10-Q 1 reno-20220331x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: March 31, 2022

or

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

For the transition period from ________________ to ________________

Commission file number 001-36843

Graphic

RENOVARE ENVIRONMENTAL, INC.

(Exact name of registrant as specified in its charter)

Delaware

    

46-2336496

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

 

 

80 Red Schoolhouse Road, Suite 101
Chestnut Ridge, New York

10977

(Address of principal executive offices)

(Zip Code)

(845) 262-1081

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes       No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes        No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  

Accelerated filer  

Non-accelerated filer  

Smaller reporting company  

 

Emerging growth company  

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes       No  

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

   

Trading
Symbol(s)

   

Name of each exchange on which
registered

Common Stock, $0.0001 par value per share

 

RENO

 

OTC Pink

The number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class

    

Outstanding as of June 28, 2022

Common Stock, $0.0001 par value per share

35,199,478

PART I -            FINANCIAL INFORMATION

Item 1.                Financial Statements

Renovare Environmental, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

Three Months Ended

March 31, 

    

2022

    

2021

Revenue

Equipment sales

$

550,640

$

2,266,513

Rental, service and maintenance

542,762

421,229

MBT (Mechanical Biological Treatment)

 

42,504

 

352,548

Total revenue

 

1,135,906

 

3,040,290

Operating expenses

 

 

Equipment sales

318,843

1,236,016

Rental, service and maintenance

 

318,477

 

255,709

MBT processing

 

393,436

 

677,277

Selling, general and administrative

 

1,882,071

 

1,645,957

Depreciation and amortization

 

496,158

 

501,833

Total operating expenses

 

3,408,985

 

4,316,792

Loss from operations

 

(2,273,079)

 

(1,276,502)

Other expenses

 

 

Interest income

 

(147)

 

(187)

Interest expense

 

1,079,852

 

1,028,405

Loss from unconsolidated entity

 

22,058

 

30,003

Total other expenses, net

 

1,101,763

 

1,058,221

Net loss

 

(3,374,842)

 

(2,334,723)

Net loss attributable to non-controlling interests

 

 

(700,510)

Net loss attributable to Parent

 

(3,374,842)

 

(1,634,213)

Other comprehensive income (loss)

Foreign currency translation adjustment

 

38,775

 

(10,675)

Comprehensive loss

$

(3,336,067)

$

(1,644,888)

Net loss attributable to Parent

$

(3,374,842)

$

(1,634,213)

Deemed dividend on down round features

 

(553,379)

 

Preferred stock dividends

(175,169)

(182,855)

Net loss attributable to common shareholders

 

(4,103,390)

(1,817,068)

Net loss per common share - basic and diluted

$

(0.13)

$

(0.07)

Weighted average number of common shares outstanding - basic and diluted

 

32,179,275

 

24,320,618

See accompanying notes to unaudited condensed consolidated financial statements.

1

Renovare Environmental, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

    

March 31, 

    

2022

December 31, 

(Unaudited)

2021

Assets

Current Assets

Cash

$

53,279

$

180,381

Restricted cash

 

2,527,322

 

3,764,652

Accounts receivable, net of allowance for doubtful accounts of $198,481 and $183,729 as of March 31, 2022 and December 31, 2021, respectively (related party $424,150 and $461,674 as of March 31, 2022 and December 31, 2021, respectively)

 

903,716

 

1,247,868

Inventory

 

331,394

 

647,760

Prepaid expenses and other current assets

 

190,073

 

119,273

Total Current Assets

 

4,005,784

 

5,959,934

Restricted cash

 

2,584,163

 

2,584,099

Equipment on operating leases, net

 

814,206

 

924,769

MBT facility, equipment, fixtures and vehicles, net

 

30,563,470

 

30,955,155

Operating lease right of use assets

 

1,165,157

 

1,186,241

Investment in unconsolidated entity

 

643,809

 

665,867

Other assets

 

60,306

 

60,306

Total Assets

$

39,836,895

$

42,336,371

Liabilities and Stockholders’ (Deficit) Equity

 

 

  

Current Liabilities

 

 

  

Line of credit

$

1,500,000

$

1,500,000

Advances from related parties

 

885,000

 

935,000

Accounts payable (related party $597,544 and $552,042 as of March 31, 2022 and December 31, 2021, respectively)

4,691,469

4,133,637

Accrued interest payable

 

822,730

 

1,410,568

Accrued expenses and liabilities

 

1,401,579

 

1,314,261

Deferred revenue

178,405

247,402

Customer deposits

 

319,266

 

603,431

Notes payable to EntsorgaFin S.p.A (related party)

 

1,254,696

 

1,254,696

Senior Secured Note

 

3,281,250

 

3,275,000

Nonrecourse WV EDA Senior Secured Bonds payable

33,000,000

33,000,000

Note Payable

100,000

100,000

Current portion of long term debt

2,691

3,820

Total Current Liabilities

 

47,437,086

 

47,777,815

Junior note due to related party, net of unamortized discounts of $44,843 and $50,549 as of March 31, 2022 and December 31, 2021, respectively

999,634

993,928

Accrued interest (related party)

2,160,219

2,070,324

Non-current lease liabilities

 

1,101,243

 

1,119,754

Total Liabilities

 

51,698,182

 

51,961,821

Series A redeemable convertible preferred stock, 333,401 shares designated and issued, and 95,312 outstanding as of March 31, 2022 and December 31, 2021

 

476,560

 

476,560

Commitments and Contingencies (Note 8)

 

 

Stockholders’ Deficit

 

 

Preferred stock, $0.0001 par value; 10,000,000 shares authorized; 3,209,210 designated; 1,936,214 and 1,936,214 issued; 535,064 and 540,064 outstanding, including Sr. A redeemable preferred stock, which is excluded from permanent equity, as of March 31, 2022 and December 31, 2021, respectively

 

4,725,529

 

4,768,979

Common stock, $0.0001 par value, 50,000,000 shares authorized, 32,916,145 and 30,531,145 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

 

3,291

 

3,053

Additional paid in capital

 

79,025,440

 

77,317,895

Accumulated deficit

 

(95,998,340)

 

(92,059,396)

Accumulated other comprehensive (loss)

 

(93,767)

 

(132,541)

Stockholders’ deficit attributable to Parent

 

(12,337,847)

 

(10,102,010)

Stockholders’ equity attributable to non-controlling interests

 

 

Total Stockholders’ Deficit

 

(12,337,847)

 

(10,102,010)

Total Liabilities and Stockholders’ Deficit

$

39,836,895

$

42,336,371

See accompanying notes to unaudited condensed consolidated financial statements.

2

Renovare Environmental, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

Three Months Ended

March 31, 

    

2022

    

2021

Cash flows from operating activities:

 

  

 

  

Net loss

$

(3,374,842)

$

(2,334,723)

Adjustments to reconcile net loss to net cash used in operations:

 

 

Depreciation and amortization

 

496,158

 

501,833

Amortization of operating lease right of use assets

21,084

19,190

Provision for bad debts

 

15,000

 

15,000

Share based employee and vendor compensation

35,734

257,989

Interest resulting from amortization of financing costs and discounts

 

143,447

 

97,244

Loss from unconsolidated entity

22,058

30,003

Changes in operating assets and liabilities

 

402,901

 

(526,057)

Net cash used in operating activities

 

(2,238,460)

 

(1,939,521)

Cash flow from investing activities:

 

 

Purchases of facility, equipment, fixtures and vehicles

 

 

(18,402)

MBT facility development costs incurred

 

 

(26,145)

Net cash used in investing activities

 

 

(44,547)

Cash flows from financing activities:

 

 

  

Proceeds from the issuances of common stock

1,075,220

6,895,618

Payments of long-term debt

 

(1,128)

 

(1,075)

Payment of senior secured note

(150,000)

Related party advances (payments), net

 

(50,000)

 

Net cash provided by financing activities

 

874,092

 

6,894,543

Effect of exchange rate on cash (restricted and unrestricted)

 

 

(92)

Net change in cash (restricted and unrestricted)

 

(1,364,368)

 

4,910,383

Cash - beginning of period (restricted and unrestricted)

 

6,529,132

 

6,896,495

Cash - end of period (restricted and unrestricted)

$

5,164,764

$

11,806,878

Supplementary cash flow information (cash paid during the periods):

Interest

$

1,332,906

$

1,384,380

Income taxes

Supplementary Disclosure of Non-Cash Investing and Financing Activities:

Transfer of inventory to leased equipment

$

$

7,583

Accrual of Series A preferred stock dividends

10,723

14,098

Payment of Series A preferred stock dividends in common stock

79,181

Payment of preferred stock dividends in common stock

390,460

Issuance of subsidiary membership interest in exchange for liabilities due non-controlling interest entity

1,918,947

Exchange of subsidiary non-controlling interest in exchange for liabilities owed Company by non-controlling interest entity

333,135

Reconciliation of Cash and Restricted Cash:

Cash

$

53,279

$

7,314,056

Restricted cash (current)

2,527,322

1,884,813

Restricted cash (non-current)

2,584,163

2,608,009

Total cash and restricted cash at the end of the period

$

5,164,764

$

11,806,878

See accompanying notes to unaudited condensed consolidated financial statements.

3

Renovare Environmental, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ (Deficit) Equity (Unaudited)

Statement of Stockholders’ Deficit Attributable to Parent for the Three Months Ended March 31, 2022:

    

Preferred Stock

    

Common Stock

    

Additional

Accumulated

    

Shares

    

    

Shares

    

    

Paid in

    

Comprehensive

    

Accumulated

    

Outstanding

Amount

Outstanding

Amount

Capital

Other Loss

Deficit

Total

Balance at January 1, 2022

 

444,752

$

4,768,979

 

30,531,145

$

3,053

$

77,317,895

$

(132,541)

$

(92,059,396)

$

(10,102,010)

Common stock sold in private placement, net of offering costs

 

2,241,667

 

224

 

1,074,996

 

 

 

1,075,220

Common stock issued to vendor for services rendered

60,000

6

28,074

28,080

Sr. C preferred stock conversion

 

(5,000)

 

(43,450)

83,333

 

8

 

43,442

 

 

 

Sr. A preferred stock dividend accrual

(10,723)

(10,723)

Deemed dividend resulting from down round adjustment in warrant exercise and preferred stock conversion pricing

 

 

 

553,379

 

 

(553,379)

 

Share-based employee and director compensation

7,654

7,654

Net loss

 

 

 

 

 

(3,374,842)

 

(3,374,842)

Foreign currency translation adjustment

 

 

38,774

38,774

Balance at March 31, 2022

439,752

$

4,725,529

32,916,145

$

3,291

$

79,025,440

$

(93,767)

$

(95,998,340)

$

(12,337,847)

Statement of Stockholders’ Equity Attributable to Non-Controlling Interests in Consolidated Subsidiaries for the Three Months Ended March 31, 2022:

Non- Controlling

Accumulated

    

Equity Interest

    

Deficit

    

Total

Balance at January 1, 2022

$

9,665,396

$

(9,665,396)

$

Net loss

 

 

 

Balance at March 31, 2022

$

9,665,396

$

(9,665,396)

$

Statement of Stockholders’ Equity Attributable to Parent for the Three Months Ended March 31, 2021:

Additional

Preferred Stock

Common Stock

Paid in

Accumulated

Shares

Shares

Comprehensive

Accumulated

    

Outstanding

    

Amount

    

Outstanding

    

Amount

    

Capital

    

Other Loss

    

Deficit

    

Total

Balance at January 1, 2021

 

722,980

$

6,621,576

 

23,354,130

$

2,334

$

60,253,664

$

(143,814)

$

(64,419,802)

$

2,313,958

Common stock sold, net of offering costs

 

3,416,663

 

342

 

6,895,276

 

 

 

6,895,618

Common stock issued to employee under restricted stock units and vendor for services rendered

 

174,512

17

90,703

90,720

Warrants exercised

148,471

15

(15)

Sr. A redeemable preferred stock conversion, dividend payments and accrual (Sr. A preferred is not included in equity preferred shares)

127,324

13

229,162

(14,098)

215,077

Sr. C preferred stock dividend payment

 

 

44,577

5

 

80,233

(80,238)

 

Sr. D preferred stock conversion and dividend payments

(11,100)

(865,304)

 

749,321

 

76

 

1,104,017

 

 

(238,789)

 

Sr. F preferred dividend payments

42,381

4

76,707

(76,711)

Share-based employee and director compensation

 

 

 

167,269

 

 

 

167,269

Net loss

 

 

 

 

 

(1,634,213)

 

(1,634,213)

Foreign currency translation adjustment

 

 

 

 

(10,675)

 

 

(10,675)

Balance at March 31, 2021

 

711,880

$

5,756,272

 

28,057,379

$

2,806

$

68,897,016

$

(154,489)

$

(66,463,851)

$

8,037,754

Statement of Stockholders’ Equity Attributable to Non-Controlling Interests in Consolidated Subsidiaries for the Three Months Ended March 31, 2021:

Non-Controlling

Accumulated

Equity Interest

Deficit

Total

Balance at January 1, 2021

    

$

8,079,585

    

$

(6,938,919)

    

$

1,140,666

Membership units issued to non-controlling member

1,918,946

1,918,946

Membership units assigned to BioHiTech by non-controlling member

 

(333,135)

 

 

(333,135)

Net loss

 

 

(700,510)

 

(700,510)

Balance at March 31, 2021

$

9,665,396

$

(7,639,429)

$

2,025,967

See accompanying notes to unaudited condensed consolidated financial statements.

4

Table of Contents

Renovare Environmental, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021 and as of March 31, 2022 and December 31, 2021

Note 1. Basis of Presentation and Going Concern

Nature of Operations - Renovare Environmental, Inc., formerly known as BioHiTech Global, Inc. (the “Company” or “Renovare”) through its wholly-owned and controlled subsidiaries, provides cost-effective and sustainable environmental management solutions.

Our cost-effective technology solutions include biological disposal of food waste on-site, proprietary real-time data analytics tools to reduce food waste generation, and patented processing of municipal solid waste into a valuable renewable fuel. Our solutions enable businesses and municipalities of all sizes to lower disposal costs while having a positive impact on the environment. When used individually or in combination, our solutions lower the carbon footprint associated with waste transportation and can reduce or virtually eliminate landfill usage.

During the first quarter of 2022 the Company commenced an operational and strategic review of Entsorga West Virginia LLC (“EWV”) and its facility based MBT operations in Martinsburg, West Virginia (the “Facility”) that resulted in a decision to pause production operations to allow for reducing losses and cash requirements from the Facility. This pause has continued into the second quarter of 2022.

Since March 2020, when the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic, as well as those from new strains of the virus, the Company has monitored the near term and longer term impacts of COVID-19 and any related business and travel restrictions and other changes intended to reduce its spread, and its impact on operations, financial position, cash flows, inventory, supply chains, purchasing trends, customer payments, and the industry in general, in addition to the impact on its employees. Due to the nature of the pandemic, while presently the level of the pandemic is low, the magnitude and duration of the pandemic and its impact on the Company’s operations, liquidity and financial performance may depend on certain developments, including duration, spread and reemergence of the outbreak, its impact on our customers, supply chain partners and employees, and the range of governmental and community reactions to the pandemic.

Basis of Presentation - The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned and controlled subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is management’s opinion, however, that the accompanying condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, and the elimination of intercompany accounts and transactions which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s financial statements for the year ended December 31, 2021, which contains the audited financial statements and notes thereto, for the years ended December 31, 2021 and 2020 included within the Company’s Form 10-K filed with the Securities and Exchange Commission (“SEC”) on April 15, 2022. The financial information as of December 31, 2021 presented hereto is derived from the audited consolidated financial statements presented in the Company’s audited consolidated financial statements for the year ended December 31, 2021. The interim results for the three months ended March 31, 2022 is not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future interim periods.

As of March 31, 2022 and December 31, 2021, the Company’s active wholly-owned subsidiaries were BioHiTech America, LLC, BioHiTech Europe Limited, BHT Financial, LLC, BRT HoldCo Inc. (formed in 2022) and BHT Renewables LLC (formerly E.N.A. Renewables LLC), and its controlled subsidiary was Refuel America LLC (68.2%) and its wholly-owned subsidiaries Apple Valley Waste Technologies Buyer, Inc., Apple Valley Waste Technologies, LLC, New Windsor Resource Recovery LLC and Rensselaer Resource Recovery LLC and its controlled subsidiary Entsorga West Virginia LLC (93.5%). As each of these subsidiaries operate as environmental-based service entities under a single management structure, under Fianancial Accounting Stardards Board Accounting Standards (“ASC”) 280 Segment Reporting, the Company reports as a single segment company.

5

Table of Contents

Renovare Environmental, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021 and as of March 31, 2022 and December 31, 2021

Going Concern and Liquidity - For the three months ended March 31, 2022, the Company had a consolidated net loss of $3,374,842, incurred a consolidated loss from operations of $2,273,079 and used net cash in consolidated operating activities of $2,238,460. At March 31, 2022, consolidated total stockholders’ deficit amounted to $12,337,847 and the Company had a consolidated working capital deficit of $43,431,302. The working capital deficit includes $33,000,000 of non-recourse bonds and $3,281,250 of a senior secured note that are presently in default of their most recent forbearance agreements or not compliant with their financial covanents. The Company does not yet have a history of financial profitability. While during the three months ended March 21, 2022, the Company raised $1,075,220 from the sale and issuance of common stock, there is no assurance that the Company will continue to raise sufficient capital or debt to sustain operations or to pursue its strategic initiatives or that such financing will be on terms that are favorable to the Company. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These condensed consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern. The ability of the Company to continue as a going concern is dependent on management’s further implementation of the Company’s on-going and strategic plans, which include continuing to raise funds through equity and/or debt raises. Should the Company be unable to raise adequate funds, certain aspects of the on-going and strategic plans may require modification.

Note 2. Summary of Significant Accounting Policies

The condensed consolidated financial statements have been prepared by the Company in accordance with the rules and regulations of the SEC on a consistent basis with and should be read in conjunction with our audited financial statements for the year ended December 31, 2021. Certain information has been condensed or omitted as permitted by the SEC, although we believe the disclosures that are made are adequate to make the information presented herein not misleading.

Recent Accounting Standards

The Company has implemented the following accounting standards during the three months ended March 31, 2022.

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The amendments in this update provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting as the market transitions from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. The amendments in this update were effective for the Company for the interim and annual periods of 2022. The implementation of Reference Rate Reform (Topic 848) by the Company did not have an impact as none of its instruments included LIBOR rate references.

The Company has not implemented the following accounting standards:

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. This standard requires an allowance to be recorded for all expected credit losses for certain financial assets. The new standard introduces an approach, based on expected losses, to estimate credit losses on certain types of financial instruments. ASU 2016-13 is effective for public companies for interim and annual period beginning after December 15, 2022. Entities are required to apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company has not yet adopted this update and is currently evaluating the effect this new standard will have on its financial condition and results of operations.

6

Table of Contents

Renovare Environmental, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021 and as of March 31, 2022 and December 31, 2021

In August 2020, the FASB issued ASU No. 2020-06, Debt with Conversion and other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40). The new guidance eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, the new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted earnings per share computation. As the Company is under SEC rules is classified as a smaller reporting company, this guidance is effective for fiscal years beginning after December 15, 2023.

There have been no other recent accounting standards or changes in accounting standards that have been issued but not yet adopted that are of significance, or potential significance, to the Company.

Loss per Share - The Company’s potential dilutive instruments include convertible preferred stock, options, convertible debt and warrants. For the three months ended March 31, 2022 and 2021, as the exercise price of the Company’s outstanding options and warrants was greater than the market price of our common shares those instruments were not dilutive. The following have excluded from the calculation of diluted loss per share as they are anti-dilutive for the three months ended March 31:

    

2022

    

2021

Restricted stock units

918,922

904,147

Convertible preferred shares

9,880,074

4,466,285

Total

 

10,798,996

 

5,370,432

Note 3. Equipment on Operating Leases, net

Equipment on operating leases consist of the following:

    

March 31, 

    

December 31, 

2022

2021

Leased equipment

$

3,101,223

$

3,115,369

Less: accumulated depreciation

 

(2,287,017)

 

(2,190,600)

Total Equipment on Operating Leases, net

$

814,206

$

924,769

The Company is a lessor of digester units under non-cancellable operating lease agreements expiring through January 2026.

During the three months ended March 31, 2022 and 2021, revenue under the agreements, which is included in rental, service and maintenance revenue, amounted to $258,962 and $320,605, respectively. During the three months ended March 31, 2022 and 2021, depreciation expense amounted to $104,472 and $114,792, respectively.

The minimum future estimated contractual payments to be received under these leases as of March 31, 2022 is as follows:

Year ending December 31, 

    

  

2022, remaining

$

709,640

2023

 

588,084

2024

 

305,051

2025

 

129,983

2026 and thereafter

 

41,839

$

1,774,597

7

Table of Contents

Renovare Environmental, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021 and as of March 31, 2022 and December 31, 2021

Note 4. MBT facility, equipment, fixtures and vehicles, net

MBT facility, equipment, fixtures and vehicles, net consist of the following:

    

March 31, 

    

December 31, 

    

2022

    

2021

MBT facility

 

$

27,491,859

 

$

27,491,859

MBT equipment

 

7,676,527

 

7,676,527

Computer software and hardware

 

112,073

 

112,073

Furniture and fixtures

 

48,196

 

48,196

Vehicles

 

50,319

 

50,319

 

35,378,974

 

35,378,974

Less: accumulated depreciation and amortization

 

(4,815,504)

 

(4,423,819)

Total MBT facility, equipment, fixtures and vehicles, net

 

$

30,563,470

 

$

30,955,155

During the three months ended March 31, 2022 and 2021, depreciation expense amounted to $391,686 and $348,795, respectively.

Note 5. Line of Credit, Promissory Notes Payable, Notes Payable, Advances, Bonds and Long-Term Debts

Line of Credit, Promissory Notes Payable, Notes Payable, Advances, Bonds and Long-Term Debts consist of the following:

March 31, 2022

December 31, 2021

Non-

Non-

    

Current

    

Current

    

Current

    

Current

Demand note, line of credit

$

1,500,000

$

$

1,500,000

$

Advance from related party (See Note 11 Related Parties)

 

885,000

 

 

935,000

 

Senior secured note

 

3,281,250

 

 

3,275,000

 

Junior note due to related party

 

 

999,634

 

 

993,928

EntsorgaFin S.p.A notes payable

1,254,696

1,254,696

Note payable

 

100,000

 

 

100,000

 

Nonrecourse WV EDA senior secured bonds

 

33,000,000

 

 

33,000,000

 

Long term debts, remaining balances

 

2,691

 

 

3,820

 

Total Notes, Bonds, Debts and Borrowings

$

40,023,637

$

999,634

$

40,068,516

$

993,928

Michaelson Senior Secured Term Promissory Financing - On February 17, 2022 the Company and MCSFF entered into a forbearance agreement that provided that the quarterly repayment due on February 15, 2022 of $625,000 be deferred until March 8, 2022 and subsequently on March 15, 2022 and April 8, 2022 amended the forbearance agreement extending the payment date to April 15, 2022 with a grace period through April 28, 2022. On June 22, 2022 the Company and MCSFF entered into a forbearance agreement through June 30, 2022, if certain conditions are not met, or February 2, 2023 unless an event of default occurs. As of March 31, 2022 and December 31, 2021, the Company did not receive a waiver for non-compliance with certain financial covenants and has recognized the entire amount of the note as a current liability. All remaining unamortized bifurcation and deferred costs associated with the note has been recognized as interest expense during the year ended Decmber 31, 2021.

EntsorgaFin S.p.A Notes Payable - On May 19, 2021 the Company’s subsidiary EWV executed a series of notes related to the settlement of a previously recognized claim (See Note 8 Commitments and Contingencies) with EntsorgaFin S.p.A (“EFin”), the parent company of Entsorga USA, Inc., a non-controlling member of the Company’s EWV subsidiary. The series of notes are comprised of 24 monthly notes of $41,725 bearing interest at 1% if not paid at maturity, of which 4 notes, totaling $166,900 are only payable if EFin successfully repairs certain equipment at the EWV facility. In addition to the 24 notes, there is a note for $253,296 (“Default Note”) that is only payable in the event of a default on the other notes due to EFin. The 24 monthly notes totaling $1,001,400 had initially been discounted at the rate of 6.6%, resulting in an initial net balance due of $917,421, which is the amount that the Company had previously accrued for the claims made. On November 1, 2021 EWV failed to repay a note then due; accordingly the default note and interest has been recognized as interest expense during the year ended December 31, 2021 and all notes have been classified as currently due.

8

Table of Contents

Renovare Environmental, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021 and as of March 31, 2022 and December 31, 2021

Entsorga West Virginia, LLC Nonrecourse WVEDA Solid Waste Disposal Revenue Bonds - The loan agreement and indenture of trust, which are collateralized by the assets and membership interests of EWV, place restrictions on the EWV and its members regarding additional encumbrances on the property, disposition of the property, and limitations on equity distributions. The loan agreement also provides for financial covenants, which became effective on September 30, 2019. As of March 31, 2022 and December 31, 2021 the Company was not in compliance with all of the financial and other covenants and was in default on principal repayments due in through February 2021. The Company has entered into a series forbearance agreements and amendments, most recently on November 15, 2021 with the bond trustee that provided, they will not accelerate the repayment of the bonds due to the defaults through October 1, 2022. During December 2021 EWV failed to make payments under the forbearance agreement and as described in Notes 1 and 8, during the first quarter of 2022, the Company commenced a review of its facility collateralizing the WVEDA Bonds that resulted in a decision to pause production operations. As a result of the forbearance default, as of March 31, 2022 and December 31, 2021, the Company has recognized the entire amount of the WVEDA Bonds as a current liability and accelerated the recognition of the unamortized deferred costs as interest expenses as of December 31, 2021.

Contractual Maturities, as adjusted for non-compliance with terms or covenants, of Demand Note, Promissory Notes Payable, Notes Payable, Advances, Bonds and Long-Term Debts as of March 31, 2022, excluding discounts and deferred finance costs, are as follow:

2022,

2026 and

    

remaining

    

2023

    

2024

    

2025

    

thereafter

    

Total

Demand note, line of credit

 

$

1,500,000

$

$

$

$

$

1,500,000

Advance from related party

 

885,000

 

 

 

885,000

Senior secured note

 

3,281,250

 

 

 

3,281,250

Junior note due to related party

 

999,634

 

 

 

999,634

EntsorgaFin S.p.A notes payable

1,254,696

1,254,696

Note Payable

 

100,000

100,000

Nonrecourse WVEDA senior secured bonds

 

33,000,000

33,000,000

Long term debts, remaining balances

 

2,691

2,691

Total Maturities by Year

$

40,023,637

$

$

999,634

$

$

$

41,023,271

Note 6. Equity and Equity Transactions

The Company has 50,000,000 shares of its $0.0001 par common stock and 10,000,000 shares of blank check preferred stock authorized by its shareholders. As of March 31, 2022 and December 31, 2021, 32,916,145 and 30,531,145 shares of common stock, respectively, have been issued; and 3,209,210 shares of preferred stock have been designated in five series of shares that have a total of $2,104,582 in accumulated, but undeclared preferential dividends as of March 31, 2022, as follows:

Outstanding

Carrying Amount