UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2015

 

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _____to_____.

 

Commission File Number 000-54307

 

National Waste Management Holdings, Inc.

(Exact name of small business issuer as specified in its charter)

 

FLORIDA   27-2037711
(State or other jurisdiction
of incorporation or organization)
  (I.R.S. Employer
Identification No.)

 

5920 N. Florida Avenue

Hernando, FL 34442

(Address of principal executive offices)

 

(352) 489-6912

(Company’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes   No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

  Large accelerated filer Accelerated filer
  Non-accelerated filer Smaller reporting company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No 

 

The Company has 60,351,842shares issued and outstanding as of August 14, 2015.

 

 

 

 
 

 

TABLE OF CONTENTS

 

    Page
  PART I — Financial Information  
Item 1. Consolidated Financial Statements (unaudited) 1-14
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 15-18
Item 3. Quantitative  and Qualitative Disclosures about Market Risk 19
Item 4. Controls and Procedures 19
     
  PART II — Other Information  
Item 1. Legal Proceedings 20
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Mine Safety Disclosures 20
Item 5. Other Information 20
Item 6. Exhibits 20
  Signatures 21

 

 
 

 

PART I – FINANCIAL INFORMATION

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.
(PREVIOUSLY KOPJAGGERS, INC.)

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE QUARTER ENDED JUNE 30, 2015

 

Index to Consolidated Financial Statements

 

  PAGE
   
Unaudited Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014 2
Unaudited Consolidated Statements of Operations for the Six and Three Months Ended June 30, 2015 and 2014 3
Unaudited Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2015 and 2014 4
Unaudited Consolidated Notes to the Financial Statements 5-14

 

1
 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2015 AND DECEMBER 31, 2014

 

  2015   2014 
   (unaudited)     
Assets        
Current assets:       
Cash and cash equivalents  $340,052   $108,642 
Accounts receivable, net   189,633    105,625 
Other current assets    2,660    3,685 
Due from related party    8,400    8,400 
Total current assets   540,745    226,352 
Property and equipment, net   692,302    744,405 
           
Other assets:           
Intangible assets, net    51,516    36,325 
Secured letter of credit    324,950    324,950 
Deposits on landfill acquisition   150,000    - 
Other deposits     8,750    17,412 
Total other assets   535,216    378,687 
Total assets  $1,768,263   $1,349,444 
           
Liabilities and Stockholder's Equity (Deficit)          
Current liabilities:           
Accounts payable and accrued expenses  $71,437   $19,336 
Current portion of capital lease obligations   23,098    21,228 
Due to related party - accrued interest   26,080    22,308 
Income taxes payable     95,986    32,242 
           
Total current liabilities   216,601    95,114 
           
Long-term liabilities:           
Capital lease obligations, net of current portion   116,024    128,060 
Environmental remediation obligation   424,596    424,596 
Loan from shareholder     704,547    756,337 
Long term deferred tax liability   48,709    48,709 
           
Total liabilities  $1,510,477   $1,452,816 
           
Commitments and Contingencies (see note 5)          
           
Stockholders' equity (deficit):          
Common stock, no pair value; 250,000,000 shares authorized, 61,000,000 and 47,500,000 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively  $-   $- 
Preferred stock, no par value; 10,000,000 shares authorized, 1 share and 0 shares issued and outstanding as of June 30, 2015 and December 31, 2014, respectively   -    - 
Additional paid-in capital   12,054    9,454 
Common stock subscribed   255,442    - 
Accumulated deficit     (9,710)   (112,826)
           
Total stockholders' equity (deficit)   257,786    (103,372)
           
Total liabilities and stockholders' equiy (deficit)  $1,768,263   $1,349,444 

 

2
 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2015 AND 2014

 

   Six Months   Six Months   Three Months   Three Months 
   Ended   Ended   Ended   Ended 
   June 30,
2015
   June 30,
2014
   June 30,
2015
   June 30,
2014
 
   (unaudited)   (unaudited)   (unaudited)   (unaudited) 
Revenues  $870,126   $818,936   $479,534   $424,600 
                     
Cost of revenues   445,539    474,105    247,632    233,385 
                     
Gross profit   424,587    344,831    231,902    191,215 
                     
Selling, general and  administrative expenses   233,300    196,058    112,545    90,872 
                     
Income from operations   191,287    148,773    119,357    100,343 
                     
Other income (expenses):                    
Interest expense   (19,620)   (4,528)   (11,454)   (2,191)
Other expenses   (4,807)   -    -    - 
                     
Total other income (expenses)   (24,427)   (4,528)   (11,454)   (2,191)
                     
Income before income taxes   166,860    144,245    107,903    98,152 
                  $- 
Income tax expense   63,744    -    43,161    - 
                     
Net income  $103,116   $144,245   $64,742   $98,152 
                     
Net income per common share:                    
Basic  $0.002   $0.003   $0.001   $0.002 
Diluted  $0.002   $0.003   $0.001   $0.002 
                     
Weighted average number of shares outstanding:                    
Basic   60,054,444    51,537,222    60,100,000    54,831,111 
Diluted   60,054,444    51,537,222    60,100,000    54,831,111 

 

3
 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014

 

   2015   2014 
   (unaudited)   (unaudited) 
Cash flow from operating activities:        
Net income     $103,116   $144,245 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization expenses   80,279    59,907 
Non-cash professional expenses   108,042    - 
Bad debt expense   (81,761)   762 
(Increase) decrease in assets:          
Accounts receivable, net   (2,247)   (20,540)
Other current assets   1,025    - 
Deposits   8,662    - 
(Decrease) increase in liabilities:          
Accounts payable and accrued expenses   52,101    7,331 
Related party accrued interest   3,772    4,528 
Income taxes payable   63,744    - 
Net cash provided by operating activities  $336,733   $196,233 
           
Cash flows from investing activities:          
Purchases of property and equipment   (19,095)   (30,131)
Purchase of intangible assets   (24,272)   - 
Net cash used in investing activities  $(43,367)  $(30,131)
           
Cash flows from financing activities:          
Payments on capital lease obligation   (10,166)   - 
Advances from shareholder   -    8,100 
Payments on loan from shareholder   (51,790)   (134,719)
Net cash provided by financing activities  $(61,956)  $(126,619)
           
Net increase (decrease) in cash  $231,410   $39,483 
           
Cash, beginning of year   108,642    57,447 
           
Cash, end of year   $340,052   $96,930 
           
Supplemental disclosure of cash flow information:          
           
Cash paid during the year for interest  $15,903   $- 
Cash paid during the year for income taxes  $-   $- 
           
Supplemental schedule of non-cash activities:          
Issuances of shares for professional services  $2,600   $- 
Issuances of shares subscribed for deposit on landfill  $150,000   $- 
Issuances of shares subscribed for professional services  $111,642   $- 

 

4
 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDTED NOTES TO THE FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014

 

Note 1 – Business Organization

 

These financial statements represent the financial statements of National Waste Management Holdings, Inc. (“NWMH”) (previously known as Kopjaggers, Inc.) and its wholly owned operating subsidiary, Sand/Land of Florida Enterprises, Inc. (“Sand/Land”). NWMH and Sand/Land are collectively referred to herein as the “Company”. The Company changed its name from Kopjaggers, Inc. to National Waste Management Holdings, Inc. effective October 31, 2014.

 

On June 16, 2014, pursuant to a share exchange agreement, NWMH merged with Sand/Land of Florida Enterprises, Inc. (“Sand/Land”), a Florida corporation formed as a S-Corporation under the laws of the State of Florida on August 15, 1986, in which the existing stockholders of Sand/Land exchanged all of their issued and outstanding shares of common stock for 9,490,000 shares of common stock of NWMH (the “Reverse Merger”). After the consummation of the Reverse Merger, stockholders of Sand/Land owned 47.45% of NWMH outstanding common stock.

 

As a result of the Reverse Merger, Sand/Land became a wholly owned subsidiary of NWMH. For accounting purposes, the Reverse Merger was treated as a reverse acquisition with Sand/Land as the acquirer and NWMH as the acquired party. As a result, the business and financial information included in this Annual Report on Form 10-K is the business and financial information of Sand/Land. The accumulated deficit of NWMH has been included in additional paid-in-capital. Pro-forma information has not been presented as the financial information of NWMH was insignificant.

 

The Company operates as a licensed Construction & Demolition landfill. The Company’s primary operations are based near Tampa, Florida.

 

Note 2 – Significant Accounting Policies

 

Basis of Presentation

 

The financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates.

 

Fair Value of Financial Instruments

 

For certain financial instruments, including accounts receivable, accounts payable, accrued expenses, interest payable, advances payable and notes payable, the carrying amounts approximate fair value due to their relatively short maturities.

 

5
 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDTED NOTES TO THE FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014

 

Note 2 – Significant Accounting Policies (Continued)

 

Fair Value of Financial Instruments (Continued)

 

The Company adopted ASC 820-10, “Fair Value Measurements and Disclosures.” ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

 

Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

 

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

 

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

 

The Company did not identify any non-recurring assets and liabilities that are required to be presented in the balance sheets at fair value in accordance with ASC 815.

 

In February 2007, the FASB issued ASC 825-10 “Financial Instruments.” ASC 825-10 permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings.

 

The carrying amounts of cash and current liabilities approximate fair value due to the short maturity of these items. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment, and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates. The Company does not hold or issue financial instruments for trading purposes, nor does it utilize derivative instruments in the management of foreign exchange, commodity price, or interest rate market risks.

 

Revenue and Cost Recognition

 

The Company applies paragraph 605-10-99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the sales price is fixed or determinable, (iii) collectability is reasonably assured and (iv) goods have been shipped and/or services rendered.

 

6
 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDTED NOTES TO THE FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014

 

Note 2 – Significant Accounting Policies (Continued)

 

Cash and Cash Equivalents

 

For purposes of reporting cash flows, the Company considers cash and cash equivalents to be all highly liquid deposits with maturities of three months or less. Cash equivalents are carried at cost, which approximates market value.

 

The Company maintains its cash and cash equivalents at various financial institutions where they are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. The balances of these accounts from time to time exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents.

 

Accounts Receivable, Bad Debts and Allowance for Doubtful Accounts

 

An allowance for doubtful accounts is provided for as a percentage of trade accounts receivable based on historical loss experience. At June 30, 2015 and December 31, 2014, the allowance for doubtful accounts was approximately $70,000 and $112,000. Bad debt expense recognized for the six and three months ended June 30, 2015 and 2014 was $(81,761), $0, $762 and $420, respectively. The reason for the negative bad debt expense balance at June 30, 2015 is due to the allowance being overstated at June 30, 2015 and requiring adjustment.

 

Property, Plant and Equipment

 

Property, plant and equipment are recorded at cost less accumulated depreciation. Expenditures for major additions and improvements are capitalized. As property and equipment are sold or retired, the applicable cost and accumulated depreciation are removed from the accounts and any resulting gain or loss thereon is recognized as operating expenses.

 

Depreciation is calculated using the straight-line method over the estimated useful lives or, in the case of leasehold improvements, the term of the related lease, including renewal periods, if shorter. Estimated useful lives are as follows:

 

Transportation equipment 5 years
Office and machinery equipment 5 years
Roll off containers 5-7 years
Airspace 39.5 years

 

The Company reviews property, plant and equipment and all amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Recoverability is based on estimated undiscounted cash flows. Measurement of the impairment loss, if any, is based on the difference between the carrying value and fair value.

 

7
 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDTED NOTES TO THE FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014

 

Note 2 – Significant Accounting Policies (Continued)

 

Impairment of Long-Lived Assets and Amortizable Intangible Assets

 

The Company follows ASC 360-10, “Property, Plant, and Equipment,” which established a “primary asset” approach to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting for a long-lived asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell. Through June 30, 2015, the Company has not experienced impairment losses on its long-lived assets.

 

Intangible Assets – Customer List

 

A Customer list was bought from a related party in 2011. It is being amortized over five years.

 

The Company incurred website development costs in 2015. Once completed, It will be amortized over three years.

 

The Company incurred engineering costs as part of a 10 year permit renewal with the Department of Environmental Protection. These costs were capitalized and will begin being amortized over 10 years when the Permit is finalized.

 

Advertising Costs

 

The Company expenses all advertising costs as incurred. Advertising expenses for the six and three months ended June 30, 2015 and 2014 were $2,674, $1,206, $2,302 and $1,153, respectively.

 

Income Taxes

 

The Company files income tax returns in the United States and Florida, which are subject to examination by the tax authorities in these jurisdictions, generally for three years after the filing date.

 

Management has evaluated tax positions in accordance with FASB ASC 740, Income Taxes, and has not identified any tax positions that require disclosure.

 

Environmental Remediation Liability

 

The Company accrues for losses associated with environmental remediation obligations when such losses are probable and reasonably estimable. Accruals for estimated losses from environmental remediation obligations generally are recognized no later than completion of the remedial feasibility study. Such accruals are adjusted as further information develops or circumstances change. Costs of future expenditures for environmental remediation obligations are not discounted to their present value. Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed probable.

 

8
 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDTED NOTES TO THE FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014

 

Note 2 – Significant Accounting Policies (Continued)

 

Stock Issued to Non-Employees for Services Rendered

 

The Company accounts for stock issued to non-employees in accordance with the provisions of FASB ASC 505-50 “Equity Based Payments to Non-Employees.” FASB ASC 505-50 states that equity instruments that are issued in exchange for the receipt of goods or services should be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The measurement date occurs as of the earlier of (a) the date at which a performance commitment is reached or (b) absent a performance commitment, the date at which the performance necessary to earn the equity instruments is complete (that is, the vesting date).

 

Reclassifications

 

Certain reclassifications have been made in prior year balances to conform to the current year presentation. Such reclassifications had no effect on net income as previously reported.

 

Note 3 – Property, Plant and Equipment

 

Property, plant and equipment and related accumulated depreciation consist of the following at June 30, 2015 and December 31, 2014:

 

   2015   2014 
Machinery and equipment   2,098,138   $2,094,316 
Airspace   865,076    865,076 
Transportation  equipment   561,240    561,240 
Improvements   321,645    306,372 
Office furniture and equipment   2,117    2,117 
Land Fill Area   72,098    72,098 
Total Property, plant and equipment   3,920,314    3,901,219 
Less: accumulated depreciation   (3,228,012)   (3,156,814)
Property, plant and equipment, net  $692,302   $744,405 

 

Depreciation expense for the six and three months ended June 30, 2015 and 2014 was $71,198, $35,720, $39,736 and $20,100, respectively.

 

9
 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDTED NOTES TO THE FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014

 

Note 4 – Amortizable Intangible Assets

 

Intangible assets consist of the following as of June 30, 2015 and December 31, 2014:

 

           Amortization 
   2015   2014   Period  
Customer list  $90,813   $90,813    5 years 
Website costs   7,954    -    3 years 
Licenses and permits   16,318         10 Years 
Less accumulated amortization   (63,569)   (54,488)     
Intangible assets, net  $51,516   $36,325      

 

The estimated aggregate amortization expense for each of the next five years is as follows:

 

Year Ending    
2015  $10,560 
2016   22,446 
2017   4,283 
2018   3,620 
2019   1,632 
Thereafter   8,975 
   $51,516 

 

Amortization expense for the six and three months ended June 30, 2015 and 2014 was $9,081, $3,536, $9,081 and $4,540, respectively.

 

Note 5 – Commitments and Contingencies

 

During the normal course of business, the Company may be exposed to litigation. When the Company becomes aware of potential litigation, it evaluates the merits of the case in accordance with FASB ASC 450, Contingencies. The Company evaluates its exposure to the matter, possible legal or settlement strategies and the likelihood of an unfavorable outcome. If the Company determines than an unfavorable outcome is probable and can be reasonably estimated, it establishes the necessary accruals. Certain insurance policies held by the Company may reduce the cash outflows with respect to an adverse outcome of certain of these litigation matters.

 

The Company currently operates a fully licensed landfill under approval by the Florida Department of Environmental Protection. As such the company has set up a reserve allowance of $424,596 against estimated future closing cost. As of December 31, 2013 the Florida Department of Environmental Protection has approved the secured letter of credit cash reserve of $324,950 set aside by the Company at June 30, 2015 and December 31, 2014, respectively, in order to be in compliance with the financial assurance requirements for long term care cost of the facility. It is reasonably possible that the recorded estimate of the obligation may change in the near term.

 

10
 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDTED NOTES TO THE FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014

 

Note 5 – Commitments and Contingencies (continued)

 

As discussed in note 7 to the financial statements, during the six months ended June 30, 2015 and 2014, approximately 26% and 38% of the Company’s revenues were generated from a related party, respectively and approximately 51% and 56% of net accounts receivable were due from related parties as of June 30, 2015 and December 31, 2014, respectively.

 

Note 6 – Capital Leases

 

During 2014, the Company purchased equipment under a capital lease obligation. The lease is payable in 60 monthly payments of $3,750, beginning December 20, 2014, maturing December 20, 2019. The capital lease is collateralized by the equipment purchased. The capital lease is personally guaranteed by the Chairman and CEO of the Company.

 

Future minimum lease payments under the lease for the three months ended June 30, 2015 are as follows:

 

2015   23,098 
2016   27,345 
2017   32,373 
2018   38,326 
2019   17,980 
Total capital lease obligation  $139,122 

 

The following is a summary of leased assets included in machinery and equipment as of June 30,:

 

   2015   2014 
Leased Equipment  $179,620   $179,620 
Less accumulated depreciation   (17,962)   - 
Net leased assets  $161,658   $179,620 

 

Note 7 – Related Party Transactions

 

Related Party Sales and Accounts Receivable

 

The Company generates a significant portion of their revenue from related parties, companies owned by the majority shareholder of the Company. Total revenue generated from the related parties during the six months ended June 30, 2015 and 2014 was $224,485 and $312,224 or 26% and 38% of total revenue, respectively. Total revenue generated from the related parties during the three months ended June 30, 2015 and 2014 were $124,135 and $166,250 or 26% and 39% of total revenue, respectively. Total related party accounts receivable as of June 30, 2015 and 2014 related to these sales was approximately $97,465 and $66,585, or 51% and 56% of total net accounts receivable, respectively.

 

11
 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDTED NOTES TO THE FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014

 

Note 7 – Related Party Transactions (continued)

 

Related Party Shareholder Loan

 

The Company has a note with the sole shareholder of the Company. This note is unsecured, matures on December 31, 2016 and carries a 1% interest rate. Though this note is due during 2016, the Company makes periodic payments on the Note when excess cash is available.

 

The balance of the note at June 30, 2015 and December 31, 2014 was $704,547 and $756,337 respectively. The balance of the related accrued interest at June 30, 2015 and December 31, 2014 was $26,080 and $22,308, respectively. Related party interest expense for the six and three months ended June 30, 2015 and 2014 was $3,772, $1,881, $4,528 and $2,191, respectively.

 

The aggregate annual maturities of the related party long-term debt are as follows:

 

Year Ending    
2015  $- 
2016   704,547 
   $704,547 

 

Workers’ Compensation

 

The Company pays for workers compensation insurance for a related entity and is then reimbursed by the related party after payment is made. Total costs incurred on behalf of the related party for the six months ended June 30, 2015 were $13,533. The related party owed the Company $7,286 as of June 30, 2015 related to workers compensation insurance paid on the related parties’ behalf.

 

Expenses Paid by Related Party

 

Throughout the period ending June 30, 2015, Strategic Capital Markets (“Strategic”), a related party, paid for expenditures of the Company as well as deposits on a landfill acquisition on behalf of the Company. These expenditures primarily related to professional fees incurred for compliance related to being a public company as well as marketing the Company’s investment strategy. Total expenses incurred for these services were $97,138. Total deposits on the landfill (see note 9) paid by Strategic totaled $150,000 through June 30, 2015. Strategic also incurred costs to build the Company’s investor relations website of $7,594, $4,704 of which was paid and $3,250 which is an outstanding payable to the vendor as of June 30, 2015. Total cash outlays by Strategic were $251,842 through June 30, 2015. During June 2015, the Company and Strategic agreed to settle this amount for 251,842 of the Company’s common shares. The shares were issued subsequent to June 30, 2015 and thus were not accounted for as stock subscribed as of June 30, 2015.

 

12
 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDTED NOTES TO THE FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014

Note 8 – Stockholders’ Deficit

 

On March 23, 2015 the Company issued 100,000 shares of restricted common stock for services related to Corporate Governance. The common shares were valued based on the fair value of the services provided rather than the common stock issued because it was determined by management that the fair value of the services rendered was more readily available than the fair value of the restricted common stock issued. The total value assigned to these services was $6,100; $3,500 was paid in cash and $2,500 was recognized related to the issuance of the restricted common stock. The Company receiving the shares paid the Company $100 for the shares as part of the consulting agreement.

 

During May 2015, the Company amended the Articles of Incorporation to authorize 10,000,000 shares of the Company’s Series A preferred stock, no par value per share. On June 17, 2015, the Company issued one share of Series A Preferred Stock, no par value, to the Company’s Chairman of the Board (the “Chairman”). As a holder of the outstanding share of Series A Preferred Stock, the Chairman is entitled to voting power equivalent to the number of votes equal to the total number of the Company’ common stock outstanding as of the record date for the determination of stockholders entitled to vote at each meeting of stockholders of the Company and entitled to vote on all matters submitted or required to be submitted to a vote of the stockholders of the Company.

 

The Company promised 100,000 shares of common stock to an attorney who worked with the Company. The shares are being issued as compensation for services provided as part of the original reverse merger filed by the Company. The shares were promised prior to the Company being a public entity and thus had no trading value or history. The shares were valued at $3,600. The common shares were valued based on the fair value of the services provided rather than the common stock issued because it was determined by management that the fair value of the services rendered was more readily available than the fair value of the restricted common stock issued. The shares were issued subsequent to June 30, 2015, and thus have been accounted for as stock subscribed as of June 30, 2015.

 

As discussed in Note 7, a related entity incurred costs and paid deposits on an acquisition on behalf of the Company. Total cash outlays by Strategic were $251,842 through June 30, 2015. During June 2015, the Company and Strategic agreed to settle this amount for 251,842 of the Company’s common shares. The shares were issued subsequent to June 30, 2015 and thus were accounted for as stock subscribed as of June 30, 2015.

 

Note 9 – Landfill Acquisition

 

On January 25, 2015, Sand/Land of Florida Enterprises, Inc., a Florida corporation and a wholly-owned subsidiary of National Waste Management Holdings, Inc. (the “Company”), entered into a commercial property purchase agreement (the “Agreement”) with Nova Resources, LLC (“Nova”), a Florida limited liability company, to acquire a certain commercial and industrial construction and demolition landfill (the “Transaction”) located at 3890 Grover Cleveland, County of Citrus, Homosassa, Florida 34465 (the “Property”) for $2,500,000, on an “as is” basis. The Property services regions in and around Citrus County, Florida. The Property is approximately eighty (80) acres and is permitted by the State of Florida Department of Environmental Protection as a “Construction and Demolition Landfill”.

 

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NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDTED NOTES TO THE FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014

 

Note 9 – Landfill Acquisition (continued)

 

Pursuant to the terms of the Agreement, the Company agreed to pay an initial non-refundable down payment of $25,000 on January 25, 2015 (the “Initial Payment Day”) and may pay up to five additional non-refundable monthly payments of $25,000 due on the 15th day of each month (the “Extension Payment”) following the Initial Payment Day to extend the closing date for an additional thirty (30) days. Each Extension Payment shall be credited towards the total amount payable to Nova, with any remaining balance due no later than thirty (30) days after the fifth Extension Payment. The Agreement may be terminated at the election of either party in the event that the Transaction does not close.

 

Nova agreed to a certain non-compete provision for a period of five (5) years from the closing date. Nova also agreed to provide, at the closing date, certain completed permit applications.

 

The Transaction is not subject to any realty commission and has not closed as of June 30, 2015 or the date of this filing. The Company has a third party making the deposit payments and are thus not recorded on the Company’s books. If the deal does not close, the Company will not be required to reimburse the third party for the non-refundable deposit payments if the closing of the deal does not occur. As of June 30, 2015, the third party had made six payments of $25,000, totaling $150,000. This agreement was extended for an additional six months as the deal was not closed as of June 30, 2015 or the date of the filing.

 

Note 10 – Subsequent Events

 

Subsequent to June 30, 2015, the Company issued all of the shares subscribed as discussed in Note 8 to the financial statements. Total shares issued were 351,842.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

FORWARD-LOOKING STATEMENTS

 

This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objections of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.

 

Forward-looking statements may include the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Except for our ongoing securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement.

 

Although we believe that the expectations reflected in any of our forward- looking statements are reasonable, actual results could differ materially from those projected or assumed in any or our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The factors impacting these risks and uncertainties include, but are not limited to:

 

Our results are vulnerable to economic conditions;

 

Our ability to raise adequate working capital;

 

Loss of customers or sales weakness;

 

Inability to achieve sales levels or other operating results;

 

The unavailability of funds for capital expenditures;

 

Operational inefficiencies;

 

Increased competitive pressures from existing competitors and new entrants;

 

Competition for acquisition candidates, consolidation within the waste industry and economic and market conditions may limit our ability to grow through acquisitions;

 

We may incur charges related to capitalized expenditures of landfill development projects, which would decrease our earnings;

 

Pending or future litigation or governmental proceedings could result in material adverse consequences, including judgments or settlements;

 

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We may be subject in the normal course of business to judicial, administrative or other third-party proceedings that could interrupt or limit our operations, require expensive remediation, result in adverse judgments, settlements or fines and create negative publicity;

 

Our accruals for our landfill site closure and post-closure costs may be inadequate;

 

Liabilities for environmental damage may adversely affect our financial condition, business and earnings;

 

Our financial and operating performance may be affected by the inability to renew landfill operating permits, obtain new landfills and expand existing ones;

 

Extensive and evolving environmental, health and safety laws and regulations may restrict our operations and growth and increase our costs;

 

Extensive regulations that govern the design, operation and closure of landfills may restrict our landfill operations or increase our costs of operating landfills; and

 

Alternatives to landfill disposal may cause our revenues and operating results to decline.

 

These risks and uncertainties, as well as others, are discussed in greater detail in this Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission, or SEC, including our most recent Annual Report on Form 10-K. There may be additional risks of which we are not presently aware or that we currently believe are immaterial which could have an adverse impact on our business. We make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances that may change.

 

GENERAL

 

Overview

 

We are a landfill service that provides landfill services, roll-off dumpster service, and mulch products. We service the counties of Citrus, Hernando, and Marion in Florida. We average annual disposals of approximately 110,000 cubic yards of construction debris and manage our 54 acre landfill facility. We started operations with one roll-off truck and now operate four trucks and 350 containers. We have maintained a contract with Citrus County Solid Waste Management landfill to back-up their roll-off trucks since 2000.

 

Results of Operations

 

Comparison for the six months ended June 30, 2015 and 2014

 

Sales for the six months ended June 30, 2015 and 2014 were $870,126 and $818,936, respectively, an increase of $51,190 or approximately 6% of consolidated revenue. This is due to execution of our business model, increasing our customer base and expanded sales to current customers.

 

Cost of revenues for the six months ended June 30, 2015 and 2014 were $445,539 and $474,105, respectively, a decrease of $28,566 or approximately 6%. This is primarily attributable to cost cutting efforts and increased overall margins, including reduced fuel costs and adding fuel to our location at wholesale rather than retail prices.

 

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Selling, general and administrative costs for the six months ended June 30, 2015 and 2014 respectively, were $233,300 and $196,058, respectively, an increase of $37,242 or approximately 19%. The increase is primarily due to increased professional fees to support the compliance aspect of being a public company, including additional legal and accounting fees for various SEC filings, preparation and counsel. Other increases include increased salaries year over year. The primary increase in salary was to the CEO of the Company who had extended responsibilities once the Company was a public entity.

 

Interest expense was $19,620 and $4,528 for the six months ended June 30, 2015 and 2014, respectively. The increase is attributable to the Company entering into a capital lease obligation to purchase equipment during the fourth quarter of 2014.

 

Net income for the six months ended June 30, 2015 and 2014 was $103,116 and $144,245 respectively. The decrease of $41,129 is primary attributable to the Company now recognizing income tax expense at the entity level rather than the shareholder level when the Company was an S-Corp. Income tax expense recognized over the six month period ended June 30, 2015 was $63,744. With income taxes eliminated for comparative purposes, the Company’s income (income before income taxes) would have been $166,860, an increase of $22,615 or 16%, primarily attributable to execution of our business model, increased revenues and reduced cost of sales as discussed above.

 

Comparison for the three months ended June 30, 2015 and 2014

 

Sales for the three months ended June 30, 2015 and 2014 were $479,534 and $424,600, respectively, an increase of $54,934 or approximately 13% of consolidated revenue. This is due to execution of our business model, increasing our customer base and expanded sales to current customers.

 

Cost of revenues for the three months ended June 30, 2015 and 2014 were $247,632 and $233,385, respectively, an increase of $14,247 or approximately 6%. This increase is in line with the increase in sales. The six months cost of sales decreased overall due to the lower fuel costs in quarter 1 of 2015 as compared to higher fuel costs in quarter 2 of 2015. Other increases include increased depreciation expense due to purchase of equipment in December of 2014 that was not being depreciated during the three months ended June 30, 2014.

Selling, general and administrative costs for the three months ended June 30, 2015 and 2014 respectively, were $112,545 and $90,872 respectively, an increase of $21,673 or approximately 24%. The increase is primarily due to increased professional fees to support the compliance aspect of being a public company, including additional legal and accounting fees for filing preparation and counsel. Other increases include increased salaries year over year. The primary increase in salary was to the CEO of the Company who had extended responsibilities once the Company was a public entity.

 

Interest expense was $11,454 and $2,191 for the three months ended June 30, 2015 and 2014, respectively. The increase is attributable to the Company entering into a capital lease during the fourth quarter of 2014.

 

Net income for the three months ended June 30, 2015 and 2014 was $64,742 and $98,152 respectively. The decrease of $33,410 is primary attributable to the Company now recognizing income tax expense at the entity level rather than the shareholder level when the Company was an S-Corp. Income tax expense recognized over the three month period ended June 30, 2015 was $43,161. With income taxes eliminated for comparative purposes, the Company’s income (income before income taxes) would have been $107,903, an increase of $9,751 or 10%, primarily attributable to execution of our business model, increased revenues and reduced cost of sales as discussed above.

 

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Liquidity and Capital Resources

 

Our primary sources of cash are cash flows from operations. We intend to use excess cash on hand and cash from operating activities, together with borrowings, to fund purchases of equipment, working capital, acquisitions and debt repayments. As of June 30, 2015, we had cash and cash equivalents of $340,052 and working capital of $324,144 as compared to cash of $108,642 and working capital of $131,238 at December 31, 2014.

 

Cash Flows for the Six Months Ended June 30, 2015 Compared to the Six Months Ended June 30, 2014

 

Cash flows from operating activities for the six months ended June 30, 2015 provided cash of $336,733 compared to $196,233 for the six months ended June 30, 2014, an increase of $140,500 or 72%. This increase was primarily due to increased sales, expenses incurred where stock was issued to settle the professional fee liability rather than cash, and the timing of payments on payables, accrued expenses and taxes. Our cash flows used in investing activities were $43,367 and $30,131 for the six months ended June 30, 2015 and 2014, respectively, an increase of $13,236 or 44%. The increase is due to the purchase of equipment and intangible assets, including a permit with the Department of Labor with an expected useful life of 10 years and the investment in our webpage. Our cash flows used in financing activities were $61,956 and $126,619. The decrease is due to less payments being made on the Shareholder demand loan during the six months ended June 30, 2015 as compared to the prior year six month period ended June 30, 2015.

 

Off-Balance sheet arrangements

 

None.

 

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

Not applicable

 

Item 4. Controls and Procedures.

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

As required by SEC Rule 15d-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2015.

 

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PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

We know of no material pending legal proceedings to which our company or our subsidiary is a party or of which any of our properties, or the properties of our subsidiary, is the subject. In addition, we do not know of any such proceedings contemplated by any governmental authorities.

 

We know of no material proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder is a party adverse to our company or our subsidiary or has a material interest adverse to our company or our subsidiary.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

None.

 

Item 3. Defaults Upon Senior Securities.

 

None

 

Item 4. Mine Safety Disclosures.

 

None

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits.

 

Exhibit Index

 

Exhibit

Number

  Description
     
31.1   Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2+   Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 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.LAB   XBRL Taxonomy Extension Label Linkbase Document.
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document.

 

+ In accordance with the SEC Release 33-8238, deemed being furnished and not filed.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  NATIONAL WASTE MANAGEMENT HOLDINGS, INC.
   
Date: August 14, 2015 /s/ Louis Pavglio
  Name: Louis Pavglio
  Chief Executive Officer & Chief Financial Officer
  (Principal Executive Officer &
Principal Financial Officer)

 

 

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