensation and related expense on the statement of operations.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Recent Accounting Pronouncements | ASU 2016-09 “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The amendments are effective for public companies for annual periods beginning after December 15, 2016, and interim periods within those annual periods. For private companies, the amendments are effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted for any interim or annual period.
ASU 2016-02 “Leases (Topic 842).” Among other things, in the amendments in ASU 2016-02, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date:
-A lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and
-A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.
Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers.
Effective for Public business entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019, for a calendar year entity). Nonpublic business entities should apply the amendments for fiscal years beginning after December 15, 2019 (i.e., January 1, 2020, for a calendar year entity), and interim periods within fiscal years beginning after December 15, 2020. Early application is permitted for all public business entities and all nonpublic business entities upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach.
ASU 2015-17 “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes.” The amendments in ASU 2015-17 eliminates the current requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organizations will be required to classify all deferred tax assets and liabilities as noncurrent.
Effective for public business entities for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. For all other entities, the amendments are effective for financial statements issued for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. The amendments may be applied prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented.
ASU 2014-15 “Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” The amendments in ASU 2014-15 are intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. Under GAAP, financial statements are prepared under the presumption that the reporting organization will continue to operate as a going concern, except in limited circumstances. The going concern basis of accounting is critical to financial reporting because it establishes the fundamental basis for measuring and classifying assets and liabilities. Currently, GAAP lacks guidance about management’s responsibility to evaluate whether there is substantial doubt about the organization’s ability to continue as a going concern or to provide related footnote disclosures. This ASU provides guidance to an organization’s management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations today in the financial statement footnotes.
Effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early application is permitted for annual or interim reporting periods for which the financial statements have not previously been issued.
Statement of Cash Flows — In August 2016, the FASB issued amended authoritative guidance associated with the classification of certain cash receipts and cash payments on the statement of cash flows. The amended guidance addresses specific cash flow issues with the objective of reducing existing diversity in practice. The amended guidance is effective for the Company on January 1, 2018, with early adoption permitted.
Revenue Recognition — In May 2014, the FASB issued amended authoritative guidance associated with revenue recognition. The amended guidance requires companies to recognize 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. Additionally, the amendments will require enhanced qualitative and quantitative disclosures regarding customer contracts. The amended guidance associated with revenue recognition is effective for the Company on January 1, 2018. The amended guidance may be applied retrospectively for all periods presented or retrospectively with the cumulative effect of initially applying the amended guidance recognized at the date of initial adoption.
The Company is currently assessing the potential impact of the above recent accounting pronouncements. |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operations related to its landfill assets and liability |
|
3. PROPERTY, PLANT AND EQUIPMENT (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, plant and equipment |
|
5. NOTES PAYABLE AND CONVERTIBLE NOTES (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long term debt |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair value calculation |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Change in the market value |
|
6. SHAREHOLDERS' EQUITY (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of key assumptions used |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Roll forward of the Shortfall Provision derivative liability |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Warrant activity |
|
7. FAIR VALUE MEASUREMENT (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of fair value by hierarchy |
|
8. LEASES (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||
Leases [Abstract] | ||||||||||||||||||||||||||||||||||||
Future minimum lease payments |
|
11. RELATED PARTY TRANSACTIONS (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of financial position and results of operations of MSTI |
|
1. NATURE OF OPERATIONS AND ORGANIZATION (Details Narrative) - USD ($) |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Working capital deficit | $ 4,783,161 | |
Cash and cash equivalents | 1,247,756 | $ 2,729,795 |
Short-term investments | 1,952,805 | $ 0 |
Borrowing capacity | $ 12,850,000 |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2016 |
Dec. 31, 2015 |
|
Landfill Assets | ||
Beginning balance | $ 3,393,476 | $ 3,396,519 |
Capital additions | 350,699 | 0 |
Amortization of landfill assets | (229,538) | (3,043) |
Asset retirement adjustments | 11,869 | 0 |
Ending balance | 3,526,506 | 3,393,476 |
Landfill Asset Retirement Obligation | ||
Beginning balance | 200,252 | 196,519 |
Obligations incurred and capitalized | 11,869 | 0 |
Obligations settled | 0 | 0 |
Interest accretion | 125,809 | 3,733 |
Revisions in estimates and interest rate assumption | 0 | 0 |
Ending balance | $ 337,930 | $ 200,252 |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Dec. 31, 2015 |
|
Accounting Policies [Abstract] | |||||
Interest income | $ 844 | $ 0 | $ 7,270 | $ 0 | |
Allowance for doubtful accounts | 170,000 | 170,000 | $ 618,000 | ||
FDIC limit | 250,000 | 250,000 | |||
United States bank deposits | 1,247,756 | 1,247,756 | |||
Federally insured | 950,725 | 950,725 | |||
Not federally insured | $ 297,031 | $ 297,031 | |||
Weighted-average common shares relating to the convertible debt | 70,709 | ||||
Outstanding warrants converted into common shares | 175,023 | 127,428 | |||
Stock based compensation expense | $ 8,850,030 | $ 7,599,150 |
3. PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($) |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Property, Plant and Equipment [Abstract] | ||
Land | $ 1,590,000 | $ 1,690,000 |
Buildings & Building Improvements | 397,156 | 692,156 |
Furniture & office equipment | 386,382 | 258,702 |
Containers | 6,799,566 | 4,453,386 |
Trucks, Machinery, & Equipment | 12,844,481 | 9,948,686 |
Total cost | 22,017,585 | 17,042,930 |
Less accumulated depreciation | (5,086,141) | (2,609,190) |
Net property and Equipment | $ 16,931,444 | $ 14,433,740 |
3. PROPERTY, PLANT AND EQUIPMENT (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Property, Plant and Equipment [Abstract] | ||||
Land and building held for sale | $ 395,000 | $ 395,000 | ||
Depreciation expense | $ 895,238 | $ 398,178 | $ 2,462,586 | $ 1,176,561 |
5. NOTES PAYABLE AND CONVERTIBLE NOTES (Details) - USD ($) |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Debt Disclosure [Abstract] | ||
Goldman Sachs - Tranche A Term Loan - LIBOR Interest | $ 40,000,000 | $ 40,000,000 |
Goldman Sachs - Revolver | 2,150,000 | 0 |
Goldman Sachs - MDTL | 0 | 0 |
Convertible Notes Payable | 1,250,000 | 1,250,000 |
Capitalized lease - financing company, secured by equipment | 15,898 | 37,097 |
Equipment loans | 300,053 | 395,119 |
Notes payable to seller of Meridian, subordinated debt | 1,475,000 | 1,475,000 |
Less: debt issuance cost/fees | (1,253,319) | (1,416,697) |
Less: debt discount | (1,899,851) | (2,152,603) |
Total debt | 42,181,533 | 39,371,048 |
Less: current portion | (339,178) | (417,119) |
Long term debt less current portion | $ 41,698,603 | $ 39,170,796 |
5. NOTES PAYABLE AND CONVERTIBLE NOTES (Details 1) |
9 Months Ended |
---|---|
Sep. 30, 2016
USD ($)
$ / shares
| |
Debt Disclosure [Abstract] | |
Purchase Price | $ | $ 450,000 |
Time to expiration | Dec. 22, 2023 |
Risk-free interest rate | 1.43% |
Estimated volatility | 60.00% |
Dividend | 0.00% |
Stock price on September 30, 2016 | $ / shares | $ .88 |
Expected forfeiture rate | 0.00% |
5. NOTES PAYABLE AND CONVERTIBLE NOTES (Details 2) |
9 Months Ended |
---|---|
Sep. 30, 2016
USD ($)
| |
Debt Disclosure [Abstract] | |
Fair value of warrants at December 31, 2015 | $ 2,820,000 |
Unrealized gain on derivative liability | (1,280,000) |
Fair value of warrants at September 30, 2016 | $ 1,540,000 |
5. NOTES PAYABLE AND CONVERTIBLE NOTES (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Notes Payable And Convertible Notes Details Narrative | ||||
Interest expense | $ 1,224,217 | $ 454,709 | $ 3,603,807 | $ 865,994 |
Amortization of debt discount | 86,913 | 252,751 | ||
Amortization of capitalized loan fees | 56,156 | 163,377 | ||
Interest expense on debt | $ 1,224,217 | $ 3,603,807 |
6. SHAREHOLDERS' EQUITY (Details) |
9 Months Ended |
---|---|
Sep. 30, 2016
$ / shares
| |
Stock Price | $ .88 |
Minimum | |
Stock Price | 0.00 |
Exercise Price | $ 1.12 |
Term | 3 months 18 days |
Risk Free Interest Rate | 29.00% |
Volatility | 60.00% |
Dividend Rate | 0.00% |
Minimum | Inception | |
Stock Price | $ 0.00 |
Exercise Price | $ 1.12 |
Term | 6 months |
Risk Free Interest Rate | 0.39% |
Volatility | 60.00% |
Dividend Rate | 0.00% |
Maximum | |
Stock Price | $ 1.76 |
Term | 5 months 1 day |
Maximum | Inception | |
Stock Price | $ 3.00 |
Risk Free Interest Rate | 0.47% |
6. SHAREHOLDERS' EQUITY (Details 1) |
3 Months Ended |
---|---|
Sep. 30, 2016
USD ($)
| |
Shareholders Equity Details 1 | |
Balance - June 30, 2016 | $ 0 |
Issuances of Series C | 930,048 |
Fair Value Adjustment | 180,541 |
Balance - September 30, 2016 | $ 1,110,589 |
6. SHAREHOLDERS' EQUITY (Details 2) |
9 Months Ended |
---|---|
Sep. 30, 2016
USD ($)
$ / shares
shares
| |
Number of Warrants | |
Balance, beginning | 83,678 |
Granted - Goldman, Sachs & Co. | 20,636 |
Forfeited | 0 |
Exercised | 0 |
Balance, ending | 104,314 |
Exercisable | 104,314 |
Average Exercise Price | |
Balance, beginning | $ / shares | $ 0.00 |
Granted | $ / shares | 4.31 |
Forfeited | $ / shares | 0.00 |
Exercised | $ / shares | 0.00 |
Balance, ending | $ / shares | $ 4.31 |
Balance, beginning | $ | $ 449,518 |
Granted | $ | 0 |
Forfeited | $ | 0 |
Exercised | $ | 0 |
Balance, ending | $ | $ 449,518 |
7. FAIR VALUE MEASUREMENT (Details) - USD ($) |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Derivative liability – stock warrants | $ 1,540,000 | $ 2,820,000 |
Stock settled debt | 12,500 | |
Derivative liability - Series C Preferred Stock | 1,110,589 | |
Total | 2,650,589 | 2,832,500 |
Level 1 | ||
Derivative liability – stock warrants | 0 | 0 |
Stock settled debt | 10,000 | |
Derivative liability - Series C Preferred Stock | 0 | |
Total | 0 | 10,000 |
Level 2 | ||
Derivative liability – stock warrants | 0 | 0 |
Stock settled debt | 0 | |
Derivative liability - Series C Preferred Stock | 0 | |
Total | 0 | 0 |
Level 3 | ||
Derivative liability – stock warrants | 1,540,000 | 2,820,000 |
Stock settled debt | 2,500 | |
Derivative liability - Series C Preferred Stock | 1,110,589 | |
Total | $ 2,650,589 | $ 2,822,500 |
8. LEASES (Details) |
Sep. 30, 2016
USD ($)
|
---|---|
Leases [Abstract] | |
2016 | $ 154,941 |
2017 | 530,551 |
2018 | 250,497 |
2019 | 178,303 |
2020 | 138,700 |
Thereafter | 151,200 |
Total | $ 1,404,192 |
8. LEASES (Details Narrative) - USD ($) |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Leases [Abstract] | ||
Rent expense | $ 409,007 | $ 222,869 |
11. RELATED PARTY TRANSACTIONS (Details) - USD ($) |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Dec. 31, 2015 |
|
Assets | |||||
Current assets | $ 5,938,358 | $ 5,938,358 | $ 4,917,587 | ||
Noncurrent assets | 26,957,104 | 26,957,104 | 30,915,222 | ||
Total assets | 50,221,906 | 50,221,906 | 50,266,549 | ||
Liabilities and Equity | |||||
Current liabilities | 10,721,519 | 10,721,519 | 10,788,838 | ||
Total liabilities and equity | 50,221,906 | 50,221,906 | $ 50,266,549 | ||
Summary of Statements of Operations | |||||
Expense | 5,070,322 | $ 2,104,701 | 14,288,853 | $ 5,989,174 | |
Net loss | (3,735,949) | $ (1,430,064) | (14,308,049) | $ (11,309,967) | |
MSTI Member | |||||
Assets | |||||
Current assets | 3,609 | 3,609 | |||
Noncurrent assets | 2,877,313 | 2,877,313 | |||
Total assets | 2,880,922 | 2,880,922 | |||
Liabilities and Equity | |||||
Current liabilities | 236,562 | 236,562 | |||
Noncurrent liabilities | 0 | 0 | |||
Equity | 2,644,360 | 2,644,360 | |||
Total liabilities and equity | $ 2,880,922 | 2,880,922 | |||
Summary of Statements of Operations | |||||
Revenues | 177 | ||||
Expense | 16,410 | ||||
Net loss | $ (16,233) |
^B1"&U:P%)(\ZWAS$3(-8 G!"DM%LC'R7:)J@5O5W6"O+?8I
M?.V6_Z:F/U^U08V^@O^Z//\U^?AL[&<(=_0<<13W#4NQG-M_YY<+N[@Z566F
M:YZLM/!TI9WL@5Y )^@! -,4'>!,@D' :
M]8$'I?@ [P,$0DZC/O"@%!_@K8! SFG4!QZ4X@.\&Q"(.HWZP(,2?$#Q?D A
MZC3F P]B"3Z@>#^@$'46\T$ )?B XOV SE&OHC+0#AA+D,'; 86DLRJFXT%U
M@@[>#B@DG:'_>+R.!RT3=/!V0"'I;!73\:!U@@[>#B@DO2IC.AZ4\B<.;P<4
MDE[1F(X'I?@ ;P<4DEY%?>!!*3[ VP&%I%=1'WA0@@\8W@X8)+V*^2" $GS
M\'; (.EUS VA
MM@G;OZ\OP":K2/N"9X9SF?&EG-"\VA[ D3 !0&J= [7*&1^#<"5GCMTGSP](1+^-9
M_BU((9 #('87X/B!!YS/T0@#X&\:T%]!.HC
M4/\2Y'9(R)-5Y)/% UDL_8@G 1 )#R=D$4T1:(! @TL0[9!X-9_SZ*DDQ<$T
M#!Z",0\3PL?CQ0J!;A#HYA+$.F09E3U)GCZ1Y:PB0&?\?U?!LAFC6P2ZO01Y
M'1*$"0^GP?W,)SR._:0>%Q\#*T:@.P2ZNP3U(4:+Q(_)DC_QBA56<5]#'X&-
MA>QA(WN7J %$Z9%'_N-B-O&C^$,UK.0)(QI26ZR^Z9 ''D1DS65D[$"OS.6K&(U6)$[D3DX(]F$%:RH*!0
MZ&28915AKJ9&S8*J0LA-L7TY4UC[49/FJR1=\.81=J.@0]%<=8V:)93(38%&
MQG,5-FH6O'_D;G<$W8SGBFS4+/A+0NZ>1]#2.)[I^E$3+BH"=],ODO,^9!XZ@EBL:(DW8E]X4]T77F:/A_?[8M:HF?M?-.>=R,3QQ(B:%)6W
M1')$K("= <>9I6E(Z(P"!DJB4
M "$EB:[-$")%S?!3G/F9EI1. "C,J<2 +B< %Q&
8T\PXGDHD\.<82/CD1B/3MGSWK'(A0^6CGEK
M7$X_UZ^.+HY-=S\=Z?2+F_;I-*1CA?/=\['19QB//M[=W]FK*AW^O(39;A[K
M^^:ONKO?G_K%MW88VN-T_G'7MD,379E/;KEX:.K;\Y=#
,ESY>=^D(*'T9
MVL?Y1.M\K+;]'U!+ P04 " P=&]),,;V=Z ! "Q P & 'AL+W=O
ME*^)$$X[%1L/G +2\+C1,Q _=GM]DZN/8B3IDX;\:-'31U&+PLCN7F
M-BW8T0N=82)Q/V-6!'/J%UND]!(]#?3T>WIV3L^BPVQVF'TOD)\+Y%$@_VK$
MB-DOF/Q3$W:RIPIT&ZZ.(16.O8U;NE;7VWF7AC/Y@)?%P%OXS74K>D,.:-W)
MA@-H$"VX]LG5-26=>S]K(J&Q/KQUL8Y7*B86A^6!K*^T_ ]02P,$% @
M,'1O27/3F@^C 0 L0, !D !X;"]W;W)K
[@)(EZ9>&_6CQTU31R\*L_5YLNV9.<@=(5)Q..,61',
MJ]]LD=-;]#S2\X_IVVOZ-CG2&D?MTI:NU?5V/N3Q3-[@53GP#GYRTPEMR0F=/]EX "VB ]\^N]M1TOOW
MLR826A?"SSXVZ4JEQ.&P/)#UE5;_ %!+ P04 " P=&])<* #XPL# ":
M#@ &0 'AL+W=O)KX%D%!9K\#=