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
years 2019. After the industrial cleaning was discontinued as of 2019, REGS continued with its manufacturing and assembly operations
during 2020 and into 2021. These operations consisted primarily of building kilns and related equipment. The company expects to
wind down REGS for all purposes and cease all operations in September 2021; 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
two majority-owned subsidiaries include 1) Paragon Waste Solutions, LLC (“PWS”), and 2) PelleChar, LLC (“PelleChar”).
PWS is currently owned 54% 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.
PelleChar
was established in September 2018 and is owned 51% by SEER. Pellechar has secured third-party pellet manufacturing capabilities from
one of the nation’s premier pellet manufacturers. 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 six months ended June 30, 2021, PelleChar activity related to startup of operations that
were interrupted by the pandemic in 2020, and a commencement to market its product. Revenue and expenses of PelleChar were not material
for the six months 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 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 $30.6
million as of June 30, 2021, and $29.7
million as of December 31, 2020. For the six
months ended June 30, 2021, and 2020, the Company incurred net losses from continuing operations of approximately $1.0
million and $1.3
million, respectively. The Company had a working
capital deficit of approximately $9.8
million as of June 30, 2021, consistent with a working capital
deficit of $9.8 million
as of December 31, 2020. These factors raise substantial doubt about the ability of the Company to continue to operate as a going concern.
Realization
of a major portion of the Company’s assets as of June 30, 2021, 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 six months
ended June 30, 2021, the Company raised approximately $1.0
million from the Payroll Protection Program,
and the issuance of short-term and long-term debt, offset by payments of principal on short term notes and capital leases of $0.1
million, for a net cash provided by financing
activities of approximately $0.9
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.
Basis
of presentation Unaudited Interim Financial Information
The
accompanying interim condensed consolidated financial statements are unaudited. In the opinion of management, the accompanying unaudited
condensed consolidated financial statements contain all the normal recurring adjustments necessary to present fairly the financial position
and results of operations as of and for the periods presented. The interim results are not necessarily indicative of the results to be
expected for the full year or any future period.
Certain
information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting
principles generally accepted in the United States have been condensed or omitted pursuant to the rules and regulations of the Securities
and Exchange Commission (“SEC”). The Company believes that the disclosures are adequate to make the interim information presented
not misleading. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial
statements and the notes thereto included in the Company’s Report on Form 10-K filed on April 15, 2021, for the year ended December
31, 2020.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 carrying amount of
intangible assets; valuation allowances and reserves for receivables and inventory and deferred income taxes; revenue recognition related
to contracts accounted for under the percentage of completion method; share-based compensation; and loss contingencies, including those
related to litigation. Actual results could differ from those estimates.
Reclassifications
Certain
amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications
had no effect on reported consolidated net loss.
Revenue
Recognition
Revenue
is recognized under FASB guidelines, which 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)
Research
and Development
Research
and development (“R&D”) costs are charged to expense as incurred. 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 both the six months ended June 30, 2021, and 2020.
Inventories
Inventories
are stated at the lower of cost or net realizable value on a first in, first out basis and includes the following amounts:
SCHEDULE OF INVENTORY
|
|
|
June
30, 2021
|
|
|
December
31, 2020
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Finished
goods
|
|
$
|
59,000
|
|
|
$
|
158,100
|
|
|
Work
in process
|
|
|
36,100
|
|
|
|
88,800
|
|
|
Raw
materials
|
|
|
3,900
|
|
|
|
3,300
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
$
|
99,000
|
|
|
$
|
250,200
|
|
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 six months ended June 30, 2021, and 2020 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 as of June 30, 2021, and 2020. 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.
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, the Company found no change in the manner product revenue is recognized. 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.
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.
Disaggregation
of Revenue (Unaudited)
SCHEDULE OF DISAGGREGATION OF REVENUE
|
|
|
Three months ended June 30, 2021
|
|
|
|
|
Environmental Solutions
|
|
|
Solid Waste
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sources of Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product sales
|
|
$
|
675,100
|
|
|
|
-
|
|
|
$
|
675,100
|
|
|
Media sales
|
|
|
187,600
|
|
|
|
-
|
|
|
|
187,600
|
|
|
Licensing fees
|
|
|
-
|
|
|
|
8,300
|
|
|
|
8,300
|
|
|
Operating fees
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Management fees
|
|
|
-
|
|
|
|
50,000
|
|
|
|
50,000
|
|
|
Total Revenue
|
|
$
|
862,700
|
|
|
$
|
58,300
|
|
|
$
|
921,000
|
|
|
|
|
Three
months ended June 30, 2020
|
|
|
|
|
Environmental
Solutions
|
|
|
Solid
Waste
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sources
of Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
sales
|
|
|
353,000
|
|
|
|
-
|
|
|
|
353,000
|
|
|
Media
sales
|
|
|
381,300
|
|
|
|
-
|
|
|
|
381,300
|
|
|
Licensing
fees
|
|
|
-
|
|
|
|
8,300
|
|
|
|
8,300
|
|
|
Operating
fees
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Management
fees
|
|
|
-
|
|
|
|
50,000
|
|
|
|
50,000
|
|
|
Total
Revenue
|
|
$
|
734,300
|
|
|
$
|
58,300
|
|
|
$
|
792,600
|
|
|
|
|
Six months ended June 30, 2021
|
|
|
|
|
Environmental Solutions
|
|
|
Solid Waste
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sources of Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product sales
|
|
$
|
1,283,900
|
|
|
|
-
|
|
|
$
|
1,283,900
|
|
|
Media sales
|
|
|
442,000
|
|
|
|
-
|
|
|
|
442,000
|
|
|
Licensing fees
|
|
|
-
|
|
|
|
16,500
|
|
|
|
16,500
|
|
|
Operating fees
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Management fees
|
|
|
-
|
|
|
|
100,000
|
|
|
|
100,000
|
|
|
Total Revenue
|
|
$
|
1,725,900
|
|
|
$
|
116,500
|
|
|
$
|
1,842,400
|
|
|
|
|
Six months ended June 30, 2020
|
|
|
|
|
Environmental Solutions
|
|
|
Solid Waste
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sources of Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product sales
|
|
$
|
977,700
|
|
|
|
-
|
|
|
$
|
977,700
|
|
|
Media sales
|
|
|
522,400
|
|
|
|
-
|
|
|
|
522,400
|
|
|
Licensing fees
|
|
|
-
|
|
|
|
16,500
|
|
|
|
16,500
|
|
|
Operating fees
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Management fees
|
|
|
-
|
|
|
|
100,000
|
|
|
|
100,000
|
|
|
Total Revenue
|
|
$
|
1,500,100
|
|
|
$
|
116,500
|
|
|
$
|
1,616,600
|
|
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:
SCHEDULE OF CONTRACT BALANCES
|
|
|
|
|
|
|
|
|
|
|
|
Contract
Liabilities
|
|
|
|
|
|
Accounts
Receivable, net
|
|
|
|
Revenue
Contract Assets
|
|
|
|
Revenue
Contract Liabilities
|
|
|
|
Deferred Revenue
(current)
|
|
|
|
Deferred Revenue
(non-current)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2021
(Unaudited)
|
|
$
|
535,900
|
|
|
$
|
-
|
|
|
$
|
616,300
|
|
|
$
|
13,700
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2020
|
|
|
375,600
|
|
|
|
6,800
|
|
|
|
323,900
|
|
|
|
30,200
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease) increase
|
|
$
|
160,300
|
|
|
$
|
(6,800
|
)
|
|
$
|
292,400
|
|
|
$
|
(16,500
|
)
|
|
$
|
-
|
|
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 June 30, 2021, the aggregate amount of the transaction price allocated to the remaining performance obligations was approximately
$1.3 million, of which the Company expects to recognize approximately 75% of this revenue 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 – PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid
expenses and other current assets are assets and payments previously made, that benefit future periods. The balance as of June 30, 2021,
includes Employee Retention Tax Credit (“ERTC”) program from the U.S Treasury, as part of the COVID-19 stimulus package.
The ERTC program refunds a portion of taxes paid for payroll. We accrued the amounts that we qualify for, and this reduced our payroll
expenses during the quarter applied for and approved. Prepaid and other current assets comprised of the following:
SCHEDULE OF PREPAID AND OTHER CURRENT ASSETS
|
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
Prepaid expenses
|
|
$
|
126,000
|
|
|
$
|
110,600
|
|
|
ERTC credits
|
|
|
97,200
|
|
|
|
-
|
|
|
Total prepaid expenses and other current assets
|
|
$
|
223,200
|
|
|
$
|
110,600
|
|
NOTE
5 – PROPERTY AND EQUIPMENT
Property
and equipment was comprised of the following:
SCHEDULE OF PROPERTY PLANT AND EQUIPMENT
|
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
Field and shop equipment
|
|
$
|
1,246,400
|
|
|
$
|
1,282,700
|
|
|
Vehicles
|
|
|
407,800
|
|
|
|
476,900
|
|
|
Waste destruction equipment, placed in service
|
|
|
553,300
|
|
|
|
553,300
|
|
|
Furniture and office equipment
|
|
|
348,700
|
|
|
|
345,700
|
|
|
Leasehold improvements
|
|
|
36,200
|
|
|
|
36,200
|
|
|
Building and improvements
|
|
|
21,200
|
|
|
|
21,200
|
|
|
Land
|
|
|
162,900
|
|
|
|
162,900
|
|
|
Property and equipment, gross
|
|
|
2,776,500
|
|
|
|
2,878,900
|
|
|
Less: accumulated depreciation and amortization
|
|
|
(2,278,700
|
)
|
|
|
(2,330,900
|
)
|
|
Property and equipment, net
|
|
$
|
497,800
|
|
|
$
|
548,000
|
|
Depreciation
expense for the three months ended June 30, 2021, and 2020 was $26,600 and $37,900, respectively. For the three months ended June 30,
2021, and 2020, depreciation expense included in cost of goods sold was $20,300 and $24,600, respectively. For the three months ended
June 30, 2021, and 2020, depreciation expense included in selling, general and administrative expenses was $6,500 and $13,300, respectively.
Depreciation
expense for the six months ended June 30, 2021, and 2020 was $53,200 and $73,900, respectively. For the six months ended June 30, 2021,
and 2020, depreciation expense included in cost of goods sold was $40,400 and $45,700, respectively. For the six months ended June 30,
2021, and 2020, depreciation expense included in selling, general and administrative expenses was $12,900 and $28,200, respectively.
Depreciation
expense on leased CoronaLux™ units included in depreciation and amortization above is $0 and $19,400 as of June 30, 2021, and 2020,
respectively.
Property
and equipment included the following amounts for leases that have been capitalized at:
SCHEDULE OF PROPERTY AND EQUIPMENT FOR LEASES CAPITALIZED
|
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
Vehicles, field and shop equipment
|
|
$
|
10,200
|
|
|
$
|
10,200
|
|
|
Less: accumulated amortization
|
|
|
(10,200
|
)
|
|
|
(10,200
|
)
|
|
Property and equipment
for leases capitalized
|
|
$
|
-
|
|
|
$
|
-
|
|
NOTE
6 – INTANGIBLE ASSETS
Intangible
assets were comprised of the following:
SCHEDULE OF INTANGIBLE ASSETS
|
|
|
June 30, 2021 (Unaudited)
|
|
|
|
|
Gross carrying amount
|
|
|
Accumulated amortization
|
|
|
Net carrying value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$
|
277,800
|
|
|
$
|
-
|
|
|
$
|
277,800
|
|
|
Customer list
|
|
|
42,500
|
|
|
|
(42,500
|
)
|
|
|
-
|
|
|
Technology
|
|
|
1,021,900
|
|
|
|
(868,400
|
)
|
|
|
153,500
|
|
|
Trade name
|
|
|
54,900
|
|
|
|
(54,900
|
)
|
|
|
-
|
|
|
|
|
$
|
1,397,100
|
|
|
$
|
(965,800
|
)
|
|
$
|
431,300
|
|
|
|
|
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
|
|
The
estimated useful lives of the intangible assets range from seven to ten years. Amortization expense was $9,700 and $8,000 for the three
months ended June 30, 2021, and 2020, respectively. Amortization expense was $16,100 for both six months ended June 30, 2021, and 2020.
NOTE
7 – LEASES
The
Company has entered into operating leases primarily for real estate. These leases have terms which range from 1
to 8
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 June 30, 2021, 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 June 30, 2021, Condensed
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 $226,600
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 June 30, 2021, total right-of-use assets and operating lease
liabilities were approximately $326,600 and
$359,500,
respectively. All operating lease expense is recognized on a straight-line basis over the lease term. In the six months ended June 30,
2021, the Company recognized approximately $72,900
in operating lease costs for right-of-use assets.
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 (Unaudited):
SCHEDULE OF RIGHT-OF-USE ASSETS AND RELATED LEASE LIABILITIES
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
Cash paid for operating lease liabilities
|
|
$
|
72,700
|
|
|
$
|
108,200
|
|
|
Right-of-use assets obtained in exchange for new operating lease obligations
|
|
|
-
|
|
|
|
118,100
|
|
|
Weighted-average remaining lease term
|
|
|
62
months
|
|
|
|
62 months
|
|
|
Weighted-average discount rate
|
|
|
10
|
%
|
|
|
10
|
%
|
Maturities of lease liabilities as of June 30, 2021 were as follows:
SCHEDULE OF MATURITIES OF LEASE LIABILITIES
|
|
|
|
June 30, 2021
|
|
|
2022
|
|
$
|
84,500
|
|
|
2023
|
|
|
87,000
|
|
|
2024
|
|
|
89,600
|
|
|
2025
|
|
|
92,300
|
|
|
2026
|
|
|
95,000
|
|
|
Thereafter
|
|
|
16,200
|
|
|
Lease liabilities
|
|
|
464,600
|
|
|
Less imputed interest
|
|
|
(105,300
|
)
|
|
Total lease liabilities
|
|
|
359,300
|
|
|
Current operating lease liabilities
|
|
|
48,900
|
|
|
Non-current operating lease liabilities
|
|
|
310,400
|
|
|
Total lease liabilities
|
|
$
|
359,300
|
|
NOTE
8 – ACCRUED LIABILITIES
Accrued
liabilities were comprised of the following:
SCHEDULE OF ACCRUED LIABILITIES
|
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Accrued compensation and related taxes
|
|
$
|
471,300
|
|
|
$
|
486,400
|
|
|
Accrued interest
|
|
|
1,472,200
|
|
|
|
1,170,500
|
|
|
Accrued settlement/litigation claims
|
|
|
150,000
|
|
|
|
150,000
|
|
|
Warranty and defect claims
|
|
|
37,500
|
|
|
|
34,000
|
|
|
Other
|
|
|
152,000
|
|
|
|
136,300
|
|
|
Total Accrued Liabilities
|
|
$
|
2,283,000
|
|
|
$
|
1,977,200
|
|
NOTE
9 – UNCOMPLETED CONTRACTS
Costs,
estimated earnings and billings on uncompleted contracts are as follows:
SCHEDULE OF UNCOMPLETED CONTRACTS
|
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Revenue recognized
|
|
$
|
-
|
|
|
$
|
102,700
|
|
|
Less: billings to date
|
|
|
-
|
|
|
|
(95,900
|
)
|
|
Costs and estimated earnings in excess of billings on uncompleted contracts
|
|
|
-
|
|
|
|
6,800
|
|
|
|
|
|
|
|
|
|
|
|
|
Billings to date
|
|
|
2,895,000
|
|
|
|
1,716,800
|
|
|
Revenue recognized
|
|
|
(2,278,700
|
)
|
|
|
(1,392,900
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Revenue contract liabilities
|
|
$
|
616,300
|
|
|
$
|
323,900
|
|
NOTE
10 – INVESTMENT IN PARAGON WASTE SOLUTIONS LLC
Since
its inception through June 30, 2021, the Company has provided approximately $6.9 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 to provide the funding as an advance
against future earnings distributions made by PWS.
Payments
received for non-refundable licensing and placement fees have been recorded as deferred revenue in the accompanying consolidated balance
sheets. The balance as of June 30, 2021, and December 31, 2020, are $13,700 and $30,200, respectively, and are being recognized as revenue
ratably over the term of the contract.
NOTE
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 June 30, 2021, and December 31, 2020, the outstanding balance due to the IRS by REGS was $1,074,000, and $1,085,400, respectively.
Other
than this outstanding payroll tax matter, which is owed exclusively by REGS, arising in 2009 and 2010, all state and federal payroll
taxes have been paid by REGS in a timely manner.
NOTE
12 – DEBT
Debt
as of June 30, 2021 (Unaudited), and December 31, 2020, was comprised of the following:
SCHEDULE OF DEBT
|
|
|
Paycheck protection program
|
|
|
Short term notes
|
|
|
Convertible notes, unsecured
|
|
|
Current portion of long-term debt and capital lease obligations
|
|
|
Long term debt and capital lease obligations
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2020
|
|
$
|
590,300
|
|
|
$
|
3,032,800
|
|
|
$
|
1,605,000
|
|
|
$
|
523,900
|
|
|
$
|
30,300(5)
|
(5)
|
|
$
|
5,782,300
|
|
|
Increase in borrowing
|
|
|
130,100
|
(1)
|
|
|
52,400
|
(2)
|
|
|
-
|
|
|
|
-
|
|
|
|
835,000
|
(3)
|
|
|
1,017,500
|
|
|
Principal reductions
|
|
|
-
|
|
|
|
(186,400
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(11,700
|
) (5)
|
|
|
(198,100
|
)
|
|
Long term debt to current
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,000
|
|
|
|
(1,000)
|
|
|
|
-
|
|
|
Amortization of debt discount
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
28,700
|
|
|
|
28,700
|
|
|
Balance June 30, 2021
|
|
$
|
720,400
|
|
|
$
|
2,898,800(4)
|
(4)
|
|
$
|
1,605,000
|
|
|
$
|
524,900
|
|
|
$
|
881,300
|
|
|
$
|
6,630,400
|
|
|
|
(1)
|
Paycheck
Protection Program (“PPP”) draw #2, received the first quarter of 2021.
|
|
|
(2)
|
Unsecured
note payable insurance premium financing, interest at approximately 5.1% per annum, payable in 10 installments of $5,400, maturing
on November 1, 2021.
|
|
|
(3)
|
A)
Unsecured note payable dated January 19, 2021, 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. For the six months ended June 30, 2021, the Company recorded
interest expense of $5,400.
Unpaid interest at June 30, 2021 was approximately $5,400. B)
Note payable dated February 2, 2021, 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. For the six months ended June 30, 2021, the Company recorded
interest expense of $16,200.
Unpaid interest at June 30, 2021 was approximately $16,200. C)
Note payable dated May 25, 2021, 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. For the six months ended June 30, 2021, the Company recorded
interest expense of $2,200.
Unpaid interest at June 30, 2021 was approximately $2,200.
|
|
|
(4)
|
The
balance consists of $2,460,000 of secured notes, and $438,800 unsecured notes payable.
|
|
|
(5)
|
Secured
notes.
|
NOTE
13 – RELATED PARTY TRANSACTIONS
Notes
payable and accrued interest, related parties
Related
parties accrued interest due to certain related parties are as follows:
SCHEDULE OF RELATED PARTIES, NOTES PAYABLE AND ACCRUED INTEREST
|
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Short term notes
|
|
$
|
155,000
|
|
|
$
|
155,000
|
|
|
Accrued interest
|
|
|
71,100
|
|
|
|
53,100
|
|
|
Total short-term notes and accrued
interest - Related parties
|
|
$
|
226,100
|
|
|
$
|
208,100
|
|
On
January 6, 2021, the Company signed a $10,000
short-term note payable to the CEO. The note
accrued interest at 8%
interest per annum, with a $250
minimum interest to be paid. The loan and
interest due was paid back within the first quarter, and $250
was recorded as interest expense.
NOTE
14 – EQUITY TRANSACTIONS
2021
Common Stock Transactions
During
the six months ended June 30, 2021, no new equity transactions have occurred.
2020
Common Stock Transactions
During
the six months ended June 30, 2020, the Company recorded 742,500 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 $74,700 (See Note 12).
During
the six months ended June 30, 2020, the Company issued options to purchase 60,000 shares of $0.001 par value common stock to a short-term
note holder of the Company, at $0.10 per share. The options were in connection with a new short-term note, and therefore recorded as
debt discount. The Company valued the options using the Black-Sholes model, using a volatility of 134%, a risk-free rate of 0.29%, and
an expected term, using the simplified method, of 3.0 years. The fair value at grant date of $3,500 will be amortized over the vesting
period and recorded as interest expense.
During
the six months ended June 30, 2020, the Company issued options to purchase 30,000 shares of $0.001 par value common stock to a short-term
note holder of the Company, at $0.10 per share. The options were in connection with a new short-term note, and therefore recorded as
debt discount. The Company valued the options using the Black-Sholes model, using a volatility of 134%, a risk-free rate of 0.30%, and
an expected term, using the simplified method, of 3.0 years. The fair value at grant date of $2,000 will be amortized over the vesting
period and recorded as interest expense.
Non-controlling
Interest
The
non-controlling interest presented in our condensed consolidated financial statements reflects a 46% non-controlling equity interest
in PWS and 49% non-controlling equity interest in PelleChar. Net losses attributable to non-controlling interest, as reported on our
condensed consolidated statements of operations, represents the net loss of each entity attributable to the non-controlling equity interest.
The non-controlling interest is reflected within stockholders’ equity on the condensed consolidated balance sheet.
NOTE
15 – CUSTOMER CONCENTRATIONS
The
Company had sales from operations to five and one customers, for the six months ended June 30, 2021, and 2020 that surpassed the 10%
threshold of total revenue, respectively. In total, these customers represented approximately 76% and 14% of our total sales, respectively.
The concentration of the Company’s business with a relatively small number of customers may expose us to a material adverse effect
if one or more of these large customers were to experience financial difficulty or were to cease being customers for non-financial related
issues.
NOTE
16 – 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 periods presented in the condensed 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.
Potentially
dilutive securities were comprised of the following (unaudited):
SCHEDULE OF POTENTIALLY DILUTIVE SECURITIES
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Warrants
|
|
|
271,000
|
|
|
|
721,000
|
|
|
Options
|
|
|
1,590,000
|
|
|
|
1,665,000
|
|
|
Convertible notes payable, including accrued interest
|
|
|
2,969,400
|
|
|
|
2,768,100
|
|
|
|
|
|
4,830,400
|
|
|
|
5,154,100
|
|
NOTE
17 – SEGMENT INFORMATION AND MAJOR CUSTOMERS
The
Company currently has identified two segments as follows:
|
|
MV,
SEM, PelleChar, REGS
|
Environmental
Solutions
|
|
|
PWS
|
Solid
Waste
|
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 for the three and six months ended June 30, 2021 (Unaudited), and 2020 is as follows:
SCHEDULE OF SEGMENT INFORMATION
|
Three Months Ended June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
|
Environmental
|
|
|
|
Solid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Solutions
|
|
|
|
Waste
|
|
|
|
Corporate
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
862,700
|
|
|
$
|
58,300
|
|
|
$
|
-
|
|
|
$
|
921,000
|
|
|
Depreciation and amortization (1)
|
|
|
17,100
|
|
|
|
8,500
|
|
|
|
9,000
|
|
|
|
34,600
|
|
|
Interest expense
|
|
|
9,600
|
|
|
|
-
|
|
|
|
179,600
|
|
|
|
189,200
|
|
|
Stock-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
4,800
|
|
|
|
4,800
|
|
|
Net income (loss)
|
|
|
(102,100
|
)
|
|
|
(55,500
|
)
|
|
|
(482,200
|
)
|
|
|
(639,800
|
)
|
|
Capital expenditures (cash and noncash)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Total assets
|
|
$
|
1,395,800
|
|
|
$
|
331,800
|
|
|
$
|
618,200
|
|
|
$
|
2,345,800
|
|
|
2020
|
|
Environmental
|
|
|
Solid
|
|
|
|
|
|
|
|
|
|
|
Solutions
|
|
|
Waste
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
734,300
|
|
|
$
|
58,300
|
|
|
$
|
-
|
|
|
$
|
792,600
|
|
|
Depreciation and amortization (1)
|
|
|
15,400
|
|
|
|
9,700
|
|
|
|
12,800
|
|
|
|
37,900
|
|
|
Interest expense
|
|
|
12,300
|
|
|
|
-
|
|
|
|
188,500
|
|
|
|
200,800
|
|
|
Stock-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
1,200
|
|
|
|
1,200
|
|
|
Net income (loss)
|
|
|
(84,400
|
)
|
|
|
(61,900
|
)
|
|
|
(454,900
|
)
|
|
|
(601,200
|
)
|
|
Capital expenditures (cash and noncash)
|
|
|
45,200
|
|
|
|
-
|
|
|
|
-
|
|
|
|
45,200
|
|
|
Total assets
|
|
$
|
2,031,900
|
|
|
$
|
297,400
|
|
|
$
|
569,300
|
|
|
$
|
2,898,600
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
Environmental
|
|
|
Solid
|
|
|
|
|
|
|
|
|
|
|
Solutions
|
|
|
Waste
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
1,725,900
|
|
|
$
|
116,500
|
|
|
$
|
-
|
|
|
$
|
1,842,400
|
|
|
Depreciation and amortization (1)
|
|
|
34,300
|
|
|
|
17,000
|
|
|
|
17,900
|
|
|
|
69,200
|
|
|
Interest expense
|
|
|
19,300
|
|
|
|
-
|
|
|
|
372,400
|
|
|
|
391,700
|
|
|
Stock-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
9,500
|
|
|
|
9,500
|
|
|
Net income (loss)
|
|
|
36,100
|
|
|
|
(77,800
|
)
|
|
|
(928,600
|
)
|
|
|
(970,300
|
)
|
|
Capital expenditures (cash and noncash)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Total assets
|
|
$
|
1,395,800
|
|
|
$
|
331,800
|
|
|
$
|
618,200
|
|
|
$
|
2,345,800
|
|
|
2020
|
|
Environmental
|
|
|
Solid
|
|
|
|
|
|
|
|
|
|
|
Solutions
|
|
|
Waste
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
1,500,100
|
|
|
$
|
116,500
|
|
|
$
|
-
|
|
|
$
|
1,616,600
|
|
|
Depreciation and amortization (1)
|
|
|
27,300
|
|
|
|
19,400
|
|
|
|
27,200
|
|
|
|
73,900
|
|
|
Interest expense
|
|
|
25,400
|
|
|
|
-
|
|
|
|
369,400
|
|
|
|
394,800
|
|
|
Stock-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
9,500
|
|
|
|
9,500
|
|
|
Net income (loss)
|
|
|
(131,100
|
)
|
|
|
(132,900
|
)
|
|
|
(990,600
|
)
|
|
|
(1,254,600
|
)
|
|
Capital expenditures (cash and noncash)
|
|
|
64,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
64,500
|
|
|
Total assets
|
|
$
|
2,031,900
|
|
|
$
|
297,400
|
|
|
$
|
569,300
|
|
|
$
|
2,898,600
|
|
|
(1)
|
Includes
depreciation of property, equipment and leasehold improvement and amortization of intangibles
|
NOTE 18 – SUBSEQUENT EVENTS
In July 2021, the Company received approval for the forgiveness of
the full amount of one loan under the Payroll Protection Program in the amount of approximately $87,000.
