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 March 31, 2017

 

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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

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

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

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 68,919,049 shares outstanding as of May 19, 2017.

 

 

 

 

 

 

TABLE OF CONTENTS

 

      Page
  PART I — Financial Information    
Item 1. Consolidated Financial Statements (unaudited)   1-21
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations   22-24
Item 3. Quantitative and Qualitative Disclosures about Market Risk   25
Item 4. Controls and Procedures   25
       
  PART II — Other Information    
Item 1. Legal Proceedings   26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds   26
Item 3. Defaults Upon Senior Securities   26
Item 4. Mine Safety Disclosures   26
Item 5. Other Information   26
Item 6. Exhibits   26
  Signatures   27

 

 

 

 

PART I – FINANCIAL INFORMATION

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2017
   
Index to Consolidated Financial Statements

 

  PAGE
   
Unaudited Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016 2
Unaudited Consolidated Statements of Operations for the Three Months March 31, 2017 and 2016 3
Unaudited Consolidated Statements of Cash Flows for the Three months Ended March 31, 2017 and 2016 4
Unaudited Notes to the Consolidated Financial Statements 5-21

 

 1 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016

 

   As of   As of 
   March 31, 2017   December 31, 2016 
Assets      
Current assets:        
Cash and cash equivalents  $192,317   $344,617 
Accounts receivable, net   706,664    561,049 
Prepaids and other current assets   153,179    194,640 
Due from related party   19,460    16,754 
           
Total current assets   1,071,620    1,117,060 
           
Property and equipment, net   5,007,586    4,941,285 
           
Other assets:          
Goodwill   2,317,965    2,317,965 
Intangible assets, net   1,332,412    1,184,259 
Secured letter of credit   324,950    324,950 
Deferred tax asset   442,210    438,444 
           
Total other assets   4,417,537    4,265,618 
           
Total assets  $10,496,743   $10,323,963 
           
Liabilities and Stockholders’ Equity          
Current liabilities:          
Accounts payable and accrued expenses  $603,525   $648,230 
Current portion of long term debt   213,988    155,889 
Current portion of related party debt   11,451    - 
Current portion of capital lease obligations   31,035    29,753 
Due to related party   121,511    73,996 
Related party accrued preferred stock dividends   250,000    200,000 
           
Total current liabilities   1,231,510    1,107,868 
           
Long-term liabilities:          
Long term debt, net of current portion   564,743    320,451 
Related party long term debt, net of current portion   48,549    - 
Capital lease obligations, net of current portion   61,270    69,526 
Environmental remediation obligation   324,950    324,950 
Long term deferred tax liability   657,354    694,476 
           
Total liabilities  $2,888,376   $2,517,271 
           
Commitments and contingencies (see note 5)          
           
Stockholders’ equity:          
Common stock, no par value; 250,000,000 shares authorized, 68,919,049 and 69,094,049 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively.  $6,720,003   $6,717,582 
Series A Preferred stock, no par value; 5 shares authorized, 1 share issued and outstanding as of March 31, 2017 and December 31, 2016, respectively   -    - 
Series B Preferred stock, no par value; 10,000,000 shares authorized, 10,000 shares issued and outstanding as of March 31, 2017 and December 31, 2016, respectively   2,000,000    2,000,000 
Accumulated deficit   (1,111,636)   (910,890)
           
Total stockholders’ equity   7,608,367    7,806,692 
           
Total liabilities and stockholders’ equity  $10,496,743   $10,323,963 

  

See the notes to the unaudited consolidated financial statements

 

 2 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016

 

       (Restated) 
   Three Months Ended   Three Months Ended 
   March 31, 2017   March 31, 2016 
         
Revenues  $1,662,256   $1,553,296 
           
Cost of revenues   1,091,523    917,034 
           
Gross profit   570,733    636,262 
           
Selling, general and administrative expenses   740,226    592,248 
           
Income (loss) from operations   (169,493)   44,014 
           
Other income (expenses):          
Interest expense   (15,876)   (17,065)
Gain on sale of assets   5,000    - 
Other income (expense)   505      
Write off of landfill deposits   -    (72,473)
Total other income (expenses)   (10,371)   (89,538)
           
Loss before income taxes   (179,864)   (45,524)
           
Income tax expense (benefit)   (29,118)   (4,318)
           
Net loss  $(150,746)  $(41,206)
           
Preferred stock dividends   (50,000)   (50,000)
           
Net loss attributable to common shareholders  $(200,746)  $(91,206)
           
Net loss per common share:          
           
Basic  $(0.002)  $(0.001)
Diluted  $(0.002)  $(0.001)
           
Weighted average number of shares outstanding:          
           
Basic   69,060,716    65,568,229 
Diluted   69,060,716    65,568,229 

 

See the notes to the unaudited consolidated financial statements

 

 3 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016

 

       (Restated) 
   Three Months   Three Months 
   Ended   Ended 
   March 31, 2017   March 31, 2016 
Cash flow from operating activities:        
Net loss  $(150,746)  $(41,206)
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization expenses   276,745    258,151 
Non-cash professional expenses   2,421    64,455 
Non cash write off of acquisition deposits   -    50,000 
Gain on disposition of assets   (5,000)   - 
Bad debt expense   245    335 
(Increase) decrease in assets:          
Accounts receivable, net   (145,860)   (33,809)
Other current assets   41,461    (2,404)
Due from related party   (2,710)     
Deposits   -    (4,948)
(Decrease) increase in liabilities:          
Accounts payable and accrued expenses   (44,704)   29,984 
Income taxes payable   -    (21,506)
Deferred tax assets and liabilities, net   (21,104)   17,188 
Net cash provided by (used in) operating activities  $(49,252)  $316,240 
           
Cash flows from investing activities:          
Acquisition of business (cash portion)   (108,000)   - 
Purchases of equipment   (14,257)   (51,389)
Net cash used in investing activities  $(122,257)  $(51,389)
           
Cash flows from financing activities:          
Issuance of related party long term-debt   18,000    - 
Payments on long term debt   (39,332)   (57,946)
Payments on capital lease obligation   (6,974)   (5,890)
Advance from related party   47,515    - 
Net cash provided by (used in) financing activities  $19,209   $(63,836)
           
Net increase (decrease) in cash  $(152,300)  $201,015 
Cash, beginning of period   344,617    344,365 
Cash, end of period  $192,317   $545,380 
           
Supplemental disclosure of cash flow information:          
Cash paid during the year for interest  $15,850   $17,065 
Cash paid during the year for income taxes  $-   $- 
           
Supplemental schedule of non-cash activities:          
Acquisition of business for cash and $270,000 owner financed note (financed portion) and $42,000 of proceeds from related party note payable paid directly to acquisition  $270,000   $- 
Purchase of vehicle, financed portion  $71,723   $- 
Refinanced debt acquired from Northeast Data Destruction  $60,000   $- 
Issuances of shares subscribed  $-   $3,150,000 
Short term acquisition note paid on behalf of Company by a related party  $-   $250,000 
Conversion of shareholder debt to 10% cumulative preferred stock  $-   $2,000,000 
Conversion of shareholder debt to non-interest bearing accrued short term payable (remaining difference from Preferred Conversion of Shareholder Debt)  $-   $17,301 
Preferred stock dividends accrued, not paid  $50,000   $50,000 
Conversion of related party payable to restricted common stock  $-   $592,829 

 

See the notes to the unaudited consolidated financial statements

 

 4 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

UNAUDITED CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

  

Note 1 – Business Organization

 

These financial statements represent the financial statements of National Waste Management Holdings, Inc. (“NWMH”) and its wholly owned operating subsidiaries, Sand/Land of Florida Enterprises, Inc. (“Sand/Land”), Waste Recovery Enterprises, LLC (“WRE”) and Gateway Rolloff Services, LP (“Gateway”). NWMH, Sand/Land, WRE and Gateway are collectively referred to herein as the “Company”.

 

Sand/Land 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. The Company was founded in 1986 and principally serves the following Florida counties: Citrus, Hernando, and Marion counties. 

 

WRE is a waste management company that offers trash collection services, roll-off services, data destruction and shredding services and a full-service transfer station. The Company also offers wood grinding, demolition, and mulch and gravel services. The Company’s primary operations are based near Binghamton, New York. The Company was founded in 1998 and principally serves the Northeastern U.S. industrial and residential markets.

 

Gateway offers commercial and residential dumpster service and roll-off boxes for construction and cleanup 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.

 

The Company, as a consolidated entity, is a full service solid waste management company headquartered near Tampa, Florida with operations in Florida and New York.

 

Basis of Presentation

 

The interim financial statements are condensed and should be read in conjunction with the Company’s latest annual financial statements filed with the Securities and Exchange Commission on April 17, 2017; interim disclosures generally do not repeat those in the annual statements.

 

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”). The Consolidated financial statements include the operations of Sand/Land, WRE and Gateway, together, NWMH.

 

It is Management’s opinion that all adjustments necessary for a fair presentation of the results for the interim periods have been made and that all adjustments are of a normal recurring nature except for the purchase accounting related to the acquisition of Burt’s Refuse on February 28, 2017. Purchase price accounting and disclosure is only necessary when acquisitions are completed by the Company. See note 10, “Acquisitions” for the purchase price allocation and pro-forma income statement presentation related to the acquisition.

 

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.

 

 5 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

UNAUDITED CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

 

Note 2 – Significant Accounting Policies

 

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 and associated market interest rates.

 

The Company adopted Accounting Standards Codification (“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 measurements that enhances disclosure requirements for fair value measures. 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.

 

ASC 825-10, “Financial Instruments” 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 reported in the consolidated balance sheets for receivables and current liabilities, long-term debt, capital leases and Series B, 10% cumulative preferred stock each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period between the origination of such instruments and their expected realization or their current market rates of interest or dividend yield. 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 recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all 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.

UNAUDITED 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 March 31, 2017 and December 31, 2016, the consolidated allowance for doubtful accounts was $20,000. Consolidated bad debt expense recognized for the three months ended March 31, 2017 and 2016 was $245 and $335, respectively.

 

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 other income or 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   5-7 years 
Roll off containers   5-7 years 
Improvements   5-7 years 
Buildings   39.5 years 
Landfill Airspace   39.5 years 

 

The Company reviews property, plant, 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.

UNAUDITED 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 the cost to sell.

 

Goodwill

 

Goodwill consists of the excess of cost over identifiable net tangible and intangible assets of company’s acquired. In accordance with ASC 350, “Intangibles-Goodwill and Other”, the carrying amount of goodwill and intangible assets is to be reviewed at least annually for impairment, and losses in value, if any, will be charged to operations in the period of impairment. Goodwill was determined to not be impaired as of March 31, 2017. The test for impairment was done in accordance with guidance in Accounting Standards Update (“ASU”) 2011-8 for the year ended December 31, 2016; no qualitative factors occurred during the three months ended March 31, 2017 that led the Company to believe goodwill was impaired during that period. ASU 2011-8 permits an entity to evaluate qualitative factors to assess whether impairment is more likely than not to have occurred.

 

The Company acquired two related entities during 2015, WRE and Gateway, assigning $1,265,406 and $1,006,897 of Goodwill to the purchase prices of those entities, respectively. The Company acquired one related entity and one non-related entity during 2016, assigning $36,053 and $9,609 of goodwill to the purchase prices of those entities, respectively.

 

Total Goodwill at March 31, 2017 and December 31, 2016 was $2,317,965. See Note 10, “Acquisitions” for the purchase price allocations of the businesses acquired during three months ended March 31, 2017 and December 31, 2016.

 

Reconciliation of Goodwill:    
Total goodwill at December 31, 2015   2,272,303 
Goodwill assigned to the acquisition of Sivart on May 11, 2016   36,053 
Goodwill assigned to the acquisition of Northeast Data on December 31, 2016   9,609 
Total goodwill at March 31, 2017 and December 31, 2016  $2,317,965 

 

 8 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

UNAUDITED CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

 

Note 2 – Significant Accounting Policies (Continued)

 

Amortizable Intangible Assets

 

The Company has certain intangible assets resulting from business combinations and acquisitions that are recorded at cost. Intangible assets with finite lives are amortized on a straight-line basis over their respective estimated useful lives.

 

Intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the estimated undiscounted future cash flows related to the asset are less than the carrying value, the Company recognizes a loss equal to the difference between the carrying value and the estimated fair value, usually determined by the estimated discounted future cash flows of the asset. See note 10, “Acquisitions” for details related to the purchase price allocation of identified definite lived amortizable intangible assets, including customer lists, licenses, permits, and non-compete agreements. The Company has a customer list that was bought from a related party in 2011, a website built in 2015 and engineering costs as part of a 10-year permit renewal with the Department of Environmental Protection. The Company purchased two related entities during 2015, one related business and one unrelated business in 2016, assigning a portion of the purchase prices to amortizable intangible assets, primarily customer lists. See note 4, “Amortizable Intangible Assets” and Note 10, “Acquisitions”.

 

Advertising Costs

 

The Company expenses all advertising costs as incurred. Consolidated advertising expenses for the three months ended March 31, 2017 and 2016 were $3,832 and $2,800, respectively.

 

Income Taxes

 

The Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company reviews the tax positions taken or expected to be taken on tax returns to determine whether and to what extent a benefit can be recognized in our consolidated financial statements. To the extent interest and penalties would be assessed by taxing authorities on any underpayment of income tax, such amounts are accrued and classified as a component of income tax expense. For the three months ended March 31, 2017 and 2016, we did not recognize any accrued interest or penalties.

 

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 March 31, 2017, the following tax years are subject to examination:

 

Jurisdiction   Open Three months for Filed Returns
Federal   December 31, 2013 – 2016

 

 9 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

UNAUDITED 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.

 

Selling, General and Administrative Expenses

 

Business operating costs, including expenses generated from administration and purchasing functions, are recorded in “Selling, general and administrative expenses” in the Consolidated Statements of Operations. Business operating costs include items such as wages, benefits, utilities, supplies, repairs and maintenance, advertising costs and credits, rent, insurance, depreciation not related to equipment used in operations, amortization of intangible assets, leasehold amortization and costs for outside provided services.

 

Stock Issued to Non-Employees for Services Rendered

 

The Company accounts for stock issued to non-employees in accordance with the provisions of ASC 505-50, “Equity Based Payments to Non-Employees.” 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).

 

Earnings Per-Share

 

Earnings per share are based on the weighted-average number of common shares outstanding at each reporting period.

   

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 or retained earnings as previously reported.

 

 10 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

UNAUDITED CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

 

Note 3 – Property and Equipment

 

Property, plant and equipment and related accumulated depreciation consist of the following at March 31, 2017 and December 31, 2016:

 

   2017   2016 
Machinery and equipment  $2,558,563   $2,563,838 
Transportation equipment   2,524,563    2,380,394 
Containers   2,028,714    1,944,969 
Airspace   865,076    865,076 
Buildings   515,595    515,595 
Improvements   338,799    338,799 
Land   225,000    225,000 
Leased equipment   179,620    179,620 
Landfill area   72,098    72,098 
Leasehold improvements   15,781    15,781 
Office furniture and equipment   6,304    6,304 
Total Property, plant and equipment   9,330,113    9,107,474 
Less: accumulated depreciation   (4,322,527)   (4,166,189)
Property, plant and equipment, net  $5,007,586   $4,941,285 

 

Depreciation expense for the three months ended March 31, 2017 and 2016 was $203,427 and $185,554, respectively.

 

Note 4 – Amortizable Intangible Assets

 

Intangible assets consist of the following at March 31, 2017 and December 31, 2016:

 

           Amortization 
   2017   2016   Period 
Customer list  $1,681,560   $1,468,608    5 Years 
Website costs   5,954    5,954    3 Years 
Licenses and permits   66,318    66,318    10 Years 
Non-compete agreements   28,519    20,000    5 Years 
Less accumulated amortization   (449,939)   (376,621)     
Intangible assets, net  $1,332,412   $1,184,259      

 

 11 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

UNAUDITED CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

 

Note 4 – Amortizable Intangible Assets (Continued)

 

The estimated aggregate amortization expense for each of following five years and thereafter as of March 31, 2017 is as follows:

 

Year Ending    
2017 (Remaining)  $242,103 
2018   321,812 
2019   320,819 
2020   320,819 
2021   84,263 
Thereafter   42,596 
Total  $1,332,412 

 

Amortization expense for the three months ended March 31, 2017 and 2016 was $73,318 and $72,597, respectively.

 

Impairment expense for the three months ended March 31, 2017 and 2016 and the year ended December 31, 2016 was $0, $0 and $159,977, respectively. The 2016 impairment charge was due to four of the significant customers originally included in the customer list valuation for WRE having significantly lower revenues in 2016.

 

Reconciliation of Amortizable Intangible Assets:

 

Reconciliation of amortizable Intangibles  Customer
Lists
   Permits   Non
Compete
   Website   Total 
Balance at December 31, 2015, net  $1,340,889   $65,502   $-    6,962   $1,413,353 
Acquisition of Sivart on May 11, 2016   79,547    -    10,000    -    89,547 
Acquisition of Northeast on December 31, 2016   135,165    -    10,000    -    145,165 
Website discount from vendor   -    -    -    (2,000)   (2,000)
Amortization expense   (293,546)   (4,965)   (1,333)   (1,985)   (301,829)
Impairment charge for WRE Customer list   (159,977)   -    -    -    (159,977)
Balance at December 31, 2016, net  $1,102,078   $60,537   $18,667    2,977   $1,184,259 
Acquisition of Burt’s Refuse on February 28, 2017   212,953    -    8,518    -    221,471 
Amortization expense   (70,439)   (1,241)   (1,142)   (496)   (73,318)
Balance at March 31, 2017, net  $1,244,592   $59,296   $26,043    2,481   $1,332,412 

 

 12 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

UNAUDITED CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

 

Note 5 – Commitments and Contingencies

 

General

 

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 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 that 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.

 

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 $324,950 against estimated future closing costs. As of December 31, 2016, the Florida Department of Environmental Protection has approved the secured letter of credit cash reserve of $324,950 set aside by the Company at March 31, 2017 and December 31, 2016, respectively, 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 8, “Related Party Transactions,” during the three months ended March 31, 2017 and 2016, approximately 10% and 12% of the Company’s revenues were generated from a related party, respectively. As of March 31, 2017 and December 31, 2016, 7% and 16% of consolidated accounts receivable were due from a related party, respectively.

 

 13 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

UNAUDITED CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

 

Note 6 – Long-Term Debt

 

Detail of non-related party long term debt:

 

   March 31,   December 31, 
   2017   2016 
Notes payable to various banks, to finance various equipment purchases, payable in monthly installments of between $1,187 and $10,107, with interest rates ranging from 2.39% to 9.63%, maturing from December 30, 2017 through November 2022  $778,731   $476,340 
Less current maturities of long-term debt   (213,988)   (155,889)
Long-term debt, net of current portion  $564,743   $320,451 

 

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

 

Period Ended December 31:    
2017 (Remaining)   165,269 
2018   206,996 
2019   213,369 
2020   93,795 
2021   73,522 
Thereafter   25,780 
Total  $778,731 

 

 14 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

UNAUDITED CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

 

Note 7 – 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.

 

Following is a breakdown of the capital lease obligation as of March 31, 2017 and December 31, 2016:

 

   March 31,   December 31, 
   2017   2016 
Capital lease to purchase equipment  $92,305   $99,279 
Less current portion of capital lease obligations:   (31,035)   (29,753)
Long-term capital lease obligations, net of current portion  $61,270   $69,526 

 

Minimum future lease payments under the capital leases as of March 31, 2017 are as follows:

 

Period Ending December 31:    
2017 (Remaining)  $33,752 
2018   45,003 
2019   37,604 
Total minimum lease payments  $116,359 
Less amount representing interest expense   (24,045)
Present value of minimum lease payments  $92,305 
Less current portion of minimum lease payments   (31,035)
Long-term capital lease obligations at March 31, 2017  $61,270 

 

The following is a summary of leased assets included in machinery and equipment as of March 31, 2017 and December 31, 2016:

 

   March 31,   December 31, 
   2017   2016 
Leased Equipment  $179,620   $179,620 
Less accumulated depreciation   (80,829)   (71,848)
Net leased assets  $98,791   $107,772 

 

 15 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

UNAUDITED CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

 

Note 8 – Related Party Transactions

 

Related Party Sales and Accounts Receivable

 

The Company generates a portion of its revenue from a related entity transfer station, owned by the majority shareholder of the Company. This related entity uses the Company’s landfill (Sand/Land) as its primary source of disposal for construction and demolition debris. Sand/Land also trucks the disposal costs from the Company’s site, either directly or through a third party and bills the Company accordingly for trucking services. Total revenue generated from the related entity during the three months ended March 31, 2017 and 2016 were $167,618 and $181,535 or 10% and 12% of total consolidated revenue, respectively. Total related party accounts receivable as of March 31, 2017 and December 31, 2016 related to these sales were $50,780 and $93,450, respectively, or 7% and 16% of total net accounts receivable, respectively.

 

Gateway disposes a portion of its construction and debris collected in the related entities transfer station. Total expenses incurred from the related entity during the three months ended March 31, 2017 and 2016, were $36,183 and $34,779 respectively. Total related party accounts payable due to the related entity as of March 31, 2017 and December 31, 2016 were approximately $24,000 and $21,000, respectively.

 

Related Party Shareholder Loan

 

The Company had a note due the largest shareholder of the Company. This note was unsecured, had a maturity date of December 31, 2016 and carried a 1% interest rate. On January 1, 2016, the Note was converted to Series B, 10% cumulative preferred stock and the note was cancelled. The total converted debt was $2,000,000. Total related party Series B preferred stock outstanding at March 31, 2017 and December 31, 2016 was $2,000,000. Total related party accrued dividends at March 31, 2017 and December 31, 2016 were $250,000 and $200,000 respectively.

 

Related Party Acquisitions

 

On December 31, 2016, the Company closed on the acquisition of Northeast Data Destruction and Recycling, LLC (“Northeast Data”). This acquired entity was owned 50% by the majority shareholder of the Company prior to the acquisition. A second, non-related party owner owned the second 50% of the acquired entity. Northeast was acquired for $100,000 in cash and 1,425,000 shares of the Company’s restricted common stock. The majority shareholder of the Company received only restricted common stock consideration of 1,025,000 shares and the second Member of the acquired LLC received 400,000 shares of the Company’s restricted common stock and $100,000 cash. The restricted common stock was valued at $0.077 per share, equivalent with the closing price of the quoted market price of NWMH on December 30, 2016, the last trading business day of 2016. Total consideration paid for the acquisition was $209,725, including the $100,000 cash payment and $109,725 in restricted common stock. See note 10, “Acquisitions” for further information related to the acquisitions and the purchase price allocation for acquired entity.

 

Related Party Consulting Agreement

 

The Chairman of the Board is a consultant for the Company and meets with each subsidiary general manager on a regular basis, consulting on matters such as acquisitions and integration, growth plan objectives, operating effectiveness, organization structure, and equipment and financing requirements, among other matters. Total related party consulting expenses incurred and paid to the Chairman for the three months ended March 31, 2017 and 2016 was $33,000 and $23,000, respectively.

 

 16 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

UNAUDITED CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

 

Note 8 – Related Party Transactions (Continued)

 

Related Party Consolidated Workers Compensation Policy and Receivables Due from Related Party Transfer Station for Advances and Expenses Paid on Behalf of the Transfer Station

 

The Company has a consolidated workers compensation policy with a related entity transfer station company (the “Transfer Station”). The related party receivable for the workers compensation payments at March 31, 2017 and December 31, 2016 were $4,985 and $2,279, respectively. The Company loaned the Transfer Station $8,400 for equipment purchase needs in 2014. The receivable carries 0% interest. The balance of the related party receivable was $8,400 at March 31, 2017 and December 31, 2016. The Company engaged an appraiser for the Transfer Station, which Sandland paid for on behalf of the Transfer Station; $6,075 is due from the related party at March 31, 2017 for the appraisal. Total due from the Related Entity related to the equipment advance, workers compensation consolidated policy and the appraisal costs at March 31, 2017 and December 31, 2016 were $19,460 and $16,754, respectively.

 

Note 9 – Stockholders’ Deficit

 

Shares issued to Strategic for Expenses, Deposits and Acquisitions paid for on Behalf of the Company:

 

At December 31, 2015, the Company had an amount payable due to Strategic Capital Markets, LLC, a previous Financier of the Company who paid public company professional fees on behalf of the Company and assisted in financing acquisitions. The amount due the Company as of December 31, 2015 was $592,829 which was settled for 592,829 shares of the Company’s restricted common stock ($1 per share conversion) during the three months ended March 31, 2016.

 

Shares granted to independent board of director members for services:

 

During the three months ended March 31, 2017, the Company granted two-independent members of the Board of Directors a total of 25,000 shares of the Company’s restricted common stock valued at $2,421. Currently, the Company grants each independent director 12,500 shares of the Company’s common stock quarterly, valued based on the 10-day moving average of the stock price at the end of the related quarter.

 

Shares issued to consultant for professional fees:

 

The Company entered into an agreement with a consulting firm for investor relation services throughout a 12-month period, from May 10, 2016 through May 9, 2017. A total of 400,000 restricted common shares were granted and distributed to that firm during the year ended December 31, 2016. The granted shares were valued based on the value of the stock on the date of grant, May 10, 2016 of $0.13. The total value of the shares issued was approximately $53,000, amortized monthly over the term of the contract. The Company subsequently cancelled this contract and settled with the vendor to return 200,000 shares of the restricted common stock issued. Total expenses incurred for this contract were $26,300 and restricted common stock valued at approximately $26,300 was returned and common shares outstanding were reversed by 200,000 during the three months ended March 31, 2017.

  

 17 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

UNAUDITED CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

 

Note 9 – Stockholders’ Deficit (Continued)

 

Shares subscribed during the three months ended June 30, 2016:

 

During the three months ended March 31, 2016, the Company incurred amounts due to a related entity for expenses paid on behalf of the Company by the related entity and for payment of the short-term acquisition note paid on behalf of the Company by the related entity as part of the WRE acquisition, totaling $250,000 during January 2016. The $250,000 acquisition note with WRE was settled for $1 per share of the Company’s stock for a total of 250,000 subscribed shares of the Company’s restricted common stock. The Company settled $112,154 of expenses paid by the third party for expenses incurred by the Company during the period from January 1, 2016 through March 31, 2016, primarily for professional fees for $0.50 per share subscribed, or 224,308 subscribed shares of the Company’s restricted common stock. All shares subscribed due to Strategic as of March 31, 2016 were issued during the three months ended June 30, 2016.

 

Preferred Stock

 

Related Party Series A Preferred Stock, No Par Value:

 

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 September 17, 2015, the Company issued one share of Series A Preferred Stock, no par value, to the Company’s Chairman of the Board. As a holder of the 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 the Company’s 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.

 

Related Party Series B, 10% Cumulative Preferred Stock, No Par Value:

 

On January 1, 2016, the Company’s Board of Directors approved 10,000,000 shares of Series B, 10%, cumulative preferred stock and $2,000,000 of Shareholder debt was converted into 10,000 shares of the Series B, 10% cumulative preferred stock. During the three months and year ended March 31, 2017 and December 31, 2016, $50,000 and $200,000 of dividends were accrued, respectively, but not paid to the holder. Total related party accrued dividends at March 31, 2017 and December 31, 2016 were $250,000 and $200,000, respectively.

 

 18 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

UNAUDITED CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

 

Note 10 – Acquisitions

 

Acquisition of Business – Unrelated Entity – Three Months Ended March 31, 2017

 

On February 28, 2017, the Company purchased a garbage hauler and roll-off business, servicing both commercial and residential customers in Upstate New York, incorporating it into WRE’s operations. The business was purchased for $420,000.

 

Operations subsequent to February 28, 2017 are included in the accompanying consolidated financial statements. The purchase price of $420,000 included a $270,000, 5 year, 6% owner financed note, collateralized by a portion of the equipment acquired and a $150,000 cash payment. The acquisition has been accounted for using the purchase method of accounting; the $420,000 purchase was allocated as follows:

 

Assets    
Property and Equipment   
Transportation equipment  $95,000 
Containers   83,745 
Total property and equipment   178,745 
Amortizable intangible assets     
Customer list   212,953 
5 year non-compete agreement   8,518 
Total amortizable intangible assets   221,471 
Deferred tax assets   19,784 
Total purchase price  $420,000 

 

 19 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

UNAUDITED CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

 

Note 10 – Acquisitions (Continued)

 

Acquisition of Business – Unrelated Entity - 2016

 

On May 11, 2016, the Company purchased a business in Upstate New York, incorporating it into WRE’s operations. The business was purchased for $230,000.

 

Assets    
Property and Equipment  $104,400 
Goodwill and intangible assets     
Customer list   79,547 
5 year, 100 miles non-compete agreement   10,000 
Goodwill   36,053 
Total goodwill and intangible assets   125,600 
Total purchase price  $230,000 

 

Related Party Acquisitions - Fiscal Year Ended December 31, 2016

 

Northeast Data Destruction and Recycling, LLC (Northeast Data)

 

On March 31, 2016, the Company acquired Northeast Data, an entity that was 50% owned by the majority shareholder of the Company. Northeast Data offers document shredding and destruction, hard-drive shredding, and cardboard recycling services. The Company’s primary operations are in Kingston, NY. The operations of this acquisition were tucked in to WRE operations and extend the service offerings of WRE to Kingston, NY. WRE will also begin to offer document and hard-drive destruction services in the Kingston area.

 

See the table below summarizing the purchase price paid to the related party owner and the second, non-related party entity:

 

Party

 

Cash

  

Restricted Common Shares

   Value Assigned to Shares ($0.077/share)  

Total
Purchase Price

 
Majority Shareholder – 50% owner  $-    1,025,000   $78,925   $78,925 
Non-related entity - 50% owner   100,000    400,000    30,800    130,800 
Total  $100,000    1,425,000   $109,725   $209,725 

 

 20 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

UNAUDITED CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

 

Note 10 – Acquisitions (Continued)

 

Related Party Acquisitions - Fiscal Year Ended December 31, 2016 (Continued)

 

Northeast Data Destruction and Recycling, LLC (Northeast Data) (Continued)

 

Operations on and after December 31, 2016 are included in the accompanying consolidated financial statements. The acquisition has been accounted for using the purchase method of accounting. The purchase price of $209,725 was allocated as follows:

 

Property and Equipment    
Transportation equipment  $42,000 
Machinery and Equipment   64,500 
Containers   32,000 
Total property and equipment   138,500 
Deferred tax Assets   14,360 
Goodwill and intangible assets     
Customer relationships   135,165 
Non-compete agreement   10,000 
Goodwill  $9,609 
Total goodwill and intangible assets   154,774 
      
Assumed Debt   (59,057)
Deferred tax liability   (38,852)
Total consideration for acquisition  $209,725 

 

The following pro-forma financial results reflect the historical operating results of acquired entities from the period from January 1, 2016 presenting the three months ended March 31, 2017. No adjustments have been made for synergies that may result from the acquisition. These combined results are not necessarily indicative of the results that may have been achieved had the companies been combined as of such dates or periods, or of the Company’s future operations.

 

 

March 31, 2017

   March 31, 2016 
Revenues  $1,766,453   $1,762,702 
Net income (loss) from continuing operations   (161,423)   72,344 
Net income (loss)   (142,676)   (12,876)
Net income (loss) attributable to common shareholders   (192,676)   (62,876)
           
Income (loss) per share – basic and diluted  $(0.002)  $(0.001)
Weighted average shares outstanding – basic and diluted   69,060,716    65,568,229 

  

 21 

 

 

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

 

FORWARD-LOOKING STATEMENTS

 

This document contains “forward-looking statements”. 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;

 

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;

 

 22 

 

 

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, as well as others, are discussed in greater detail in our last 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 to reflect events or circumstances that may change.

 

GENERAL

 

Overview

 

We are a Waste Management Company incorporated in Florida with operations in Upstate New York and Central Florida. We operate three subsidiaries: Sand/Land of Florida Enterprises, Inc. (“Sand/Land”), Waste Recovery Enterprises, LLC (“WRE”) and Gateway Rolloff Services, LP (“Gateway”). Our primary operations and headquarters are based near Tampa, Florida.

 

Sand/Land specializes in construction and demolition landfill and roll-off services and is headquartered near Tampa, Florida.

 

Gateway offers commercial and residential dumpster service and roll-off boxes for construction and cleanup 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.

 

WRE is a waste management company that offers trash collection services, roll-off services, a full-service transfer station and document and hard-drive destruction services. WRE also offers wood grinding, demolition, mulch and gravel services. WRE’s primary operations are based near Binghamton, New York and Kingston, New York and serve the Northeastern U.S. industrial and residential markets.

 

Our business currently focuses on five distinct businesses related to waste removal and management: 1) Landfill Services; 2) Roll-off Dumpster Services; 3) Commercial and Residential Trash Collection; 4) Transfer Station Operations; and 5) Paper Shredding and Data Destruction.

 

Results of Operations

 

Comparison for the three months ended March 31, 2017 and 2016

 

Sales for the three months ended March 31, 2017 and 2016 were $1,662,256 and $1,553,296, respectively, an increase of $108,960 or 7%. The $108,960 increase is due to the acquisitions of Northeast Data Destruction, LLC (“NDD”) and Burt’s Refuse LLC (“Burt’s) on December 31, 2016 and February 28, 2017, respectively and an increase in roll-off services in Florida.

 

Cost of revenues for the three months ended March 31, 2017 and 2016 were $1,091,523 and $917,034 respectively, an increase of $174,489 or 19%. This $174,489 increase is due to the acquisitions of NDD and Burt’s, increased fuel prices in our roll-off operations in both Florida and Upstate, NY as well as increased hours for our Rolloff drivers in our Florida operations as we expand our territory and service area.

 

General and administrative costs for the three months ended March 31, 2017 and 2016 were $740,226 and $592,248, respectively, reflecting an increase of $147,978 or approximately 25%. This $147,978 increase is due to us hiring a Chief Financial Officer to assist in our growth and public company compliance, increased salary to our CEO for expanded responsibilities and travel requirements, increased wages for our workforce and increased healthcare premium costs.

 

 23 

 

 

Interest expense was $15,876 and $17,065 for the three months ended March 31, 2017 and 2016, respectively. The decrease is attributable to the payoff of some of our debt during the year ended December 31, 2016 that was still outstanding at 3-31-2016.

 

Other income and (expenses), net, were $(10,371) and $(89,538) for the three months ended March 31, 2017 and 2016, respectively, a decrease of $79,167 or 88%. This $79,167 decrease is due to us not writing off any deposits in 2017 as we did in 2016.

 

Net loss for the three months ended March 31, 2017 and 2016 was $150,746 and $41,206, respectively. The increase of $109,540 was highly attributable to the non-cash depreciation and amortization charges to earnings of $276,745 during the three months ended March 31, 2017 as compared to depreciation and amortization charges of $258,151 to earnings during the three months ended March 31, 2016. Also attributable were the factors explained above in explanations of increased cost of services and general and administrative expenses year over year, including higher fuel prices, wages, hiring of a CFO and expansion costs.

 

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 March 31, 2017, we had cash and cash equivalents of $192,317 and negative working capital of $159,890 as compared to cash of $344,617 and working capital of $9,192 at December 31, 2016. The primary reason for the negative working capital at March 31, 2017 is due to the accrual of the related party preferred stock dividends. As of March 31, 2017 the preferred stock dividends totaled $250,000; we do not intend to, nor is it required to pay these dividends until working capital allows. The Company has recently used cash to close acquisitions and purchase equipment, including cash payments to NDD of $100,000 shortly after year end and $150,000 to Burt’s on February 28, 2017.

 

Cash Flows for the Three months Ended March 31, 2017 Compared to the Three months Ended March 31, 2016

 

Cash flows from operating activities for the three months ended March 31, 2017 provided (used) cash of $(49,252) compared to $316,240 for the three months ended March 31, 2016, a decrease of $365,492 or 100%. This $365,492 decrease was primarily due to the increased net loss during the three months ended march 31, 2017, acquisition related costs that were incurred for closing and implementing operations, and the timing of cash receipts from customers, payments on payables, accrued expenses and taxes. Our cash flows used in investing activities were $122,257 and $51,389 for the three months ended March 31, 2017 and 2016, respectively, an increase of $70,868 or 138%, due to the acquisition of a business which included a $108,000 direct cash payment. Our cash flows from (used in) financing activities were $19,209 and $(63,836) during the three months ended March 31, 2017 and 2016, respectively, an increase of $83,045 or 130%. The $83,045 increase is due to the issuance of related party debt to assist in the closing of Burts, an advance from a related party and payments on existing debt decreasing during the three months ended March 31, 2017 due to the payoff of some of the Companies debt during the year ended December 31, 2016.

 

Off-Balance sheet arrangements

 

None.

 

 24 

 

 

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 March 31, 2017.

 

 25 

 

 

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 1A – Risk Factors

 

As a smaller reporting company, we are not required to provide risk factors.

 

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.

 

 26 

 

 

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: May 19, 2017

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.  

 

/s/ Louis Paveglio  
Name: Louis Paveglio  
Chief Executive Officer  
(Principal Executive Officer)  

 

/s/ Dali Kranzthor  
Name: Dali Kranzthor  
Chief Financial Officer  
(Principal Financial Officer)  

 

 

 

27