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 September 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 registrant 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 60,451,842 shares outstanding as of November 13, 2015.

 

 

 

 

 

 

TABLE OF CONTENTS

 

      Page
PART I — Financial Information    
Item 1. Consolidated Financial Statements (unaudited)   1-15
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations   16-19
Item 3. Quantitative and Qualitative Disclosures about Market Risk   20
Item 4. Controls and Procedures   20
       
PART II — Other Information    
Item 1. Legal Proceedings   21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds   21
Item 3. Defaults Upon Senior Securities   21
Item 4. Mine Safety Disclosures   21
Item 5. Other Information   21
Item 6. Exhibits   21
  Signatures  

 

 

 

 

PART I – FINANCIAL INFORMATION

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015

 

Index to Consolidated Financial Statements

 

  PAGE
   
Unaudited Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014 2
Unaudited Consolidated Statements of Operations for the Nine and Three Months Ended September 30, 2015 and 2014 3
Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2015 and 2014 4
Unaudited Consolidated Notes to the Financial Statements 5-15

 

 1 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2015 AND DECEMBER 31, 2014

 

  2015   2014 
Assets  (unaudited)     
Current assets:       
Cash and cash equivalents  $471,514   $108,642 
Accounts receivable, net   217,172    105,625 
Prepaids and other current assets   10,010    3,685 
Due from related party   8,400    8,400 
           
Total current assets   707,096    226,352 
           
Property and equipment, net   672,627    744,405 
           
Other assets:          
Intangible assets, net   45,905    36,325 
Secured letter of credit   324,950    324,950 
Deposits on landfill acquisition   225,000    - 
Other deposits   8,750    17,412 
           
Total other assets   604,605    378,687 
           
Total assets  $1,984,328   $1,349,444 
           
Liabilities and Stockholder's Equity (Deficit)          
Current liabilities:          
Accounts payable and accrued expenses  $65,461   $19,336 
Current portion of capital lease obligations   24,093    21,228 
Due to related party - accrued interest   27,841    22,308 
Income taxes payable   126,287    32,242 
           
Total current liabilities   243,682    95,114 
           
Long-term liabilities:          
Capital lease obligations, net of current portion   109,614    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  $1,531,148   $1,452,816 
           
Commitments and contingencies (see note 5)          
           
Stockholders' equity (deficit):          
Common stock, no par value; 250,000,000 shares authorized, 60,451,842 and 60,000,000 shares issued and outstanding at September 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 September 30, 2015 and December 31, 2014, respectively   -    - 
Additional paid-in capital   267,496    9,454 
Common stock subscribed   113,640    - 
Retained earnings (deficit)   72,044    (112,826)
           
Total stockholders' equity (deficit)   453,180    (103,372)
           
Total liabilities and stockholders' equity (deficit)  $1,984,328   $1,349,444 

 

See the notes to the consolidated financial statements

 

 2 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014

 

   Nine Months   Nine Months   Three Months   Three Months 
   Ended   Ended   Ended   Ended 
   September 30,   September 30,   September 30,   September 30, 
   2015   2014   2015   2014 
   (unaudited)   (unaudited)   (unaudited)   (unaudited) 
                 
Revenues  $1,349,824   $1,241,572   $479,698   $422,636 
                     
Cost of revenues   661,622    698,313    216,083    224,208 
                     
Gross profit   688,202    543,259    263,615    198,428 
                    
Selling, general and administrative expenses   380,775    331,085    147,475    135,027 
                     
Income from operations   307,427    212,174    116,140    63,401 
                     
Other income (expenses):                    
Interest expense   (23,705)   (6,494)   (4,085)   (1,966)
Other expenses   (4,807)   -    -    - 
                     
Total other income (expenses)   (28,512)   (6,494)   (4,085)   (1,966)
                     
Income before income taxes   278,915    205,680    112,055    61,435 
                     
Income tax expense   94,045    -    30,301    - 
                     
Net income  $184,870   $205,680   $81,754   $61,435 
                     
Net income per common share:                    
                     
Basic  $0.003   $0.004   $0.001   $0.001 
Diluted  $0.003   $0.004   $0.001   $0.001 
                     
Weighted average number of shares outstanding                    
                     
Basic   60,126,602    55,784,444    60,269,156    63,111,111 
Diluted   60,126,602    55,784,444    60,269,156    63,111,111 

 

See the notes to the consolidated financial statements

 

 3 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014

 

   Nine Months   Nine Months 
   Ended   Ended 
   September 30,   September 30, 
   2015   2014 
   (unaudited)   (unaudited) 
Cash flow from operating activities:        
Net income  $184,870   $205,680 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization expenses   122,064    91,082 
Non-cash interest expense   5,533    6,144 
Non-cash professional expenses   146,682    - 
Bad debt expense   (81,761)   762 
(Increase) decrease in assets:          
Accounts receivable, net   (29,786)   (26,342)
Other current assets   (6,325)   - 
Deposits   8,662    - 
(Decrease) increase in liabilities:          
Accounts payable and accrued expenses   46,125    19,837 
Income taxes payable   94,045    - 
Net cash provided by operating activities  $490,109   $297,163 
           
Cash flows from investing activities:          
Purchases of property and equipment   (35,594)   (30,131)
Purchase of intangible assets   (24,272)   - 
Net cash used in investing activities  $(59,866)  $(30,131)
           
Cash flows from financing activities:          
Payments on capital lease obligation   (15,581)   - 
Advances from shareholder   -    8,100 
Payments on loan from shareholder   (51,790)   (184,881)
Net cash provided by financing activities  $(67,371)  $(176,781)
           
Net increase (decrease) in cash  $362,872   $90,251 
           
Cash, beginning of period   108,642    57,447 
           
Cash, end of period  $471,514   $147,698 
           
Supplemental disclosure of cash flow information:          
           
Cash paid during the year for interest  $19,988   $- 
Cash paid during the year for income taxes  $-   $- 
           
Supplemental schedule of non-cash activities:          
Issuances of shares for professional services  $6,200   $- 
Issuances of shares subscribed for deposit on landfill  $225,000   $- 
Issuances of shares or shares subscribed for professional services  $146,682   $- 

 

See the notes to the consolidated financial statements

 

 4 

 

 

National Waste Management Holdings, Inc.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

 

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 Quarterly Report on Form 10-Q is the business and financial information of Sand/Land.

 

The Company is a solid waste management company headquartered in Central Florida, currently operating 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 U.S. 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.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

 

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-S99-1 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.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

 

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 may exceed federally insured limits. The Company has not experienced any losses in such accounts.

 

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. As of September 30, 2015 and December 31, 2014, the allowance for doubtful accounts was approximately $70,000 and $112,000, respectively. Bad debt expense recognized for the nine ended September 30, 2015 and 2014 was $(81,761) and $0, respectively. Bad debt expense recognized for the three months ended September 30, 2015 and 2014 was $0 and $762, respectively. The reason for the negative bad debt expense balance at September 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.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

 

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 September 30, 2015, the Company has not experienced impairment losses on its long-lived assets.

 

Intangible Assets

 

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. These costs are being 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 are being amortized over 10 years.

 

Advertising Costs

 

The Company expenses all advertising costs as incurred. Advertising expenses for the nine months ended September 30, 2015 and 2014 were $4,576 and $3,621, respectively. Advertising expenses for the three months ended September 30, 2015 and 2014 were $1,902 and $1,319, 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.

 

As of September 30, 2015, the following tax years are subject to examination:

 

Jurisdiction  Open Years for Filed Returns
Federal  December 31, 2011 - 2014

 

 8 

 

 

National Waste Management Holdings, Inc.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

 

Note 2 – Significant Accounting Policies (Continued)

 

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.

 

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 September 30, 2015 and December 31, 2014:

 

   2015   2014 
Machinery and equipment   2,098,138    2,094,316 
Airspace   865,076    865,076 
Transportation equipment   565,440    561,240 
Improvements   333,944    306,372 
Office furniture and equipment   2,117    2,117 
Landfill area   72,098    72,098 
Total Property, plant and equipment   3,936,813    3,901,219 
Less: accumulated depreciation   (3,264,186)   (3,156,814)
Property, plant and equipment, net  $672,627   $744,405 

 

 9 

 

 

National Waste Management Holdings, Inc.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

 

Note 3 – Property, Plant and Equipment (continued)

 

Depreciation expense for the nine months ended September 30, 2015 and 2014 was $107,372 and $77,460, respectively. Depreciation expense for the three months ended September 30, 2015 and 2014 was $36,174 and $26,634, respectively.

 

Note 4 – Amortizable Intangible Assets

 

Intangible assets consist of the following as of September 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   (69,180)   (54,488)   
Intangible assets, net  $45,905   $36,325    

 

Year Ending    
2015  $4,949 
2016   22,446 
2017   4,283 
2018   3,620 
2019   1,632 
Thereafter   8,975 
   $45,905 
      

Amortization expense for the nine months ended September 30, 2015 and 2014 was $14,692 and $13,622, respectively. Amortization expense for the three months ended September 30, 2015 and 2014 was $5,611 and $4,541, respectively.

 

Note 5 – Commitments and Contingencies

 

General

 

During the normal course of business, the Company may be exposed to litigation. When t7he 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.

 

 10 

 

 

National Waste Management Holdings, Inc.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

 

Note 5 – Commitments and Contingencies (continued)

 

Landfill Related Environmental Remediation

 

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 September 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.

 

Concentrations of Revenues and Receivables

 

As discussed in note 7 to the financial statements, during the nine months ended September 30, 2015 and 2014, approximately 27% and 33% of the Company’s revenues were generated from a related party, respectively and approximately 54% and 54% of net accounts receivable were due from related parties as of September 30, 2015 and 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 as of September 30, 2015 are as follows:

 

2016   24,093 
2017   28,523 
2018   33,768 
2019   39,978 
2020   7,345 
Total capital lease obligation  $133,707 

 

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

 

   2015   2014 
 Leased Equipment  $179,620   $179,620 
 Less accumulated depreciation   (26,943)   - 
 Net leased assets  $152,677   $179,620 

 

 11 

 

 

National Waste Management Holdings, Inc.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

 

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 nine months ended September 30, 2105 and 2014 was $472,080 and $405,350 or 35% and 33% of total revenue, respectively. Total revenue generated from the related parties during the three months ended September 30, 2015 and 2014 were $137,950 and $158,600 or 29% and 38% of total revenue, respectively. Total related party accounts receivable as of September 30, 2015 and 2014 related to these sales was approximately $103,630 and $66,650, or 48% and 54% of total net accounts receivable, respectively.

 

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 as of September 30, 2015 and December 31, 2014 was $704,547 and $756,337 respectively. The balance of the related accrued interest at September 30, 2015 and December 31, 2014 was $27,841 and $22,308, respectively. Related party interest expense for the nine months ended September 30, 2015 and 2014 was $5,533 and $6,494, respectively. Related party interest expense for the three months ended September 30, 2015 and 2014 was $1,761 and $1,966, respectively.

 

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

 

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

 

 12 

 

 

National Waste Management Holdings, Inc.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

 

Note 7 – Related Party Transactions (continued)

 

Expenses Paid by Related Party

 

Throughout the period ending September 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 $135,778. Total deposits on the landfill (see note 9) paid by Strategic totaled $225,000 through September 30, 2015. Strategic also incurred costs to build the Company’s investor relations website of $7,594, $4,704 which was paid and $3,250 which is an outstanding payable to the vendor as of September 30, 2015. Total cash outlays by Strategic were $365,482 through September 30, 2015. Through September 30, 2015, the Company and Strategic agreed to settle this amount for 365,482 of the Company’s common shares, respectively. 251,842 shares were issued as of September 30, 2015. The remaining 113,640 shares were issued subsequent to September 30, 2015 and thus were accounted for as stock subscribed.

 

Related Party Acquisitions (Subsequent to September 30, 2015)

 

Subsequent to September 30, 2015, the Company closed on the acquisition of Waste Recovery Enterprises, LLC (“WRE”), a related party acquisition, on October 15 2015 for $250,000 in cash and 2,750,000 shares of the Company’s restricted stock. The Company entered into a letter of intent to buy Gateway Rolloff Services, LP (“Gateway”) during October, 2015. The terms of the letter of intent for Gateway include a purchase price of $450,000 and a total of 2,400,000 shares of stock of National Waste Management Holdings, Inc. The acquisition is planned to close during November, 2015.

 

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 outstanding shares of Series A Preferred Stock, the Chairman is entitled to voting power equivalent to the number of votes equal to the total number of 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.

 

 13 

 

 

National Waste Management Holdings, Inc.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

 

Note 8 – Stockholders’ Deficit (continued)

 

The Company agreed to issue 100,000 shares of common stock to an attorney for services provided as part of the original reverse merger filed by the Company. The shares were committed prior to the Company being a public entity and thus had no trading value or history. The shares were valued at $3,600 based on the fair value of services provided rather than the common stock issued because it was determined by management that the fair value of the services rendered were more readily available than the fair value of the restricted common stock issued.

 

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 included $225,000 related to deposits on the landfill acquisition and $140,482 related to professional services paid on behalf of the Company, totaling $365,482 through September 30, 2015. Through September 30, 2015, the Company and Strategic agreed to settle this amount for 365,482 of the Company’s common shares. 251,842 shares were issued as of September 30, 2015 and the remaining 113,640 shares were issued subsequent to September 30, 2015 and thus were accounted for as stock subscribed as of September 30, 2015.

 

Note 9 – Acquisitions

 

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”.

 

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 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.

 

 14 

 

 

National Waste Management Holdings, Inc. 

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

 

Note 9 – Acquisitions (continued)

 

Landfill Acquisition (continued)

 

The Transaction is not subject to any realty commission and has not closed as of September 30, 2015 or the date of this filing. The Company has a third party making the deposit payments as discussed in Note 7 and Note 8. As of September 30, 2015, the third party had made nine payments of $25,000, totaling $225,000. This agreement was extended for an additional six months through February 26th, 2016. The deal was not closed as of September 30, 2015 or through the date of this filing.

 

Related Party Acquisitions Subsequent to September 30, 2015

 

As discussed in Note 10, Subsequent Events, subsequent to September 30, 2015, the Company closed on a related party acquisition and entered into a letter of intent to acquire a second related party business. The Company closed on the acquisition of Waste Recovery Enterprises, LLC (“WRE”), a related party acquisition, on October 15 2015 for $250,000 in cash and 2,750,000 shares of the Company’s restricted stock. The Company entered into a letter of intent to buy Gateway Rolloff Services, LP (“Gateway”) on November 1, 2015. The terms of the letter of intent for Gateway include a purchase price of $450,000 and a total of 2,400,000 shares of National Waste Management Holdings, Inc. The acquisition is planned to close during November, 2015.

 

Note 10 – Subsequent Events

 

Subsequent to September 30, 2015, the Company closed on a related party acquisition and entered into a letter of intent to acquire a second related party business. The Company closed on the acquisition of Waste Recovery Enterprises, LLC (“WRE”), a related party acquisition, on October 15 2015 for $250,000 in cash and 2,750,000 shares of the Company’s restricted stock. The Company entered into a letter of intent to buy Gateway Rolloff Services, LP (“Gateway”) on November 1, 2015. The terms of the letter of intent for Gateway include a purchase price of $450,000 and a total of 2,400,000 shares of the Company’s restricted stock. The acquisition is planned to close during November, 2015.

 

WRE offers residential trash pickup, commercial or residential dumpster service and roll-off boxes for construction and clean up projects. The Company has a transfer station that accepts construction and demolition debris, household trash, furniture and appliances. The Company also offers wood grinding, demolition, mulch and gravel services. The Company’s primary operations are based near Binghamton, New York.

 

Gateway offers commercial and residential dumpster service and roll-off boxes for construction and clean up projects specializing in the removal of debris, garbage, waste, hauling construction and demolition debris, focused on servicing general contractors, new home builders, reconstruction, renovation, landscaping and home improvement professionals. The Company’s primary operations are based near Tampa, FL.

 

As of the date of the filing, the purchase price allocation was not complete or available as related to these acquisitions.

 

 15 

 

 

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;

 

 16 

 

 

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 three months ended September 30, 2015 and 2014

 

Sales for the three months ended September 30, 2015 and 2014 were $479,698 and $422,636, respectively, an increase of $57,062 or approximately 14% of consolidated revenue. This is primarily due to the execution of our business model, increase of our customer base and expanded sales to current customers.

 

Cost of revenues for the three months ended September 30, 2015 and 2014 were $216,083 and $224,208, respectively, a decrease of $8,125 or approximately 4%. The cost of sales decreased overall due to the lower fuel costs during the three months ended September 30, 2015 as compared to the same period in the prior year.

 

General and administrative costs for the three months ended September 30, 2015 and 2014 respectively, were $145,475 and $135,027 respectively, an increase of $10,448 or approximately 8%. 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. Other increases include increased salaries, of which the primary increase in salary was to the CEO of the Company who had extended responsibilities once the Company became a public entity.

 

Interest expense was $4,085 and $1,966 for the three months ended September 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 September 30, 2015 and 2014 was $81,754 and $61,435 respectively. Income tax expense recognized over the three month period ended September 30, 2015 was $30,301. With income taxes eliminated for comparative purposes, the Company’s income (income before income taxes) would have been $112,055, an increase of $50,620 or 83%, primarily attributable to execution of our business model, increased revenues and reduced cost of sales as discussed above.

 

Comparison for the nine months ended September 30, 2015 and 2014

 

Sales for the nine months ended September 30, 2015 and 2014 were $1,349,824 and $1,241,572, respectively, an increase of $108,252 or approximately 9% of consolidated revenue. This is primarily due to the execution of our business model, increase of our customer base and expanded sales to current customers.

 

Cost of revenues for the nine months ended September 30, 2015 and 2014 were $661,622 and $698,313, respectively, a decrease of $36,691 or approximately 5%. 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.

 

 17 

 

 

General and administrative costs for the nine months ended September 30, 2015 and 2014 respectively, were $380,755 and $331,085 respectively, an increase of $49,670 or approximately 15%. 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. Other increases also include increased salaries, of which the primary increase in salary was to the CEO of the Company who had extended responsibilities once the Company became a public entity.

 

Interest expense was $23,705 and $6,494 for the nine months ended September 30, 2015 and 2014, respectively. The increase is primarily attributable to the Company’s entering into a capital lease during the fourth quarter of 2014.

 

Net income for the nine months ended September 30, 2015 and 2014 was $184,870 and $205,680 respectively. The decrease of $20,810 is primarily attributable to the Company‘s 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 nine month period ended September 30, 2015 was $94,045. With income taxes eliminated for comparative purposes, the Company’s income (income before income taxes) would have been $278,915, an increase of $73,235 or 36%, primarily attributable to execution of our business model, increased revenues and reduced cost of sales as discussed above.

 

 18 

 

 

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 September 30, 2015, we had cash and cash equivalents of $471,514 and working capital of $463,414 as compared to cash of $108,642 and working capital of $131,238 at December 31, 2014.

 

Cash Flows for the Nine Months Ended September 30, 2015 Compared to the Nine Months Ended September 30, 2014

 

Cash flows from operating activities for the nine months ended September 30, 2015 provided cash of $490,109 compared to $297,163 for the nine months ended September 30, 2014, an increase of $192,946 or 65%. 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 $59,866 and $30,131 for the nine months ended September 30, 2015 and 2014, respectively, an increase of $29,735 or 99%. 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 $67,371 and $176,781 for the nine months ended September 30, 2015 and 2014, respectively, a decrease of $109,410 or 62%. The decrease is due to less payments being made on the shareholder demand loan during the nine months ended September 30, 2015 as compared to the prior year nine month period ended September 30, 2015.

 

Off-Balance sheet arrangements

 

None.

 

 19 

 

 

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 September 30, 2015.

 

 20 

 

 

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.   Defaults Upon Senior Securities.

 

On October 27, 2015, the Company entered into Membership Purchase Interest Agreements (the “Agreements”) with two related parties whereby the Company acquired 100% membership interests in Waste Recovery Enterprises, LLC (“Waste Recovery”), a limited liability company in New York. As part of the terms and conditions of the Agreements, in exchange for 100% of the outstanding membership interests in Waste Recovery, the Company issued an aggregate of 2,750,000 shares of Company’s common stock to the two parties.

 

The shares described above were not registered under the Securities Act of 1933, as amended (the “Securities Act”) and are restricted securities. The shares were issued pursuant to the registration exemption afforded the Company under the Securities Act

 

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
4.1   Promissory Note, issued to Denton L. Reed, dated October 27, 2015 (incorporated by reference to Exhibit  4.1 to the Current Report on Form 8-K filed on November 5, 2015)
10.1   Membership Interest Purchase Agreement, dated October 27, 2015 between National Waste Management Systems, LP and National Waste Management Holdings, Inc. (incorporated by reference to Exhibit  4.1 to the Current Report on Form 8-K filed on November 5, 2015)
10.2   Membership Interest Purchase Agreement, dated October 27, 2015 between Denton L. Reed and National Waste Management Holdings, Inc. (incorporated by reference to Exhibit  4.1 to the Current Report on Form 8-K filed on November 5, 2015)
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.

 

 21 
 

 

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.

 

Date: November 13, 2015

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC..  
   
/s/ Louis Paveglio  
Name: Louis Paveglio  
Chief Executive Officer & Chief Financial Officer  
(Principal Executive Officer & Principal Financial Officer)  
     

   

 22