UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

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

 

For the annual period ended December 31, 2015

 

or

 

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

 

For the transition period from _____to_____.

 

Commission File Number 000-54307

 

National Waste Management Holdings, Inc.

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

 

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

 

5920 N. Florida Avenue

Hernando, FL 34442

(Address of principal executive offices)

 

(352) 489-6912

(Company’s telephone number, including area code)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  ☐ No ☒

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☒ No  ☐

 

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K ☐

 

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 ☒

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.

 

The Company has 66,623,312 shares outstanding as of March 25, 2016.

 

 

 

 

 

 

TABLE OF CONTENTS

 

      Page
  PART I    
Item 1. Business   1
Item 1a. Risk factors   6
Item 2. Properties   17
Item 3. Legal Proceedings   17
Item 4. Mine Safety Disclosures   17
       
  PART II    
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities   18
Item 6. Selected Financial Data   19
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations   19
Item 7a. Quantitative and Qualitative Disclosures About Market Risk   24
Item 8. Financial Statements and Supplementary Data   25
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure   53
Item 9a. Controls and Procedures   53
Item 9b. Other Information   53
       
  PART III    
Item 10. Directors and Executive Officers of the Registrant   54
Item 11. Executive Compensation   58
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters   59
Item 13. Certain Relationships and Related Transactions and Director Independence   60
Item 14. Principal Accountant Fees and Services   62
Item 15. Exhibits   63
Signatures     64

 

 

 

 

National Waste Management Holdings, Inc.

Form 10-K

 

FORWARD-LOOKING STATEMENTS

 

This report contains forward-looking statements. Forward-looking statements are projections in respect of future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “intends”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, or “continue” or the negative of these terms or other comparable terminology. These statements speak only as of the date of this Current Report and are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks listed under the section entitled “Risk Factors” commencing on page 8 of this report, which may cause our or our industry’s actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements.

 

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

 

In this report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.

 

As used in this report and unless otherwise indicated, the terms “we”, “us” and “our” refer to National Waste Management Holdings, Inc.

 

 

 

 

Part I

Item 1. Business

 

National Waste Management Holdings, Inc. (“NWMH”, the “Company”), a Florida corporation is a waste management company with operations in Upstate New York and Central Florida. The Company operates three subsidiaries, Sand/Land of Florida Enterprises, Inc. (“Sand/Land”), Waste Recovery Enterprises, LLC (“WRE”) and Gateway Rolloff Services, LP (“Gateway”).

 

Sand/Land specializes in construction and demolition landfill services and is headquartered near Tampa, FL.

 

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. Gateway’s primary operations are based near Tampa, FL.

 

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

 

The headquarters of NWMH are near Tampa, FL.

 

The business currently focuses on five distinct business 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) Mulch Products. Each is described in more detail below.

 

Landfill Service

 

The core of our business is our specialization in servicing our own land fill which we operate in accordance with Florida Department of Environmental Protection (“FL DPA”) standards. Our landfill facilities service both waste from our own operations in roll-off dumpster services and third parties, either individual or corporate, which require the use of our landfill facilities.

 

Currently, our landfill operations service the following types of waste:

 

Construction and debris landfill
   
Clean-up and hauling

 

Land clearing and yard trash debris

 

Recycling

 

Roll-Off Dumpster Services

 

Our roll-off dumpster services the Hernando, FL area and surrounding counties providing dumpsters for lease for construction sites and special events. We provide full service delivery, removal and replacement dumpsters. Our dumpster rentals range from 13 cubic yards to 40 cubic yards and are delivered within 24 hours. Upon removal we take along all waste and garbage and clean the site.

 

 

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Residential and Commercial Trash Collection

 

Collection involves picking up and transporting waste and recyclable materials from where it was generated to a transfer station, material recovery facility (“MRF”) or disposal site. We generally provide collection services under one of two types of arrangements:

 

a.For commercial and industrial collection services, the fees under the agreements are influenced by factors such as collection frequency, type of collection equipment we furnish, type and volume or weight of the waste collected, distance to the disposal facility, labor costs, cost of disposal and general market factors. As part of the service, we provide steel containers to most customers to store their solid waste between pick-up dates. Containers vary in size and type according to the needs of our customers and the restrictions of their communities. Many are designed to be lifted mechanically and either emptied into a truck’s compaction hopper or directly into a disposal site. By using these containers, we can service most of our commercial and industrial customers with trucks operated by only one employee.

 

b.For most residential collection services, we have a contract with, or a franchise granted by, a municipality, homeowners’ association or some other regional authority that gives us the exclusive right to service all or a portion of the homes in an area. These contracts or franchises are typically for periods of three to six years. We also provide services under individual monthly subscriptions directly to households. The fees for residential collection are either paid by the municipality or authority from their tax revenues or service charges, or are paid directly by the residents receiving the service.

 

Transfer Station:

 

At December 31, 2015, we owned 1 transfer station in New York. We deposit waste at this station, as do other waste haulers. The solid waste is then consolidated and compacted to reduce the volume and increase the density of the waste and transported by transfer trucks to disposal sites.

 

Access to transfer stations is critical to haulers who collect waste in areas not in close proximity to disposal facilities. Fees charged to third parties at transfer stations are usually based on the type and volume or weight of the waste deposited at the transfer station, the distance to the disposal site, market rates for disposal costs and other general market factors.

 

The utilization of our transfer stations by our own collection operations improves internalization by allowing us to retain fees that we would otherwise pay to third parties for the disposal of the waste we collect. It enables us to manage costs associated with waste disposal because transfer trucks, , allows us to deliver more waste to the disposal facility in each trip; (ii) waste is accumulated and compacted at transfer stations that are strategically located to increase the efficiency of our network of operations and (iii) we can retain the volume by managing the transfer of the waste to one of our own disposal sites.

 

Mulching

 

As an ancillary business to the waste and garbage traditionally covered by waste management companies, we also provide mulching services as a retail component. We sell bulk mulch in a variety of colors, species of plants, and sizes, delivered anywhere in the tri-county area. We utilize our waste management and removal operations to source prime mulching materials. The offset of sourcing materials through existing operations, allows us to minimize the total cost of operating our mulching service.

 

Competition

 

Competition is encountered in the C&D landfill services, roll off businesses, collection services, transfer station business and mulch. Competitive price pressures have the potential to affect the operating results and financial position of our operations adversely. We may encounter the constant risk of demands for price reductions from large corporate clients, but we will strive to maintain profitability in the face of downward price pressures by continually seeking to raise productivity, enhance brand image, develop new clients and provide greater values to customers. However, management cannot guarantee that such efforts will always be sufficient to offset the effects of competition. Our strategy is based on maintaining a highly competitive pricing structure.

 

We have a clear advantage over a majority of our competition because our competition is our customer also. Most of our competition do not have their own landfill (FL only currently) and transfer station (NY only currently )which gives us a great advantage in these competitive geographical locations. We believe in long term relationships and work to facilitate them with our customers as we are dedicated to our clients’ needs for responsive turnkey C&D services.

 

 

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NWMH will continue its efforts of being a highly visible company known as the prominent C&D landfill to the contracting and construction industry in Central FL and at being a collection service, C&D business and transfer station in Upstate NY. We will reinforce our regional presence and market our services to a bigger marketplace in order to facilitate our planned expansion. NWMH will be actively promoting sustainable growth to improve market share and increase profitability.

 

NWMH will also pursue the goals below:

 

Understand customers, competition and industry, and meet specific customer requirements to include an increased regional customer base.
   
Expand our service area to include a greater presence in surrounding counties that we currently service with roll off services, debris handling and disposal companies.
   
Grow the Company in new or emerging markets including recycling while promoting service lines that are currently underutilized.
   
Balance people, management, business goals, and improve internal systems. Upgrade or implement a lead tracking system to interface with related systems in accounting and operations.
   
Develop revenue and profit goals for each business and make each accountable for specific revenue and profitability goals.
   
Streamline business processes to operate economically. Reduce the overall expenditures.
   
Re-develop company values and culture through education and coaching to establish a team.

  

We feel confident that our stated goals can be reached, based on the experience of our management team in environments where they have already managed substantial growth. NWMH has a track record of tackling robust projects since our inception. The company has been prudently managed and has thrived in the recent economic downturn. We have the staff and management team to maintain the growth in C&D, transfer stations and collections services to be one of the top in our field.

 

RECENT ACQUISITIONS

 

The Company has set its focus on expanding the business in order to diversify operations and investments. The Company acquired Waste Recovery Enterprises, LLC and Gateway Rolloff Services, LP on October 15, 2015 and December 1, 2015.

 

Waste Recovery Enterprises, LLC

 

On October 15, 2015, the Company acquired Waste Recovery Enterprises, LLC (“WRE”), an entity that was 50% owned by the Majority shareholder of the Company. 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 Roll-Off Services LP

 

On December 1, 2015, the Company acquired Gateway Rolloff Services, LP (“Gateway”), an entity that was 50% owned by the Majority shareholder of the Company. 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.

 

 

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INDUSTRY OVERVIEW

 

In 1980, Florida had approximately 500 open dumps. During this time period, it was common practice to either burn or use one of these open dumps in order to alleviate solid waste. Not one of these landfills contained any methods to prevent toxins from leaching into the groundwater. Today C&D debris accounts for almost 25% of Florida’s total Municipal Solid Waste (MSW) stream. A wide range of these materials can be recovered and reused or recycled into new products.

 

Construction and demolition debris means discarded materials generally considered to be not water soluble and non-hazardous in nature, including but not limited to steel, glass, brick, concrete, asphalt material, pipe, gypsum wallboard, and lumber, from the construction or destruction of a structure as part of a construction or demolition project or from the renovation of a structure, including such debris from construction of structures at a site remote from the construction or demolition project site. The term includes rocks, soils, tree remains, trees, and other vegetative matter which normally results from land clearing or land development operations and clean cardboard, paper, plastic, wood, and metal scraps from construction projects.

 

The figures below were determined by a volume-based composition study of Florida’s C&D disposal stream conducted by The Florida Center for Solid and Hazardous Waste Management. It should be understood that due to significant densities among C&D materials, the results shown would be significantly different if the study was based on weight.

 

Wood  Cardboard  Metals  Pallets  Other  Shingles  Concrete  Drywall
44%  11%  5%  4%  17%  6%  5%  8%

 

REGULATION

 

The primary management practices for C&D waste in Florida are landfilling and recycling. Sanitary landfills are the most common means of managing C&D waste. Referred to in the past as “dumps,” modern landfills are operated to meet regulations placed to protect human health and the environment. Landfills that receive household and commercial waste must have elaborate liner systems to protect the groundwater from contamination. C&D landfills currently do not require liners in most areas of the state.

 

C&D waste landfills are currently required by the State to meet certain requirements regarding location and operation. Rules are in place, which require location restrictions, operator training, groundwater monitoring and financial assurance. A number of Florida counties have more strict requirements for C&D disposal than the State. These counties include Palm Beach, Dade, and Broward. In some counties, C&D waste may not be disposed in unlined landfills. Waste is either disposed in a lined class I or class III landfill or sent to a C&D processing and recycling facility. The added requirements for C&D landfills have raised the cost of landfilling, and thus created opportunities for recycling.

 

Several options exist for recycling C&D waste. Waste can be separated and processed at the C&D job site. This requires active participation by the C&D contractor. Tight economics and the need for rapid completion of construction and demolition projects have limited this practice, although education continues in this area. Most C&D waste recycling takes place at materials recovery facilities (MRFs) where waste stream materials are processed and separated. Waste materials are separated by a combination of mechanical and manual separation. The process often involves crushing the waste in the early stages of the process to aid in the mechanical separation of the material.

 

Our business is subject to extensive and evolving federal, state or provincial and local environmental, health, safety and transportation laws and regulations. These laws and regulations are administered by the U.S. Environmental Protection Agency (“EPA”), Environment Canada, and various other federal, state, provincial and local environmental, zoning, transportation, land use, health and safety agencies in the United States and Canada. Many of these agencies regularly examine our operations to monitor compliance with these laws and regulations and have the power to enforce compliance, obtain injunctions or impose civil or criminal penalties in case of violations. In recent years, we have perceived an increase in both the amount of government regulation and the number of enforcement actions being brought by regulatory entities against operations in the waste services industry. We expect this heightened governmental focus on regulation and enforcement to continue.

 

 

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Because the primary mission of our business is to collect and manage solid waste in an environmentally sound manner, a significant amount of our capital expenditures are related, either directly or indirectly, to environmental protection measures, including compliance with federal, state or provincial and local rules. There are costs associated with siting, design, permitting, operations, monitoring, site maintenance, corrective actions, financial assurance, and facility closure and post-closure obligations. In connection with our acquisition, development or expansion of a management or disposal facility or transfer station, we must often spend considerable time, effort and money to obtain or maintain required permits and approvals. There are no assurances that we will be able to obtain or maintain required governmental approvals. Once obtained, operating permits are subject to renewal, modification, suspension or revocation by the issuing agency. Compliance with current regulations and future requirements could require us to make significant capital and operating expenditures. However, most of these expenditures are made in the normal course of business and do not place us at any competitive disadvantage.

 

The primary United States federal statutes affecting our business are summarized below.

 

The Resource Conservation and Recovery Act of 1976 (“RCRA”), as amended, regulates handling, transporting and disposing of hazardous and non-hazardous waste and delegates authority to states to develop programs to ensure the safe disposal of solid waste. In 1991, the EPA issued its final regulations under Subtitle D of RCRA, which set forth minimum federal performance and design criteria for solid waste landfills. These regulations are typically implemented by the states, although states can impose requirements that are more stringent than the Subtitle D standards. We incur costs in complying with these standards in the ordinary course of our operations.

 

The Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, (“CERCLA”) which is also known as Superfund, provides for federal authority to respond directly to releases or threatened releases of hazardous substances into the environment that have created actual or potential environmental hazards. CERCLA’s primary means for addressing such releases is to impose strict liability for cleanup of disposal sites upon current and former site owners and operators, generators of the hazardous substances at the site and transporters who selected the disposal site and transported substances thereto. Liability under CERCLA is not dependent on the intentional disposal of hazardous substances; it can be based upon the release or threatened release, even as a result of lawful, unintentional and non-negligent action, of hazardous substances as the term is defined by CERCLA and other applicable statutes and regulations. The EPA may issue orders requiring responsible parties to perform response actions at sites, or the EPA may seek recovery of funds expended or to be expended in the future at sites. Liability may include contribution for cleanup costs incurred by a defendant in a CERCLA civil action or by an entity that has previously resolved its liability to federal or state regulators in an administrative or judicially-approved settlement. Liability under CERCLA could also include obligations to a potentially responsible party, or PRP, that voluntarily expends site clean-up costs. Further, liability for damage to publicly-owned natural resources may also be imposed.  

 

Employees

 

At December 31, 2015, we had thirty five (35) full-time employees. We believe that our relations with our employees are good.

 

 

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ITEM 1A.  RISK FACTORS.

 

Investing in our common stock involves a high degree of risk, and you should be able to bear the complete loss of your investment. You should carefully consider the risks described below, the other information in this Form 10-K, and the documents incorporated by reference herein and the risk factors discussed in our other filings with the Securities and Exchange Commission when evaluating our company and our business. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known by us or that we currently deem immaterial also may impair our business operations. If any of the following risks actually occur, our business could be harmed. In such case, the trading price of our common stock could decline and investors could lose all or a part of the money paid to buy our common stock.

 

In an effort to keep our stockholders and the public informed about our business, we may make “forward-looking statements.” Forward-looking statements usually relate to future events and anticipated revenues, earnings, cash flows or other aspects of our operations or operating results. Forward-looking statements are often identified by the words, “will,” “may,” “should,” “continue,” “anticipate,” “believe,” “expect,” “plan,” “forecast,” “project,” “estimate,” “intend” and words of similar nature and generally include statements containing:

 

projections about accounting and finances;

 

plans and objectives for the future;

 

projections or estimates about assumptions relating to our performance; or

 

our opinions, views or beliefs about the effects of current or future events, circumstances or performance.

 

You should view these statements with caution. These statements are not guarantees of future performance, circumstances or events. They are based on facts and circumstances known to us as of the date the statements are made. All aspects of our business are subject to uncertainties, risks and other influences, many of which we do not control. Any of these factors, either alone or taken together, could have a material adverse effect on us and could change whether any forward-looking statement ultimately turns out to be true. Additionally, we assume no obligation to update any forward-looking statement as a result of future events, circumstances or developments. The following discussion should be read together with the Consolidated Financial Statements and the notes thereto. Outlined below are some of the risks that we believe could affect our business and financial statements for 2015 and beyond and that could cause actual results to be materially different from those that may be set forth in forward-looking statements made by the Company.

 

The waste industry is highly competitive, and if we cannot successfully compete in the marketplace, our business, financial condition and operating results may be materially adversely affected.

 

We encounter intense competition from governmental, quasi-governmental and private sources in all aspects of our operations. In North America, the industry consists primarily of two national waste management companies and regional and local companies of varying sizes and financial resources, including companies that specialize in certain discrete areas of waste management, operators of alternative disposal facilities and companies that seek to use parts of the waste stream as feedstock for renewable energy and other by-products. Some of our regional competitors can be significant competitors in local markets and are pursuing aggressive regional growth strategies. We compete with these companies as well as with counties and municipalities that maintain their own waste collection and disposal operations. These counties and municipalities may have financial competitive advantages because tax revenues are available to them and tax-exempt financing is more readily available to them. Also, such governmental units may attempt to impose flow control or other restrictions that would give them a competitive advantage. In addition, some of our competitors may have lower financial expectations, allowing them to reduce their prices to expand sales volume or to win competitively-bid contracts, including large national accounts and exclusive franchise arrangements with municipalities. When this happens, we may lose customers and be unable to execute our pricing strategy, resulting in a negative impact to our revenue growth from yield on base business.

 

If we fail to implement our business strategy, our financial performance and our growth could be materially and adversely affected.

 

Our future financial performance and success are dependent in large part upon our ability to implement our business strategy successfully. Implementation of our strategy will require effective management of our operational, financial and human resources and will place significant demands on those resources. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview for more information on our business strategy.

 

 

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An investment in our securities involves significant risks. You should carefully consider the risks described below, together with all of the other information in this Form 10-K, including our consolidated and other financial statements and related notes, and the financial statements of our acquired subsidiaries, included elsewhere in this Form 10-K, before you decide to purchase our securities. If any of these risks actually occurs, our business, prospects, financial condition or results of operations could be materially and adversely affected, the trading price and value of our securities could decline and you could lose all or part of your investment.

 

There are risks involved in pursuing our strategy, including the following:

 

Our strategy may result in a significant change to our business, and our employees, customers or investors may not embrace and support our strategy.

 

We may not be able to hire or retain the personnel necessary to manage our strategy effectively.

 

Customer segmentation could result in fragmentation of our efforts, rather than improved customer relationships.

 

In efforts to enhance our revenues, we have implemented price increases and environmental fees, and we have continued our fuel surcharge program to offset fuel costs. The loss of volumes as a result of price increases may negatively affect our cash flows or results of operations.

 

We may be unsuccessful in implementing improvements to operational efficiency and such efforts may not yield the intended result.

 

Our restructuring may not achieve and/or maintain the goals and cost savings intended.

 

On-going rationalization of our asset portfolio following our restructuring may result in impairments to our assets. See Item 1A. Risk Factors — We may record material charges against earnings due to any number of events that could cause impairments to our assets.

 

Our ability to make strategic acquisitions and to invest in technologies depends on our ability to identify desirable acquisition or investment targets, negotiate advantageous transactions despite competition for such opportunities, fund such acquisitions on favorable terms, and realize the benefits we expect from those transactions.

 

Acquisitions, investments and/or new service offerings may not increase our earnings in the timeframe anticipated, or at all, due to difficulties operating in new markets or providing new service offerings, failure of emerging technologies to perform as expected, failure to operate within budget, integration issues, or regulatory issues, among others.

 

Integration of acquisitions, investments and/or new services offerings could increase our exposure to the risk of inadvertent noncompliance with applicable laws and regulations.

 

Execution of our strategy may cause us to incur substantial research and development costs, make substantial investments in emerging technologies and/or incur additional indebtedness, which may divert capital away from our traditional business operations.
   
We continue to seek to divest underperforming and non-strategic assets if we cannot improve their profitability. We may not be able to successfully negotiate the divestiture of underperforming and non-strategic operations, which could result in asset impairments or the continued operation of low-margin businesses.

 

In addition to the risks set forth above, implementation of our business strategy could also be affected by a number of factors beyond our control, such as increased competition, legal developments, government regulation, general economic conditions, increased operating costs or expenses and changes in industry trends. We may decide to alter or discontinue certain aspects of our business strategy at any time. If we are not able to implement our business strategy successfully, our long-term growth and profitability may be adversely affected. Even if we are able to implement some or all of the initiatives of our business strategy successfully, our operating results may not improve to the extent we anticipate, or at all.

 

 

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Compliance with existing or future regulations and/or enforcement of such regulations may restrict or change our operations, increase our operating costs or require us to make additional capital expenditures.

 

Stringent government regulations at the federal, state, provincial, and local level in the United States and Canada have a substantial impact on our business, and compliance with such regulations is costly. A large number of complex laws, rules, orders and interpretations govern environmental protection, health, safety, land use, zoning, transportation and related matters. In recent years, we have perceived an increase in both the amount of government regulation and the number of enforcement actions being brought by regulatory entities against operations in the waste services industry. We expect this heightened governmental focus on regulation and enforcement to continue. Among other things, governmental regulations and enforcement actions may restrict our operations and adversely affect our financial condition, results of operations and cash flows by imposing conditions such as:

 

limitations on siting and constructing new waste disposal, transfer, recycling or processing facilities or on expanding existing facilities;

 

limitations, regulations or levies on collection and disposal prices, rates and volumes;

 

limitations or bans on disposal or transportation of out-of-state waste or certain categories of waste;

 

mandates regarding the management of solid waste, including requirements to recycle, divert or otherwise process certain waste, recycling and other streams; or

 

limitations or restrictions on the recycling, processing or transformation of waste, recycling and other streams.

 

Regulations affecting the siting, design and closure of landfills could require us to undertake investigatory or remedial activities, curtail operations or close landfills temporarily or permanently. Future changes in these regulations may require us to modify, supplement or replace equipment or facilities. The costs of complying with these regulations could be substantial.

 

In order to develop, expand or operate a landfill or other waste management facility, we must have various facility permits and other governmental approvals, including those relating to zoning, environmental protection and land use. The permits and approvals are often difficult, time consuming and costly to obtain and could contain conditions that limit our operations.

 

We also have significant financial obligations relating to final capping, closure, post-closure and environmental remediation at our existing landfills. We establish accruals for these estimated costs, but we could underestimate such accruals. Environmental regulatory changes could accelerate or increase capping, closure, post-closure and remediation costs, requiring our expenditures to materially exceed our current accruals.

 

Various states have enacted, or are considering enacting, laws that restrict the disposal within the state of solid waste generated outside the state. From time to time, the United States Congress has considered legislation authorizing states to adopt regulations, restrictions, or taxes on the importation of out-of-state or out-of-jurisdiction waste. Additionally, several state and local governments have enacted “flow control” regulations, which attempt to require that all waste generated within the state or local jurisdiction be deposited at specific sites. The United States Congress’ adoption of legislation allowing restrictions on interstate transportation of out-of-state or out-of-jurisdiction waste certain types of flow control, or courts’ interpretations of interstate waste and flow control legislation, could adversely affect our solid and hazardous waste management services.

 

Additionally, regulations establishing extended producer responsibility, or EPR, are being considered or implemented in many places around the world, including in Canada and the U.S. EPR regulations are designed to place either partial or total responsibility on producers to fund the post-use life cycle of the products they create. Along with the funding responsibility, producers may be required to take over management of local recycling programs by taking back their products from end users or managing the collection operations and recycling processing infrastructure. There is no federal law establishing EPR in the U.S. or Canada; however, state, provincial and local governments could, and in some cases have, taken steps to implement EPR regulations. If wide-ranging EPR regulations were adopted, they could have a fundamental impact on the waste streams we manage and how we operate our business, including contract terms and pricing. A significant reduction in the waste, recycling and other streams we manage could have a material adverse effect on our financial condition, results of operations and cash flows.

 

 

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Increasing customer preference for alternatives to landfill disposal and waste-to-energy facilities could reduce our ability to operate at full capacity and cause our revenues and operating results to decline.

 

Our customers are increasingly diverting waste to alternatives to landfill and waste-to-energy disposal, such as recycling and composting, while also working to reduce the amount of waste they generate. In addition, several state and local governments mandate recycling and waste reduction at the source and prohibit the disposal of certain types of waste, such as yard and food waste, at landfills or waste-to-energy facilities. Where such organic waste is not banned from the landfill or waste-to-energy facility, some large customers such as grocery stores and restaurants are choosing to divert their organic waste from landfills. Zero-waste goals (sending no waste to the landfill) have been set by many of North America’s largest companies. Although such mandates and initiatives help to protect our environment, these developments reduce the volume of waste going to landfills and waste-to-energy facilities in certain areas, which may affect our ability to operate our landfills and waste-to-energy facilities at full capacity, as well as affecting the prices that we can charge for landfill disposal and waste-to-energy services. Our landfills and our waste-to-energy facilities currently provide and have historically provided our highest income from operations margins. If we are not successful in expanding our service offerings and growing lines of businesses to service waste streams that do not go to landfills or waste-to-energy facilities and to provide services for customers that wish to reduce waste entirely, then our revenues and operating results will decline. Additionally, despite the development of new service offerings and lines of business, it is reasonably possible that our revenues and our income from operations margins could be negatively affected due to disposal alternatives.

 

Developments in technology could trigger a fundamental change in the waste management industry, as waste streams are increasingly viewed as a resource, which may adversely impact volumes at our landfills and waste-to-energy facilities and our profitability.

 

Our Company and others have recognized the value of the traditional waste stream as a potential resource. Research and development activities are on-going to provide disposal alternatives that maximize the value of waste, including using waste as a source for renewable energy and other valuable by-products. We and many other companies are investing in these technologies. It is possible that such investments and technological advancements may reduce the cost of waste disposal or power production to a level below our costs and may reduce the demand for landfill space and waste-to-energy facilities. As a result, our revenues and margins could be adversely affected due to advancements in disposal alternatives.

 

If we are not able to develop new service offerings and protect intellectual property, or if a competitor develops or obtains exclusive rights to a breakthrough technology, our financial results may suffer.

 

Our existing and proposed service offerings to customers may require that we invest in, develop or license, and protect, new technologies. Research and development of new technologies and investment in emerging technologies often requires significant spending that may divert capital investment away from our traditional business operations. We may experience difficulties or delays in the research, development, production and/or marketing of new products and services or emerging technologies in which we have invested, which may negatively impact our operating results and prevent us from recouping or realizing a return on the investments required to bring new products and services to market. Further, protecting our intellectual property rights and combating unlicensed copying and use of intellectual property is difficult, and any inability to obtain or protect new technologies could impact our services to customers and development of new revenue sources. Our Company and others are increasingly focusing on new technologies that provide alternatives to traditional disposal and maximize the resource value of waste. If a competitor develops or obtains exclusive rights to a “breakthrough technology” that provides a revolutionary change in traditional waste management, or if we have inferior intellectual property to our competitors, our financial results may suffer.

 

Our business depends on our reputation and the value of our brand.

 

We believe we have developed a reputation for high-quality service, reliability and social and environmental responsibility, and we believe our brand symbolizes these attributes. The Sand/Land of Florida Enterprises, Inc. brand name, trademarks and logos and our reputation are powerful sales and marketing tools, and we devote significant resources to promoting and protecting them. Adverse publicity, whether or not justified, relating to activities by our operations, employees or agents could tarnish our reputation and reduce the value of our brand. Damage to our reputation and loss of brand equity could reduce demand for our services. This reduction in demand, together with the dedication of time and expense necessary to defend our reputation, could have an adverse effect on our financial condition, liquidity and results of operations, as well as require additional resources to rebuild our reputation and restore the value of our brand.

 

 

 9

 

 

 

Our operations are subject to environmental, health and safety laws and regulations, as well as contractual obligations that may result in significant liabilities.

 

There is risk of incurring significant environmental liabilities in the use, treatment, storage, transfer and disposal of waste materials. Under applicable environmental laws and regulations, we could be liable if our operations cause environmental damage to our properties or to the property of other landowners, particularly as a result of the contamination of air, drinking water or soil. Under current law, we could also be held liable for damage caused by conditions that existed before we acquired the assets or operations involved. This risk is of particular concern as we execute our growth strategy, partially though acquisitions, because we may be unsuccessful in identifying and assessing potential liabilities during our due diligence investigations. Further, the counterparties in such transactions may be unable to perform their indemnification obligations owed to us. Additionally, we could be liable if we arrange for the transportation, disposal or treatment of hazardous substances that cause environmental contamination, or if a predecessor owner made such arrangements and, under applicable law, we are treated as a successor to the prior owner. Any substantial liability for environmental damage could have a material adverse effect on our financial condition, results of operations and cash flows.

 

In the ordinary course of our business, we have in the past, we are currently, and we may in the future, become involved in legal and administrative proceedings relating to land use and environmental laws and regulations. These include proceedings in which:

 

agencies of federal, state, local or foreign governments seek to impose liability on us under applicable statutes, sometimes involving civil or criminal penalties for violations, or to revoke or deny renewal of a permit we need; and

 

local communities, citizen groups, landowners or governmental agencies oppose the issuance of a permit or approval we need, allege violations of the permits under which we operate or laws or regulations to which we are subject, or seek to impose liability on us for environmental damage.

 

We generally seek to work with the authorities or other persons involved in these proceedings to resolve any issues raised. If we are not successful, the adverse outcome of one or more of these proceedings could result in, among other things, material increases in our costs or liabilities as well as material charges for asset impairments.

 

Further, we often enter into agreements with landowners imposing obligations on us to meet certain regulatory or contractual conditions upon site closure or upon termination of the agreements. Compliance with these agreements inherently involves subjective determinations and may result in disputes, including litigation. Costs to remediate or restore the condition of closed sites may be significant.

 

General economic conditions can directly and adversely affect our revenues and our income from operations margins.

 

Our business is directly affected by changes in national and general economic factors that are outside of our control, including consumer confidence, interest rates and access to capital markets. A weak economy generally results in decreased consumer spending and decreases in volumes of waste generated, which decreases our revenues. In addition, we have a relatively high fixed-cost structure, which is difficult to quickly adjust to match shifting volume levels. Consumer uncertainty and the loss of consumer confidence may limit the number or amount of services requested by customers. Economic conditions may also limit our ability to implement our pricing strategy.

 

Some of our customers, including governmental entities, have suffered financial difficulties affecting their credit risk, which could negatively impact our operating results.

 

We provide service to a number of governmental entities and municipalities, some of which have suffered significant financial difficulties due to the downturn in the economy, reduced tax revenue and/or high cost structures. Some of these entities could be unable to pay amounts owed to us or renew contracts with us at previous or increased rates.

 

Many non-governmental customers have also suffered serious financial difficulties, including bankruptcy in some cases. The inability of our customers to pay us in a timely manner or to pay increased rates, particularly large national accounts, could negatively affect our operating results.

 

 

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We may be unable to obtain or maintain required permits or to expand existing permitted capacity of our landfills, which could decrease our revenue and increase our costs.

 

Our ability to meet our financial and operating objectives depends in part on our ability to obtain and maintain the permits necessary to operate landfill sites. Permits to build, operate and expand solid waste management facilities, including landfills and transfer stations, have become more difficult and expensive to obtain and maintain. Permits often take years to obtain as a result of numerous hearings and compliance requirements with regard to zoning, environmental and other regulations. These permits are also often subject to resistance from citizen or other groups and other political pressures. Local communities and citizen groups, adjacent landowners or governmental agencies may oppose the issuance of a permit or approval we may need, allege violations of the permits under which we currently operate or laws or regulations to which we are subject, or seek to impose liability on us for environmental damage. Responding to these challenges has, at times, increased our costs and extended the time associated with establishing new facilities and expanding existing facilities. In addition, failure to receive regulatory and zoning approval may prohibit us from establishing new facilities or expanding existing facilities. Our failure to obtain the required permits to operate our landfills could have a material adverse impact on our consolidated financial condition, results of operations and cash flows.

 

Significant shortages in diesel fuel supply or increases in diesel fuel prices will increase our operating expenses.

 

The price and supply of diesel fuel can fluctuate significantly based on international, political and economic circumstances, as well as other factors outside our control, such as actions by the Organization of the Petroleum Exporting Countries (“OPEC”) and other oil and gas producers, regional production patterns, weather conditions and environmental concerns. Average diesel fuel prices decreased in 2015 and 2014 but increased in both 2012 and 2011. We need diesel fuel to run a significant portion of our collection and transfer trucks and our equipment used in our landfill operations. Supply shortages could substantially increase our operating expenses. Additionally, as fuel prices increase, our direct operating expenses increase and many of our vendors raise their prices as a means to offset their own rising costs. We have in place a fuel surcharge program, designed to offset increased fuel expenses; however, we may not be able to pass through all of our increased costs and some customers’ contracts prohibit any pass-through of the increased costs. Additionally, we are currently party to pending litigation that pertains to our fuel and environmental charges included on our invoices and generally alleges that such charges were not properly disclosed, were unfair, and were contrary to customer service contracts.. Regardless of any offsetting surcharge programs, increased operating costs due to higher diesel fuel prices will decrease our income from operations margins.

 

We are increasingly dependent on technology in our operations and if our technology fails, our business could be adversely affected.

 

We may experience problems with the operation of our current information technology systems or the technology systems of third parties on which we rely, as well as the development and deployment of new information technology systems, that could adversely affect, or even temporarily disrupt, all or a portion of our operations until resolved. Inabilities and delays in implementing new systems can also affect our ability to realize projected or expected cost savings. Additionally, any systems failures could impede our ability to timely collect and report financial results in accordance with applicable laws and regulations.

 

A cybersecurity incident could negatively impact our business and our relationships with customers.

 

We use computers in substantially all aspects of our business operations. We also use mobile devices, social networking and other online activities to connect with our employees and our customers. Such uses give rise to cybersecurity risks, including security breach, espionage, system disruption, theft and inadvertent release of information. Our business involves the storage and transmission of numerous classes of sensitive and/or confidential information and intellectual property, including customers’ personal information, private information about employees, and financial and strategic information about the Company and its business partners. We also rely on a Payment Card Industry compliant third party to protect our customers’ credit card information. Further, as the Company pursues its strategy to grow through acquisitions and to pursue new initiatives that improve our operations and cost structure, the Company is also expanding and improving its information technologies, resulting in a larger technological presence and corresponding exposure to cybersecurity risk. If we fail to assess and identify cybersecurity risks associated with acquisitions and new initiatives, we may become increasingly vulnerable to such risks. Additionally, while we have implemented measures to prevent security breaches and cyber incidents, our preventative measures and incident response efforts may not be entirely effective. The theft, destruction, loss, misappropriation, or release of sensitive and/or confidential information or intellectual property, or interference with our information technology systems or the technology systems of third parties on which we rely, could result in business disruption, negative publicity, brand damage, violation of privacy laws, loss of customers, potential liability and competitive disadvantage.

 

 

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Our operating expenses could increase as a result of labor unions organizing or changes in regulations related to labor unions.

 

Labor unions continually attempt to organize our employees, and these efforts will likely continue in the future. Certain groups of our employees are currently represented by unions, and we have negotiated collective bargaining agreements with these unions. Additional groups of employees may seek union representation in the future, and, if successful, the negotiation of collective bargaining agreements could divert management attention and result in increased operating expenses and lower net income. If we are unable to negotiate acceptable collective bargaining agreements, our operating expenses could increase significantly as a result of work stoppages, including strikes. Any of these matters could adversely affect our financial condition, results of operations and cash flows.

 

Our business is subject to operational and safety risks, including the risk of personal injury to employees and others.

 

Providing environmental and waste management services, including constructing and operating landfills, involves risks such as truck accidents, equipment defects, malfunctions and failures, mass instability or waste slides, severe weather and natural disasters, which could potentially result in releases of hazardous materials and odors, injury or death of employees and others, or a need to shut down or reduce operation of our facilities while remedial actions are undertaken. Operation of fueling stations, and control systems and involves additional risks of fire and explosion. All of these risks expose us to potential liability for pollution and other environmental damages, personal injury, loss of life, business interruption, and property damage or destruction.

 

While we seek to minimize our exposure to such risks through comprehensive training and compliance programs, as well as vehicle and equipment maintenance programs, if we were to incur substantial liabilities in excess of any applicable insurance, our business, results of operations and financial condition could be adversely affected. Any such incidents could also tarnish our reputation and reduce the value of our brand.

 

We have substantial financial assurance and insurance requirements, and increases in the costs of obtaining adequate financial assurance, or the inadequacy of our insurance coverages, could negatively impact our liquidity and increase our liabilities.

 

The amount of insurance we are required to maintain for environmental liability is governed by statutory requirements. We believe that the cost for such insurance is high relative to the coverage it would provide and, therefore, our coverages are generally maintained at the minimum statutorily-required levels. We face the risk of incurring additional costs for environmental damage if our insurance coverage is ultimately inadequate to cover those damages. We also carry a broad range of other insurance coverages that are customary for a company our size. We use these programs to mitigate risk of loss, thereby enabling us to manage our self-insurance exposure associated with claims. The inability of our insurers to meet their commitments in a timely manner and the effect of significant claims or litigation against insurance companies may subject us to additional risks. To the extent our insurers are unable to meet their obligations, or our own obligations for claims are more than we estimated, there could be a material adverse effect to our financial results.

 

 

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We may record material charges against our earnings due to any number of events that could cause impairments to our assets.

 

In accordance with GAAP, we capitalize certain expenditures and advances relating to disposal site development, expansion projects, acquisitions, software development costs and other projects. Events that could, in some circumstances, lead to an impairment include, but are not limited to, shutting down a facility or operation or abandoning a development project or the denial of an expansion permit. Additionally, declining waste volumes and development of, and customer preference for, alternatives to traditional waste disposal could warrant asset impairments. If we determine an asset or expansion project is impaired, we will charge against earnings any unamortized capitalized expenditures and advances relating to such asset or project reduced by any portion of the capitalized costs that we estimate will be recoverable, through sale or otherwise. We also carry a significant amount of goodwill on our Consolidated Balance Sheet, which is required to be assessed for impairment annually, and more frequently in the case of certain triggering events. We may be required to incur charges against earnings if such impairment tests indicate that the fair value of a reporting unit is below its carrying value. Any such charges could have a material adverse effect on our results of operations.

 

Our capital requirements and our business strategy could increase our expenses, cause us to change our growth and development plans, or fail to maintain our desired credit profile.

 

If economic conditions or other risks and uncertainties cause a significant reduction in our cash flows from operations, we may reduce or suspend capital expenditures, growth and acquisition activity, implementation of our business strategy, dividend declarations or share repurchases. We may choose to incur indebtedness to pay for these activities, although our access to capital markets is not assured and we may not be able to incur indebtedness at a cost that is consistent with current borrowing rates. We also may need to incur indebtedness to refinance scheduled debt maturities, and it is possible that the cost of financing could increase significantly, thereby increasing our expenses and decreasing our net income. Further, our ability to execute our financial strategy and our ability to incur indebtedness is somewhat dependent upon our ability to maintain investment grade ratings on our senior debt. The credit rating process is contingent upon our credit profile, as well as a number of other factors, many of which are beyond our control, including methodologies established and interpreted by third party rating agencies. If we were unable to maintain our investment grade credit ratings in the future, our interest expense would increase and our ability to obtain financing on favorable terms could be adversely affected. 

 

The adoption of climate change legislation or regulations restricting emissions of greenhouse gases could increase our operating costs or reduce demand for our products.

 

Environmental advocacy groups and regulatory agencies in the United States and other countries have been focusing considerable attention on the emissions of carbon dioxide, methane and other greenhouse gases and their potential role in climate change. The adoption of laws and regulations to implement controls of greenhouse gases, including the imposition of fees or taxes, could adversely impact our operations and financial condition.

 

The U.S. Congress is currently working on legislation to control and reduce emissions of greenhouse gases in the United States, which includes establishing cap-and-trade programs. In addition to the pending climate legislation, the U.S. Environmental Protection Agency has proposed regulations that would require permits for and reductions in greenhouse gas emissions for certain facilities, and may issue final rules this year. These changes in the legal and regulatory environment could reduce oil and natural gas drilling activity and result in a corresponding decline in the demand for our products and services, which could adversely impact our operating results and financial condition.

 

The seasonal nature of our business, severe weather events and “one-time” special projects cause our results to fluctuate, and prior performance is not necessarily indicative of our future results.

 

Our operating revenues tend to be somewhat higher in summer months, primarily due to the higher volume of construction and demolition waste. The volumes of industrial and residential waste in certain regions where we operate also tend to increase during the summer months. Our second and third quarter revenues and results of operations typically reflect these seasonal trends. The operating results of our first quarter often reflect higher repair and maintenance expenses because we rely on the slower winter months, when waste flows are generally lower, to perform scheduled maintenance at our waste-to-energy facilities.

 

Service disruptions caused by severe storms, extended periods of inclement weather or climate extremes resulting from climate change can significantly affect the operating results of the affected Areas. On the other hand, certain destructive weather conditions that tend to occur during the second half of the year, such as the hurricanes that most often impact our operations in the Florida., can actually increase our revenues in the areas affected. While weather-related and other “one-time” occurrences can boost revenues through additional work for a limited time span, as a result of significant start-up costs and other factors, such revenue sometimes generates earnings at comparatively lower margins.

 

 

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For these and other reasons, operating results in any interim period are not necessarily indicative of operating results for an entire year, and operating results for any historical period are not necessarily indicative of operating results for a future period. Our stock price may be negatively impacted by interim variations in our results.

 

Currently pending or future litigation or governmental proceedings could result in material adverse consequences, including judgments or settlements.

 

Although we are currently not involved in civil litigation in the ordinary course of our business, we may encounter such issues in the future and from time-to-time be involved in governmental proceedings relating to the conduct of our business. The timing of the final resolutions to these types of matters is often uncertain. Additionally, the possible outcomes or resolutions to these matters could include adverse judgments or settlements, either of which could require substantial payments, adversely affecting our liquidity.

 

We may experience adverse impacts on our reported results of operations as a result of adopting new accounting standards or interpretations.

 

Our implementation of and compliance with changes in accounting rules, including new accounting rules and interpretations, could adversely affect our reported financial position or operating results or cause unanticipated fluctuations in our reported operating results in future periods. 

 

We may not be profitable.

 

If we fail to achieve our business objectives, then we may not be able to realize our expected revenue growth, maintain our existing revenue levels or operate at a profit. Even if we do realize our business objectives, our business may not be profitable in the future. 

 

We depend on the experience of our executive officers and our business may be severely disrupted in the event that we lose their services and are unable to find replacements with comparable experience and expertise.

 

We believe that our future success is dependent upon the continued services of our executive officers, as we rely on their industry experience and expertise in our business operations. In particular, we rely heavily on Mr. Pavelegio, our Chief Executive Officer and our Chief Financial Officer and the members of the Board of Directors, for their business vision, management skills and technical expertise in the waste management industry as well as their working relationships with many of our potential acquisition targets, the municipalities we service and other participants in the waste management industry. We do not maintain key-man life insurance for any of our executive officers. If any of these executive officers were unable or unwilling to continue in their present positions, or if they left our company, we may not be able to replace them with comparably skilled executives, which would cause severe disruption to our ability to manage our business. If we are unable to retain or replace our key personnel and other key employees, we may not be able to implement our business strategy and our financial condition and results of operations may be materially and adversely affected.

 

We will need substantial additional funding to accomplish our growth strategy and may be unable to raise capital on terms favorable to us or at all, which could increase our financing costs, dilute your ownership interests, affect our business operations or force us to delay, reduce or abandon our growth strategy.

 

Our growth strategy is to acquire and develop additional waste management sites in Florida and concentrate on those projects with potential for expansion. To successfully implement this growth strategy, we will need to raise substantial additional funds. Our ability to arrange financing and the cost of such financing are dependent on numerous factors, including but not limited to:

 

general economic and capital market conditions;

 

the availability of credit from banks or other lenders;

 

 

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investor confidence in us; and

 

the continued performance of our waste management site.

 

Additional funding from debt financings may make it more difficult for us to operate our business because we would need to make principal and interest payments on the indebtedness and may be obligated to abide by restrictive covenants contained in the debt financing agreements, which may, among other things, limit our ability to make business and operational decisions and pay dividends. Furthermore, raising capital through public or private sales of equity to finance acquisitions or expansion could cause earnings or ownership dilution to your shareholding interests in our company.

  

Assumptions applied to our investment analyses and feasibility studies may not be accurate, and thus our actual return on investments, operational results, and overall growth may be materially and adversely affected.

 

In performing investment analysis and feasibility studies for our acquisition and development targets, we consider factors such as: (i) demand for waste management in the area where the landfill and service area is located, (ii) increase in regulations in the locality, (iii) the increase of competition in the locality, (iv) quality of technology and ancillary services in the locality,(v) ability to obtain new financing for expansion, generally. However, much of the information we rely on in preparing these analyses is provided by the sellers of the acquisition targets. There is some increased risk of acquisition targets operating based on inaccurate or incomplete technical data. As a result, the assumptions we use to perform our internal investment analyses and feasibility studies may not be accurate or complete. If any one of our observations or assumptions, or a combination thereof, proves to be inaccurate, then our estimated returns on investments, operational results and our overall growth may be materially adversely affected.

 

The operations of our waste management plants may be adversely affected by the failure of key equipment, civil structures or transmission systems, which could result in lost revenues, increased maintenance costs and our owing damages to our customers for lost revenues.

 

The breakdown of waste management equipment or failure of other key equipment or of a civil structure in one or more of our waste management sites could disrupt the ability to collect waste and result in revenues being lower than expected. Further, any breakdown or failure of one or more of our waste collecting systems could disrupt the collection of trash to our municipalities. Repair of such breakdowns may take one or two days or up to a month, depending on the nature of the problem and availability of spare parts. A portion of the collection facilities that we may acquire in the future, were, or may have been, constructed many years ago. Older waste collecting equipment may require significant capital expenditure to keep it operating efficiently. Such equipment is also likely to require periodic upgrading and improvement. Breakdown or failure of one of our sites also may prevent us from performing under the applicable power sales agreement which, in certain situations, could result in termination of the agreement or incurring liability for liquidated damages. These events may reduce our ability to collect waste, resulting in loss of revenues and increased maintenance costs.

  

Our operations may be interrupted by realization of unexpected risks or difficulties in integrating acquired businesses, which could interrupt our existing business and materially and adversely affect our results of operations.

 

Our continued growth and ability to leverage our management expertise depend on the successful implementation of our acquisition strategy. We cannot assure you that any particular acquisition will produce the intended benefits. For instance, if we fail to integrate an acquired project into our operations successfully, or the synergies expected from an integration ultimately fail to materialize, then our existing business operations may be interrupted. We may have as a result expended significant management time, capital and other resources to the transaction, which interrupted our existing business operations.

 

Risks which may be incurred through acquisitions include, but are not limited to:

 

potential construction or engineering problems which may expose us to severe economic loss or legal liabilities and require substantial expenditure from us to remediate;

 

 

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unforeseen or hidden liabilities, including exposure to legal proceedings, associated with newly acquired companies;

 

potential impairment losses and amortization expenses relating to goodwill and intangible assets arising from any of such acquisitions, which may materially reduce our net income or result in a net loss; and

 

  failure to generate sufficient revenues to offset the costs and expenses of acquisitions;

 

We are subject to any one of the risks at the Waste Management site and additional plants we may acquire.  Any one or a combination of the above risks could interrupt our existing business and materially adversely affect our results of operations.

 

Our growth strategy is dependent upon our ability to manage our growth effectively which, if unsuccessful, could result in a material adverse impact on our financial condition and results of operations.

 

We hope to expand our business and operations. The success of our growth strategy will depend in part upon our ability to manage our growth, including, for example, our ability to assimilate management of acquired companies into our own management structure, to hire, train, supervise and manage new employees, to establish and maintain adequate financial control and reporting systems and other systems and processes, and to manage a rapidly growing and much larger operation. We cannot assure you that we will be able to:

 

  ●      expand our systems and processes effectively or efficiently or in a timely manner;
     
  ●      identify and hire qualified employees or retain valued employees;
     
  ●      maintain good relationship with municipalities and third party providers; or
     
  ●      centralize and improve the efficiency of the management and operations of the companies acquired.

 

Planning, construction, acquisition and operation of our Waste Management site require us to obtain and maintain a significant number of permits and approvals from The State of Florida, some of which we have not obtained or were not transferred to us upon project acquisition. Failure to obtain these permits and approvals could result in significant fines and our loss of the right to develop or operate those assets, which would materially and adversely affect our future growth plans and results of operations.

 

The planning, construction, acquisition and operation of small waste management sites in The State of Florida requires permits and approvals to be obtained and maintained under different regulatory schemes administered by a wide range of government agencies. See “Regulation.” We believe we have applied for the grant, of all permits and approvals required to develop and operate our waste management sites. However, our applications with respect to one or more projects may be rejected and we may be fined for failure to timely obtain permits and approvals for any of those projects. Failure to obtain missing permits and approvals may in certain cases result in significant fines or the government authorities requiring us to cease operation of our waste management operations, or unwind the acquisition of the project, any of which would materially and adversely affect our future growth plans and results of operations. Failure to obtain permits and approvals for our development projects may result in our inability to complete and operate the project, or our being subject to penalties and fines upon completion of the project, either of which could materially and adversely affect our future growth and results of operations.

 

Failure to properly manage growth could adversely affect our business.

 

The Company intends to grow its business both internally and through acquisitions.  Any such growth will increase the demands on the Company’s management, operating systems and internal controls.  The Company’s existing management resources and operational, financial, human and management information systems and controls may be inadequate to support existing or expanded operations.  The Company currently has limited business operations and has no history of managing growth.  It may be unable to manage growth successfully.  If the Company grows but is unable to successfully manage such growth, its business will suffer and its capacity for future growth will be significantly impaired.  Because of these factors, the Company may be unable to predict with any degree of accuracy its future ability to grow or rate of growth.

 

 

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If the Company is successful in identifying and closing acquisitions, it faces additional risks, including among others, difficulties and expenses incurred in the consummation of acquisitions and assimilation of the operations, technologies, personnel and services or products of the acquired companies, difficulties of operating new businesses and retaining their customers, the diversion of management’s attention from other business concerns and the potential loss of key employees of the acquired company.  The Company has no history or experience in successfully integrating acquired businesses and may be unable to successfully manage these risks.  The Company may have difficulty retaining employees.  In addition, any acquisitions by the Company may involve certain other risks, including the assumption of additional liabilities and potentially dilutive issuances of convertible debt or equity securities.

 

Failure to attract, train and retain skilled managers and other personnel could increase costs or limit growth.

 

The Company believes that its future success will depend in large part upon its ability to attract, train and retain additional highly skilled executive-level management and creative, technical, financial and marketing personnel.  Competition for such personnel is intense, and no assurance can be given that the Company will be successful in attracting, training and retaining such personnel.  The Company’s need for executive-level management will increase if it grows.  If the Company fails to attract, train and retain key personnel, its business, operating results and financial condition will be materially and adversely affected.

 

Investors may incur dilution.

 

The Company may issue additional shares of its equity securities to raise additional cash to fund acquisitions or for working capital.  If the Company issues additional shares of its capital stock, shareholders will experience dilution in their respective percentage ownership in the Company.

 

There is no intention to pay dividends at the present time.

 

The Company has never paid dividends or made other cash distributions on the common stock, and does not expect to declare or pay any dividends in the foreseeable future.  The Company intends to retain future earnings, if any, for working capital and to finance current operations and expansion of its business.

 

ITEM 2. PROPERTIES

 

Our Florida facilities are headquartered at 5920 N. Florida Avenue, Hernando, FL 34442, and our telephone number is (352) 489-6912. Our New York facilities are located at 122 Valley View Rd, Bainbridge, NY 13733. We have a second location in Florida for the Gateway operations at 2230 Destiny Way, Odessa, FL 33556.

 

ITEM 3. LEGAL PROCEEDINGS

 

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

Item 4. MINE SAFETY DISCLOSURES

 

Not Applicable.

 

 

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PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

 

On December 9, 2013, our common stock became eligible for quotation on the OTC Bulletin Board under the symbol "NWMH."

 

For the periods indicated, the following table sets forth the high and low bid prices per share of common stock. These high and low bid prices represent prices quoted by broker-dealers on the OTC Bulletin Board. These prices represent inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions.

 

Fiscal Year Ended December 31, 2015:

 

   High   Low 
First quarter  $1.72   $1.00 
Second quarter  $1.92   $1.73 
Third quarter  $1.65   $1.49 
Fourth quarter  $1.55   $1.23 

 

Fiscal Year Ended December 31, 2014:

 

   High   Low 
First quarter  $0.01   $0.01 
Second quarter  $0.01   $0.01 
Third quarter  $0.01   $0.01 
Fourth quarter  $1.10   $0.01 

 

Common Stock

As of March 25, 2016, our common stock was held by 20 stockholders of record and we had 66,623,312 shares of common stock issued and outstanding.

Dividend Policy

We have never declared or paid any cash dividends on our common stock. We do not anticipate paying any cash dividends to stockholders in the foreseeable future. In addition, any future determination to pay cash dividends will be at the discretion of the board of directors and will be dependent upon our financial condition, results of operations, capital requirements, and such other factors as the Board of Directors deem relevant. There are no restrictions in our articles of incorporation or bylaws that restrict us from declaring dividends.

Unregistered Sale of Equity Securities

During December of 2015, the Company issued 75,000 shares of restricted common stock to consultants for public relations and investor relation services. The shares were valued at the estimated fair value of the services performed, $15,000 or $0.20 per share.

 

 

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

 

As discussed in Note 8 in the Financial Footnotes, a related entity incurred costs and paid landfill acquisition deposits and paid the cash portion of an acquisition on behalf of the Company. Total restricted common shares issued prior to December 31, 2015 for settlement of these costs totaled 365,482 (settled for $1 per share). Subsequent to year end, an additional 592,829 shares of the Company’s restricted common stock were settled for these expenses, deposits and acquisition costs at $1 per restricted common share.

 

Shares issued for Acquisitions

 

On October 15, 2015 and December 1, 2015, the Company closed on the Acquisition of Waste Recovery Enterprises, LLC and Gateway Rolloff Services, LP, respectively. Each of these acquired entities were owned 50% by the majority shareholder of the Company prior to the acquisitions. In each acquisition, a second owner owned 50% of the each acquired entity.

 

A total of 2,400,000 shares of the Company’s restricted common stock were issued for these two acquisitions. The majority shareholder of the Company received no cash or notes; instead, he received 1,500,000 and 1,650,000 shares of the Company’s restricted common stock for the sale of WRE and Gateway, respectively. The total 3,150,000 shares of the Company’s restricted common stock were not issued to the majority shareholder until after December 31, 2015, and thus have been presented as common stock subscribed in the equity section of the balance sheet. The shares were valued at $1 per share, equivalent with the settlement with Strategic as described above in the related party note section describing the expenses paid on behalf of the Company.

 

ITEM 6. SELECTED FINANCIAL DATA

We are a smaller reporting company as defined by Rule 229.10(f) (1) and are not required to provide the information required by this Item.

 

ITEM 7. 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;

 

 

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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;

 

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.

 

 

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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 200,000 cubic yards of construction debris and manage our 54 acre landfill facility. We started operations with one roll-off truck and now operate thirteen rolloff trucks and approximately 800 containers (subsequent to the WRE and Gateway Acquisitions). We have maintained a contract with Citrus County Solid Waste Management landfill to back-up their roll-off trucks since 2000. On October 15, 2015 and December 1, 2015, we acquired WRE and Gateway as described above (Item 1, Business) and in Note 10 to the financial statements, Acquisitions. These acquisitions added a large roll-off business for C&D to operations as well as full service Waste Company in Upstate NY, offering residential and commercial trash collection, a transfer station and C&D services.

 

Results of Operations

 

Comparison of the Results of Operations for the Years Ended December 31, 2015 and 2014

 

Revenues for the years ended December 31, 2015 and 2014 were $2,499,842, and $1,668,354, respectively, an increase of $831,488 or approximately 50%. The increase in sales is primarily attributable to increased sales to a related party accounting for $674,320 and $523,250 of total sales for the year ended December 31, 2015 and 2014 (27% and 31% of total sales, respectively), an increase of 29% of sales to this related party year over year. Increased sales are also attributable to a better economy year over year and stronger customer base. We acquired WRE and Gateway during the years ended December 31, 2015. The revenues for these entities for the period from the acquisition date (10-15 and 12-1) to December 31, 2015 are included in our consolidated operations. Revenues fro these entities were $446,918 (18% of total) and $194,597 (8% of total) for the 75 days and 31 days ended December 31, 2015, respectively, accounting for a total additional revenue of $641,515, representing 38% of the increase year over year.

 

Cost of goods sold for the years ended December 31, 2015 and 2014 were $1,319,169 and $934,251 respectively, an increase of $384,918 or 41%. The increase is primarily due to an increase in sales as discussed above and the inclusion of WRE and Gateway acquisitions in our operations for 75 days and 31 days ended December 31, 2015, respectively. WRE and Gateway represented $260,803 and $143,779, or 20% and 11% of consolidated cost of sales for the years ended December 31, 2015 and 2014, accounting for a total of $404,609 or 105% of the increase in cost of sales year over year. The reason the total is over 100% is due to cost of sales for Sand/land, the previous sole operating subsidiary of the Company have reduced cost of sales year over year of approximately 2% or $20,000. This was due to fuel costs being lower during the year ended December 31, 2015 as compared to 2014.

 

General and administrative cost for the years ended December 31, 2015 and 2014 were $940,454 and $485,403, an increase of $455,051, or 94%. The largest driver of this increase related to the acquisition of WRE and Gateway. The other driver for this increase was due to professional fees incurred related to being an early stage public company, including professional fees and building a company governance infrastructure. We also incurred acquisition related costs, including due diligence, legal and professional fees. A large portion of our general and administrative costs were non-cash expenses paid by a related entity on behalf of the Company. Total non-cash costs incurred by the Company during the year ended December 31, 2015 were $384,511, or 41% of total general and administrative costs. Total Sand/Land general and administrative costs increased from $485,403 during 2014 to $768,840 in 2015, an increase of $283,437 or 58%. As mentioned above, this increase was due to the professional fees incurred related to being an early stage public company and building the required infrastructure for accretive growth.

 

Income from operations for the years ended December 31, 2015 and 2014 were $240,219 and $248,700, a decrease of 3%. This decrease is due to increased professional fees in 2015 as compared to 2014. As described above in the general and administrative expenses year over year comparison, a large portion of these professional fees were non-cash expenses.

 

Interest expense was $29,970 and $10,610 for the years ended December 31, 2015 and 2014, respectively. During the years ended December 31, 2015 and 2014, we incurred related party interest expense of $6,100 and $10,610, respectively. The decrease is due to the Shareholder loan being paid down during 2015. In December 2014, the Company entered into a capital lease to purchase equipment and incurred interest expense of $19,763 during the year ended December 31, 2015. The Company also acquired equipment debt as part of the acquisition of WRE. Total interest expense incurred for the period from October 15, 2015 through December 31, 2015 in WRE was $4,107.

 

 

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Other expenses, net increased to $330,670 as compared to the prior year net expenses of $10,610. The prior year amount related 100% to the interest on the shareholder loan. In 2015, the Company’s interest expense increased as discussed above due to an equipment capital lease and acquisition of WRE. The Company incurred a $300,000 one time charge off of deposits on an acquisition that was not completed by the Contract date. The deposits were non-refundable and have been included in other expenses. In 2016, we expect to have an additional $50,000 write off for deposits made in 2016. The deposits were non-cash expenses as they were paid for by a related entity on behalf of the Company. These costs were settled during the year for stock at $1 per share. Total loss of the Company related to these deposits is equivalent to 300,000 shares of restricted common stock, with an additional 50,000 shares to be issued in 2016.

 

Net income (loss) for the years ended December 31, 2015 and 2014 respectively were $(62,408) and $157,139, respectively. The loss in 2015 is due to the one time non cash write off of landfill acquisition deposits as described in the other income/expense comparison above. Without this one time charge off, not tax adjusted, the Company would have had net income of approximately $237,592, an increase from prior year. The Company acquired Gateway and WRE during the year. WRE had two and a half month included in operations, resulting in net income of $67,000 and Gateway only had one month of operations included, with a net loss of $6,000. December is an offseason month for Gateway, driving the loss. We expect both of these subsidiaries to add significant growth to our earnings during 2016 and all of our subsidiaries to be profitable in 2016.

 

Liquidity and Capital Resources

 

As of December 31, 2015 we had cash of $344,365 and a working capital deficit of $556,156 as compared to cash of $108,642 and working capital of $131,328 as of December 31, 2014. The reason for the working capital deficit at December 31, 2015 is due to professional fees and acquisition costs that were settled in stock shortly after year end. The total current liabilities to be settled in stock at $1 per share subsequent to year end, is $157,829 of professional fees and deposits made on the landfill acquisition as discussed above, $450,000 for the acquisition of Gateway (cash portion of purchase price paid for on behalf of the Company by third party), and $250,000 for the acquisition note paid to the second 50% owner of the Company (WRE, counterparty of the acquisition that wasn’t the Chairman). Total working capital to be settled in restricted common stock at $1 per share included in due to related party on our balance sheet at December 31, 2015 was $607,829. The short term acquisition note is included in acquisition notes at December 31, 2015, and represents $250,000 of the total $350,000 balance at December 31, 2015. None of these described liabilities affected our cash. Adjusted working capital after adding back these non cash payments is $301,673 at December 31, 2015. The increase is due to the increase in cash from operations year over year.

 

We are dependent on our revenues for cash flow, as we have minimized cash flow requirements through equity or debt financing. However, as we intend to expand operations, it is likely that we will require cash flow from financing in the future which could affect our ability to become cash flow positive.

 

Operating activities provided cash of $706,560 and $301,839 during the years ended December 31, 2015 and 2014, respectively. The increase was due to higher consolidated net income after adding back the non-cash charges incurred for professional fees and deposit write-off. The Company’s year over year revenues have increased significantly due to a better economy, better utilization of resources and the acquisitions of WRE and Gateway. Financing activities provided (used) cash of $76,101 and $(212,113) for the years ended December 31, 2015 and 2014, respectively. Financing activities provided positive cash in 2015 due to us taking out a loan to purchase equipment. Investing activities used cash of $546,938 and $38,531 for the years ended December 31, 2015 and 2014, respectively. The increase is primarily due to the purchase of equipment to assist in the bandwidth and growth of the Company.

 

Historical annual operating trends may not be indicative of future performance because of changes in operations, revenue streams and continued sales growth.

 

We have yet to determine precisely how we will structure future acquisitions and how we intend to pay for them. We may require additional financing, but we are uncertain as to whether we will finance acquisitions or use equity as purchasing currency. In either case, our acquisitions may have a negative effect on stockholder equity.

 

 

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Future Financings

 

We are currently in discussions with a third party to provide financing for additional potential acquisitions. This loan has not been finalized as of December 31, 2015 or the date of the filling.

  

Off-Balance Sheet Arrangements

 

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

 

Inflation

 

The amounts presented in the financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.

 

Recently Adopted Accounting Pronouncements

In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. ASU 2014-08 amends guidance on reporting discontinued operations only if the disposal of a component of an entity or group of components of an entity represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. It also allows companies to have significant continuing involvement and continuing cash flows with the discontinued operations. Additional disclosures are also required for discontinued operations and individually material disposal transactions that do not meet the definition of a discontinued operation. The standard should be applied prospectively for all disposals of components of an entity and for all businesses that, on acquisition, are classified as held for sale that occurred within annual periods beginning on or after December 15, 2014, including interim periods within that reporting period. Adoption of the ASU did not have an impact on the Company’s 2015 Consolidated Financial Statements.

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which amended the existing accounting standards for revenue recognition. ASU 2014-09 establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. The standard was initially effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. In August 2015, the FASB issued a one-year deferral of the effective date of this new guidance resulting in it now being effective for the Company beginning in fiscal year 2018. Early adoption is not permitted. The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. The Company is currently in the process of evaluating the impact of adoption of the ASU on its Consolidated Financial Statements.

 

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40)(Topic 718): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. ASU 2014-15 provides guidance related to management’s responsibility to evaluate whether there is substantial doubt about the entity’s ability to continue as a going concern and to provide related footnote disclosures. The new requirements are effective for the annual periods ending after December 15, 2016, and for interim periods and annual periods thereafter. Early adoption is permitted. Adoption of the new ASU will not have an impact on the Company’s Consolidated Financial Statements.

 

In February 2015, the FASB issued ASU No. 2015-02, "Consolidations (Topic 810): Amendments to the Consolidation Analysis" ("ASU 2015-02"), which amends current consolidation guidance including changes to both the variable and voting interest models used by companies to evaluate whether an entity should be consolidated. The requirements from ASU 2015-02 are effective for interim and annual periods beginning after December 15, 2015, and early adoption is permitted. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.

 

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In May 2015, the FASB issued ASU No. 2015-09, "Revenue from Contracts with Customers" ("ASU 2015-09"), which establishes a comprehensive new revenue recognition model designed to depict the transfer of goods or services to a customer in an amount that reflects the consideration the entity expects to be entitled to receive in exchange for those goods or services and requires significantly enhanced revenue disclosures. ASU 2015-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective. The standard is effective for interim and annual periods beginning after December 15, 2016 and permits the use of either the retrospective or cumulative effect transition method. Early adoption is not permitted. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.

 

In September 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. ASU 2015-16 requires that any effect on earnings due to depreciation, amortization or other income effects, due to a change to the provisional amounts be recorded in the current period’s financial statements as if the accounting had been completed at the acquisition date. The portion of the amount recorded in the current-period earnings, which would have been recorded in the previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date, must be presented separately on the face of the income statement or disclosed in the notes to the financial statements by line item. The amendment is effective for the fiscal year beginning after December 15, 2015. The amendments are to be applied prospectively to any adjustments occurring after the effective date. Adoption of this ASU is not expected to have a material impact on the Company’s Consolidated Financial Statements.

 

In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. ASU 2015-17 simplifies the presentation of deferred income taxes and requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The Company adopted ASU 2015-17 for the fiscal year ended December 31, 2015 and applied it retrospectively.

 

In February 2016, the FASB issued ASU 2016-02 Leases (Topic 842). ASU 2016-02 requires lessees to recognize assets and liabilities for the rights and obligations created by their leases with lease terms more than 12 months. Current guidance only requires capital leases to be recognized on the balance sheet. However, the ASU 2016-02 now requires that both capital and operating leases be recognized on the balance sheet. The effect on cash flows will strictly depend on whether the lease is classified as an operating lease or capital lease. The ASU 2016-02 will require disclosures to aid investors and other financial statement users to better understand the amount, timing and uncertainty of the cash flows arising from leases. These disclosures are to include qualitative and quantitative information about the amounts recorded in the financial statements. This update remains unchanged for lessors. However, new guidance contains targeted improvements to align, where necessary, the lessor’s accounting with the lessee’s accounting standards. ASU 2016-02 will become effective for annual periods beginning after December 15, 2018 and for interim periods within those fiscal years. The Company is currently in the process of evaluating the impact of adoption of the ASU on its Consolidated Financial Statements.

 

ITEM 7A. QUANTITATIVE AND QUALITIATIVE DISCLOSURES ABOUT MARKET RISK

 

We are a smaller reporting company, as defined by Rule 229.10(f) (1) and are not required to provide the information required by this Item.

 

 

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

The Company’s consolidated financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles.

 

It is the opinion of management that the audited consolidated financial statements for the calendar years ended December 31, 2015 and 2014 include all adjustments necessary in order to ensure that the audited consolidated financial statements are not misleading.

 

The following financial statements are filed as part of this annual report.

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

(PREVIOUSLY KOPJAGGERS, INC.)

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

 

Index to the Consolidated Financial Statements

 

   PAGE
Independent Auditors’ Report 26
   
Consolidated Balance Sheets as of December 31, 2015 and December 31, 2014 27
   
Consolidated Statements of Operations for Years Ended December 31, 2015 and 2014 28
   
Consolidated Statement of Stockholders’ Equity for Years Ended December 31, 2015 and 2014 29
   
Consolidated Statements of Cash Flows for the Years Ended December 31, 2015 and 2014 30
   
Consolidated Notes to the Financial Statements 31

 

 

 25

 

 

 

Report of Independent Registered Public Accounting Firm

 

Board of Directors

National Waste Management Holdings, Inc. and Subsidiaries

 

We have audited the accompanying consolidated balance sheets of National Waste Management Holdings, Inc. and Subsidiaries (“the Company”) as of December 31, 2015 and December 31, 2014, and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal controls over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of National Waste Management Holdings, Inc. and Subsidiary as of December 31, 2015 and 2014, and the consolidated results of its operations, stockholders' deficit and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.

 

/s/ John Scrudato CPA

Califon, New Jersey

March 28, 2016

 

 

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NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2015 AND 2014

  

  2015   2014 
Assets        
Current assets:            
Cash and cash equivalents  $344,365   $108,642 
Accounts receivable, net   570,347    105,625 
Prepaids and other current assets   38,362    3,685 
Due from related party   54,473    8,400 
           
Total current assets   1,007,547    226,352 
           
Property and equipment, net   5,041,280    744,405 
           
Other assets:          
Secured letter of credit   324,950    324,950 
Intangible assets, net   1,413,353    36,325 
Goodwill   2,179,183    - 
Deferred tax asset   53,662    - 
Other deposits   8,750    17,412 
           
Total other assets   3,979,898    378,687 
           
Total assets  $10,028,725   $1,349,444 
           
Liabilities and Stockholder's Equity (Deficit)          
Current liabilities:          
Accounts payable and accrued expenses  $228,957   $19,336 
Current portion of long term debt   184,932    - 
Current portion of capital lease obligations   25,131    21,228 
Due to related party   742,441    22,308 
Short term related party acquisition notes   350,000    - 
Income taxes payable   32,242    32,242 
           
Total current liabilities   1,563,703    95,114 
           
Long-term liabilities:          
Capital lease obligations, net of current portion   102,929    128,060 
Long term debt, net of current portion   419,073      
Environmental remediation obligation   424,596    424,596 
Loan from shareholder   2,017,301    756,337 
Long term deferred tax liability   70,221    48,709 
           
Total liabilities  $4,597,823   $1,452,816 
           
Commitments and contingencies (see note 5)          
           
Stockholders' equity (deficit):          
Common stock, no par value; 250,000,000 shares authorized, 62,880,483 and 60,000,000 shares  issued and outstanding at December 31, 2015 and 2014, respectively  $-   $- 
Preferred stock, no par value; 10,000,000 shares authorized, 1 share and 0 shares issued and outstanding as of December 31, 2015 and 2014, respectively   -    - 
Additional paid-in capital   2,456,136    9,454 
Common stock subscribed   3,150,000    - 
Retained earnings (deficit)   (175,234)   (112,826)
           
Total stockholders' equity (deficit)   5,430,902    (103,372)
           
Total liabilities and stockholders' equity (deficit)  $10,028,725   $1,349,444 

 

 

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NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

 

   Year Ended   Year Ended 
   December 31,   December 31, 
   2015   2014 
         
Revenues   2,499,842   $1,668,354 
           
Cost of revenues   1,319,169    934,251 
           
Gross profit   1,180,673    734,103 
           
Selling, general and administrative expenses   940,454    485,403 
           
Income from operations    240,219    248,700 
           
Other income (expenses):             
Interest expense   (29,970)   (10,610)
Write off of landfill deposits   (300,000)   - 
Other expenses   (4,807)   - 
           
Total other income (expenses)   (334,777)   (10,610)
           
Income before income taxes   (94,558)   238,090 
           
Income tax expense (benefit)   (32,150)   80,951 
           
Net income (loss)  $(62,408)  $157,139 
           
Net income per common share:           
Basic  $(0.001)  $0.003 
Diluted  $(0.001)  $0.003 
           
Weighted average number of shares outstanding          
Basic   60,426,837    56,778,493 
Diluted   60,426,837    56,778,493 

 

 

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NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

 

   Preferred       Common       Additional   Common         
   Stock   Amount   Stock   Amount   Paid-in   Stock   Accumulated     
   Shares   at par   Shares   at par   Capital   Subscribed   Deficit   Total 
                                 
Balances at December 31, 2013   -    -    47,450,000   $-   $9,454   $-   $(269,965)  $(260,511)
                                         
Issuance of shares in reverse merger   -    -    52,550,000    -    -    -    -    - 
                                         
Retirement of shares   -    -    (40,000,000)   -    -    -    -    - 
                                         
Net income          -    -    -    -    -    -    157,139    157,139 
                                         
Balances at December 31, 2014   -   $-    60,000,000   $-   $9,454   $-   $(112,826)  $(103,372)
                                         
Issuance of preferred share   1    -    -    -    -    -    -    - 
                                         
Issuance of shares to consultants for services   -    -    475,000    -    61,200    -    -    61,200 
                                         
Issuance of common stock for debt settlement   -    -    365,483    -    365,482    -    -    365,482 
                                         
Restricted common stock sold to investors at $0.50 per share   -    -    40,000    -    20,000    -    -    20,000 
                                         
Stock issued as parital consideration for acquisitions   -    -    2,000,000    -    2,000,000    3,150,000    -    5,150,000 
                                         
Net loss            -    -    -    -    -    -    (62,408)   (62,408)
                                         
    -   $-    62,880,483   $-   $2,456,136   $3,150,000   $(175,234)  $5,430,902 

 

 

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NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

 

   Year Ended   Year Ended 
   December 31,   December 31, 
   2015   2014 
Cash flow from operating activities:        
Net income (loss)  $(62,408)  $157,139 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization expenses   271,311    122,249 
Non-cash professional expenses   384,511    - 
Bad debt expense   (32,682)   762 
Non cash write off of acquisition deposits   300,000    - 
(Increase) decrease in assets:          
Accounts receivable, net   (160,581)   (7,768)
Other current assets   10,599    (1,025)
Deposits   8,662    (8,662)
(Decrease) increase in liabilities:          
Accounts payable and accrued expenses   12,994    (13,279)
Related party accrued interest   6,304    (28,528)
Income taxes payable   -    32,242 
Deferred tax assets and liabilities, net   (32,150)   48,709 
Net cash provided by operating activities  $706,560   $301,839 
           
Cash flows from investing activities:          
Purchases of property and equipment   (577,203)   (30,131)
Advance to related party   -    (8,400)
Purchase of intangible assets   (24,272)   - 
Cash acquired in acquisitions   54,537    - 
Net cash used in investing activities  $(546,938)  $(38,531)
           
Cash flows from financing activities:          
Issuance of  long term debt   448,809    - 
Payments on long term debt   (99,690)   - 
Payments on capital lease obligation   (21,228)   (30,332)
Payments on loan from shareholder   (251,790)   (181,781)
Net cash provided by (used in) financing activities  $76,101   $(212,113)
           
Net increase (decrease) in cash  $235,723   $51,195 
Cash, beginning of period   108,642    57,447 
Cash, end of period  $344,365   $108,642 
           
Supplemental disclosure of cash flow information:          
Cash paid during the year for interest  $23,666   $10,610 
Cash paid during the year for income taxes  $-   $- 
           
Supplemental schedule of non-cash activities:          
Acquisition of Waste Recovery Enterprises, LLC in exchange for common stock, common stock subscribed and an owner financed short term note.  See note 10, Acquisitions.  $3,000,000   $- 
Acquisition of Gateway Rolloff Services, LP in exchange for common stock, common stock subscribed and an amount due to a related party.  See note 10, Acquisitions.  $2,950,000   $- 
Issuances of shares subscribed for deposit on landfill  $300,000   $- 
Issuances of shares or shares subscribed for services  $126,682   $- 

 

 30

 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

 

Note 1 – Business Organization

 

These financial statements represent the financial statements of National Waste Management Holdings, Inc. (“NWMH”) and it’s 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”. 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.

 

WRE and Gateway were related party acquisitions. They were acquired on October 15, 2015 and December 1, 2015, respectively. See Notes 9 and 10, Related Party Transactions and Acquisitions, respectively.

 

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.

 

WRE is a waste management company that offers trash collection services, roll-off services and a full service transfer station. The Company also offers wood grinding, demolition, 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 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.

 

The Consolidated Company is a full service solid waste management company with operations in Florida and New York, Headquartered near Tampa, FL.

 

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

 

 

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NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

 

Note 2 – Significant Accounting Policies

 

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.

 

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.

 

 

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NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

 

Note 2 – Significant Accounting Policies (Continued)

 

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.

 

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 December 31, 2015 and 2014, the allowance for doubtful accounts was approximately $20,000 and $112,000, respectively. Bad debt expense recognized for the years ended December 31, 2015 and 2014 was $(32,682) and $0, respectively. The negative bad debt expense balance at December 31, 2015 was due to the allowance being overstated in the prior period 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 

 

 

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NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

 

Note 2 – Significant Accounting Policies (Continued)

 

Property, Plant and Equipment (Continued)

 

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.

 

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 December 31, 2015, the Company has not experienced impairment losses on its long-lived assets.

 

Goodwill

 

Goodwill consists of the excess of cost over identifiable net tangible and intangible assets of company’s acquired. In accordance with the Accounting Standards Codification (“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 December 31, 2015. The test for impairment was done in accordance with guidance in Accounting Standards Update (ASU) 2011-8 for the year ended December 31, 2015. 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. As part of those acquisitions, the Company assigned $1,238,173 and $941,010 of Goodwill to the purchase prices of WRE and Gateway, for a total of $2,179,183 goodwill included in our balance sheet.

 

 

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NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

 

Note 2 – Significant Accounting Policies (Continued)

 

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 trademarks. 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. See note 4, Intangible Assets.

 

Advertising Costs

 

The Company expenses all advertising costs as incurred. Consolidated advertising expenses for the years ended December 31, 2015 and 2014 was $18,175 and $4,774, 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. Refer to Note 11 to the Consolidated Financial Statements for the amount of unrecognized tax benefits and other disclosures related to uncertain tax positions. 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.

 

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 December 31, 2015, the following tax years are subject to examination:

 

Jurisdiction   Open Years for Filed Returns
Federal   December 31, 2012 – 2015

 

 

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NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

 

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.

 

Operating, General and Administrative Expenses

 

Business operating costs including expenses generated from administration and purchasing functions, are recorded in “Operating, general and administrative expenses” in the Consolidated Statements of Income. Business operating costs include items such as wages, benefits, utilities, repairs and maintenance, advertising costs and credits, rent, insurance, depreciation, 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 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).

 

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 as previously reported.

 

 

 36

 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

 

Note 2 – Significant Accounting Policies (Continued)

 

Current Relevant Accounting Standards

 

In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. ASU 2014-08 amends guidance on reporting discontinued operations only if the disposal of a component of an entity or group of components of an entity represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. It also allows companies to have significant continuing involvement and continuing cash flows with the discontinued operations. Additional disclosures are also required for discontinued operations and individually material disposal transactions that do not meet the definition of a discontinued operation. The standard should be applied prospectively for all disposals of components of an entity and for all businesses that, on acquisition, are classified as held for sale that occurred within annual periods beginning on or after December 15, 2014, including interim periods within that reporting period. Adoption of the ASU did not have an impact on the Company’s 2015 Consolidated Financial Statements.

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which amended the existing accounting standards for revenue recognition. ASU 2014-09 establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. The standard was initially effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. In August 2015, the FASB issued a one-year deferral of the effective date of this new guidance resulting in it now being effective for the Company beginning in fiscal year 2018. Early adoption is not permitted. The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. The Company is currently in the process of evaluating the impact of adoption of the ASU on its Consolidated Financial Statements.

 

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40)(Topic 718): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. ASU 2014-15 provides guidance related to management’s responsibility to evaluate whether there is substantial doubt about the entity’s ability to continue as a going concern and to provide related footnote disclosures. The new requirements are effective for the annual periods ending after December 15, 2016, and for interim periods and annual periods thereafter. Early adoption is permitted. Adoption of the new ASU will not have an impact on the Company’s Consolidated Financial Statements.

 

In February 2015, the FASB issued ASU No. 2015-02, "Consolidations (Topic 810): Amendments to the Consolidation Analysis" ("ASU 2015-02"), which amends current consolidation guidance including changes to both the variable and voting interest models used by companies to evaluate whether an entity should be consolidated. The requirements from ASU 2015-02 are effective for interim and annual periods beginning after December 15, 2015, and early adoption is permitted. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.

 

 

 37

 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

 

Note 2 – Significant Accounting Policies (Continued)

 

Current Relevant Accounting Standards (Continued)

 

In May 2015, the FASB issued ASU No. 2015-09, "Revenue from Contracts with Customers" ("ASU 2015-09"), which establishes a comprehensive new revenue recognition model designed to depict the transfer of goods or services to a customer in an amount that reflects the consideration the entity expects to be entitled to receive in exchange for those goods or services and requires significantly enhanced revenue disclosures. ASU 2015-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective. The standard is effective for interim and annual periods beginning after December 15, 2016 and permits the use of either the retrospective or cumulative effect transition method. Early adoption is not permitted. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.

 

In September 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. ASU 2015-16 requires that any effect on earnings due to depreciation, amortization or other income effects, due to a change to the provisional amounts be recorded in the current period’s financial statements as if the accounting had been completed at the acquisition date. The portion of the amount recorded in the current-period earnings, which would have been recorded in the previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date, must be presented separately on the face of the income statement or disclosed in the notes to the financial statements by line item. The amendment is effective for the fiscal year beginning after December 15, 2015. The amendments are to be applied prospectively to any adjustments occurring after the effective date. Adoption of this ASU is not expected to have a material impact on the Company’s Consolidated Financial Statements.

 

In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. ASU 2015-17 simplifies the presentation of deferred income taxes and requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The Company adopted ASU 2015-17 for the fiscal year ended December 31, 2015 and applied it retrospectively.

 

In February 2016, the FASB issued ASU 2016-02 Leases (Topic 842). ASU 2016-02 requires lessees to recognize assets and liabilities for the rights and obligations created by their leases with lease terms more than 12 months. Current guidance only requires capital leases to be recognized on the balance sheet. However, the ASU 2016-02 now requires that both capital and operating leases be recognized on the balance sheet. The effect on cash flows will strictly depend on whether the lease is classified as an operating lease or capital lease. The ASU 2016-02 will require disclosures to aid investors and other financial statement users to better understand the amount, timing and uncertainty of the cash flows arising from leases. These disclosures are to include qualitative and quantitative information about the amounts recorded in the financial statements. This update remains unchanged for lessors. However, new guidance contains targeted improvements to align, where necessary, the lessor’s accounting with the lessee’s accounting standards. ASU 2016-02 will become effective for annual periods beginning after December 15, 2018 and for interim periods within those fiscal years. The Company is currently in the process of evaluating the impact of adoption of the ASU on its Consolidated Financial Statements.

 

 

 38

 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

 

Note 3 – Property, Plant and Equipment

 

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

 

   2015   2014 
Machinery and equipment  $3,209,228   $1,914,696 
Transportation  equipment   2,119,472    561,240 
Containers   942,400    - 
Airspace   865,076    865,076 
Buildings   493,225    - 
Improvements   306,372    306,372 
Land   225,000    - 
Leased  equipment   179,620    179,620 
Land Fill Area   72,098    72,098 
Office furniture and equipment   2,117    2,117 
Total Property, plant and equipment   8,450,689    3,901,219 
Less: accumulated depreciation   (3,409,409)   (3,156,814)
Property, plant and equipment, net  $5,041,280   $744,405 

 

Depreciation expense for the year ended December 31, 2015 and 2014 was $251,008 and $104,086, respectively.

 

Note 4Amortizable Intangible Assets

 

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

 

           Amortization
   2015   2014   Period
Customer list  $1,413,872   $90,813   5 years
Website costs   7,954    -   3 years
Licenses and permits   66,318    -   10 years
Less accumulated amortization   (74,791)   (54,488)   
Intangible assets, net  $1,413,353   $36,325    

 

Year Ending    
2016  $290,391 
2017   272,228 
2018   270,903 
2019   269,577 
2020   267,945 
Thereafter   42,309 
   $1,413,353 

 

 

 39

 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

 

Note 4 – Amortizable Intangible Assets (Continued)

 

Amortization expense for the years ended December 31, 2015 and 2014 was $14,692 and $14,692, respectively.

 

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 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.

 

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 December 31, 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 8, Related Party Transactions, during the years ended December 31, 2015 and 2014, approximately 20% and 31% of the Company’s revenues were generated from a related party, respectively and approximately 16% and 79% of net accounts receivable were due from related parties as of December 31, 2015 and 2014, respectively.

 

 

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NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

 

Note 6 – Long-Term Debt

 

During 2015, the Company acquired WRE and the related debt outstanding as of the acquisition date. See note 10, Acquisitions, for a breakdown of the purchase price allocation and total acquired debt, most of which relates to equipment financing on acquired equipment.

 

Following is a breakdown of non-related party long term debt:

 

   2015   2014 
         
Notes payable to various banks, to finance various equipment    purchases, payable in monthly installments between $646 and $10,107, with interest rates ranging from 2.39% to 9.63% maturing from December  30, 2015 through     December 28, 2020    $604,005   $- 
Less current portion of long-term debt:       (184,932)   - 
Long-term debt, net of current portion      $419,073   $- 

  

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

 

2015  $184,932 
2016   141,399 
2017   126,203 
2018   127,899 
2019   23,572 
Total  $604,005 

 

Related Party Shareholder Loan

 

The Company has a note due the largest shareholder of the Company. This note is unsecured, matures on December 31, 2016 and carries a 1% interest rate. The balance of the note as of December 31, 2015 and 2014 was $504,547 and $756,337 respectively. During 2015, the Company paid down the Shareholder note by approximately $250,000. During the years ended December 31, 2015 and 2014, the Company incurred related party interest expense of $6,304 and $8,472. Total related party accrued interest related to this note as of December 31, 2015 and 2014 was $28,612 and$22,308, respectively.

 

On October 15, 2015, the Company acquired a related entity that was 50% owned by the largest shareholder of the Company. As part of that acquisition, the Company acquired a shareholder note owed to the same majority shareholder of the Company. The balance of the note, including accrued interest on the acquisition date was $1,512,753.

 

The combined balances of these related party notes at December 31, 2015 were $2,017,301. Subsequent to year end, the Board and the Shareholder mutually agreed to convert $2,000,000 of the Notes balance to 10% cumulative preferred stock; these notes have been included in long-term liabilities due to the conversion subsequent to year end. The remaining balance of the related party note after conversion was approximately $13,000.

 

 

 41

 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

 

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.

 

Future minimum lease payments under the lease as of December 31, 2015 are as follows:

 

2016  $25,131 
2017   29,753 
2018   35,224 
2019   37,952 
Total capital lease obligation  $128,060 

 

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

 

 

   2015   2014 
 Leased Equipment  $179,620   $179,620 
 Less accumulated depreciation   (35,924)   - 
 Net leased assets  $143,696   $179,620 

 

Note 8 – Related Party Transactions

 

Related Party Sales and Accounts Receivable

 

The Company generates a significant portion of their revenue from a related entity Transfer Station, owned by the majority shareholder of the Company. This related entity uses the Company’s landfill (Sandland) as its primary source of disposal for trash, debris and waste and collected. Sandland 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 years ended December 31, 2015 and 2014 for disposal costs were $674,320 and $523,250 or 27% and 31% of total consolidated revenue, respectively. Total revenue generated from the related entity during the years ended December 31, 2015 and 2014 for trucking services were $216,222 and $144,834, or 9% and 9% of consolidated revenue, respectively. Total revenue generated from the related entity during the years ended December 31, 2015 and 2014 was $890,542 and $668,084, or 36% and 40% of consolidated revenue, respectively. Total related party accounts receivable as of December 31, 2015 and 2014 related to these sales were approximately $91,000 and $75,000, or 16% and 71% of total net accounts receivable, respectively.

  

 

 42

 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

 

Note 8 – Related Party Transactions (Continued)

 

Related Party Sales and Accounts Receivable (Continued)

 

On December 1, 2015, the Company acquired Gateway, a related entity that was previously owned 50% by the largest shareholder of the Company. See note 10, Acquisitions for details. Gateway disposes a large portion of their construction and debris collected in the related entities transfer station. Total expenses incurred from the related entity during the years by the Consolidated entity during the years ended December 31, 2015 and 2014 were $56,331 and $0, respectively. Total related party accounts payable of the consolidated entity as of December 31, 2015 and 2014 related to these expenses were approximately $17,000 and $0, respectively.

 

Related Party Shareholder Loan

 

The Company has a note due the largest shareholder of the Company. This note is unsecured, matures on December 31, 2016 and carries a 1% interest rate. The balance of the note as of December 31, 2015 and 2014 was $504,547 and $756,337 respectively. During 2015, the Company paid down the Shareholder note by approximately $250,000. During the years ended December 31, 2015 and 2014, the Company incurred related party interest expense of $6,304 and $8,472. Total related party accrued interest related to this note as of December 31, 2015 and 2014 was $28,612 and$22,308, respectively.

 

On October 15, 2015, the Company acquired a related entity that was 50% owned by the largest shareholder of the Company. As part of that acquisition, the Company acquired a shareholder note owed to the same majority shareholder of the Company. The balance of the note, including accrued interest on the acquisition date was $1,512,753.

 

The combined balances of these related party notes at December 31, 2015 were $2,017,301. Subsequent to year end, the Board and the Shareholder mutually agreed to convert $2,000,000 of the Notes balance to 10% cumulative preferred stock; these notes have been included in long-term liabilities due to the conversion subsequent to year end. The remaining balance of the related party note after conversion was approximately $13,000.

 

Expenses Paid on Behalf of the Company by a Related Party

 

Throughout the year ended December 31, 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 $203,607. Total deposits on the landfill (see note 10) paid by Strategic totaled $300,000 through December 31, 2015. Strategic also incurred costs to build the Company’s investor relations website of $4,704during the fiscal year ended December 31, 2015. Strategic paid the cash portion of the acquisition of Gateway Rolloff Services, LP on December 1, 2015, totaling $450,000. Total cash outlays by Strategic were $958,311 during the year ended December 31, 2015. As of December 31, 2015, $365,482 was settled for 365,482 shares of the Company’s restricted common stock ($1 per share conversion). The remaining $592,829 is included in the due from related party account. Subsequent to year end, this amount was settled for 592,829 shares of the Company’s restricted common stock ($1 per share conversion).

  

 

 43

 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

 

Note 8 – Related Party Transactions (Continued)

 

Related Party Acquisitions

 

On October 15, 2015 and December 1, 2015, the Company closed on the Acquisition of Waste Recovery Enterprises, LLC and Gateway Rolloff Services, LP, respectively. Each of these acquired entities were owned 50% by the majority shareholder of the Company prior to the acquisitions. In each acquisition, a second owner owned 50% of the each acquired entity.

 

Waste Recovery Enterprises, LLC (“WRE”), was acquired for a $250,000 owner financed note that was paid in January of 2016 and 2,750,000 shares of the Company’s restricted common stock. Gateway Rolloff Services, LP (“Gateway”) was acquired for $450,000 in cash and a total of 2,400,000 shares of the Company’s restricted common stock. The majority shareholder of the Company received no cash or notes; he received 1,500,000 and 1,650,000 shares of the Company’s restricted common stock. The 3,150,000 shares of the Company’s restricted common stock were not issued as of December 31, 2015, and thus have been presented in the balance sheet as common stock subscribed in the equity section of the balance sheet. The shares were valued at $1 per share, equivalent with the settlement with Strategic as described above in the related party note section describing the expenses paid on behalf of the Company.

 

See note 10, Acquisitions for further information related to the acquisitions and the purchase price allocation.

 

Note 9 – Stockholders’ Deficit

 

Issuances of Restricted Common Stock for Services

 

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. On October 2, 2015, the Company entered into a second agreement with this consultant, this time for the issuance of 200,000 in exchange for governance services and NASDAQ consulting related to a potential up list to that Exchange. The services provided included a search for qualified independent board members, independency verifications of these potential members, drafting of a compensation package for Board of Director members, NASDAQ application for a potential up list (including related consulting on an up list), ongoing acquisition identification and due diligence, drafting of an insider trading policy, ongoing governance consulting through December 31, 2015 and succession planning for the Company as a whole. The shares were valued at the estimated fair value of the services provided, which was estimated as $40,000 based on the Consultants estimate of fair value of the services. The per share value (restricted common) for these services recognized in our financial statements based on the fair value of services performed, or $0.20 per share.

 

 

 44

 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

 

Note 9 – Stockholders’ Deficit (Continued)

 

Issuances of Restricted Common Stock for Services (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.

 

During December of 2015, the Company issued 75,000 shares of restricted common stock to consultants for public relations and investor relation services. The shares were valued at the estimated fair value of the services performed, $15,000 or $0.20 per share.

 

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

 

As discussed in Note 8 above, a related entity incurred costs and paid landfill acquisition deposits and paid the cash portion of an acquisition on behalf of the Company. Total restricted common shares issued prior to December 31, 2015 for settlement of these costs totaled 365,482 (settled for $1 per share). Subsequent to year end, an additional 592,829 shares of the Company’s restricted common stock were settled for these expenses, deposits and acquisition costs at $1 per restricted common share.

 

Shares issued for Acquisitions

 

On October 15, 2015 and December 1, 2015, the Company closed on the Acquisition of Waste Recovery Enterprises, LLC and Gateway Rolloff Services, LP, respectively. Each of these acquired entities were owned 50% by the majority shareholder of the Company prior to the acquisitions. In each acquisition, a second owner owned 50% of the each acquired entity.

 

A total of 2,400,000 shares of the Company’s restricted common stock were issued for these two acquisitions. The majority shareholder of the Company received no cash or notes; instead, he received 1,500,000 and 1,650,000 shares of the Company’s restricted common stock for the sale of WRE and Gateway, respectively. The total 3,150,000 shares of the Company’s restricted common stock were not issued to the majority shareholder until after December 31, 2015, and thus have been presented as common stock subscribed in the equity section of the balance sheet. The shares were valued at $1 per share, equivalent with the settlement with Strategic as described above in the related party note section describing the expenses paid on behalf of the Company.

  

 

 45

 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

 

Note 9 – Stockholders’ Deficit (Continued)

 

Preferred Stock

 

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.

 

Private Placement Shares

 

The Company raised $20,000 through sales of 40,000 shares of the Company’s restricted common at $0.50 per share through a Private Placement Memorandum. Total proceeds for these sales was $20,000.

 

Note 10 – Acquisitions

 

Related Party Acquisitions

 

Waste Recovery Enterprises, LLC

 

On October 15, 2015, the Company acquired Waste Recovery Enterprises, LLC (“WRE”), an entity that was 50% owned by the Majority shareholder of the Company. 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.

 

See the table below summarizing the purchase price paid to the related party owner and the 2nd, non-related party entity:

  

Party  Cash   Owner Financed Short Term Note   Restricted Common Shares   Value Assigned  to Shares ($1/share)   Total Purchase Price 
Majority Shareholder – 50% owner  $-   $-    1,500,000   $1,500,000   $1,500,000 
Non-related entity – 50% owner   -    250,000    1,250,000    1,250,000    1,500,000 
Total  $-   $250,000    2,750,000   $2,750,000   $3,000,000 

 

 

 46

 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

 

Note 10 – Acquisitions (Continued)

 

Related Party Acquisitions (Continued)

 

Waste Recovery Enterprises, LLC (Continued)

 

Operations subsequent to October 15, 2015 are included in the accompanying consolidated financial statements. The acquisition has been accounted for using the purchase method of accounting. The purchase price of $3,000,000 was allocated as follows:

 

Assets    
Cash  $29,625 
Accounts receivable   32,706 
Other current assets   54,598 
Due from related party   30,097 
Total current assets   162,882 
Property and Equipment     
Transportation equipment   1,116,682 
Machinery and Equipment   756,800 
Buildings   493,225 
Land   225,000 
Containers   160,400 
Leasehold improvements   17,154 
Furniture and fixtures   2,069 
Total property and equipment   2,771,330 
Goodwill and intangible assets     
Customer relationships   639,433 
Licenses and permits   50,000 
Goodwill   1,238,173 
Total goodwill and intangible assets   1,927,607 
Total assets   4,861,819 
Liabilities     
Accounts payable and accrued liabilities   (64,179)
Due to related entity   (30,000)
Total current liabilities   (94,179)
Related party debt   (1,512,754)
Long term debt   (254,886)
Total liabilities   1,861,819 
Total consideration for acquisition  $3,000,000 

  

 

 47

 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

 

Note 10 – Acquisitions (Continued)

 

Related Party Acquisitions (Continued)

 

Gateway Rolloff Services, LP

 

On December 1, 2015, the Company acquired Gateway Rolloff Services, LP (“Gateway”), an entity that was 50% owned by the Majority shareholder of the Company. 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.

 

See the table below summarizing the purchase price paid to the related party owner and the 2nd, non-related party entity.

 

Party  Cash   Cash Paid on Behalf of Company By Related Entity   Restricted Common Shares   Value Assigned to Shares ($1/share)   Total Purchase Price 
Majority Shareholder – 50% owner  $-   $-    1,650,000   $1,650,000   $1,650,000 
Non-related entity - 50% owner   -   $450,000    750,000    1,250,000    1,500,000 
Total  $-   $450,000    2,400,000   $2,750,000   $3,150,000 

 

 

 48

 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

 

Note 10 – Acquisitions (Continued)

 

Related Party Acquisitions (Continued)

 

Gateway Rolloff Services, LP (Continued)

 

Operations subsequent to November 30, 2015 are included in the accompanying consolidated financial statements. The acquisition has been accounted for using the purchase method of accounting. The purchase price of $3,150,000 was allocated as follows:

 

Assets    
Cash  $24,912 
Accounts receivable   238,753 
Total current assets   263,665 
Property and Equipment     
Transportation equipment   417,350 
Containers   782,000 
Total property and equipment   1,199,350 
Goodwill and intangible assets     
Customer relationships   683,626 
Goodwill   941,010 
Total goodwill and intangible assets   1,624,636 
Total assets   3,087,651 
Liabilities     
Accounts payable and accrued liabilities   (111,651)
Due to related party   (26,000)
Total current liabilities   (137,651)
Total consideration for acquisition  $2,950,000 

 

The Majority shareholder received a total of 3,150,000 shares of the Company’s restricted common stock. The shares were note issued as of December 31, 2015, so they are included on the balance sheet as common stock subscribed. They were issued subsequent to year end.

 

The $450,000 paid in cash by a related entity of the Company for the acquisition of Gateway was settled in restricted common stock subsequent to year end, at $1 per share, for a total of 450,000 shares of the Company’s restricted common stock.

  

 

 49

 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

 

Note 10 – Acquisitions (Continued)

 

Landfill Acquisition – Unrelated Entity

 

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.

 

The Transaction is not subject to any realty commission and has not closed as of December 31, 2015 or the date of this filing. The Company has a third party making the deposit payments as discussed in Note 8 and Note 9, Related Party Transactions and Stockholders’ Deficit, respectively. As of December 31, 2015, the third party had made 12 payments of $25,000, totaling $300,000. This agreement was extended for an additional six months through February 26th, 2016. The Company has written off these non-cash deposits due to the Company not closing on the landfill by February 26, 2016. The expense was included in other expenses as a one time write off.

  

 

 50

 

 

 

NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

 

Note 11 – Income Taxes

 

For the years ended December 31 2015 and 2014, the Company recognized income tax expense (benefit) of $(32,150) and $80,951, respectively.

 

Income tax provisions for the years ended December 31,:

  

   2015   2014 
Current tax expense        
Federal  $-   $29,895 
State   -    2,347 
         32,242 
Deferred tax expense (benefit)          
Federal   (32,150)   45,163 
State   -    3,546 
    (32,150)   48,709 
Total  $(32,150)  $80,951 

 

The reconciliations of the results of applying the Company's effective statutory federal income tax rate of 34% for the years ended December 31, 2015 and 2014 to the Company's income before taxes and the Company's provision for income taxes are as follows:

 

   2015   2014 
Federal income taxes   34.00%   34.00%
State income taxes   3.63%   3.63%
Effective tax rate   37.63%   37.63%

  

The components of the deferred tax assets, net of deferred tax liabilities for each period are:

 

   2015   2014 
Property and equipment  $21,512   $48,709 
Expenses paid by related party, not settled as of year end   (53,662)   - 
Total Long term deferred tax liabilities  $(32,150)  $48,709 

  

 

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NATIONAL WASTE MANAGEMENT HOLDINGS, INC.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

 

Note 12 – Subsequent Events

 

Subsequent to December 31, 2015, the Company cancelled an acquisition and forfeited the non-refundable deposits that had been paid on behalf of the Company by a related entity. Total non cash loss from this write off was included in our other income and expenses as a one time charge to the Company’s operations.

  

Subsequent to year end, the Company issued 592,829 shares of restricted common stock in settlement for expenses paid for on behalf of the Company. Total costs incurred by the related entity included $450,000 for the acquisition of Gateway (see Note 10, Acquisitions), $75,000 for funding the deposits for the landfill acquisition that were written off subsequent to year end and $67,829 for professional fees paid for on behalf of the Company. The shares settled a total of $592,829 and are included in liabilities on the Company’s balance sheet at December 31, 2015.

 

Subsequent to December 31, 2015, the Company entered into an agreement to settle the Company’s consolidated related party note due the majority shareholder of the Company. The consolidated balances of these related party notes at December 31, 2015 were $2,017,301. Subsequent to year end, the Company’s Board of Directors and Majority Shareholder (holder of the Note) mutually agreed to convert $2,000,000 of the Notes balance to 10% cumulative preferred stock; these notes have been included in long-term liabilities due to the conversion subsequent to year end. The remaining balance of the related party note after conversion was approximately $13,000.

 

 

 52

 

 

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None.

 

ITEM 9A. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of our principal executive and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934 (“Exchange Act”) as of the end of the period covered by this report. Based on that evaluation, our principal executive and principal financial officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

 

Internal Control over Financial Reporting

 

Management’s Annual Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) for the Company. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Because of its inherent limitations, internal control over financial reporting may not prevent nor detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.

 

Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2015. In making its assessment of internal control over financial reporting, management used the criteria established in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. This assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of those controls. Based on the results of this assessment, management has concluded that our internal controls over financial reporting were effective as of December 31, 2015. A material weakness is a deficiency, or combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

 

Management's assessment was not subject to attestation by the Company's independent registered public accounting firm and as such, no attestation was performed pursuant to SEC Final Rule Release Nos. 33-8934; 34-58028 that permit the Company to provide only management's assessment report for the year ended December 31, 2015 and 2014.

 

Changes in Internal Control over Financial Reporting

 

There has been no change in our internal control over financial reporting that occurred in our fiscal year ended December 31, 2015 that has materially adversely affected, or is reasonably likely to materially adversely affect, our internal control over financial reporting.

  

ITEM 9B. OTHER INFORMATION

 

None.

 

 

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Part III

 

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

Directors and Executive Officers, Promoters and Control Persons

 

All directors of our directors and officers hold office until the next annual meeting of our shareholders and until such director’s successor is elected and has been qualified, or until such director’s earlier death, resignation or removal. The following table sets forth the names, positions and ages of our executive officers and directors. Our board of directors elects officers and their terms of office are at the discretion of our board of directors.

 

Name  Age  Position
Louis “Tiny” Paveglia  61  Chief Executive Officer, Chief Financial Officer and Director
Charles W. Teelon  86  Chairman of the Board
Jeff Chartier  52  President, Director

 

Business Experience

 

The following is a brief account of the education and business experience during at least the past five years of our directors and executive officers, indicating their principal occupations during that period, and the name and principal business of the organizations in which such occupation and employment were carried out.

 

Louis “Tiny” Paveglio /CEO, CFO, Director

 

Mr. Paveglio’s first entrepreneurial endeavor was in 1976 at the age of 21 when he started and operated his own trucking company in upstate New York. He eventually left the trucking industry after nine years and purchased BNC Inc., a small paving and asphalt maintenance company in 1985. Tiny expanded this company into a large commercial paving and sealing company. It served large plazas and strip malls all over upstate New York. He diversified the company by starting a parking lot sweeping company, and expanded it into sweeping state highways, colleges, etc. strategically purchasing another company he made BNC. Inc., one of the largest sweeping companies in New York State. He then sold the entire company in 1995. During this 10-year span Mr. Paveglio also owned an auto body repair facility and a manufactured housing and modular home sales business. In 1990 he profited by selling the home sales company and closed the auto body business in 1997 but retained the property for rental income.

 

Mr. Paveglio in 1992 entered the sanitation industry when he purchased Fox Sanitation in Chenango County New York. He and his partner operated this company until 1997 when they sold part of their company to Mr. Charles Teelon. This was the beginning of a long association with Mr. Teelon. Mr. Paveglio then sold his remaining half of the company to his partner in 1998 to slow down and reassess, and took a sales job selling paving equipment in the Northeast. After one year he was recruited by Mr. Teelon for a management position to help increase revenues and profitability at his company Waste Recovery Ent., Inc. Within one year he was given a partnership share in the company. Waste Recovery Ent. Inc. consisted of mining and crushing, dump trucks, roll-offs, a solid waste transfer station and residential garbage pick-up.

 

In 2002 Mr. Paveglio was then approached by Charlie Teelon to manage and operate the Sandland of Florida Enterprises, Inc. operation. He currently still holds this position and has made many significant changes to increase productivity and efficiencies. After reviewing financial statements and operations at Sandland, Mr. Paveglio knew the potential for the company. After the restructuring, he increased profits while the downturn in new construction was hitting the C&D industry. Tiny knew in the waning economy he had to diversify to keep increasing revenue. He began trucking recycled materials with his own tractor trailers to other various facilities saving airspace at the landfill while fulfilling the need for recycled materials. With continued insight and vision of where he sees the company going, Mr. Paveglio is confident in the direction he is leading Sandland.

 

Tiny knew in the waning economy he had to diversify to keep revenue increasing. That was when he saw the potential for trucking the recycled materials from Sandland away from the facility with his own tractor trailers to other various facilities. Not only is this conserving airspace of the landfill it is also filling the need for recycled materials. As sales continue to increase and with the future acquisitions the company is pursuing, the possibilities of growth are endless.

 

 

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Charles W. Teelon, Chairman of the Board

 

Mr. Teelon was born in 1930, the son of a dairy farmer in rural upstate New York. He spent four years in the US Navy culminating in serving on the USS Midway during the Korean conflict before being honorably discharged in 1952. Charlie joined the New York State Police as a motorcycle officer ultimately reaching the level of Sr. Investigator for the Bureau of Criminal Investigation before retiring after 21 years with the State Police.

 

Then Charlie spent several years working for the United States Treasury as Special Agent in Charge for the Bureau of the Mint where he acted as Deputy Chief of Security. His other responsibilities included being Chief of Occupational Safety and Health for the Bureau of the Mint.

 

In the mid-1970’s Mr. Teelon organized a small, one county/one truck residential trash collection business in upstate New York known as Ulster County Sanitation. The name was later changed to Ulster Sanitation and over time Mr. Teelon expanded the business to include commercial and industrial waste services to over 15 upstate counties. By the late 90’s Charlie had grown this small shoestring business into a multi-million dollar organization, acquiring more than 60 small businesses along the way. By this time Ulster Sanitation included more than 100 trash trucks and coupled the trash collection business with paper shredding, landfills, interstate trucking, roll-off service, transfer stations and recycling facilities. Ulster Sanitation was valued at over $70,000,000 by the time it was sold off in sections to organizations including Waste Management, United Waste, Eastern Environmental and Casella Waste Systems.

 

Still retaining paper shredding, gravel and crushed stone, roll-off service and landfill enterprises in New York state, Mr. Teelon expanded to the Florida market in the late 1990’s purchasing Sandland Enterprises landfill in 1998. In 1999 Mr. Teelon and a partner started Florida Fibre transfer stations and in 2000 with another partner he established Gateway Roll-off. He still retains his partial ownership of both companies. Charlie also extended his Florida ventures to include land development and commercial building, with environmentally friendly projects including recycling. Mr. Teelon applies the high standards he has developed throughout his lifetime of service to each and every project he takes on. Sandland employs trained and highly skilled and professional individuals in each of its varied departments, who are committed to providing the highest quality of service.

 

Jeff Chartier, Director

 

Jeff Chartier has over 30 years of experience in the financial industry. His Wall Street career began in 1981 as a floor runner at Prudential-Bache Securities on the commodities exchange. By 1996 he was Vice President at Morgan Stanley and won the Morgan Stanley Dean Witter National Sales Directors Award along with numerous other awards for sales and customer service excellence. In 2002 Mr. Chartier started his own firm, Chartier Financial, offering full service retail brokerage products to his clients. Mr. Chartier then resigned from the industry as a broker in 2009 to become President of Green EnviroTech Holdings Corp. Since resigning from Green EnviroTech Holdings Corp. in February 2011, Mr. Chartier has formed a consulting firm to assist and consult with private companies looking to enter the public marketplace.

 

Family Relationships

 

There are no familial relationships between Charles Teelon, Louis “Tiny” Paveglio, Jeff Chartier and the Company.

 

Litigation

 

During the past ten years, Charles Teelon, Louis “Tiny” Paveglio, and Jeff Chartier have not been the subject of the following events:

 

1.      A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;

 

2.      Convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);

 

 

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3.      The subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities;

 

i)     Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

 

ii)     Engaging in any type of business practice; or

 

iii)    Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;

 

4.      The subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph 3.i in the preceding paragraph or to be associated with persons engaged in any such activity;

 

5.      Was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;

 

6.      Was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;

 

7.      Was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:

 

i)      Any Federal or State securities or commodities law or regulation; or

 

ii)     Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or

 

iii)    Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

 

8.      Was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

 

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Section 16(a) Beneficial Ownership Compliance

 

Section 16(a) of the Securities Exchange Act requires our executive officers and directors, and persons who own more than 10% of our common stock, to file reports regarding ownership of, and transactions in, our securities with the Securities and Exchange Commission and to provide us with copies of those filings. Based solely upon a review of copies of such forms filed on Forms 3, 4, and 5, and amendments thereto furnished to us, we believe that as of December 31, 2015, our executive officers, directors and greater than 10 percent beneficial owners have complied on a timely basis with all Section 16(a) filing requirements, with the exception of our officers, directors and greater than 10 percent beneficial owners listed in the table below: 

 

Name  Number of Late Reports  Number and Description of Transactions Note Reported on a Timely Basis
Louis “Tiny” Paveglia  2  1 transaction was not reported on a timely basis following the disposition of shares and 1 transaction was not reported following the acquisition of shares
Charles W. Teelon  2  8 transactions were not reported on a timely basis following the disposition of shares and 1 transaction was not reported on a timely basis following the acquisition of shares in the year ended December 31, 2015.
Jeff Chartier  2  19 transactions were not reported on a timely basis following the disposition of shares and 1 transaction was not reported on a timely basis following the acquisition of shares in the year ended December 31, 2015.

  

Code of Ethics

 

We adopted a Code of Business Conduct and Ethics that applies to, among other persons, our company’s president (being our principal executive officer, principal financial officer and principal accounting officer), as well as persons performing similar functions. As adopted, our Code of Business Conduct and Ethics sets forth written standards that are designed to deter wrongdoing and to promote;

 

1.Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

 

2.Full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the Securities and Exchange Commission and in other public communications made by us;

 

3.Compliance with applicable governmental laws, rules and regulations;

 

4.The prompt internal reporting of violations of the Code of Business Conduct and Ethics to an appropriate person or persons identified in the Code of Business Conduct and Ethics; and

 

5.Accountability for adherence to the Code of Business Conduct and Ethics

 

Our Code of Business Conduct and Ethics requires, among other things, that all of our company’s personnel shall be accorded full access to our president with respect to any matter which may arise relating to the Code of Business Conduct and Ethics. Further, all of our company’s personnel are to be accorded full access to our company’s board of directors if any such matter involves an alleged breach of the Code of Business Conduct and Ethics by our president.

 

 

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In addition, our Code of Business Conduct and Ethics emphasizes that all employees, and particularly managers and/or supervisors, have a responsibility for maintaining financial integrity within our company, consistent with generally accepted accounting principles, and federal, provincial and state securities laws. Any employee who becomes aware of any incidents involving financial or accounting manipulation or other irregularities, whether by witnessing the incident or being told of it, must report it to his or her immediate supervisor or to our company’s president. If the incident involves an alleged breach of the Code of Business Conduct and Ethics by the president, the incident must be reported to any member of our board of directors. Any failure to report such inappropriate or irregular conduct of others is to be treated as a severe disciplinary matter. It is against our company policy to retaliate against any individual who reports in good faith the violation or potential violation of our company’s Code of Business Conduct and Ethics.

 

Our Code of Business Conduct and Ethics was filed as an exhibit with our Registration Statement on Form S-1 filed with the Securities and Exchange Commission on July 31, 2009. We will provide a copy of the Code of Business Conduct and Ethics to any person without charge, upon request. Requests can be sent to the Company address listed above.

 

Nomination Process

 

As of December 31, 2015, we did not affect any material changes to the procedures by which shareholders may recommend nominees to the board of directors. We do not have any defined policy or procedure requirements for shareholders to submit recommendations or nominations for directors. The board of directors believes that, given the current stage of our development, a specific nominating policy would be premature and of little assistance until our operations develop to a more advanced level. We do not currently have any specific or minimum criteria for the election of nominees to the board of directors and there is no specific process or procedure for evaluating such nominees. The board of directors assesses all candidates, whether submitted by management or shareholders, and makes recommendations for election or appointment.

 

A shareholder who wishes to communicate with the board of directors may do so by directing a written request addressed to our Chief Executive Officer or the Chief Financial Officer at the address appearing on the face page of this report.

 

Committees of the Board

 

All proceedings of the board of directors were conducted by resolutions consented to in writing by all the directors and filed with the minutes of the proceedings of the directors. Such resolutions consented to in writing by the directors entitled to vote on that resolution at a meeting of the directors are, according to the Nevada Business Corporation Act and our Bylaws as valid and effective as if they had been passed at a meeting of the directors duly called and held.

 

ITEM 11. EXECUTIVE COMPENSATION

 

Summary Compensation Table

 

The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officer paid by us during the years ended December 31, 2015, and 2014 in all capacities. Our named executive officer for 2014 and 2015 was Louis “Tiny” Paveglio.  

 

Name and Principal Position  Year   Salary
($’s)
   Bonus
($’s)
   Stock Awards
($)
   Option Awards
($’s)
   All other Compensation   Total 
Louis “Tiny” Paveglio   2015   $115,019   $3,000   $-   $-   $-   $118,019 
CEO, CFO, Director   2014    111,800   $3,000   $-   $-   $-   $114,800 

 

Director Compensation

 

We have provided Compensation to the Directors in the form of common stock equivalent. Each non-employee Director receives a combination of common stock and cash for a total of $20,000 per quarter in compensation.

 

The following table provides information for 2015 regarding all compensation awarded to, earned by or paid to each person who served as a non-employee Director for some portion or all of 2015 other than as set forth in the table, to date we have not paid any fees to or, except for reasonable expenses for attending Board and committee meetings, reimbursed any expenses of our directors, made any equity or non-equity awards to directors, or paid any other compensation to directors. 

  

Name  Fees
Earned or
Paid in
Cash
($)
   Stock
Awards (1)
($)
   Option
Awards
($)
   Non-Equity
Incentive Plan
Compensation
($)
   Nonqualified
Deferred
Compensation
Earnings
($)
   All
Other
Compensation
($)
   Total
($)
 
Charles Teelon  $0    $    0                   $0 
Jeff Chartier  $0    $    0                   $0 

 

(1)

(2)

 

  

 

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth certain information regarding our shares of common stock beneficially owned as of March 22, 2016, for (i) each stockholder known to be the beneficial owner of 5% or more of our outstanding shares of common stock, (ii) each named executive officer and director, and (iii) all executive officers and directors as a group. A person is considered to beneficially own any shares: (i) over which such person, directly or indirectly, exercises sole or shared voting or investment power, or (ii) of which such person has the right to acquire beneficial ownership at any time within 60 days through an exercise of stock options or warrants. Unless otherwise indicated, voting and investment power relating to the shares shown in the table for our directors and executive officers is exercised solely by the beneficial owner or shared by the owner and the owner’s spouse or children.

 

For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person has the right to acquire within 60 days of March 22, 2016. For purposes of computing the percentage of outstanding shares of our common stock held by each person or group of persons named above, any shares that such person or persons has the right to acquire within 60 days of March 22, 2016, is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership. Unless otherwise specified, the address of each of the persons set forth below is care of the company at the address of: 5920 N. Florida Avenue, Hernando, FL 34442

 

 

Name

  Amount and Nature of Beneficial Ownership (1)  

 

Percent of Class (1)

 
Louis “Tiny” Paveglio, CEO, CFO, Director, Treasurer(2)   10,890,000    16.35%
Charles W. Teelon, Chairman of the Board    36,742,500    55.15%
Jeff Chartier,  Director   5,145,000    7.72%
All Executive Officers and Directors as a group (3 persons)   52,777,500    79.22%
5% shareholder – None
          

  

(1)Based on 66,623,312 shares of common stock outstanding as of March 22, 2016. Shares of common stock subject to options or warrants currently exercisable or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage of the person holding such options or warrants, but are not deemed outstanding for purposes of computing the percentage of any other person.
(2)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.

  

 

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, AND DIRECTOR INDEPENDENCE

  

Related Party Sales and Accounts Receivable

 

The Company generates a significant portion of their revenue from a related entity Transfer Station, owned by the majority shareholder of the Company. This related entity uses the Company’s landfill (Sandland) as its primary source of disposal for trash, debris and waste and collected. Sandland 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 years ended December 31, 2015 and 2014 for disposal costs were $674,320 and $523,250 or 27% and 31% of total consolidated revenue, respectively. Total revenue generated from the related entity during the years ended December 31, 2015 and 2014 for trucking services were $216,222 and $144,834, or 9% and 9% of consolidated revenue, respectively. Total revenue generated from the related entity during the years ended December 31, 2015 and 2014 was $890,542 and $668,084, or 36% and 40%, respectively. Total related party accounts receivable as of December 31, 2015 and 2014 related to these sales were approximately $91,000 and $75,000, or 16% and 71% of total net accounts receivable, respectively.

 

On December 1, 2015, the Company acquired Gateway, a related entity that was previously owned 50% by the largest shareholder of the Company. See note 10, Acquisitions for details. Gateway disposes a large portion of their construction and debris collected in the related entities transfer station. Total expenses incurred from the related entity during the years by the Consolidated entity during the years ended December 31, 2015 and 2014 were $56,331 and $0, respectively. Total related party accounts payable of the consolidated entity as of December 31, 2015 and 2014 related to these expenses were approximately $17,000 and $0, respectively.

 

Related Party Shareholder Loan

 

The Company has a note due the largest shareholder of the Company. This note is unsecured, matures on December 31, 2016 and carries a 1% interest rate. The balance of the note as of December 31, 2015 and 2014 was $504,547 and $756,337 respectively. During 2015, the Company paid down the Shareholder note by approximately $250,000. During the years ended December 31, 2015 and 2014, the Company incurred related party interest expense of $6,304 and $8,472. Total related party accrued interest related to this note as of December 31, 2015 and 2014 was $28,612 and$22,308, respectively.

 

On October 15, 2015, the Company acquired a related entity that was 50% owned by the largest shareholder of the Company. As part of that acquisition, the Company acquired a shareholder note owed to the same majority shareholder of the Company. The balance of the note, including accrued interest on the acquisition date was $1,512,753.

 

The combined balances of these related party notes at December 31, 2015 were $2,017,301. Subsequent to year end, the Board and the Shareholder mutually agreed to convert $2,000,000 of the Notes balance to 10% cumulative preferred stock; these notes have been included in long-term liabilities due to the conversion subsequent to year end. The remaining balance of the related party note after conversion was approximately $13,000.

 

 

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Expenses Paid on Behalf of the Company by a Related Party

 

Throughout the year ended December 31, 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 $203,607. Total deposits on the landfill (see note 10) paid by Strategic totaled $300,000 through December 31, 2015. Strategic also incurred costs to build the Company’s investor relations website of $4,704during the fiscal year ended December 31, 2015. Strategic paid the cash portion of the acquisition of Gateway Rolloff Services, LP on December 1, 2015, totaling $450,000. Total cash outlays by Strategic were $958,311 during the year ended December 31, 2015. As of December 31, 2015,$365,482 was settled for 365,482 shares of the Company’s restricted common stock ($1 per share conversion). The remaining $592,829 is included in the due from related party account. Subsequent to year end, this amount was settled for 592,829 shares of the Company’s restricted common stock ($1 per share conversion).

 

Related Party Acquisitions

 

On October 15, 2015 and December 1, 2015, the Company closed on the Acquisition of Waste Recovery Enterprises, LLC and Gateway Rolloff Services, LP, respectively. Each of these acquired entities were owned 50% by the majority shareholder of the Company prior to the acquisitions. In each acquisition, a second owner owned 50% of the each acquired entity.

 

Waste Recovery Enterprises, LLC (“WRE”), was acquired for a $250,000 owner financed note that was paid in January of 2016 and 2,750,000 shares of the Company’s restricted common stock. Gateway Rolloff Services, LP (“Gateway”) was acquired for $450,000 in cash and a total of 2,400,000 shares of the Company’s restricted common stock. The majority shareholder of the Company received no cash or notes; he received 1,500,000 and 1,650,000 shares of the Company’s restricted common stock. The 3,150,000 shares of the Company’s restricted common stock were not issued as of December 31, 2015, and thus have been presented in the balance sheet as common stock subscribed in the equity section of the balance sheet. The shares were valued at $1 per share, equivalent with the settlement with Strategic as described above in the related party note section describing the expenses paid on behalf of the Company.

 

See note 10 of the audited financial statements for the years ended December 31, 2015 and 2014, Acquisitions, for further information related to the acquisitions and the purchase price allocation.

 

Director Independence

 

NASDAQ Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the Company or any other individual having a relationship which, in the opinion of the Company’s Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:

 

  the director is, or at any time during the past three years was, an employee of the company;
     
  the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service);
     
  a family member of the director is, or at any time during the past three years was, an executive officer of the company;
     
  the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions);
     
  the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.

 

As of March 22, 2016, our Board is composed of three members, of which one is independent. The independent director is Jeff Chartier.

 

 

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

 

Audit Fees

 

Audit fees expensed for John Scrudato, CPA, for professional services rendered in respect to the audit of our annual financial statements included in our annual report on Form 10-K for the years ended December 31, 2015 and 2014 were approximately $15,000 and $10,000, respectively. The increased audit fee is due to the increase in operations and acquisitions of Gateway and WRE. The Company also incurred fees of approximately $15,000 for the audits of Gateway and WRE for acquisition purposes during the year ended December 31, 2015. John Scrudato CPA was the auditor for these acquisitions.

 

Our audit committee (our Board of Directors) has adopted a policy governing the pre-approval of all services, audit and non-audit, to be provided to our company by our independent auditors. Under the policy, the audit committee has pre-approved the provision by our independent auditors of specific audit, audit related, tax and other non-audit services as being consistent with auditor independence. Requests or applications to provide services that require the specific pre-approval of the board of directors must be submitted to the board of directors by the independent auditors, and the independent auditors must advise the board of directors as to whether, in the independent auditor’s view, the request or application is consistent with the Securities and Exchange Commission’s rules on auditor independence.

 

The board of directors has considered the nature and amount of the fees billed by John Scrudato, CPA and believes that the provision of the services for activities unrelated to the audit is compatible with maintaining the independence of John Scrudato, CPA.

 

Audit Related Fees

 

For the Company’s fiscal years ended December 31, 2015 and 2014, we were billed approximately $15,000 and $10,000, respectively, for audit related fees from John Scrudato, CPA. The Company also incurred fees of approximately $15,000 for the audits of Gateway and WRE for acquisition purposes during the year ended December 31, 2015. John Scrudato CPA was the auditor for these acquisitions.

 

Tax Fees

 

For the Company’s fiscal years ended December 31, 2015 and 2014, we were billed approximately $3,500 and $1,800 respectively, for professional services rendered for tax compliance, tax advice performed by an independent third party accounting Firm located near Tampa, FL (not our auditor).

 

All Other Fees

 

The Company incurred approximately $0 and $8,000 in fees, respectively, related to services rendered by our principal accountant for the fiscal years ended December 31, 2014 and 2013.

 

Pursuant to the requirements of Section 13 or 15(d) 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.

 

Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before our auditor is engaged by us to render any auditing or permitted non-audit related service, the engagement be:

 

  approved by our audit committee; or

 

entered into pursuant to pre-approval policies and procedures established by the audit committee, provided the policies and procedures are detailed as to the particular service, the audit committee is informed of each service, and such policies and procedures do not include delegation of the audit committee’s responsibilities to management.

 

We do not have a formal audit committee. Our entire board of directors acts in this capacity in the absence of the formal audit committee and pre-approves all services provided by our independent auditors. The pre-approval process has been implemented in response to the new rules and all fees were approved.

  

 

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PART IV

 

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

Exhibit Number  Exhibit Description
31.1  Certification of Principal Executive Officer and Principal Financial Officer (Rule 13a-14(a)/15(d)-14(a))
32.1  Certification of Principal Executive Officer and Principal Financial OFficer (18 U.S.C. 1350)
101 INS  XBRL Instance Document
101. SCH  XBRL Taxonomy Schema
101. CAL  XBRL Taxonomy Calculation Linkbase
101.DEF  XBRL Taxonomy Definition Linkbase
101.LAB  XBRL Taxonomy Label Linkbase
101.PRE  XBRL Taxonomy Presentation Linkbase


In accordance with SEC Release 33-8238, Exhibits 32.1 is being furnished and not filed.

 

 

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Signatures

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  NATIONAL WASTE MANAGEMENT HOLDINGS, INC.
     
Dated: March 30, 2016 By: /s/ Louis Paveglio
   

Louis Paveglio

President, Chief Executive Officer and
Chief Financial Officer

(Principal Executive Officer and Principal Accounting and Financial Officer)

  

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

  

Name   Title   Date
         
/s/ Charles W. Teelon   Chairman of the Board   March 30, 2016
Charles W. Teelon        
         
/s/ Louis Paveglio   Chief Executive Officer, Chief Financial Officer and Director   March 30, 2016
Louis Paveglio   (Principal Executive Officer and Principal Accounting and Financial Officer)    
         
/s/ Jeff Chartier   Director   March 30, 2016
Jeff Chartier        

 

 

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