Exhibit 99.1 Financial Statements

 

Annual Audited Consolidated Financial Statements    
     
    Page
     
Report of Independent Registered Public Accounting Firm   F-1
     
Consolidated Balance Sheets as of December 31, 2020 and 2019   F-2
     
Consolidated Statements of Operations for the Years Ended December 31, 2020 and 2019   F-3
     
Consolidated Statements of Stockholders’ Deficit for the Years Ended December 31, 2020 and 2019   F-4
     
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020 and 2019   F-5
     
Notes to Consolidated Financial Statements   F-6

 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and
Stockholders of Strategic Environmental & Energy Resources, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Strategic Environmental & Energy Resources, Inc. and subsidiaries (the “Company”) as of December 31, 2020 and 2019 and the related consolidated statements of income, stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2020 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

 

Explanatory Paragraph – Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As noted below as a critical audit matter and more fully described in Note 1, the Company has (i) incurred significant losses since inception, (ii) has an accumulated deficit of approximately $29.7 million as of December 31, 2020 and (iii) needs to raise substantial amounts of additional funds to meet its obligations as well as afford it time to develop profitable operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, 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.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Critical Audit Matters

 

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

 

Going Concern

 

Critical Audit Matter Description

 

As discussed in both Note 1 to the consolidated financial statements and above, the Company has incurred significant losses since inception, and has an accumulated deficit of approximately $29.7 million and a working capital deficit of $9.8 million as of December 31, 2020.

 

How We Addressed the Matter in Our Audit

 

Our audit procedures included (1) identifying the conditions and events noted above that, when considered in the aggregate, indicate there is substantial doubt about the Company’s ability to continue as a going concern; (2) evaluating management’s plans in connection with their intent to raise additional equity and debt financing in order to overcome the presumption of going concern; (3) reviewing and evaluating the financial statement presentation and disclosure regarding the substantial doubt about the ability of the Company to continue as a going concern.

 

/s/ LJ Soldinger Associates, LLC

   
We have served as the Company’s auditor since 2013.  
   
Deer Park, IL  

 

April 15, 2021  

 

F-1
 

 

STRATEGIC ENVIRONMENTAL & ENERGY RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS

 

   December 31,   December 31, 
   2020   2019 
         
ASSETS          
Current Assets          
Cash and cash equivalents  $47,300   $354,700 
Accounts receivable, net of allowance for doubtful accounts of $1,000 and $11,800, respectively   375,600    686,800 
Inventory   250,200    104,100 
Costs and estimated earnings in excess of billings on uncompleted contracts   6,800    242,500 
Prepaid expenses and other current assets   110,600    141,700 
Total Current Assets   790,500    1,529,800 
           
Property and equipment, net   548,000    561,800 
Intangible Assets, net   447,300    479,500 
Right of use assets   380,400    437,300 
Other assets   50,500    53,500 
           
TOTAL ASSETS  $2,216,700   $3,061,900 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
           
Current Liabilities          
Accounts payable  $1,109,200   $1,189,400 
Accrued liabilities   1,977,200    1,506,800 
Billings in excess of costs and estimated earnings on uncompleted contracts   323,900    327,100 
Deferred revenue   30,200    32,900 
Payroll taxes payable   1,085,400    1,052,200 
Customer deposits   16,400    10,900 
Paycheck protection program liabilities   590,300    - 
Short term notes   3,032,800    2,408,100 
Short term notes and accrued interest - related party   208,100    182,100 
Convertible notes   1,605,000    1,605,000 
Current portion of long-term debt and capital lease obligations   523,900    258,100 
Current portion of lease liabilities   78,100    86,100 
Total Current Liabilities   10,580,500    8,658,700 
           
Deferred revenue, non-current   -    30,200 
Lease liabilities net of current portion   334,700    381,900 
Long term debt and capital lease obligations, net of current portion   30,300    268,400 
Total Liabilities   10,945,500    9,339,200 
           
Commitments and contingencies   -    - 
           
Stockholders’ deficit          
Preferred stock; $.001 par value; 5,000,000 shares authorized; -0- shares issued   -    - 
Common stock; $.001 par value; 70,000,000 shares authorized; 65,088,575 and 62,591,075 shares issued, issuable ** and outstanding December 31, 2020 and December 31, 2019, respectively   65,100    62,600 
Common stock issuable   25,000    25,000 
Additional paid-in capital   22,961,200    22,651,100 
Stock Subscription receivable   (25,000)   (25,000)
Accumulated deficit   (29,693,700)   (26,964,300)
Total stockholders’ deficit   (6,667,400)   (4,250,600)
Non-controlling interest   (2,061,400)   (2,026,700)
Total Deficit   (8,728,800)   (6,277,300)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT  $2,216,700   $3,061,900 

 

** Includes 3,185,000 and 887,500 shares issuable at December 31, 2020 and December 31, 2019, respectively, per terms of note agreements.

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-2
 

 

STRATEGIC ENVIRONMENTAL & ENERGY RESOURCES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

    For the Year Ended December 31,  
    2020     2019  
Revenue:                
Products   $ 2,676,500     $ 4,052,900  
Solid waste     236,000       249,900  
Total revenue     2,912,500       4,302,800  
                 
Operating expenses:                
Products costs     2,165,600       2,314,400  
Solid waste costs     81,000       60,100  
General and administrative expenses     1,223,500       1,483,100  
Salaries and related expenses     1,601,200       1,200,300  
Total operating expenses     5,071,300       5,057,900  
                 
Loss from operations     (2,158,800 )     (755,100 )
                 
Other income (expense):                
Interest expense     (913,900 )     (553,200 )
Other     308,600       404,500  
Total non-operating expense, net     (605,300 )     (148,700 )
                 
Loss from continuing operations     (2,764,100 )     (903,800 )
                 
Loss from discontinued operations, net of tax     -       (1,785,400 )
                 
Net loss     (2,764,100 )     (2,689,200 )
                 
Less: Net loss attributable to non-controlling interest     (34,700 )     (151,200 )
                 
Net loss attributable to SEER common stockholders   $ (2,729,400 )   $ (2,538,000 )
                 
                 
Loss from continuing operations, per share   $ (0.04 )   $ (0.01 )
Loss from discontinued operations, per share     -       (0.03 )
Net loss per share, basic and diluted   $ (0.04 )   $ (0.04 )
                 
Weighted average shares outstanding – basic and diluted     64,106,563       62,110,753  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-3
 

 

STRATEGIC ENVIRONMENTAL & ENERGY RESOURCES, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT

 

   Preferred Stock   Common Stock   Additional
Paid-in
   Common Stock   Stock Subscription   Accumulated  

Non-

controller

   Total Stockholders’ 
   Shares   Amount   Shares   Amount   Capital   Subscribed   Receivable   Deficit   Interest   Deficit 
Balances at December 31, 2018       -       -    61,703,600    61,700    22,531,000    25,000    (25,000)   (24,405,500)   (2,425,500)   (4,238,300)
                                                   
Issuance of common stock upon debt penalty   -    -    887,500    900    69,600    -    -    -    -    70,500 
                                                   
Stock-based compensation   -    -    -    -    7,300    -    -    -    -    7,300 
                                                   
Allocated value of options related to note payable   -    -    -    -    13,900    -    -    -    -    13,900 
                                                   
Allocated value of warrants related to note payable   -    -    -    -    29,300    -    -    -    -    29,300 
                                                   
Adoption of ASU 2016-02, Leases (Topic 842)   -    -    -    -    -    -    -    (20,800)   -    (20,800)
                                                   
Investment in subsidiary   -    -    -    -    -    -    -    -    550,000    550,000 
                                                   
Net loss   -    -    -    -    -    -    -    (2,538,000)   (151,200)   (2,689,200)
                                                   
Balances at December 31, 2019   -    -    62,591,100    62,600    22,651,100    25,000    (25,000)   (26,964,300)   (2,026,700)   (6,277,300)
                                                   
Issuance of common stock upon debt penalty   -    -    1,522,500    1,500    225,300    -    -    -    -    226,800 
                                                   
Stock-based compensation   -    -    -    -    19,000    -    -    -    -    19,000 
                                                   
Allocated value of common stock, options, and warrants related to note payable   -    -    975,000    1,000    65,800    -    -    -    -    66,800 
                                                   
Net loss   -    -    -    -    -    -    -    (2,729,400)   (34,700)   (2,764,100)
                                                   
Balances at December 31, 2020   -    -    65,088,600    65,100    22,961,200    25,000    (25,000)   (29,693,700)   (2,061,400)   (8,728,800)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-4
 

 

STRATEGIC ENVIRONMENTAL & ENERGY RESOURCES, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

 

   For the Year Ended December 31, 
   2020   2019 
Cash flows from operating activities:          
Loss from continuing operations  $(2,764,100)  $(903,800)
Loss from discontinued operations   -    (1,785,400)
Net loss   (2,764,100)   (2,689,200)
Adjustments to reconcile net loss to net cash provided by operating activities:          
Depreciation and amortization   160,300    346,900 
Stock-based compensation expense   19,000    7,300 
Note receivable discount   -    (9,900)
Non-cash expense for interest, common stock issued for debt penalty   226,900    71,600 
Impairment of assets   -    32,900 
Provision for doubtful accounts receivable   (10,800)   (215,700)
Non-cash expense for interest, accretion of debt discount   82,600    36,700 
Gain on disposition of assets   (274,900)   (2,200)
Changes in operating assets and liabilities:          
Accounts receivable   322,000    592,400 
Costs in excess of billings on uncompleted contracts   235,700    71,800 
Inventory   (291,400)   26,100 
Prepaid expenses and other assets   185,700    187,800 
Accounts payable, accrued liabilities, and customer deposits   421,800    (252,300)
Billings in excess of revenue on uncompleted contracts   (3,200)   (85,900)
Deferred revenue   (32,900)   (248,800)
Payroll taxes payable   33,200    29,700 
Net cash used in operating activities   (1,690,100)   (2,100,800)
Cash flows from investing activities:          
Purchase of property and equipment   (131,600)   (70,100)
Proceeds from the sale of fixed assets   292,100    - 
Proceeds from outside minority investment in new subsidiary   -    226,000 
Proceeds from notes receivable   -    552,800 
Net cash provided by investing activities   160,500    708,700 
Cash flows from financing activities:          
Payments of notes and capital lease obligations   (250,300)   (408,900)
Proceeds from short-term notes - related party   -    155,000 
Proceeds from short-term notes   882,200    1,885,000 
Proceeds from paycheck protection program   590,300    - 
Net cash provided by financing activities   1,222,200    1,631,100 
           
Net (decrease) increase in cash   (307,400)   239,000 
Cash at the beginning of period   354,700    115,700 
Cash at the end of period  $47,300   $354,700 
           
Supplemental disclosures of cash flow information:          
Cash paid for interest  $23,500   $134,500 
Financing of prepaid insurance premiums  $94,700   $330,200 
Common stock and options issued in connection with notes payable  $

66,700

   $

29,300

 
Non-cash repayment of debt  $

145,300

   $

-

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-5
 

 

STRATEGIC ENVIRONMENTAL & ENERGY RESOURCES, INC.

Notes to Consolidated Financial Statements

 

NOTE 1 - ORGANIZATION AND FINANCIAL CONDITION

 

Organization and Going Concern

 

Strategic Environmental & Energy Resources, Inc. (“SEER,” or the “Company”), a Nevada corporation, is a provider of next-generation clean-technologies, waste management innovations and related services. SEER has three wholly owned operating subsidiaries and three majority-owned subsidiaries; all of which together provide technology solutions and services to companies primarily in the oil and gas, refining, landfill, food, beverage & agriculture and renewable fuel industries. The three wholly-owned subsidiaries include: 1) REGS, LLC (d/b/a Resource Environmental Group Services (“REGS”)) provided industrial and proprietary cleaning services to refineries, oil fields and other private and governmental entities, which is included in discontinued operations for fiscal year 2019; 2) MV, LLC (d/b/a MV Technologies) (“MV”), designs and builds biogas conditioning solutions for the production of renewable natural gas, odor control systems and natural gas vapor capture primarily for landfill operations, waste-water treatment facilities, oil and gas fields, refineries, municipalities and food, beverage & agriculture operations throughout the U.S.; 3) Strategic Environmental Materials, LLC,(“SEM”), a materials technology company focused on development of cost-effective chemical absorbents.

 

The three majority-owned subsidiaries include; 1) Paragon Waste Solutions, LLC (“PWS”), 2) ReaCH4Biogas (“Reach”) and 3) PelleChar, LLC (“PelleChar”). PWS is currently owned 54% by SEER (see Note 9), Reach is owned 85% by SEER and PelleChar is owned 51% by SEER.

 

PWS has and continues to develop specific opportunities to deploy and commercialize patented technologies for a non-thermal plasma-assisted oxidation process that makes possible the clean and efficient destruction of solid hazardous chemical and biological waste (i.e., regulated medical waste, chemicals, pharmaceuticals and refinery tank waste, etc.) without landfilling or traditional incineration and without harmful emissions. Additionally, PWS’ technology “cleans” and conditions emissions and gaseous waste streams (i.e., volatile organic compounds and other greenhouse gases) generated from diverse sources such as refineries, oil fields, and many others.

 

Reach (the trade name for BeneFuels, LLC), is currently owned 85% by SEER and focuses specifically on treating biogas for conversion to pipeline quality gas and/or compressed natural gas (“CNG”) for fleet vehicle fuel. Reach had minimal operations for the year ended December 31, 2020 and 2019.

 

PelleChar was established in September 2018 and is owned 90% by SEER as of December 31, 2019. Pellechar has secured third-party pellet manufacturing capabilities from one of the nation’s premier pellet manufacturer. Working closely with Biochar Now, LLC, Pellechar commenced sales in late 2019 of its proprietary pellets containing the proven and superior Biochar Now product starting with the landscaping and big agriculture markets. At this time, Pellechar is the only company able to offer a soil amendment pellet containing the Biochar Now product that is produced using the patented pyrolytic process. For the years ended December 31, 2020 PelleChar activity related to startup of operations, and an increasing sales effort. Revenue and expenses of PelleChar were not material for the years then ended.

 

Principals of Consolidation

 

The accompanying consolidated financial statements include the accounts of SEER, its wholly owned subsidiaries, REGS, MV and SEM and its majority-owned subsidiaries PWS, Reach and PelleChar, since their respective acquisition or formation dates. All material intercompany accounts, transactions, and profits have been eliminated in consolidation. The Company has non-controlling interest in joint ventures, which are reported on the equity method.

 

Going Concern

 

As shown in the accompanying consolidated financial statements, the Company has experienced recurring losses, and has accumulated a deficit of approximately $29.7 million as of December 31, 2020, and $27.0 million as of December 31, 2019. For the years ended December 31, 2020, and 2019, we incurred net losses from continuing operations of approximately $2.8 million and $0.9 million, respectively. The Company had a working capital deficit of approximately $9.8 million at December 31, 2020, an increase of $2.7 million in working capital deficit from $7.1 million at December 31, 2019. These factors raise substantial doubt about the ability of the Company to continue to operate as a going concern.

 

F-6
 

 

Realization of a major portion of the Company’s assets as of December 31, 2020, is dependent upon continued operations. The Company is dependent on generating additional revenue or obtaining adequate capital to fund operating losses until it becomes profitable. For the year ended December 31, 2020 the Company raised approximately $1.5 million from the issuance of short-term and long-term debt, offset by payments of principal on short term notes and capital leases of $0.3 million. In addition, the Company has undertaken a number of specific steps to continue to operate as a going concern. The Company continues to focus on developing organic growth in our operating companies and improving gross and net margins through increased attention to pricing, aggressive cost management and overhead reductions, including discontinuing a line of business with insufficient margins. Critical to achieving profitability will be the ability to license and or sell, permit and operate though the Company’s joint ventures and licensees the CoronaLux™ waste destruction units. The Company has increased business development efforts to address opportunities identified in expanding markets attributable to increased interest in energy conservation and emission control regulations. In addition, the Company is evaluating various forms of financing which may be available to it. There can be no assurance that the Company will secure additional financing for working capital, increase revenues and achieve the desired result of net income and positive cash flow from operations in future years. These financial statements do not give any effect to any adjustments that would be necessary should the Company be unable to report on a going concern basis.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Reclassifications

 

Certain reclassifications have been made in the 2019 consolidated financial statements to conform to the 2020 presentation. These reclassifications have no effect on net income for 2019.

 

Use of Estimates

 

The preparation of these consolidated financial statements in conformity with accounting principles generally accepted in the United States (U.S. GAAP) requires management to make a number of estimates and assumptions related to the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Significant items subject to such estimates and assumptions include the cash flows used in the impairment testing of definite lived tangible and intangible assets; valuation allowances and reserves for receivables; revenue recognition related to contracts accounted for under the percentage of completion method; revenue recognition method for perpetual technology license agreements; share-based compensation; discontinued operations future consideration and carrying amounts of equity investments. Actual results could differ from those estimates.

 

Cash and Cash Equivalents

 

We consider all highly liquid debt investments with an original maturity of three months or less at the date of acquisition to be cash equivalents. Periodically, we maintain deposits in financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents. As of December 31, 2020, and 2019, we did not hold any assets that would be deemed to be cash equivalents.

 

Accounts Receivable and Concentration of Credit Risk

 

Accounts receivable are recorded at the invoiced amounts less an allowance for doubtful accounts. The allowance for doubtful accounts is based on our estimate of the amount of probable credit losses in our accounts receivable. We determine the allowance for doubtful accounts based upon an aging of accounts receivable, historical experience and management judgment. Accounts receivable balances are periodically reviewed for collectability, and balances are charged off against the allowance when we determine that the potential for recovery is remote. An allowance for doubtful accounts of approximately $1,000 and $11,800 had been reserved as of December 31, 2020 and 2019, respectively.

 

F-7
 

 

We are exposed to credit risk in the normal course of business, primarily related to accounts receivable. Our customers operate primarily in the oil production and refining, biogas generating landfill and wastewater treatment industries in the United States. Accordingly, we are affected by the economic conditions in these industries as well as general economic conditions in the United States. To limit credit risk, management periodically reviews and evaluates the financial condition of its customers and maintains an allowance for doubtful accounts. As of December 31, 2020, we do not believe that we have significant credit risk.

 

As of December 31, 2020, we had one customer who comprised 10% or more of our accounts receivable and had a balance of approximately $229,100. As of December 31, 2019, we had two customers who comprised 10% or more of our accounts receivable and their combined accounts receivable equaled approximately $379,600.

 

For the year ended December 31, 2020 we had two customers with sales in excess of 10% of our revenue and they represented approximately 26% of total revenue for the year ended December 31, 2020. For the year ended December 31, 2019 we had two customers with sales in excess of 10% of our revenue and they represented approximately 23% of total revenue for the year ended December 31, 2019.

 

Inventories

 

Inventories are stated at the lower of cost or market and maintained on a first in, first out basis and includes the following amounts at December 31:

 

   December 31, 2020   December 31, 2019 
         
Finished goods  $158,100   $60,400 
Work in process   88,800    15,800 
Raw materials   3,300    27,900 
           
   $250,200   $104,100 

 

Vendor Concentration

 

The Company has purchases from one vendor comprising more that 10% of total purchases for both 2020 and 2019. The Company does not believe it is substantially dependent upon nor exposed to any significant concentration risk related to purchases from any single vendor.

 

Fair Value of Financial Instruments

 

The carrying amounts of our financial instruments, including accounts receivable and accounts payable, are carried at cost, which approximates their fair value due to their short-term maturities. We believe that the carrying value of notes payable with third parties, including their current portion, approximate their fair value, as those instruments carry market interest rates based on our current financial condition and liquidity. Receivables and payables, due to short term nature, approximate their fair values.

 

Fair Value

 

As defined in authoritative guidance, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (“exit price”). To estimate fair value, the Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable.

 

F-8
 

 

The authoritative guidance establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (“Level 1” measurements) and the lowest priority to unobservable inputs (“Level 3” measurements). The three levels of the fair value hierarchy are as follows:

 

Level 1 - Observable inputs such as quoted prices in active markets at the measurement date for identical, unrestricted assets or liabilities.

 

Level 2 - Other inputs that are observable, directly or indirectly, such as quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.

 

Level 3 - Unobservable inputs for which there is little or no market data and which the Company makes its own assumptions about how market participants would price the assets and liabilities.

 

In instances in which multiple levels of inputs are used to measure fair value, hierarchy classification is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

 

Property and Equipment

 

Property and equipment are recorded at cost less accumulated depreciation. Expenditures for replacements, renewals and betterments are capitalized. Repairs and maintenance costs are expensed as incurred.

 

Depreciation is calculated using the straight-line method over the estimated useful lives of the assets of generally five to seven years for equipment, five to ten years for vehicles and three years for computer related assets. Assets are depreciated starting at the time they are placed into service. A portion of depreciation expense is charged to cost of product revenue on the consolidated statement of operations.

 

Leasehold improvements are amortized using the straight-line method over the shorter of the lease term (including reasonably assured renewal periods), which range from three to seven years, or their estimated useful life.

 

Intangible Assets

 

Intangible assets with estimable useful lives are amortized using the straight-line method over their respective estimated useful lives verses their estimated residual values, and are reviewed for impairment annually, or whenever events or circumstances indicate their carrying amount may not be recoverable. We conduct our annual impairment test on December 31 of each year. The Company has evaluated its intangibles for impairment and has determined that no impairment was necessary as of December 31, 2020.

 

Impairment of Long-lived Assets

 

We evaluate the carrying value of long-lived assets for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. Further testing of specific assets or grouping of assets is required when undiscounted future cash flows associated with the assets is less than their carrying amounts. An asset is considered to be impaired when the anticipated undiscounted future cash flows of an asset group are estimated to be less than its carrying value. The amount of impairment recognized is the difference between the carrying value of the asset group and its fair value. Fair value estimates are based on assumptions concerning the amount and timing of estimated future cash flows. We recorded an impairment of long-lived assets for the year ended December 31, 2019 of $32,900, which was included in discontinued operation in the Statement of Operations.

 

F-9
 

 

Revenue Recognition

 

In May 2014, the FASB issued guidance on revenue from contracts with customers that superseded most current revenue recognition guidance, including industry-specific guidance. The underlying principle of the guidance is to recognize revenue to depict the transfer of goods or services to customers at an amount to which the company expects to be entitled in exchange for those goods or services. The new guidance requires an evaluation of revenue arrangements with customers following a five-step approach: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations; and (5) recognize revenue when (or as) the company satisfies each performance obligation. Revenues are recognized when control of the promised services are transferred to the customers in an amount that reflects the expected consideration in exchange for those services. A customer obtains control when it has the ability to direct the use of and obtain the benefits from the services. Other major provisions of the guidance include capitalization of certain contract costs, consideration of the time value of money in the transaction price and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. (See Note 3)

 

Stock-based Compensation

 

We account for stock-based awards at fair value on the date of grant and recognize compensation over the service period that they are expected to vest. We estimate the fair value of stock options and stock purchase warrants using the Black-Scholes option pricing model. The estimated value of the portion of a stock-based award that is ultimately expected to vest, taking into consideration estimated forfeitures, is recognized as expense over the requisite service periods. The estimate of stock awards that will ultimately vest requires judgment, and to the extent that actual forfeitures differ from estimated forfeitures, such differences are accounted for using the simplified method to estimate the expected term of the option and recorded in the period that estimates are revised.

 

Research and Development

 

Research and development (“R&D”) costs are charged to expense as incurred and are included in selling, general and administrative costs in the accompanying consolidated statement of operations. R&D expenses consist primarily of salaries, project materials, contract labor and other costs associated with ongoing product development and enhancement efforts. R&D expenses were $0 for the years ended December 31, 2020 and 2019. R & D expenses are included in general and administrative expenses, when incurred.

 

Income Taxes

 

The Company accounts for income taxes pursuant to Accounting Standards Codification (“ASC”) 740, Income Taxes, which utilizes the asset and liability method of computing deferred income taxes. The objective of this method is to establish deferred tax assets and liabilities for any temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled.

 

ASC 740 also provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements. Tax positions must meet a “more-likely-than-not” recognition threshold at the effective date to be recognized. During the years ended December 31, 2020 and 2019 the Company recognized no adjustments for uncertain tax positions.

 

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. No interest and penalties related to uncertain tax positions were recognized at December 31, 2020 and 2019. The Company expects no material changes to unrecognized tax positions within the next twelve months.

 

The Company has filed federal and state tax returns through December 31, 2019. The tax periods for the years ending December 31, 2017 through 2019 are open to examination by federal and state authorities.

 

F-10
 

 

Recently issued accounting pronouncements

 

Changes to accounting principles generally accepted in the United States of America (U.S. GAAP) are established by the Financial Accounting Standards Board (FASB) in the form of accounting standards updates (ASU’s) to the FASB’s Accounting Standards Codification. The Company considers the applicability and impact of all new or revised ASU’s.

 

New Accounting Pronouncements Implemented

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under current GAAP. ASU 2016-02 requires that a lessee should recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term on the balance sheet. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 (including interim periods within those periods) using a modified retrospective approach and early adoption is permitted. The Company adopted ASU 2016-02 in the first quarter of 2019. (See Note 6)

 

NOTE 3 – REVENUE

 

Products Revenue

 

Product revenue generated from contracts with customers, for the manufacture of products for the removal and treatment of hazardous vapor and gasses. Total estimated revenue includes all of the following: (1) the basic contract price, (2) contract options, and (3) change orders. Once contract performance is underway, the Company may experience changes in conditions, client requirements, specifications, designs, materials and expectations regarding the period of performance. Such changes are “change orders” and may be initiated by us or by our clients. In many cases, agreement with the client as to the terms of change orders is reached prior to work commencing; however, sometimes circumstances require that work progress without obtaining client agreement. Revenue related to change orders is recognized as costs are incurred if it is probable that costs will be recovered by changing the contract price. The Company does not incur pre-contract costs. Under the new revenue recognition guidance, we found no change in the manner we recognize product revenue. Provisions for estimated losses on uncompleted contracts are recorded in the period in which the losses are identified and included as additional loss. Provisions for estimated losses on contracts are shown separately as liabilities on the balance sheet, if significant, except in circumstances in which related costs are accumulated on the balance sheet, in which case the provisions are deducted from the accumulated costs. A provision as a liability is reported as a current liability.

 

The Company includes in current assets and current liabilities amounts related to contracts realizable and payable. Costs and estimated earnings in excess of billings on uncompleted contracts represent the excess of contract costs and profits recognized to date over billings to date and are recognized as a current asset. Revenue contract liabilities represent the excess of billings to date over the amount of contract costs and profits recognized to date and are recognized as a current liability.

 

Products revenue also includes media sales which are recognized as the product is shipped to the customer for use.

 

Services Revenue

 

Our services revenue is primarily comprised of services related to industrial cleaning and mobile railcar cleaning, which we recognize as services are rendered. These lines of business have been included in discontinued operations as of December 31, 2019.

 

Solid Waste Revenue

 

The Company’s revenues from waste destruction licensing agreements are recognized as a single accounting unit over the term of the license. Revenue from joint venture operations of the Company’s CoronaLux™ units is recognized as the revenue is earned by the joint venture. Revenue from management services is recognized as services are performed.

 

F-11
 

 

Disaggregation of Revenue

 

   Year ended December 31, 2020 
   Environmental Solutions   Solid Waste   Total 
Sources of Revenue            
Product sales  $1,805,000    -   $1,805,000 
Media sales   871,500    -    871,500 
Licensing fees   -    32,900    32,900 
Operating fees   -    3,100    3,100 
Management fees   -    200,000    200,000 
Total Revenue  $2,676,500   $236,000   $2,912,500 

 

   Year ended December 31, 2019 
   Environmental Solutions   Solid Waste   Total 
Sources of Revenue               
Product sales  $2,952,100    -   $2,952,100 
Media sales   1,100,800    -    1,100,800 
Licensing fees   -    49,900    49,900 
Operating fees   -    -    - 
Management fees   -    200,000    200,000 
Total Revenue  $4,052,900   $249,900   $4,302,800 

 

Contract Balances

 

Where a performance obligation has been satisfied but not yet invoiced at the reporting date, a contract asset is recognized on the balance sheet. Where a performance obligation has not yet been satisfied but an invoice has been raised at the reporting date, a contract liability is recognized on the balance sheet.

 

The opening and closing balances of the Company’s accounts receivables and contract liabilities (current and non-current) are as follows:

 

           Contract Liabilities 
                     
   Accounts
Receivable, net
   Revenue
Contract Assets
   Revenue Contract Liabilities   Deferred Revenue
(current)
   Deferred Revenue
(non-current)
 
                     
Balance as of December 31, 2020  $375,600   $6,800   $323,900   $30,200   $- 
                          
Balance as of December 31, 2019   686,800    242,500    327,100    32,900    30,200 
                          
(Decrease) increase  $(311,200)  $(235,700)  $(3,200)  $(2,700)  $(30,200)

 

F-12
 

 

The majority of the Company’s revenue is generally invoiced on a weekly or monthly basis, and the payments are generally received within approximately 30-60 days. Deferred revenue is recorded when cash payments are received or due in advance of the Company’s performance, including amounts that are refundable.

 

Remaining Performance Obligations

 

As of December 31, 2020, the aggregate amount of the transaction price allocated to the remaining performance obligations was approximately $0.6 million, of which the Company expects to recognize approximately 85% over the next 12 months.

 

The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected term of one year or less and (ii) contracts for which the Company recognizes revenue at the amounts to which it has the right to invoice for services performed.

 

NOTE 4 - PROPERTY AND EQUIPMENT

 

Property and equipment was comprised of the following:

 

   December 31, 2020   December 31, 2019 
Field and shop equipment  $1,282,700   $2,240,700 
Vehicles   476,900    689,700 
Waste destruction equipment, placed in service   553,300    557,100 
Furniture and office equipment   345,700    346,300 
Leasehold improvements   36,200    36,300 
Building and improvements   21,200    21,200 
Land   162,900    162,900 
    2,878,900    4,054,200 
Less: accumulated depreciation and amortization   (2,330,900)   (3,492,400)
Property and equipment, net  $548,000   $561,800 

 

Depreciation expense for the years ended December 31, 2020 and 2019 was $128,100 and $309,600, respectively. For the year ended December 31, 2020 and 2019, depreciation expense included in cost of goods sold was $85,700 and $232,700, respectively. For the year ended December 31, 2020 and 2019 depreciation expense included in selling, general and administrative expenses was $42,300 and $76,900, respectively.

 

The Company has evaluated its fixed assets and has determined that an impairment charge was required for shop equipment that will not be utilized, and an impairment charge of approximately $32,800 was taken in fiscal year 2019. No impairment charges were incurred in fiscal year 2020.

 

Depreciation expense on leased CoronaLux™ units included in accumulated depreciation and amortization above is $30,300 and $55,900 for the years ended December 31, 2020 and 2019, respectively.

 

Property and equipment includes the following amounts for leases that have been capitalized at December 31:

 

   December 31,   December 31, 
   2020   2019 
Vehicles, field and shop equipment  $10,200   $370,900 
Less: accumulated amortization   (10,200)   (316,300)
   $-   $54,600 

 

F-13
 

 

The capitalized leases have a security interest held by the lessor in their respective equipment.

 

The Company has evaluated its fixed assets and has determined that no impairment charges were required for licensed CoronaLux™ units in the year ended December 31, 2020 and 2019.

 

NOTE 5 – INTANGIBLE ASSETS

 

Intangible assets were comprised of the following:

 

   December 31, 2020 
   Gross carrying amount   Accumulated amortization   Net carrying value 
             
Goodwill  $277,800   $-   $277,800 
Customer list   42,500    (42,500)   - 
Technology   1,021,900    (852,400)   169,500 
Trade name   54,900    (54,900)   - 
   $1,397,100   $(949,800)  $447,300 

 

   December 31, 2019 
   Gross carrying amount   Accumulated amortization   Net carrying value 
             
Goodwill  $277,800   $-   $277,800 
Customer list   42,500    (42,500)   - 
Technology   1,021,900    (820,200)   201,700 
Trade name   54,900    (54,900)   - 
   $1,397,100   $(917,600)  $479,500 

 

The estimated useful lives of the intangible assets range from seven to twenty years. Amortization expense, included in selling, general and administrative expenses in the accompanying consolidated statements of operations, was $32,100 and $37,300 for the years ended December 31, 2020 and 2019, respectively.

 

NOTE 6 – LEASES

 

The Company has entered into operating leases primarily for real estate. These leases have terms which range from 4 to 6 years, and often include one or more options to renew. These renewal terms can extend the lease term from 1 year to month-to-month and are included in the lease term when it is reasonably certain that the Company will exercise the option. These operating leases are included in “Right of use assets” on the Company’s December 31, 2020 Consolidated Balance Sheets and represent the Company’s right to use the underlying asset for the lease term. The Company’s obligation to make lease payments are included in “Current portion of lease liabilities” and “Lease liabilities net of current portion” on the Company’s December 31, 2020 Consolidated Balance Sheets. Based on the present value of the lease payments for the remaining lease term of the Company’s existing leases, the Company recognized right-of-use assets of approximately $225,300 and lease liabilities for operating leases of approximately $246,100 on January 1, 2019. Operating lease right-of-use assets and liabilities commencing after January 1, 2019 are recognized at commencement date based on the present value of lease payments over the lease term. As of December 31, 2020, total right-of-use assets and operating lease liabilities were approximately $380,400. All operating lease expense is recognized on a straight-line basis over the lease term. In the year ended December 31, 2020, the Company recognized approximately $222,600 in operating lease costs for right-of-use assets.

 

F-14
 

 

Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments. The Company has certain contracts for real estate which may contain lease and non-lease components which it has elected to treat as a single lease component.

 

Information related to the Company’s right-of-use assets and related lease liabilities were as follows:

 

   Year Ended December 31, 
   2020   2019 
         
Cash paid for operating lease liabilities  $308,600   $307,100 
Right-of-use assets obtained in exchange for new operating lease obligations   60,500    75,600 
Weighted-average remaining lease term   4.0 months    6.5 months 
Weighted-average discount rate   10%   10%

 

Maturities of lease liabilities as of December 31, 2020 were as follows:    
     
2021  $114,700 
2022   85,700 
2023   88,300 
2024   90,900 
2025   93,600 
Thereafter   64,000 
    537,200 
Less imputed interest   (124,400)
Total lease liabilities   412,800 
Current operating lease liabilities   78,100 
Non-current operating lease liabilities   334,700 
Total lease liabilities  $412,800 

 

NOTE 7 - ACCRUED LIABILITIES

 

Accrued liabilities were comprised of the following:

 

   December 31,   December 31, 
   2020   2019 
         
Accrued compensation and related taxes  $486,400   $498,000 
Accrued interest   1,170,500    648,600 
Accrued settlement/litigation claims   150,000    150,000 
Warranty and defect claims   34,000    48,200 
Other   136,300    162,000 
Total Accrued Liabilities  $1,977,200   $1,506,800 

 

F-15
 

 

NOTE 8 - UNCOMPLETED CONTRACTS

 

Costs, estimated earnings and billings on uncompleted contracts are as follows:

 

   December 31,   December 31, 
   2020   2019 
         
Revenue recognized  $102,700   $1,074,800 
Less: billings to date   (95,900)   (832,300)
Costs and estimated earnings in excess of billings on uncompleted contracts   6,800    242,500 
           
Billings to date   1,716,800    2,707,200 
Revenue recognized   (1,392,900)   (2,380,100)
           
Revenue contract liabilities  $323,900   $327,100 

 

NOTE 9 – INVESTMENT IN PARAGON WASTE SOLUTIONS LLC

 

In 2010, the Company and Black Stone Management Services, LLC (“Black Stone”) formed PWS, whereby a total of 1,000,000 membership units were issued, 600,000 membership units to the Company and 400,000 membership units to Black Stone. Fortunato Villamagna, who serves as President of our PWS subsidiary, is a managing member and Chairman of Black Stone. In June 2012, the Company and Blackstone each allocated 10% of their respective membership units in PWS to Mr. J John Combs III, an officer and shareholder of the Company and Mr. Michael Cardillo, a shareholder of the Company and an officer of a subsidiary. There was no value attributable to the units at the time of the allocation. As of December 31, 2020, and 2019 the Company owned 54% of the membership units, Black Stone owned 36% of the membership units, and two related parties (as noted above), each owned 5% of the membership units.

 

In August 2011, the Company acquired certain intellectual property in regard to waste destruction technology (the “IP”) from Black Stone in exchange for 1,000,000 shares of our common stock valued at $100,000. We estimated the useful life of the IP at ten years, which was consistent with the useful life of other technology included in our intangible assets, and management’s initial assessment of the potential marketability of the IP. In March 2012, the Company entered into an Irrevocable License & Royalty Agreement with PWS that grants PWS an irrevocable world-wide license to the IP in exchange for a 5% royalty on all revenues from the sale or lease of all CoronaLux™ units from PWS and its affiliates. The term commenced as of the date of the Agreement and shall continue for a period not to exceed the life of the patent or patents filed by the Company. PWS may sub license the IP and any revenue derived from sub licensing shall be included in the calculation of Gross Revenue for purposes of determining royalty payments due the Company. Royalty payments are due 30 days after the end of each calendar quarter. PWS generated licensing and unit sales revenues of approximately $32,900 and $49,900 for the years ended December 31, 2020 and 2019, respectively.

 

Since its inception through December 31, 2020, we have provided approximately $6.8 million in funding to PWS for working capital and the further development and construction of various prototypes and commercial waste destruction units. No members of PWS have made capital contributions or other funding to PWS other than SEER. The intent of the operating agreement is that we will provide the funding as an advance against future earnings distributions made by PWS.

 

Licensing Agreements

 

On November 17, 2014, PWS entered into an Exclusive Licensing and Equipment Lease Agreement, for a limited license territory, with Medical Waste Services, LLC (“MWS”). The License Agreement grants to MWS the use of the PWS Technology and the CoronaLux™ waste destruction units for an initial term of seven years and required a payment of $225,000 as a non-refundable initial licensing fee and distributions of 50% of net operating profits, as defined in the agreement, in lieu of continuing royalty payments for the use of the licensed technology. PWS and Medical Waste Services, LLC (“MWS”) formed a contractual joint venture to exploit the PWS medical waste destruction technology. MWS has received approval from the California Department of Public Health and a restricted permit from the South Coast Air Quality Management District (“SCAQMD”) to operate the CoronaLux™ unit licensed by MWS at its facility in Southern California. Operations to date have included the destruction of medical waste under a temporary operating permit issued by SCAQMD since May 2015 and efforts to obtain a full operating permit from SCAQMD were successful and SCAQMD issued a ‘Notice of Intent to Issue Permit to Operate’ in March 2017. In November 2017, the full operating permit was issued by SCAQMD.

 

F-16
 

 

In December 2017, PWS and GulfWest Waste Solutions, LLC (“GWWS”) formed Paragon Southwest Medical Waste, LLC (“PSMW”) to exploit the PWS medical waste destruction technology. PSMW will have an exclusive license to the CoronaLux™ technology in a six-state area of the Southern United States. In addition to the equity position, PWS will be the operating partner for the business and sell a number of additional systems to the joint venture over the next five years. In 2017, PSMW purchased and installed three CoronaLux™ units for $600,000. PWS incurred costs of $525,700 to prepare the three units for sale. Operations in the form of medical waste destruction began in 2018.

 

Payments received for non-refundable licensing and placement fees have been recorded as deferred revenue in the accompanying consolidated balance sheets as of December 31, 2020 and 2019 and are recognized as revenue ratably over the term of the contract.

 

NOTE 10 – INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES

 

The Company has a non-controlling interest in several joint ventures, currently four primarily for licensing and operating PWS CoronaLux™ waste destruction units and one for development of hybrid scrubber systems. Two joint ventures have limited their activity to formation only, no other operations have commenced. The following is summary information on the joint ventures that have had some activity in 2020 and 2019. The Company has no fixed commitment to fund any losses of the operating joint ventures and has no investment basis in any of the joint ventures therefore the Company has suspended the recognition of losses under the equity method of accounting.

 

   December 31,   December 31, 
   2020   2019 
PWS-MWS Joint Venture          
Revenues  $183,600   $228,300 
Operating costs   177,400    232,500 
Net income   6,200    (4,200)
Company’s share of net income   3,100    - 
           
PWS-Paragon Southwest Joint Venture          
Revenues  $1,730,100   $1,196,800 
Operating costs   2,495,300    2,381,100 
Net loss   (765,200)   (1,184,300)
Company’s share of net income   -    - 

 

   June 30,   June 30, 
   2020   2019 
PWS UK Joint Venture          
Assets  $104,200   $671,100 
Liabilities   -    154,400 
Net assets   104,200    516,700 
Net loss   71,900    73,600 
Company’s share of net income   -    - 

 

11 - PAYROLL TAXES PAYABLE

 

In 2009 and 2010, REGS, a subsidiary of the Company, became delinquent for unpaid federal employer and employee payroll taxes, accrued interest and penalties were incurred related to these unpaid payroll taxes.

 

In 2010 the IRS filed notices of federal tax liens against certain of REGS assets in order to secure certain tax obligations. The IRS is to release this lien if and when REGS pays the full amount due. Two of the officers of REGS also have liability exposure for a portion of the taxes if REGS does not pay the liability.

 

As of December 31, 2020, and 2019, the outstanding balance due to the IRS was $1,085,400, and $1,052,200, respectively.

 

Other than this outstanding payroll tax matter arising in 2009 and 2010, all state and federal payroll taxes have been paid by REGS in a timely manner.

 

F-17
 

 

NOTE 12 – DEBT

 

Debt as of December 31, 2020 and 2019 was comprised of the following:

 

   December 31,   December 31, 
   2020   2019 
PAYROLL PROTECTION PROGRAM          
           
Under the Small Business Administration (“SBA”), the Company applied for the Paycheck Protection Program (“PPP”) loan. These loans are forgiven if used for payroll, payroll benefits, including health insurance and retirement plans, as well as certain rent payments, leases, and utility payments, which are limited to 40% of the loan proceeds, all of which if paid within either 8 weeks or 24 weeks of the receipt of the loan proceeds. At the time of this filing, we anticipate a significant amount of this loan to be forgiven, however the forgiveness application process is not yet complete. The Company has elected to record these advances under the debt treatment for these loans, under GAAP guidance. Unforgiven portions of these loans is to be repaid over 5 years, accruing interest at 1% per annum.   590,300    - 
           
SHORT TERM NOTES          
           
Secured short term note payable dated October 13, 2017 with principal and interest due 60 days from issuance. The note requires a one-time fee in the amount of $4,000 to compensate for the first two weeks of the term and each week thereafter (weeks 3-8) a fee of $400 shall be due and owing accruing on the first day of the week. The total one-time fee paid was $6,400 and was recorded as interest. A fee of 40,000 shares of restricted common stock shall be issued as a penalty for each month or prorated for any two-week portion of any month the note is outstanding past the original maturity date for months 3 through 6, and a fee of 80,000 shares of restricted common stock shall be issued to lender for each month or prorated for each two-week portion of any month the note is outstanding past the original maturity date beginning in month 7 until paid in full. The note is secured by the future sale of CoronaLux units and a personal guarantee of an officer of the Company. The penalty period for shares to be issued has been reached, however, the debt holder agreed to a reduction and a fixed amount of penalty shares in 2018, as issuable under the terms of this agreement. No additional shares will be issued by the Company. The reduction of penalty shares was accounted for as debt extinguishment and a gain was recorded in 2018. No interest accrues on the unpaid balance.  $100,000   $100,000 
           
Secured short term note payable dated November 6, 2017 with principal and interest due 60 days from issuance. The note requires a one-time fee in the amount of $5,000 to compensate for the first two weeks of the term and each week thereafter (weeks 3-8) a fee of $400 shall be due and owing accruing on the first day of the week. The total one-time fee paid was $7,400 and was recorded as interest. A fee of 50,000 shares of restricted common stock shall be issued as a penalty for each month or prorated for any two-week portion of any month the note is outstanding past the original maturity date for months 3 through 6, and a fee of 100,000 shares of restricted common stock shall be issued to lender for each month or prorated for each two-week portion of any month the note is outstanding past the original maturity date beginning in month 7 until paid in full. The note is secured by the future sale of CoronaLux units and a personal guarantee of an officer of the Company. The penalty period for shares to be issued has been reached, however, the debt holder agreed to a reduced and fixed amount of penalty shares during 2018. No additional shares will be issued by the Company. The reduction of penalty shares was accounted for as debt extinguishment and a gain was recorded in 2018. No interest accrues on the unpaid balance.   125,000    125,000 
           
Note payable dated November 20, 2017, interest at 30% per annum, principal and accrued interest due on or before February 28, 2018. The note is unsecured. During 2018, a verbal agreement was made to allow month-to-month extension of the due date as long as interest payments were made monthly. The Company made interest payments totaling $84,100 of which $37,726 of interest and principal reduction of $1,900 was paid by the issuance of 140,000 shares of common stock during 2018 and the note holder has continued to extend the due date. Unpaid interest at December 31, 2020 is approximately $196,800.   298,100    298,100 
           
Secured short term note payable dated February 1, 2019 with principal and interest due 90 days from issuance. The note requires a one-time fee in the amount of $15,000 to compensate for the first two weeks of the term and each week thereafter (weeks 3-12) a fee of $1,500 shall be due and owing accruing on the first day of the week. The total one-time fee totals $30,000 and was recorded as interest. A fee of 50,000 shares of restricted common stock shall be issued as a penalty for each month or prorated for any two-week portion of any month the note is outstanding past the original maturity date for months 4 through 6, and a fee of 100,000 shares of restricted common stock shall be issued to lender for each month or prorated for each two-week portion of any month the note is outstanding past the original maturity date beginning in month 7 until paid in full. The note is secured by the future sale of any and all PelleChar products and a personal guarantee of an officer of the Company. The penalty period for shares to be issued has been reached. For the year ended December 31, 2020, the Company recorded 1,200,000 shares of its common stock as issuable under the terms of this agreement value at $177,000 and recorded as interest expense. Unpaid one-time fees at December 31, 2020 is approximately $30,000.   500,000    500,000 

 

F-18
 

 

Secured short term note payable dated July 2, 2019 with principal and interest due 60 days from issuance. The note requires a one-time issuance of 500,000 options, which the company recorded the fair value of $37,300 as debt discount, amortized over the life of the note. The note accrues interest at 12% annually. The note is past due as the date of this filing. The Company has not received notice from the lender and continue to accrue interest. For the year ended December 31, 2020, the Company recorded interest expense of $12,000. Unpaid interest at December 31, 2020 is approximately $18,000.   100,000    100,000 
           
Secured short term note payable dated July 18, 2019 with principal and interest due 60 days from issuance. The note requires a one-time fee in the amount of $5,000 to compensate for the first two weeks of the term and each week thereafter (weeks 3-12) a fee of $500 shall be due and owing accruing on the first day of the week and was recorded as interest. A fee of 15,000 shares of restricted common stock shall be issued as a penalty for each month or prorated for any two-week portion of any month the note is outstanding past the original maturity date for months 3 through 6, and a fee of 30,000 shares of restricted common stock shall be issued to lender for each month or prorated for each two-week portion of any month the note is outstanding past the original maturity date beginning in month 7 until paid in full. The note is secured by the future sale of any and all MV Technology, LLC products. The penalty period for shares to be issued has been reached. For the year ended December 31, 2020, the Company recorded 322,500 shares of its common stock as issuable under the terms of this agreement value at $49,800 and recorded as interest expense. Unpaid interest at December 31, 2020 is approximately $10,000.   150,000    150,000 
           
Secured short term note payable dated October 17, 2019 with principal and interest due 6 months from issuance. On April 24, 2020, this note was extended to October 15, 2020. The note requires a one-time issuance of 200,000 common shares of the Company upon the maturity date of the note, which the company recorded the fair value of $13,000 as debt discount, amortized over the life of the note. The note extension requires a one-time issuance of 200,000 common shares of the Company upon the extended maturity date of the note, which the company recorded the fair value of $20,000 as debt discount, amortized over the life of the note. On November 3, 2020, this note was extended to April 16, 2021. The note extension requires a one-time issuance of 200,000 common shares of the Company upon the extended maturity date of the note, which the company recorded the fair value of $30,000 as debt discount, amortized over the life of the note.The note accrues interest at 15% annually. For the year ended December 31, 2020, the Company recorded interest expense of $45,100, and $37,600 of interest related to debt discount. Unpaid interest at December 31, 2020 is approximately $54,500.   300,000    300,000 
           
Secured short term note payable dated December 14, 2019 with principal and interest due 6 months from issuance. The note requires a one-time issuance of 250,000 common shares of the Company upon the maturity date of the note, which the company recorded the fair value of $16,300 as debt discount, amortized over the life of the note. The note accrues interest at 15% annually. The note is past due as the date of this filing. For the year ended December 31, 2020, the Company recorded interest expense of $67,700, and $16,300 of interest related to debt discount. Unpaid interest at December 31, 2020 is approximately $70,800.   450,000    450,000 
           
Secured short term note payable dated September 18, 2019 with no stated maturity date. The note accrues interest at 6% annually for the first 18 months, and 12% thereafter if not paid in full. Payments will be offset by SEER building and delivering 20 kilns for BIOCHAR to the debtor, 10 of which have been delivered. For the year ended December 31, 2020, the Company recorded interest expense of $15,100. Unpaid interest at December 31, 2020 is approximately $20,300.   154,700    300,000 
           
Secured short term note payable dated October 1, 2019 with no stated maturity date. The note accrues interest at 6% annually for the first 18 months, and 12% thereafter if not paid in full. Payments will be offset by SEER building and delivering 20 kilns for BIOCHAR to the debtor. For the year ended December 31, 2020, the Company recorded interest expense of $5,100. Unpaid interest at December 31, 2020 is approximately $5,100.   85,000    85,000 
           
Secured short term note payable dated March 16, 2020, maturing on March 15, 2021. The note bears annual simple interest, at a rate of 14%, and matures on March 15, 2021. The Lender receives a one-time option grant to purchase 60,000 shares of the Company’s common stock for $0.10 per share for a period of 3 years from grant date, on the maturity date, with payment of principal and interest. These options were value at approximately $3,500, and are recorded as debt discount, and amortized over the life of the loan. For the year ended December 31, 2020, the Company recorded interest expense of $11,100. Unpaid interest at December 31, 2020 is approximately $11,100.   100,000    - 
           
Secured short term note payable dated March 17, 2020, maturing on March 16, 2021. The note bears annual simple interest, at a rate of 14%. The Lender receives a one-time option grant to purchase 30,000 shares of the Company’s common stock for $0.10 per share for a period of 3 years from grant date, on the maturity date, on the maturity date, with payment of principal and interest. These options were value at approximately $2,000, and are recorded as debt discount, and amortized over the life of the loan. For the year ended December 31, 2020, the Company recorded interest expense of $5,500. Unpaid interest at December 31, 2020 is approximately $5,500.   50,000    - 
           
Secured short term note payable dated July 8, 2020, maturing on December 7, 2020, bearing annual simple interest at a rate of 15%. The note requires a one-time issuance of 200,000 common shares of the Company upon the maturity date of the note, which the company recorded the fair value of $11,300 as debt discount, amortized over the life of the note. For the year ended December 31, 2020, the Company recorded interest expense of $15,900, and $11,100 of interest related to debt discount. Unpaid interest at December 31, 2020 is approximately $15,900.   220,000    - 
           
Unsecured short term note payable dated August 18, 2020, maturing on November 17, 2020, bearing annual simple interest at a rate of 15%. The note is past due as the date of this filing. For the year ended December 31, 2020, the Company recorded interest expense of $6,600. Unpaid interest at December 31, 2020 is approximately $6,600.   120,000    - 
           
Secured short term note payable dated September 3, 2020, maturing on December 4, 2020, bearing annual simple interest at a rate of 15%. For the year ended December 31, 2020, the Company recorded interest expense of $13,700. Unpaid interest at December 31, 2020 is approximately $13,700.   280,000    - 
           
Total Short-term notes  $3,032,800   $2,408,100 
           
Unsecured short term note payable dated August 21, 2019 with principal and interest due 60 days from issuance. The note requires a one-time fee in the amount of $500 to compensate for the first two weeks of the term and each week thereafter (weeks 3-8) a fee of $50 shall be due and owing accruing on the first day of the week, after which the fee is $75 per week, which is recorded as interest expense. The note is from the CEO, and thus classified as a related party note. For the year ended December 31, 2020, the Company recorded interest expense of $3,600. Unpaid interest as of December 31, 2020 is approximately $5,200.  $15,000   $15,000 
           
Secured short term note payable dated August 21, 2019 with principal and interest due 60 days from issuance. The note requires a one-time fee in the amount of $4,150 to compensate for the first two weeks of the term and each week thereafter (weeks 3-8) a fee of $415 shall be due and owing accruing on the first day of the week, after which the fee is $600 per week, which is recorded as interest expense. The note is from a family member of the CEO, and thus classified as a related party note. For the year ended December 31, 2020, the Company recorded interest expense of $28,800. Unpaid interest as of December 31, 2020 is approximately $41,400.   125,000    125,000 
           
Unsecured short term note payable dated October 7, 2019 with principal and interest due 60 days from issuance. The note requires a one-time fee in the amount of $500 to compensate for the first two weeks of the term and each week thereafter (weeks 3-8) a fee of $50 shall be due and owing accruing on the first day of the week, after which the fee is $75 per week, which is recorded as interest expense. The note is from the CEO, and thus classified as a related party note. For the year ended December 31, 2020, the Company recorded interest expense of $3,600. Unpaid interest as of December 31, 2020 is approximately $4,700.   15,000    15,000 
           
Total short-term notes - related party  $155,000   $155,000 

 

F-19
 

 

Convertible notes payable, interest at 8% per annum, unpaid principal and interest maturing 3 years from note date between August 2018 and October 2019, convertible into common stock at the option of the lenders at a rate of $0.70 per share; one convertible note for $250,000 has a personal guarantee of an officer of the Company. The notes that matured in August 2018, were subsequently extended by one year to August 2019, all other terms remained the same. The note that matured November 2018 was subsequently extended to May 2019 and the interest rate increased to 13% per annum. No default notice has been received from the noteholders. For the year ended December 31, 2020, the Company recorded interest expense of $141,300. Unpaid interest at December 31, 2020 is approximately $403,500.  $1,605,000   $1,605,000 
           
Total convertible notes   1,605,000    1,605,000 
Less: current portion   (1,605,000)   (1,605,000)
Long term convertible notes, including debt discount  $-   $- 
           
LONG TERM NOTES AND CAPITAL LEASE OBLIGATIONS          
           
Note payable dated July 13, 2018, interest at 20% per annum, payable July 13, 2021. No monthly payments are due for the first six months, commencing in month seven, principal and accrued interest will be amortized and payable over the remaining 30 months. Monthly payments of principal and accrued interest did not commence in 2019. The note is secured by all assets of SEM and personally guaranteed by an officer of the Company. A fee of 200,000 shares of restricted common stock was issuable at the time of funding. During the year ended December 31, 2018, the Company recorded 200,000 shares of its common stock as issuable under the terms of this agreement. The shares were valued at $44,000 recorded as debt discount. For the year ended December 31, 2020, the Company recorded interest expense of $85,400. Unpaid interest at December 31, 2020 was approximately $239,000.  $500,000   $500,000 
           
Note payable dated April 2020, interest at 6.8% per annum, secured by a piece of heavy equipment, of which the borrowing was used to purchase. Forty-eight monthly payments of principal and accrued interest of $2,400, commence on April 17, 2020. For the year ended December 31, 2020, the Company recorded interest expense of $4,800. As of December 31, 2020, 3 payments in the amount of approximately $7,200 were classified in accounts payable.  $84,100   $- 
           
Debt discount   (29,900)   (45,700)
           
Note payable dated October 13, 2015, interest at 8% per annum, payable in 60 monthly installments of principal and interest $4,562, due October 1, 2020. Secured by real estate and other assets of SEM and guaranteed by SEER and MV.   -    43,700 
           
Capital lease obligations, secured by certain assets, which maturedin November 2020.   -    28,500 
Total long-term notes and capital lease obligations   554,200    526,500 
Less: current portion   (523,900)   (258,100)
Long term notes and capital lease obligations, long-term, including debt discount  $30,300   $268,400

 

Debt maturities as of December 31, 2020 are as follows:

 

Year Ending December 31,    
2020 (Past due)  $1,820,000 
2021   1,736,700 
2022   60,200 
2023   - 
2024   - 
Thereafter   - 
      
   $3,616,900 

 

All capital lease obligations of the Company have been paid and there are no future minimum lease payments under capital leases as of December 31, 2020.

 

F-20
 

 

NOTE 13 – RELATED PARTY TRANSACTIONS NOT DISCLOSED ELSEWHERE

 

Notes payable and accrued interest, related parties

 

Notes payable (See Note 12), and accrued interest due to certain related parties as of December 31, 2020 and 2019 are as follows:

 

   December 31,   December 31, 
   2020   2019 
Short term notes  $155,000   $155,000 
Accrued interest   53,100    27,100 
Total short-term notes and accrued interest - Related parties  $208,100   $182,100 

 

14 - COMMITMENTS AND CONTINGENCIES

 

Operating Lease Commitments

 

Future commitments under non-cancellable operating leases with terms longer than one year for office and warehouse space as of December 31, 2020 are as follows:

 

Year Ending December 31,    
2021  $114,700 
2022   85,700 
2023   88,300 
2024   90,900 
2025   93,600 
Thereafter   64,000 
      
   $537,200 

 

For the years ended December 31, 2020 and 2019, rent expense, including prorated charges and net of sub-lease income, was $300,200 and $284,700, respectively.

 

F-21
 

 

NOTE 15 –DISCONTINUED OPERATIONS

 

2019 REGS services division

 

During the fourth quarter of 2019, the Company ceased bidding on, and accepting contracts for the services division of its REGS subsidiary. No contracts have been uncompleted; therefore, the division does not have any performance obligations as of December 31, 2019. Fifteen employees in the division were terminated as of December 31, 2019. The Company is investigating the sale of REGS services division remaining assets as of December 31, 2020. Accordingly, the revenue and expenses associated with the services division are presented as “Discontinued operations” on our consolidated statement of operations and on our consolidated statement of cash flows for the year ended December 31, 2019 results. For the years ended December 31, 2020 and 2019 we recorded net income from discontinued operations equal to $0 and $1,785,400, respectively.

 

Major classes of line items constituting pretax loss on discontinued operations:

 

   For the year ended 
   December 31, 
   2020   2019 
         
Services revenue  $-   $1,661,500 
           
Services costs   -    (2,481,400)
General and administrative expenses   -    (502,400)
Salaries and related expenses   -    (512,400)
Other income (expense)   -    49,300 
Total expenses   -    (3,446,900)
           
Operating income   -    (1,785,400)
Income tax benefit   -    - 
           
Total income from discontinued operations  $-   $(1,785,400)

 

NOTE 16 – EQUITY TRANSACTIONS

 

2020 Common Stock Transactions

 

During the year ended December 31, 2020, the Company recorded 1,552,500 shares of $.001 par value common stock as issued and issuable to short-term note holders as required under their respective short-term notes, valued at approximately $226,800. (See Note 12)

 

During the year ended December 31, 2020, the Company recorded 975,000 shares of $.001 par value common stock as issued and issuable to short-term note holders in connection to new borrowings of short-term notes, valued at approximately $61,300. (See Note 12)

 

During the year ended December 31, 2020, the Company issued options to purchase 90,000 shares of $.001 par value common stock as issued and issuable to short-term note holders in connection to new borrowings of short-term notes, valued at approximately $5,500. (See Note 17)

 

F-22
 

 

2019 Common Stock Transactions

 

During the year ended December 31, 2019, the Company recorded 887,500 shares of $.001 par value common stock as issued and issuable to short-term note holders as required under their respective short-term notes valued at approximately $70,500. (See Note 12)

 

Warrants

 

In 2020 and 2019, no warrants were issued.

 

A summary of warrant activity for the years ended December 31, 2020 and December 31, 2019 is presented as follows:

 

           Weighted 
   Weighted       Average 
   Average       Remaining 
   Exercise   Number of   Contractual 
   Price   Warrants   Term in Years 
             
Balance as of December 31, 2018  $0.79    2,896,363    1.1 
Granted   -    -      
Exercised   -    -      
Cancelled   0.87    (1,675,363)     
                
Balance as of December 31, 2019  $0.67    1,221,000    1.0 
                
Granted   -    -      
Exercised   -    -      
Cancelled   0.65    (950,000)     
    -           
Balance as of December 31, 2020  $0.74    271,000    1.5 
                
Vested and exercisable as of December 31, 2020  $0.74    271,000    1.5 

 

NOTE 17 – STOCK-BASED COMPENSATION AND EMPLOYEE BENEFIT PLAN

 

Except as noted below, we do not have a qualified stock option plan, but have issued stock purchase warrants and stock options on a discretionary basis to employees, directors, service providers, private placement participants and outside consultants.

 

The Company utilizes ASC 718, Stock Compensation, related to accounting for share-based payments and, accordingly, records compensation expense for share-based awards based upon an assessment of the grant date fair value for stock options and restricted stock awards. The Black Scholes option pricing model was used to estimate the fair value of the options granted. This option pricing model requires a number of assumptions, of which the most significant are the expected stock price volatility and the expected option term (the amount of time from the grant date until the options are exercised or expire). The Company does not estimate forfeitures, and accounts for forfeitures as they occur. The Company estimated a volatility factor utilizing a weighted average of comparable published volatilities. The Company applied the simplified method to determine the expected term of all stock-based compensation grants. The risk-free interest rate is based on or approximates the U.S. Treasury yield curve in effect at the time of the grant.

 

Stock compensation expense for stock options is recognized on a straight-line basis over the vesting period of the award. The Company accounts for stock options as equity awards.

 

F-23
 

 

The weighted average estimated fair value of stock option grants and the weighted average assumptions that were used in calculating such values for the years ended December 31, 2020 and 2019 are as follows:

 

   Year Ended 
   December 31, 
   2020   2019 
         
Expected volatility   133.92% - 133.97%   98.97% - 121.17%
Expected dividend yield   -    - 
Risk-free interest rates   0.29% - 0.30%   1.39% - 1.71%
Expected term (in years)   3.0    3.0 - 4.5 

 

A summary of stock option activity for the year ended December 31, 2020 and 2019 is presented as follows:

 

           Weighted         
           Average   Weighted     
   Weighted       Remaining   Average     
   Average   Number of   Contractual   Optioned   Aggregate 
   Exercise   Optioned   Term in   Grant Date   Intrinsic 
   Price   Shares   Years   Fair Value   Value 
                     
Balance as of December 31, 2018  $0.72    750,000    1.20   $0.24   $           - 
Granted   0.70    1,500,000         0.03      
Exercised   -    -         -      
Cancelled/expired   0.73    (675,000)        0.25      
                          
Balance as of December 31, 2019  $0.69    1,575,000    3.82   $0.04   $- 
                          
Granted   0.10    90,000         0.06      
Exercised   -    -         -      
Cancelled/expired   0.54    (25,000)        0.19      
                          
Balance as of December 31, 2020  $0.66    1,640,000    2.83   $0.04   $- 
                          
Vested and exercisable as of December 31, 2020  $0.65    1,265,000    2.58   $0.04   $- 

 

For the years ended December 31, 2020 and 2019, we recorded stock-based compensation awarded to employees of $19,000 and $7,300, respectively, which is included in selling, general and administrative expense in our consolidated statements of operations.

 

As of December 31, 2020, there was approximately $12,700 of total unrecognized compensation cost related to non-vested stock options that is expected to be recognized over a weighted-average period of approximately 0.7 years.

 

Employee Benefit Plan

 

The Company has a defined contribution 401(k) plan that covers substantially all employees. Additionally, at the discretion of management, the Company may make contributions to eligible participants, as defined. During the years ended December 31, 2020 and 2019, we made no contributions in each year.

 

NOTE 18 – NET LOSS PER SHARE

 

Basic net loss per share is computed by dividing net loss attributable to common shareholders by the weighted average number of common shares outstanding. Diluted net loss per share is computed by dividing net loss attributable to common shareholders by the weighted average number of common shares outstanding plus the number of common shares that would be issued assuming exercise or conversion of all potentially dilutive common shares. Potentially dilutive securities are excluded from the calculation when their effect would be anti-dilutive. For all years presented in the consolidated financial statements, all potentially dilutive securities have been excluded from the diluted share calculations as they were anti-dilutive as a result of the net losses incurred for the respective years. Accordingly, basic shares equal diluted shares for all years presented.

 

F-24
 

 

Potentially dilutive securities were comprised of the following:

 

    Year Ended December 31,  
    2020     2019  
Warrants     271,000       1,221,000  
Options     1,640,000       1,575,000  
Convertible notes payable, including accrued interest     2,869,600       2,667,700  
      4,780,600       5,463,700  

 

NOTE 19 - SEGMENT INFORMATION AND MAJOR SEGMENT CUSTOMERS

 

The Company currently has identified two segments as follows:

 

  MV, SEM, PelleChar, REGS in FY20 (1) Environmental Solutions
  PWS Solid Waste

 

  (1) REGS industrial cleaning services division was discontinued in 2019 and is reported in discontinued operations (See Note 15). The remaining manufacturing division is reported in environmental solutions 2020.

 

The composition of our reportable segments is consistent with that used by our chief decision makers to evaluate performance and allocate resources. All of our operations are located in the U.S. The Company has not allocated corporate selling, general and administrative expenses, and stock-based compensation to the segments. All intercompany transactions have been eliminated.

 

Segment information as of December 31, 2020 and 2019 and for the years then ended is as follows:

 

   Environmental   Solid         
2020  Solutions   Waste   Corporate   Total 
                 
Revenue  $2,676,500   $236,000   $-   $2,912,500 
Depreciation and amortization (1)   74,900    34,600    50,700    160,200 
Interest expense   45,900    100    867,900    913,900 
Stock-based compensation   -    -    19,000    19,000 
Net income (loss)   (508,600)   (248,200)   (2,007,300)   (2,764,100)
Capital expenditures (cash and noncash)   131,600    -    -    131,600 
Total assets  $1,419,700   $267,800   $529,200   $2,216,700 

 

   Environmental   Solid         
2019  Solutions   Waste   Corporate   Total 
                 
Revenue  $4,052,900   $249,900   $-   $4,302,800 
Depreciation and amortization (1)   43,300    61,400    88,200    192,900 
Interest expense   11,700    1,600    539,900    553,200 
Stock-based compensation   -    -    7,300    7,300 
Net income (loss)   903,600    (295,100)   (1,562,100)   (953,600)
Capital expenditures (cash and noncash)   3,000    -    67,100    70,100 
Total assets (2)  $1,491,900   $330,700   $807,200   $2,629,800 

 

(1) Includes depreciation of property, equipment and leasehold improvement and amortization of intangibles.
   
(2) excludes assets of discontinued operations segment of $432,100.

 

F-25
 

 

NOTE 20 - INCOME TAXES

 

As of December 31, 2020, we estimate we will have net operating loss carryforwards available to offset future federal income tax of approximately $21.1 million. These carryforwards will expire between the years 2028 through 2037. Under the Tax Reform Act of 1986, the amount of and the benefit from net operating losses that can be carried forward may be limited in certain circumstances. Events that may cause changes in our tax carryovers include, but are not limited to, a cumulative ownership change of more than 50% over a three-year period. Therefore, the amount available to offset future taxable income may be limited. We carry a deferred tax valuation allowance equal to 100% of total deferred assets. In recording this allowance, we have considered a number of factors, but chiefly, our operating losses from inception. We have concluded that a valuation allowance is required for 100% of the total deferred tax assets as it is more likely than not that the deferred tax assets will not be realized.

 

Deferred tax assets were comprised of the following as of December 31, 2020 and 2019:

 

    2020     2019  
             
Allowance for doubtful accounts   $ -     $ 3,000  
Accrued expenses     105,000       97,000  
Current deferred tax asset     105,000       100,000  
                 
Intangible and fixed assets     110,000       79,000  
NOL carryforward     5,408,000       4,660,000  
Long-term deferred tax asset     5,518,000       4,739,000  
                 
Total deferred tax asset     5,623,000       4,839,000  
Less valuation allowance     (5,623,000 )     (4,839,000 )
Net deferred tax asset   $ -     $ -  

 

The benefit for income taxes differed from the amount computed using the U.S. federal income tax rate of 21% for December 31, 2020 and 2019, as follows:

 

    2020     2019  
             
Income tax benefit   $ 573,000     $ 655,000  
Non-deducible items     28,000       48,000  
State and other benefits included in valuation     196,000       319,000  
Exclusion of losses of pass-through entity     (13,000 )     (75,000 )
Change in valuation allowance     (784,000 )     (947,000 )
Income tax benefit   $ -     $ -  

 

NOTE 21 – ENVIRONMENTAL COMPLIANCE

 

Significant federal environmental laws affecting us are the Resource Conservation and Recovery Act (“RCRA”), the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), also known as the “Superfund Act”, the Clean Air Act, the Clean Water Act and the Toxic Substances Control Act (“TSCA”).

 

Pursuant to the EPA’s authorization of the RCRA equivalent programs, a number of states have regulatory programs governing the operations and permitting of hazardous waste facilities. Our facilities are regulated pursuant to state statutes, including those addressing clean water and clean air. Our facilities are also subject to local siting, zoning and land use restrictions. We believe we are in substantial compliance with all federal, state and local laws regulating our business.

 

NOTE 22 - SUBSEQUENT EVENTS

 

On January 19, 2021, the Company borrowed $150,000 under a long-term note. The note bears interest at an annual rate of 8% simple interest and matures on January 18, 2026. This note is included as part of a series of anticipated notes, all of which will be converted into common equity of Paragon Waste Services, LLC., in accordance with the note’s provisions.

 

On February 2, 2021, the Company borrowed $500,000 under a long-term note. The note bears interest at an annual rate of 8% simple interest and matures on February 3, 2026. This note is included as part of a series of anticipated notes, all of which will be converted into common equity of Paragon Waste Services, LLC., in accordance with the note’s provisions.

 

Under the Small Business Administration (“SBA”), the Company has applied for the PPP program, draw #2. During the first quarter of fiscal year 2021, we have been received $130,100 in loans for draw #2 through SEER and our subsidiaries. At the time of this filing, we do not anticipate having unqualified expenses which would not be forgiven. If we do have a portion of these loans not being forgiven, the unqualified portion is to be repaid over 2 years, accruing interest at 1% per annum.

 

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(b) Financial Statement Schedules:

 

Schedule II - Valuation and Qualifying Accounts

 

For the year ended   Balance at beginning of period     Charged to costs and expenses     Charged to other accounts     Deductions     Balance at end of period  
                               
December 31, 2019                                        
Valuation allowance on deferred tax assets   $ 3,892,000     $ 947,000     $          -     $            -     $ 4,839,000  
                                         
December 31, 2020                                        
Valuation allowance on deferred tax assets   $ 4,839,000     $ 784,000     $ -     $ -     $ 5,623,000  

 

 

All other financial schedules are not required under the related instructions or are inapplicable and therefore have been omitted.

 

F-27