RENOVARE ENVIRONMENTAL, INC. - Quarter Report: 2020 September (Form 10-Q)

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: September 30, 2020

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

BIOHITECH GLOBAL, 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 x 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 x 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 x	Smaller reporting company x
	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 x

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		BHTG		NASDAQ Capital Market

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 November 16, 2020
Common Stock, $0.0001 par value per share		23,354,130

BioHiTech Global, Inc. and Subsidiaries

TABLE OF CONTENTS

		Page
	PART I - FINANCIAL INFORMATION	1

Item 1.	Condensed Consolidated Financial Statements.	1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	23

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	32

Item 4.	Controls and Procedures.	32

	PART II - OTHER INFORMATION	33

Item 1.	Legal Proceedings.	33

Item 1A.	Risk Factors.	33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	33

Item 3.	Defaults Upon Senior Securities.	34

Item 4.	Mine Safety Disclosures.	34

Item 5.	Other Information.	34

Item 6.	Exhibits.	34

SIGNATURES		35

INDEX TO EXHIBITS		36

PART I -

FINANCIAL INFORMATION

Item 1.

Financial Statements

BioHiTech Global, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Revenue
HEBioT (related party)	$	625		$	609,905		$	1,383,656		$	886,947
Rental, service and maintenance		423,996			489,555			1,251,122			1,426,193
Equipment sales		293,876			62,565			616,992			137,799
Management advisory and other fees (related party)		24,380			264,750			124,380			761,750
Total revenue		742,877			1,426,775			3,376,150			3,212,689
Operating expenses
HEBioT processing		945,810			786,680			2,778,514			1,309,176
Rental, service and maintenance		139,665			176,651			552,195			508,164
Equipment sales		171,002			17,776			317,406			56,502
Selling, general and administrative		1,924,293			1,449,545			5,740,158			5,450,282
Impairment expense		917,420			-			917,420			-
Depreciation and amortization		562,143			611,368			1,747,109			1,350,780
Total operating expenses		4,660,333			3,042,020			12,052,802			8,674,904
Loss from operations		(3,917,456	)		(1,615,245	)		(8,676,652	)		(5,462,215	)
Other (income) expenses
Gain on sale of affiliate investment		-			(562,617	)		-			(562,617	)
Interest (income)		(108	)		(46,180	)		(17,730	)		(46,180	)
Interest expense		1,023,165			979,202			3,060,775			2,281,071
Expense incurred in warrant valuation and conversions		-			49,160			-			49,160
Total other (income) expenses		1,023,057			419,565			3,043,045			1,721,434
Net loss		(4,940,513	)		(2,034,810	)		(11,719,697	)		(7,183,649	)
Net loss attributable to non-controlling interests		(1,647,782	)		(728,337	)		(3,190,788	)		(1,859,069	)
Net loss attributable to Parent		(3,292,731	)		(1,306,473	)		(8,528,909	)		(5,324,580	)
Other comprehensive income
Foreign currency translation adjustment		71,067			(32,676	)		40,931			(37,873	)
Comprehensive loss	$	(3,221,664	)	$	(1,339,149	)	$	(8,487,978	)	$	(5,362,453	)

Net loss attributable to Parent	$	(3,292,731	)	$	(1,306,473	)	$	(8,528,909	)	$	(5,324,580	)
Preferred stock dividends		(205,115	)		(255,847	)		(587,428	)		(548,075	)
Deemed dividend on down round feature		(21,738	)		(405,324	)		(21,738	)		(405,324	)
Net loss – common shareholders		(3,519,584	)		(1,967,644	)		(9,138,075	)		(6,277,979	)
Net loss per common share - basic and diluted	$	(0.16	)	$	(0.13	)	$	(0.49	)	$	(0.41	)
Weighted average number of common shares outstanding - basic and diluted		22,044,540			15,649,174			18,787,566			15,134,301

See accompanying notes to unaudited interim condensed consolidated financial statements.

BioHiTech Global, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

	September 30, 2020		December 31, 2019
	(Unaudited)
Assets
Current Assets
Cash	$	4,950,112	$	1,847,526
Restricted cash		1,287,138		1,133,581
Accounts receivable, net of allowance for doubtful accounts of $194,066 and $170,038 as of September 30, 2020 and December 31, 2019, respectively (related entity $2,227,224 and $1,370,867 as of September 30, 2020 and December 31, 2019, respectively)		3,311,519		2,155,921
Inventory		627,261		467,784
Prepaid expenses and other current assets		240,939		126,357
Total Current Assets		10,416,969		5,731,169
Restricted cash		2,646,448		2,555,845
Equipment on operating leases, net		1,417,260		1,724,998
HEBioT facility, equipment, fixtures and vehicles, net		36,338,727		37,421,333
Operating lease right of use assets		1,285,292		945,047
License and capitalized MBT facility development costs		8,018,853		8,049,929
Goodwill		58,000		58,000
Other assets		33,749		53,726
Total Assets	$	60,215,298	$	56,540,047

Continued on following page.

See accompanying notes to unaudited interim condensed consolidated financial statements.

BioHiTech Global, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets, continued:

	September 30, 2020			December 31, 2019
	(Unaudited)
Liabilities and Stockholders' Equity
Current Liabilities:
Line of credit, net of financing costs of $2,050 and $20,152 as of September 30, 2020 and December 31, 2019, respectively	$	1,497,950		$	1,479,848
Advances from related parties		935,000			210,000
Accounts payable (related entity $2,021,940 and $2,531,034 as of September 30, 2020 and December 31, 2019, respectively)		6,363,168			4,688,339
Accrued interest payable		627,112			1,148,570
Accrued expenses and liabilities		2,075,576			1,926,965
Deferred revenue		95,331			89,736
Customer deposits		753,046			44,792
Note payable		-			100,000
Senior Secured Note, net of financing costs of $75,767 and unamortized discounts of $515,719 as of September 30, 2020		4,408,514			-
Current portion of WV EDA Senior Secured Bonds payable		2,860,000			1,390,000
Current portion of long term debt and Payroll Protection Program Loan		261,787			4,605
Total Current Liabilities		19,877,484			11,082,855
Junior note due to related party, net of unamortized discounts of $78,596 and $95,043 as of September 30, 2020 and December 31, 2019, respectively		965,881			949,434
Accrued interest (related party)		1,729,605			1,510,193
WV EDA Senior Secured Bonds payable, net of current portion, and financing costs of $1,691,516 and $1,792,574 as of September 30, 2020 and December 31, 2019, respectively		28,448,484			29,817,426
Payroll Protection Program Loan, net of current portion		163,839			-
Senior Secured Note, net of current portion, net of financing costs of $113,268, and unamortized discounts of $726,242, as of December 31, 2019		-			4,160,490
Note Payable		100,000			-
Non-current lease liabilities		1,231,144			915,170
Long-term debt, net of current portion		4,936			8,201
Total Liabilities		52,521,373			48,443,769
Series A redeemable convertible preferred stock, 333,401 shares designated and issued, and 125,312 and 145,312 outstanding as of September 30, 2020 and December 31, 2019, respectively		626,553			726,553
Commitments and Contingencies
Stockholders' Equity
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; 3,209,210 and 3,179,120 designated as of September 30, 2020 and December 31, 2019; 1,936,214 and 1,922,603 issued as of September 30, 2020 and December 31, 2019; 848,292 and 856,181 outstanding as of September 30, 2020 and December 31, 2019:
Series B Convertible preferred stock, 1,111,200 shares designated: 428,333 shares issued, no shares outstanding as of September 30, 2020 and December 31, 2019		-			-
Series C Convertible preferred stock, 1,000,000 shares designated, 427,500 shares issued and outstanding as of September 30, 2020 and December 31, 2019		3,050,142			3,050,142
Series D Convertible preferred stock, 20,000 shares designated: 18,850 shares issued; 17,350 and 18,850 outstanding as of September 30, 2020 and December 31, 2019		1,365,696			1,505,262
Series E Convertible preferred stock, 714,519 shares designated: 714,519 shares issued, 264,519 outstanding as of September 30, 2020 and December 31, 2019		698,330			698,330
Series F Convertible preferred stock, 30,090 shares designated, and 13,611 shares issued and outstanding as of September 30, 2020		1,507,408			-
Common stock, $0.0001 par value, 50,000,000 shares authorized, 23,354,130 and 17,300,899 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively		2,334			1,730
Additional paid in capital		59,775,963			49,597,059
Accumulated deficit		(61,403,226	)		(52,785,242	)
Accumulated other comprehensive (loss)		(84,069	)		(43,138	)
Stockholders’ equity attributable to Parent		4,912,578			2,024,143
Stockholders’ equity attributable to non-controlling interests		2,154,794			5,345,582
Total Stockholders’ Equity		7,067,372			7,369,725
Total Liabilities and Stockholders’ Equity	$	60,215,298		$	56,540,047

See accompanying notes to unaudited interim condensed consolidated financial statements.

BioHiTech Global, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

	Nine Months Ended September 30,
	2020			2019
Cash flows from operating activities:
Net loss	$	(11,719,697	)		(7,183,649	)
Adjustments to reconcile net loss to net cash used in operations:
Depreciation and amortization		1,747,109			1,350,780
Impairment expense		917,420			-
Amortization of operating lease right of use assets		72,402			-
Provision for bad debts		126,119			45,000
Share based employee compensation		1,537,915			741,188
Interest resulting from amortization of financing costs and discounts		419,715			333,782
Share based vendor compensation		297,835			-
Gain on sale of affiliate investment		-			(562,617	)
Loss resulting from write-off of proposed MBT site		-			346,654
Warrant modifications		-			49,160
Changes in operating assets and liabilities		(909,507	)		(1,137,810	)
Net cash used in operating activities		(7,510,689	)		(6,017,512	)

Cash flow from investing activities:
Purchases of construction in-progress, equipment, fixtures and vehicles		(207,173	)		(4,619,883	)
Proceeds from sale of investment in affiliate		-			2,250,000
Refund of deposit		5,000			-
MBT facility development costs incurred		(62,949	)		(59,013	)
MBT facility development costs refunded		-			66,000
Net cash used in investing activities		(265,122	)		(2,362,896	)

Cash flows from financing activities:
Proceeds from common stock issuance, net of offering costs		8,437,480			3,035,557
Proceeds from the sale of Series F convertible preferred stock units		1,560,450			-
Proceeds from Payroll Protection Program Loan		421,300			-
Proceeds from the sale of Series D convertible preferred stock units		-			1,772,500
Affiliate investment in subsidiary		-			1,400,000
Deferred financing costs incurred		-			(62,151	)
Repayments of long-term debt		(3,544	)		(6,846	)
Related party advances, net		725,000			210,000
Net cash provided by financing activities		11,140,686			6,349,060
Effect of exchange rate on cash (restricted and unrestricted)		(18,129	)		12,721
Net change in cash (restricted and unrestricted)		3,346,746			(2,018,627	)
Cash - beginning of period (restricted and unrestricted)		5,536,952			9,126,380
Cash - end of period (restricted and unrestricted)	$	8,883,698			7,107,753

Note 15 includes supplemental cash flow information, non-cash investing and financing activities and changes in operating assets and liabilities.

See accompanying notes to unaudited interim condensed consolidated financial statements.

BioHiTech Global, Inc. and Subsidiaries

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

Statement of Stockholders’ Equity Attributable to Parent for the Nine Months Ended September 30, 2020:
	Preferred Stock						Common Stock				Additional Paid in			Accumulated Comprehensive			Accumulated
	Shares			Amount			Shares		Amount		Capital			Other Loss			Deficit			Total
Balance at January 1, 2020		710,869		$	5,253,734			17,300,899	$	1,730	$	49,597,059		$	(43,138	)	$	(52,785,242	)	$	2,024,143
Underwritten issuance of common stock, net of costs		-						5,232,500		523		8,436,957			-			-			8,437,480
Conversion of Series A preferred stock, and payment of accrued dividends in common stock								59,639		6		107,344			-			-			107,350
Conversion of Series D preferred stock, and payment of unaccrued dividends in common stock		(1,500	)		(139,566	)		91,328		9		153,945			-			(14,388	)		-
Series F preferred stock issuance		13,611			1,507,408			-		-		53,042			-			-			1,560,450
Share-based employee and director compensation		-			-			132,400		13		1,065,256			-			-			1,065,269
Payments in common stock and warrants to vendors and creditors		-			-			141,259		14		297,821			-			-			297,835
Preferred stock dividends paid in common stock		-			-			23,801		2		42,838			-			-			42,840
Deemed dividend on down round feature		-			-			-		-		21,738			-			(21,738	)		-
Warrants exercised		-			-			372,304		37		(37	)		-			-			-
Preferred stock dividends		-			-			-		-		-			-			(52,949	)		(52,949	)
Foreign currency translation adjustment		-			-			-		-		-			(40,931	)		-			(40,931	)
Net loss		-			-			-		-		-			-			(8,528,909	)		(8,528,909	)
Balance at September 30, 2020		722,980		$	6,621,576			23,354,130	$	2,334	$	59,775,963		$	(84,069	)	$	(61,403,226	)	$	4,912,578

Statement of Stockholders’ Equity Attributable to Non-Controlling Interests in Consolidated Subsidiaries for the Nine Months Ended September 30, 2020:
	Non-Controlling		Accumulated
	Equity Interest		Deficit			Total
Balance at January 1, 2020	$	8,079,585	$	(2,734,003	)	$	5,345,582
Net loss		-		(3,190,788	)		(3,190,788	)
Balance at September 30, 2020	$	8,079,585	$	(5,924,791	)	$	2,154,794

Statement of Stockholders’ Equity Attributable to Parent for the Three Months Ended September 30, 2020:
	Preferred Stock						Common Stock				Additional Paid in		Accumulated Comprehensive			Accumulated
	Shares			Amount			Shares		Amount		Capital		Other Loss			Deficit			Total
Balance at July 1, 2020		724,480		$	6,761,142			17,809,592	$	1,780	$	50,267,673	$	(13,002	)	$	(58,056,529	)	$	(1,038,936	)
Underwritten issuance of common stock, net of costs		-			-			5,232,500		523		8,436,957		-			-			8,437,480
Conversion of Series A preferred stock, and payment of accrued dividends in common stock								59,639		6		107,344		-			-			107,350
Conversion of Series D preferred stock, and payment of unaccrued dividends in common stock		(1,500	)		(139,566	)		91,328		9		153,945		-			(14,388	)		-
Series F preferred stock issuance
Share-based employee and director compensation		-			-			9,900		1		472,646		-			-			472,647
Payments in common stock and warrants to vendors and creditors		-			-			141,259		14		297,821		-			-			297,835
Preferred stock dividends paid in common stock		-			-			9,912		1		17,839		-			-			17,840
Deemed dividend on down round feature		-			-			-		-		21,738		-			(21,738	)		-
Preferred stock dividends		-			-			-		-		-		-			(17,840	)		(17,840	)
Foreign currency translation adjustment		-			-			-		-		-		(71,067	)		-			(71,067	)
Net loss		-			-			-		-		-		-			(3,292,731	)		(3,292,731	)
Balance at September 30, 2020		722,980		$	6,621,576			23,354,130	$	2,334	$	59,775,963	$	(84,069	)	$	(61,403,226	)	$	4,912,578

Statement of Stockholders’ Equity Attributable to Non-Controlling Interests in Consolidated Subsidiaries for the Three Months Ended September 30, 2020:
	Non- Controlling		Accumulated
	Equity Interest		Deficit			Total
Balance at July 1, 2020	$	8,079,585	$	(4,277,009	)	$	3,802,576
Net loss		-		(1,647,782	)		(1,647,782	)
Balance at September 30, 2020	$	8,079,585	$	(5,924,791	)	$	2,154,794

Continued on following page.

See accompanying notes to unaudited interim condensed consolidated financial statements.

BioHiTech Global, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited), continued:

Statement of Stockholders’ Equity Attributable to Parent for the Nine Months Ended September 30, 2019:

	Preferred Stock						Common Stock				Additional Paid in		Accumulated Comprehensive		Accumulated
	Shares			Amount			Shares		Amount		Capital		Other Loss		Deficit			Total
Balance at January 1, 2019		992,019		$	4,540,472			14,802,956	$	1,480	$	43,452,963	$	5,021	$	(44,594,385	)	$	3,405,551
Issuance of registered common shares, net of offering costs		-			-			1,877,666		188		3,035,369		-		-			3,035,557
Series D preferred stock issuance		18,850			1,505,262			-		-		267,238		-		-			1,772,500
Series E preferred stock conversion		(300,000	)		(792,000	)		300,000		30		791,970		-		-			-
Share-based employee and director compensation		-			-			-		-		741,188		-		-			741,188
Issuance of restricted stock		-			-			105,000		11		205,489		-		-			205,500
Series A preferred stock conversion into common shares		-			-			50,000		5		89,995		-		-			90,000
Warrant modification		-			-			-		-		49,160		-		-			49,160
Deemed dividend on down round feature		-			-			-		-		405,324		-		(405,324	)		-
Preferred stock dividends		-			-			27,778		3		49,997		-		(140,631	)		(90,631	)
Net loss		-			-			-		-		-		-		(5,324,580	)		(5,324,580	)
Foreign currency translation adjustment		-			-			-		-		-		37,873		-			37,873

Balance at September 30, 2019		710,869		$	5,253,734			17,163,400	$	1,717	$	49,088,693	$	42,894	$	(50,464,920	)	$	3,922,118

Statement of Stockholders’ Equity Attributable to Non-Controlling Interests in Consolidated Subsidiaries for the Nine Months Ended September 30, 2019:

	Non- Controlling		Accumulated
	Equity Interest		Deficit			Total
Balance at January 1, 2019	$	6,679,585	$	(76,890	)	$	6,602,695
Investment by non-controlling interest		1,400,000		-			1,400,000
Net loss		-		(1,859,069	)		(1,859,069	)

Balance at September 30, 2019	$	8,079,585	$	(1,935,959	)	$	6,143,626

Statement of Stockholders’ Equity Attributable to Parent for the Three Months Ended September 30, 2019:

	Preferred Stock					Common Stock				Additional Paid in		Accumulated Comprehensive		Accumulated
	Shares		Amount			Shares		Amount		Capital		Other Loss		Deficit			Total
Balance at July 1, 2019		710,869	$	5,268,734			15,207,956	$	1,521	$	45,249,263	$	10,218	$	(48,649,236	)	$	1,880,500
Issuance of registered common shares, net of offering costs		-		-			1,877,666		188		3,035,369		-		-			3,035,557
Series D preferred stock issuance costs		-		(15,000	)		-		-		-		-		-			(15,000	)
Share-based employee and director compensation		-		-			-		-		209,585		-		-			209,585
Series A preferred stock conversion into common shares		-		-			50,000		5		89,995		-		-			90,000
Preferred stock dividends		-		-			27,778		3		49,997		-		(103,887	)		(53,887	)
Warrant modification		-		-			-		-		49,160		-		-			49,160
Deemed dividend on down round feature		-		-			-		-		405,324		-		(405,324	)		-
Net loss		-		-			-		-		-		-		(1,306,473	)		(1,306,473	)
Foreign currency translation adjustment		-		-			-		-		-		32,676		-			32,676

Balance at September 30, 2019		710,869	$	5,253,734			17,163,400	$	1,717	$	49,088,693	$	42,894	$	(50,464,920	)	$	3,922,118

Statement of Stockholders’ Equity Attributable to Non-Controlling Interests in Consolidated Subsidiaries for the Three Months Ended September 30, 2019:

	Non- Controlling		Accumulated
	Equity Interest		Deficit			Total
Balance at July 1, 2019	$	8,079,585	$	(1,207,622	)	$	6,871,963
Net loss		-		(728,337	)		(728,337	)

Balance at September 30, 2019	$	8,079,585	$	(1,935,959	)	$	6,143,626

See accompanying notes to unaudited interim condensed consolidated financial statements.

BioHiTech Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2020 and 2019 and as of September 30, 2020 and December 31, 2019

Note 1. Basis of Presentation and Going Concern

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

Our cost-effective technology solutions include the patented processing of municipal solid waste into a valuable renewable fuel, biological disposal of food waste on-site, and proprietary real-time data analytics tools to reduce food waste generation. 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.

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread throughout the United States and globally and more recently in the United States there has been an increase in cases reported. During October and November 2020 a resurgence in cases and hospitalizations has occurred. The Company is monitoring the near term and longer term impacts of COVID-19 and the related business and travel restrictions and changes to behavior 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 development and fluidity of this situation, the magnitude and duration of the pandemic and its impact on the Company’s operations, liquidity and financial performance will 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, which are uncertain and cannot be fully predicted at this time.

As a result of COVID-19, the implementation of the Company’s contract with Carnival Corporation (“Carnival”) had been delayed, although during the third quarter of 2020 Carnival recommenced purchasing activity with the Company making initial deliveries at the end of September 2020. As of October 31,2020, the Company has unfulfilled equipment purchase orders from Carnival amounting to approximately $2,100,000 (in addition to approximately $600,000 of shipments during October 2020). It is anticipated that many of these orders will be fulfilled during the fourth quarter of 2020. Additionally, the operations of some customers in the restaurant and hospitality industries have been temporarily interrupted due to governmental actions. For certain existing restaurant and hospitality customers, the Company has provided a deferral of recurring rental payments for a short time and have modified the rental agreements to extend the term by the period deferred. These actions placed a strain on the Company’s cash flows during the initial wave of COVID-19, resulting in the Company executing on cost controls and cash preservation practices that included reducing executive cash compensation, laying off non-essential employees, limiting expenses and disbursements, as well as extending vendor payments. It is unclear how the second wave that started in October 2020 will impact the Company.

During the third quarter of 2020 the Company raised $8,437,480 through an underwritten common stock offering and has subsequently concluded the executive deferred compensation plan and has rehired some of its employees that had been laid off.

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, 2019, which contains the audited financial statements and notes thereto, for the years ended December 31, 2019 and 2018 included within the Company’s Form 10-K filed with the Securities and Exchange Commission (“SEC”) on May 22, 2020. The financial information as of December 31, 2019 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, 2019. The interim results for the three and nine months ended September 30, 2020 is not necessarily indicative of the results to be expected for the year ending December 31, 2020 or for any future interim periods.

As of September 30, 2020 and December 31, 2019, the Company’s active wholly-owned subsidiaries were BioHiTech America, LLC, BioHiTech Europe Limited, BHT Financial, LLC and E.N.A. Renewables LLC, and its controlled subsidiary was Refuel America LLC (60%) 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 (88.7%). As each of these subsidiaries operate as environmental-based service companies, we did not deem segment reporting necessary.

BioHiTech Global, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2020 and 2019 and as of September 30, 2020 and December 31, 2019

Going Concern and Liquidity - For the nine months ended September 30, 2020, the Company had a consolidated net loss of $(11,719,697), incurred a consolidated loss from operations of $8,676,652 and used net cash in consolidated operating activities of $7,510,689. At September 30, 2020, consolidated total stockholders’ equity amounted to $7,067,372, consolidated stockholders’ equity attributable to parent amounted to $4,912,578, and the Company had a consolidated working capital deficit of $9,460,515. While the Company had not met certain of its senior secured note’s financial covenants as of September 30, 2020, the Company has favorably renegotiated those covenants and has received a waiver for such non-compliance through September 30, 2020. Despite its current compliance under the waiver, until such time as the Company regains compliance or receives a waiver of such covenants for a year beyond the balance sheet date, under current GAAP accounting rules the senior secured notes amounting to $4,408,514 have been classified as current debt. The Company does not yet have a history of financial profitability. In March and April of 2020 the Company raised $1,560,450 through a private convertible preferred stock offering and on May 13, 2020 one of the Company’s subsidiaries was funded $421,300 through the Paycheck Protection Program. On July 27, 2020 the Company used its Shelf Registration on Form S-3 to raise gross proceeds of $8,235,500 through an underwritten public offering of 4,550,000 common shares at $1.81 per share. On August 11, 2020 the underwriter provided notice that they would be exercising their over-allotment provision of the Underwriting Agreement to purchase an additional 682,500 shares of the Company’s common stock at $1.81 per share for a gross purchase price of $1,235,325. The net proceeds to the Company of the July 27, 2020 and August 11, 2020 offerings, after underwriter’s commission and other costs amounted to $8,437,480. There is no assurance that the Company will continue to raise sufficient capital or debt to sustain operations or to pursue other 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 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 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, 2019. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have 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 Pronouncements:

The Company has not implemented any recent accounting pronouncements during the nine months ended September 30, 2020.

The Company has not implemented the following accounting standard:

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 December 15, 2020. 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.

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 upon issuance for all entities through December 31, 2022. The Company is currently evaluating the effect the updated standard will have on its financial position, results of operations or financial statement disclosure.

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 EPS computation. This guidance is effective as of January 1, 2022 (Early adoption is permitted effective January 1, 2021). The Company is currently evaluating the effect the updated standard will have on its financial position, results of operations or financial statement disclosure.

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

Note 3. Equipment on Operating Leases, net

Equipment on operating leases consist of the following:

	September 30,			December 31,
	2020			2019
Leased equipment	$	3,126,761		$	3,138,951
Less: accumulated depreciation		(1,709,501	)		(1,413,953	)
Total Equipment on Operating Leases, net	$	1,417,260		$	1,724,998

The Company is a lessor of digester units under non-cancellable operating lease agreements expiring through June 2025. These leases generally have terms of three to five years and do not contain stated extension periods or options for the lessee to purchase the underlying assets. At the end of the leases, the lessee may enter into a new lease or return the asset, which would be available to the Company for releasing.

During the three months ended September 30, 2020 and 2019, revenue under the agreements, which is included in rental, service and maintenance revenue, amounted to $356,002 and $369,437, respectively. During the nine months ended September 30, 2020 and 2019, revenue under the agreements, which is included in rental, service and maintenance revenue, amounted to $1,054,534 and $1,061,289, respectively. During the three months ended September 30, 2020 and 2019, depreciation expense amounted to $116,461 and $110,795, respectively. During the nine months ended September 30, 2020 and 2019, depreciation expense amounted to $348,599 and $316,061, respectively.

The minimum future estimated contractual payments to be received under these leases as of September 30, 2020 is as follows:

Year ending December 31,
2020, remaining period	$	328,885
2021		971,888
2022		705,948
2023		534,345
2024 and thereafter		164,572
	$	2,705,638

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

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

	September 30, 2020			December 31, 2019
HEBioT facility	$	31,172,855		$	31,142,974
HEBioT equipment		7,562,649			7,388,896
Computer software and hardware		115,194			112,629
Furniture and fixtures		48,196			48,196
Vehicles		50,319			50,319
		38,949,213			38,743,014
Less: accumulated depreciation and amortization		(2,610,486	)		(1,321,681	)
Total HEBioT facility, equipment, fixtures and vehicles, net	$	36,338,727		$	37,421,333

Note 5. MBT Facility Development and License Costs

MBT Facility Development and License Costs consist of the following:

	September 30, 2020		December 31, 2019
MBT Projects
Survey and engineering	$	298,653	$	235,229

Technology Licenses
Future site		6,019,200		6,019,200
Martinsburg, West Virginia, net of $189,000 and $94,500 of amortization as of September 30, 2020 and December 31, 2019		1,701,000		1,795,500
Total Technology Licenses		7,720,200		7,814,700
Total MBT Facility Development and License Costs	$	8,018,853	$	8,049,929

MBT Facility Development Costs - During 2018, the Company commenced initial development of a project in Rensselaer, NY. As of June 30, 2020, the Company has received local permits and has filed the required state permit applications, which are undergoing review by the New York State Department of Environmental Conservation (“NYSDEC”). On August 10, 2020 the NYSDEC, by letter, informed the Company that the application had been initially denied. The Company disagrees with this decision, and as is part of the process, has exercised its right to appeal the NYSDEC findings.

Technology License Agreement – Future Facility - The royalty payment for the license amounted to $6,019,200. This Technology License Agreement can be utilized at a future project and will be amortized once the facility is in operation.

Technology License Agreement – Martinsburg, West Virginia - In connection with the 2018 acquisition accounting applied to Entsorga West Virginia acquisition, the License Agreement was valued at $1,890,000. During the three and nine months ending September 30, 2020 amortization amounted to $31,500 and $94,500, respectively. During the three and nine months ending September 30, 2019 amortization amounted to $31,500 and $63,000, respectively. Amortization of the License Agreement commenced with the facility becoming operational on March 31, 2019 and there was no amortization for the three months ended March 31, 2019.

Note 6. Line of Credit, Promissory Notes Payable, Notes Payable, Advances, and Long-Term Debts

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

	September 30, 2020				December 31, 2019
	Total		Related Party		Total		Related Party
Line of credit	$	1,497,950	$	-	$	1,479,848	$	-
Senior secured promissory note		4,408,514		-		4,160,490		-
Junior promissory note		965,881		965,881		949,434		949,434
Note payable under Payroll Protection Program		421,300		-		-		-
Note payable		100,000		-		100,000		-
Advances from related parties (See Note 14 Related Parties)		935,000		935,000		210,000		210,000
Long term debt - current and long-term portion		9,262		-		12,806		-

Line of Credit — The Credit Agreement and Note with Comerica does not have any financial covenants, carries interest at the rate of 3%, plus either the Comerica prime rate or a LIBOR-based rate, (5.00% and 5.71% (total interest rate) as of September 30, 2020 and December 31, 2019, respectively) which was amended on June 30, 2020 as a demand note with an interest rate of 3%, plus a LIBOR-based rate (with a floor of 1%). The line of credit is secured by the assets of BHT Financial, LLC and is personally guaranteed by the Company’s Chairman of the Board and former Chief Executive Officer, Frank E. Celli, and James D. Chambers, a director.

Michaelson Senior Secured Term Promissory Financing — Company and several of the Company’s wholly-owned subsidiaries have a Note Purchase and Security Agreement with Michaelson Capital Special Finance Fund II, L.P. (“ MCSFF ”) for a senior secured term promissory note in the principal amount of $5,000,000 (the “Note”). The Note is not convertible and accrues interest at the rate of 10.25% per annum. While the Company had not met certain of its senior secured note’s financial covenants as of September 30, 2020, the Company has received a waiver for such non-compliance through September 30, 2020. Despite its current compliance under the waiver, until such time as the Company regains compliance or receives a waiver of such covenants for a year beyond the balance sheet date, under current GAAP accounting rules the senior secured notes amounting to $4,408,514 have been classified as current debt. As of December 31, 2019 those certain financial covenants were not met and a waiver of such was granted by MCSFF through January 1, 2021 with the condition that the parties negotiate new financial covenants, which were concluded on June 29, 2020. As of December 31, 2019, the Note has been classified based on the contractual repayment schedule. For purposes of the following maturity schedule, as the Company believes that it will achieve compliance with the revised financial covenants and MCSFF has a history of waiving non-compliance with financial covenants, the maturities have been presented based upon the contractual repayment terms in effect as of September 30, 2020. The Note is contractually scheduled to be repaid in eight, equal, quarterly installments of $625,000 commencing on May 15, 2021 and ending February 2, 2023 (the “Maturity Date”).

Note Payable under Payroll Protection Program — On May 13, 2020 BioHiTech America, LLC, a subsidiary of the Company, was funded $421,300 under the Payroll Protection Program (“PPP”) through Comerica Bank. The PPP was established as part of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) and is administered by the U.S. Small Business Administration. The PPP Loan is non-collateralized and has no guarantees, has a two-year term and bears interest at an annual interest rate of 1%. Monthly principal and interest payments are deferred for six months, and the maturity date is May 13, 2022. Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of the loan granted under the PPP. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for payment of payroll costs and any payments of mortgage interest, rent, and utilities. However, no assurance is provided that forgiveness for any portion of the PPP Loan will be obtained.

Note Payable — As of September 30, 2020 and December 31, 2019, the $100,000 note, which was amended on July 27, 2020, carries interest at 10% and matures on January 1, 2022.

Contractual Maturities of Senior Secured, Junior Promissory, Notes Payable and Long Term Debt — As of September 30, 2020, excluding discounts and deferred finance costs, which are being amortized as interest expense, are as follow:

Year Ending December 31,	Amortizing		Non- Amortizing		Total
2020 (Remaining)	$	1,061	$	23,406	$	24,467
2021		4,380		2,155,866		2,160,246
2022		3,821		2,717,028		2,720,849
2023		-		625,000		625,000
2024 and thereafter		-		1,044,477		1,044,477
Total	$	9,262	$	6,565,777	$	6,575,039

Note 7. Entsorga West Virginia, LLC WVEDA Solid Waste Disposal Revenue Bonds

During 2016, Entsorga West Virginia LLC (the “Borrower”) was issued $25,000,000 in Non-Recourse Solid Waste Revenue Bonds from the West Virginia Economic Development Authority (the “WVEDA Bonds”). The WVEDA Bonds were issued in two series with one for $7,535,000 bearing interest at 6.75% per annum with a maturity date of February 1, 2026 and the second for $17,465,000 bearing interest at 7.25% per annum with a maturity of February 1, 2036. Both series were issued at par. The 2026 series was payable with interest-only payments through February 1, 2019 then annual payments of principal and semi-annual payments of interest through maturity. The 2036 series is payable with interest-only payments through February 1, 2019 then annual payments of principal and semi-annual payments of interest through maturity. Repayment of principal is by way of sinking fund.

During 2018, the 2016 Indenture Trust and Loan Agreement were amended and restated effective November 1, 2018. These amendments provided for a third series of bonds amounting to $8,000,000 bearing interest at 8.75% per annum with a maturity date of February 1, 2036, with special event triggered pre-payment requirements. This series was issued at par. The 2036 series is payable with interest-only payments through February 1, 2020 then annual payments of principal and semi-annual payments of interest through maturity. Repayment is by way of sinking fund.

The outstanding balance of the WVEDA Bonds as of September 30, 2020 and December 31, 2019 is $33,000,000, which is presented net of unamortized debt issuance costs amounting to $2,207,759 as of September 30, 2020 and December 31, 2019, less associated amortization of $516,243 and $415,185 as of September 30, 2020 and December 31, 2019, respectively, which includes amortization prior to the Company’s control acquisition in 2018. Amortization is calculated on the effective interest method, which is included in interest expense in the accompanying consolidated statements of operations and comprehensive loss.

The loan agreement and indenture of trust place restrictions on the Borrower 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 September 30, 2020 and December 31, 2019 the Company was not in compliance with all of the financial covenants and subsequently was in default on a principal repayment due in February 2020 and has entered into a forbearance agreement with the bond trustee that provides, they will not accelerate the repayment of the bonds due to the defaults through October 2, 2021.

The future sinking fund payments by the Borrower as of September 30, 2020 are as follow:

Year Ending December 31,	2016 Issue 2026 Series		2016 Issue 2036 Series		2018 Issue 2036 Series		Total
2020 (remaining)	$	1,160,000	$	-	$	230,000	$	1,390,000
2021		1,215,000		-		255,000		1,470,000
2022		900,000		-		275,000		1,175,000
2023		965,000		-		300,000		1,265,000
2024 and thereafter		3,295,000		17,465,000		6,940,000		27,700,000
Total	$	7,535,000	$	17,465,000	$	8,000,000	$	33,000,000

Note 8. 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 September 30, 2020 and December 31, 2019, 23,354,130 and 17,300,899 shares of common stock have been issued; and 3,209,210 and 3,179,120 shares, respectively, of preferred stock have been designated in five series of shares, which have a total of $1,602,675 in accumulated, but undeclared preferential dividends as of September 30, 2020, as follows:

	Designated		Par		Stated		Shares Outstanding
Designation	Shares		Value		Value		September 30, 2020		December 31, 2019
Series A Convertible Preferred Stock		333,401	$	0.0001	$	5.00		125,312		145,312
Series B Convertible Preferred Stock		1,111,200		0.0001	$	5.00		-		-
Series C Convertible Preferred Stock		1,000,000		0.0001	$	10.00		427,500		427,500
Series D Convertible Preferred Stock		20,000		0.0001	$	100.00		17,350		18,850
Series E Convertible Preferred Stock		714,519		0.0001	$	2.64		264,519		264,519
Series F Convertible Preferred Stock		30,090		0.0001	$	115.00		13,611		-

Under the terms of the Company’s senior lender agreements, the Company is restricted from paying dividends in cash, but is allowed to pay dividends in common stock. The Company, since its merger in 2015, has not paid any cash or stock dividends on common stock.

The consolidated financial statements include less than 100% owned and controlled subsidiaries and include equity attributable to non-controlling interests that take the form of the underlying legal structures of the less than 100% owned subsidiaries. Entsorga West Virginia LLC through its limited liability agreement and the agreements related to its WVEDA Bonds have restrictions on distributions to and loans to owners while the WVEDA Bonds are outstanding.

Common Stock Underwritten Offering — On July 27, 2020, BioHiTech Global, Inc. entered into an underwriting agreement (the “Underwriting Agreement”) with Maxim Group LLC (“Maxim”), as representative of certain underwriters (the “Underwriters”). Pursuant to the terms and conditions of the Underwriting Agreement, The Company agreed to issue and sell 4,550,000 shares of our common stock, par value $0.0001 per share (the “Underwritten Shares”), at a price to the public of $1.81 per share. Pursuant to the Underwriting Agreement, the Company also granted the underwriter an option to purchase up to an additional 682,500 shares of the Company’s common stock (together with the Underwritten Shares, the “Shares”) within 45 days after the date of the Underwriting Agreement to cover over-allotments, if any.

The offering was consummated on July 29, 2020. The Underwriters received underwriting commissions of 9% for $741,195, plus reimbursement of counsel fees in the amount of $65,000. Maxim acted as the lead book-running manager for the offering and Spartan Capital Securities, LLC acted as co-book-runner for the offering. In addition, the Company agreed to issue warrants to purchase 318,666 shares of our Common Stock to the Underwriters (the “Underwriters’ Warrants”), as a portion of the underwriting compensation payable to the underwriters in connection with this offering. The Underwriters’ Warrants are exercisable for a period commencing 180 days following the closing of the offering and ending on the fifth anniversary of the closing date at an exercise price equal to $1.991 per share, or 110% of the offering price of the common stock. The Company agreed to grant the Underwriters piggy-back registration rights for five (5) years in the event we file certain registration statements for the registration of other shares of Common Stock.

On August 11, 2020 the underwriter provided notice that they would be exercising their over-allotment provision of the Underwriting Agreement to purchase an additional 682,500 shares of the Company’s common stock at $1.81 per share for a gross purchase price of $1,235,325. The net proceeds to the Company, after underwriter’s commission and before other costs amount $1,124,146. This transaction was consummated on August 13, 2020.

The net proceeds to the Company from the offering were:

Gross proceeds at $1.81 per share	$	9,470,825
Less:
Underwriters’ fees		(852,374	)
Legal fees		(139,033	)
Accounting fees		(30,900	)
Filing and other fees		(11,038	)
Net proceeds to the Company	$	8,437,480

Other Common Stock Activity — Other than conversions of preferred stock and preferred stock dividends and the drawdown of vested restricted stock units, during the third quarter of 2020, the Company issued 141,259 shares of common stock, at market, to vendors and creditors in place of cash payments as part of its cash conservation practices resulting from the COVID-19 outbreak.

Series A Redeemable Convertible Preferred Stock — On July 30, 2020 a Series A Redeemable Convertible Preferred Stock (“Sr. A PS”) holder converted, in accordance with the terms of the Sr. A PS, 20,000 shares of Sr. A PS into 55,556 shares of the Company’s common stock. In connection with the conversion, the holder was also paid accrued dividends on the Sr. A PS through the conversion date amounting to $7,350 through the issuance of 4,083 shares of the Company’s common stock.

Series D Convertible Preferred Stock — On July 13, 2020, a Series D Convertible Preferred Stock (“Sr. D PS”) holder converted, in accordance with the terms of the Sr. D PS, 1,500 shares of Sr D PS into 83,334 shares of the Company’s common stock. In connection with the conversion, the holder was also paid accumulated dividends on the Sr. D PS through the conversion date amounting to $14,388 through the issuance of 7,994 shares of the Company’s common stock.

In July 2020, two separate holders of the Sr D PS requested, in accordance with the terms of the Sr D PS, that accumulated dividends amounting to $17,840 be paid in 9,912 shares of the Company’s common stock, which was issued on July 21, 2020.

Series F Convertible Preferred Stock — On March 9, 2020 the Company designated a new series of preferred stock and subsequently on March 18, 2020 had an initial closing of $1,500,000 on 13,045 shares of the new series of preferred stock and 178,597 five-year common stock warrants at $2.30 per share and are presented net of $50,836 in warrant valuations and $4,550 in issuance costs. On April 6, 2020 had an additional closing of $65,000 on 566 shares of the new series of preferred stock and 7,750 five-year common stock warrants at $2.30 per share and are presented net of $2,205 in warrant valuations. The newly designated series, the Series F Redeemable, Convertible Preferred Stock (the “Sr. F Preferred Stock”) is comprised of 30,090 shares with a par value of $0.0001 per share and a stated value per share of $115.00 that has a dividend rate of 9%. The Sr. F Preferred Stock is convertible by the holder at any time at a conversion rate of $2.10 as of the issuance of the Sr. F Preferred Stock, $1.81 as of July 27, 2020 as the result of the common stock offering, subject to certain antidilution adjustments and is redeemable by the Company after 24 months at its stated value, plus any outstanding accrued or accumulated dividends for cash, or if the Company’s common stock is trading over $3.00 per share and has daily trading volume of over 50,000 shares, for the Company’s common stock at the conversion rate in effect at the time.

Warrants — In connection with the issuance of convertible debt, preferred and common stock and in connection with services provided, the Company has warrants to acquire 4,676,361 shares of the Company’s common stock outstanding as of September 30, 2020, as follows:

Expiring During the Year Ending December 31,	Warrant Shares		Exercise Price per Share		Weighted Average Exercises Price per Share
2021		1,701,827		$3.30 - $3.75	$	3.30
2022		1,253,149		$1.80 - $5.00	$	2.89
2023		740,749		$1.80	$	1.80
2024		269,293		$1.80	$	1.80
2025		711,343		$1.80 - $2.25	$	1.92

The following table summarizes the outstanding warrant activity for the nine months ended September 30, 2020:

Outstanding, January 1, 2020	4,674,261
Issued as a result of Series F Convertible Preferred Stock offering	186,347
Issued to common stock offering underwriters	318,666
Issued to professional services providers	150,000
Exercised	(630,053	)
Expired	(22,860	)
Outstanding, September 30, 2020	4,676,361

On June 30, 2020, one holder of 630,053 warrants with an exercise price of $1.80 per share exercised in a cashless exercise all of their warrants in exchange for 372,304 shares of the Company’s common stock.

On July 13, 2020 the Company issued a total of 150,000 warrants to several professional service providers. The warrants have an exercise price of $1.80 per share and expire in five years. The warrants were valued utilizing the Black-Scholes option pricing model with the following assumptions: risk-free interest rate of 0.3%, expected dividend yield of 0%, expected volatility of 55.6% and term of 5 years

On July 27, 2020 as a result of the underwritten offering of common stock at $1.81 per share, the warrant exercise price of the warrants issued in connection with the Sr. F Preferred Stock was reduced from $2.30 to $1.81. As a result of the down deal feature the revaluation of the warrants, which amounted to $21,738, has been reflected as a deemed dividend.

Note 9. Equity Incentive Plans

The Company has two shareholder approved equity incentive plans:

2015 Equity Incentive Plan — During 2015, the Company established the BioHiTech Global, Inc. 2015 Equity Incentive Plan, which is available to eligible employees, directors, consultants and advisors of the Company and its affiliates. The plan allows for the granting of incentive stock options, nonqualified stock options, reload options, stock appreciation rights, and restricted stock representing up to 750,000 shares. The Plan is administered by the Compensation Committee of the Board of Directors. On July 23, 2020 the shareholders of the Company approved a 500,000 increase in the plan’s shares, increasing the plan’s shares to 1,250,000.

2017 Executive Incentive Plan — During 2017, the shareholders approved the 2017 Executive Incentive Plan, which is available to eligible employees, directors, consultants and advisors of the Company and its affiliates. The plan allows for the granting of incentive stock options, nonqualified stock options, reload options, stock appreciation rights, and restricted stock representing up to 1,000,000 shares. The Plan is administered by the Compensation Committee of the Board of Directors. On July 23, 2020 the shareholders of the Company approved a 500,000 increase in the plan’s shares, increasing the plan’s shares to 1,500,000.

Effective January 30, 2020, the Company granted nonqualified options for 155,450 shares and 269,060 restricted stock units. The options granted had a fair value of $162,959 using the Black-Scholes option pricing model with the following assumptions: risk-free interest rate of 1.44%, expected dividend yield of 0%, expected volatility of 49.24% and expected term in years of from 1.00 to 2.92 years. The restricted stock units had a value of $538,120 based on the market value on the date of the grants and a weighted average vesting period of 0.75 years.

Effective September 19, 2020, the Company granted 136,145 restricted stock units under the Interim Executive Plan. The restricted stock units had a value of $174,266 based on the market value on the date of the grants and immediately vested.

Compensation expense related to stock options and restricted stock was:

	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
Stock options	$	34,605	$	31,323	$	124,383	$	104,075
Restricted stock		438,042		178,262		940,886		637,113
Total	$	472,647	$	209,585	$	1,065,269	$	741,188

Compensation expense related to stock options and restricted stock for are reflected in the following captions within operating expenses in the condensed consolidated statements of operations and comprehensive loss:

	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
Rental, service and maintenance	$	2,097	$	3,353	$	8,416	$	12,426
Selling, general and administrative		470,550		206,232		1,056,853		728,762
Total	$	472,647	$	209,585	$	1,065,269	$	741,188

The following summarizes the Company’s stock option activity for the nine months ended September 30, 2020:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value
Outstanding – January 1, 2020		363,826		$	3.71		7.34		-
Granted		155,450			2.00		-		-
Exercised		-					-		-
Forfeited, Canceled or Expired		(58,417	)		3.57		-		-
Outstanding – September 30, 2020		460,859			3.16		7.52		-
Exercisable – September 30, 2020		307,021			3.49		6.86		-

BioHiTech Global, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2020 and 2019 and as of September 30, 2020 and December 31, 2019

The following summarizes the Company’s restricted stock unit activity for the nine months ended September 30, 2020:

Balance, January 1, 2020	291,730
Grants	405,205
Forfeited	-
Vested	(403,233	)
Balance, September 30, 2020	293,702

As of September 30, 2020, 804,221 restricted stock units have been vested but not yet drawn down by the grantees.

Interim Executive Plan — During the second quarter of 2020, the Company established a payroll cash deferment program in order to improve cash resources during the COVID-19 pandemic. Under the program, certain executives reduced their cash compensation and would be provided restricted common stock units under the shareholder approved plans as the shares were available or may be issued restricted common stock shares or cash. The shares under the individual agreements were based on a cash amount of deferral each month divided by the lower of the average or last trading day common share price. Under the program that has been concluded, all of the participants elected to receive restricted stock units resulting in 136,145 restricted stock units being issued at a cost of $174,266 that has been reflected as restricted stock compensation expense above.

Note 10. Revenue

The Company recognizes revenue as services are performed or products are delivered and generally recognize revenue for the gross amount of consideration received as we are generally the primary obligor (or principal) in our contracts with customers as we hold complete responsibility to the customer for contract fulfillment. We record amounts collected from customers for sales tax on a net basis.

Disaggregation of Revenue — The disaggregation of revenue is as follows:

		Three months ended September 30,				Nine months ended September 30,
		2020		2019		2020		2019
Revenue Type:
Rental of digesters	$	356,001	$	369,438	$	1,054,534	$	1,061,289
Services		250,177		960,146		1,428,017		1,929,174
Product sales		136,699		97,191		893,599		222,226
Total	$	742,877	$	1,426,775	$	3,376,150	$	3,212,689

Note 11. Risk Concentrations

The Company operates as a single segment on a worldwide basis through its subsidiaries, resellers and independent sales agents. Gross revenues and net non-current tangible assets on a domestic and international basis are as follows:

	United States		International		Total
2020:
Revenue, for the nine months ended September 30, 2020	$	3,079,083	$	297,067	$	3,376,150
Revenue, for the three months ended September 30, 2020		631,450		111,427		742,877
Non-current tangible assets, as of September 30, 2020		37,469,194		295,293		37,764,487

2019:
Revenue, for the nine months ended September 30, 2019	$	2,877,157	$	335,532	$	3,212,689
Revenue, for the three months ended September 30, 2019		1,333,878		92,897		1,426,775
Non-current tangible assets, as of December 31, 2019		38,803,833		355,825		39,159,658

BioHiTech Global, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2020 and 2019 and as of September 30, 2020 and December 31, 2019

Credit risk — Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable.

The Company minimizes credit risk associated with cash by periodically evaluating the credit quality of its primary financial institutions. At times, the Company’s cash may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance Corporation (“FDIC”) in the USA and the Financial Conduct Authority (“FCA”) in the UK insurance limits. Through September 30, 2020, the Company had not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.

Major customers — During the three months ended September 30, 2020, two customers represented at least 10% of revenues, accounting for 18.9% (Gold Medal Group, LLC, an affiliated entity, “GMG” or “Gold Medal”) and 45.1% of revenues. During the three months ended September 30, 2019, one customer represented at least 10% of revenues, accounting for 58.9% (Gold Medal Group, LLC, an affiliated entity, “GMG”) of revenues. During the nine months ended September 30, 2020, two customers represented at least 10% of revenues, 32.5% (GMG) and 11.4% of revenues. During the nine months ended September 30, 2019, one customer represented at least 10% of revenues, 49.2% (GMG) of revenues.

As of September 30, 2020, three customers represented at least 10% of accounts receivable, accounting for 63.4% (GMG), 18.6% and 11.5% of accounts receivable. As of December 31, 2019 one customer represented at least 10% of accounts receivable, accounting for 58.9% (GMG) of accounts receivable.

Vendor concentration — During the three months ended September 30, 2020, one vendor represented at least 10% of costs of revenue, accounting for 14.2% (GMG). During the three months ended September 30, 2019, two vendors represented at least 10% of costs of revenue, accounting for 21.5% (GMG) and 18.9% (a 1.2% shareholder). During the nine months ended September 30, 2020, one vendor represented at least 10% of costs of revenue, accounting for 26.1% (GMG). During the nine months ended September 30, 2019, two vendors represented at least 10% of costs of revenue, accounting for 11.9% (GMG) and 16.3% (a 1.2% shareholder).

As of September 30, 2020, excluding construction payables and other professional fees, one vendor represented at least 10% of accounts payable accounting for 31.8% (GMG) of accounts payable. As of December 31, 2019, one vendor represented at least 10% of accounts payable accounting for 54.4% (GMG) of accounts payable.

Affiliate relationship — GMG owns a 40% interest in Refuel America, LLC, a consolidated subsidiary of the Company. GMG’s subsidiaries, which are not consolidated in the Company’s financial statements have several business relationships with the Company and its subsidiaries that result in revenues and expenses noted above. See Note 14. Related Party Transactions.

Note 12. Commitments and Contingencies

During the nine months ended September 30, 2020 the Company was involved in the following legal matters.

During September 2020, the Company’s Entsorga West Virginia subsidiary received notice that an affiliate of a minority owner of the facility, who also provided intellectual property, equipment and engineering services relating to the set-up and initial operation of the facility, was claiming it was owed $917,420 related to services contracted as part of the facility’s construction and initial start-up and operation. The Company incurred offsetting costs and expenses greater than the claim correcting or replacing the services that were contracted but that were either not performed or performed correctly. No action has been commenced related to this claim and the Company disputes the claim and intends to defend this matter vigorously.

As a result of this claim and the related costs incurred by the Company to cure the deficiencies in the services that were contracted, the Company has reflected an impairment charge amounting to $917,420 during the three and nine months ended September 30, 2020.

On February 7, 2018, Lemartec Corporation (“Lemartec”) filed a complaint against the Company in the United States District Court for the Northern District of West Virginia arising out of the construction of the Company’s resource recovery facility in Martinsburg, West Virginia alleging breach of contract and unjust enrichment. The Company has filed its answer and counterclaims for damages against Lemartec and cross claims against Lemartec’s performance bond surety, Philadelphia Indemnity Insurance Company. The trial was scheduled to begin in August 2020. Prior to the start of the trial, on March 12, 2020 the Company entered into a settlement agreement that detailed the full and final mutual release. The settlement agreement provides that the Company pay Lemartec $775,000 in installments of $475,000 within 60 days of the execution of the settlement agreement and $25,000 each month thereafter for 12 months. The Company’s consolidated financial statements as of December 31, 2019 reflects this liability given the nature of the subsequent event.

It is management’s opinion that the resolution of these matters will not materially affect the Company’s future financial position, results of operations, or cash flows.

From time to time, the Company may be involved in other legal matters arising in the ordinary course of business. While the Company believes that such matters are currently not material, there can be no assurance that matters arising in the ordinary course of business for which the Company is, or could be, involved in litigation, will not have a material adverse effect on its business, financial condition or results of operations

BioHiTech Global, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2020 and 2019 and as of September 30, 2020 and December 31, 2019

Note 13. Leases

The Company rented its headquarters and attached warehousing space from a related party through May 31, 2020 (see Note 14), effective June 1, 2020 the property housing the Company’s headquarters and attached warehousing space was sold to an unrelated party, and has a land lease relating to the Martinsburg, WV HEBioT facility under operating leases. The HEBioT facility land lease has an initial term of 30 years, plus four 5-year extensions. For purposes of our determination of lease liabilities, extensions were not included. As the leases do not provide an implicit rate, the Company used incremental borrowing rates in determining the present value of lease payments. For the HEBioT facility land lease a rate of 11% was utilized and a rate of 10.25% has been used on the other leases. The current portion of the lease liabilities of $207,515 is included in accrued expenses and liabilities. Total lease costs under operating leases amounted to $57,129 and $55,356 for the three months, and $167,841 and $166,067 for the nine months ended September 30, 2020 and 2019, respectively. Maturities of lease liabilities under these leases, which have a weighted average remaining term of 19.7 years, as of September 30, 2020 is:

Year Ending December 31,
2020 (remaining)	$	51,783
2021		212,026
2022		217,571
2023		219,140
2024 and thereafter		3,133,649
Total lease payments		3,834,169
Less imputed interest		(2,419,658	)
Present value of lease liabilities	$	1,414,511

During the nine months ended September 30, 2020, the Company recognized operating lease right of use assets in exchange for lease liabilities amounting to $412,647 and had operating cash flows of $51,783 and $51,406 for the three months, and $140,837 and $143,597 for the nine months ended September 30, 2020 and 2019, respectively.

Note 14. Related Party Transactions

Related parties include Directors, Senior Management Officers, and shareholders, plus their immediate family, who own a 5% or greater ownership interest at the time of a transaction. Related parties also include GMG and its subsidiaries as a result of its 40% interest in Refuel America, LLC (“Refuel”), a consolidated entity of the Company.

During 2018 GMG acquired as regional waste management entity, Apple Valley Waste (“AVW”), with operations located in West Virginia, Maryland and Pennsylvania. As part of this acquisition, GMG also acquired AVW’s interests in EWV that were contributed to Refuel. Prior to GMG’s acquisition of AVW and the Company’s investments and control acquisition of EWV, in order for EWV to receive the proceeds from the Entsorga West Virginia, LLC WVEDA Non-Recourse Solid Waste Disposal Revenue Bonds, EWV and AWV had entered into several agreements relating to business services, solid waste delivery and disposal.

The table below presents the face amount of direct related party assets and liabilities and other transactions or conditions as of or during the periods indicated.

		September 30, 2020		December 31, 2019
Assets:
Accounts receivable	(a) (b)	$	2,227.224	$	1,370,867
Intangible assets, net, included in other assets	(c)		25,249		40,399
Liabilities:
Accounts payable	(c) (d) (e) (f)		3,851,722		2,531,034
Accrued interest payable			165,396		46,796
Long term accrued interest	(g)		1,729,605		1,510,193
Advance from related party	(h)		935,000		210,000
Junior promissory note	(g)		965,881		949,434
Other:
Line of credit guarantee	(i)		1,497,950		1,479,848

BioHiTech Global, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2020 and 2019 and as of September 30, 2020 and December 31, 2019

The table below presents direct related party expenses or transactions for the three and nine months ended September 30, 2020 and 2019. Compensation and related costs for employees of the Company are excluded from the table below.

		Three months ended September 30,				Nine months ended September 30,
		2020		2019		2020		2019
Management advisory and other fees	(a)	$	25,000	$	250,000	$	125,000	$	750,000
HEBioT revenue	(b)		115,173		590,262		970,943		831,274
Operating expenses - HEBioT	(d)		178,545		210,709		952,931		354,733
Operating expenses – Selling, general and administrative	(e)		-		24,537		41,514		73,611
Operating expenses - Selling, general and administrative	(c) (f)		110,650		110,650		332,016		258,050
Interest expense			98,571		76,611		295,592		194,266
Debt guarantee fees	(i)		16,875		16,875		50,625		50,625

Summary notes:

a -	Management Advisory Fees	f -	Business Services Fees
b -	HEBioT Disposal Revenues	g -	Junior Promissory Note
c -	Distribution Agreement	h -	Advances from Related Parties
d -	Disposal costs	i -	Line of Credit
e -	Facility Lease

Advances from Related Parties - The Company’s Chief Executive Officer (the “Officer”) on occasion advances the Company funds for operating and capital purposes. The advances bear interest at 13% and are unsecured and due on demand. There are no financial covenants related to this advance and there are no formal commitments to extend any further advances. In addition, during the three months ended March 31, 2020 another officer advanced $200,000 to the Company which was repaid during the three months ended June 30, 2020.

Claims by Related Party - During September 2020, the Company’s Entsorga West Virginia subsidiary received notice that a minority owner of the facility, who also provided intellectual property, equipment and engineering services relating to the set-up and initial operation of the facility, was claiming $917,420 related to services contracted as part of the facility’s construction and initial start-up and operation. The Company incurred offsetting costs and expenses greater than the claim correcting or replacing the services that were contracted but that were either not performed or performed correctly and intends to defend this matter vigorously.

Note 15. Supplemental Consolidated Statement of Cash Flows Information

Changes in non-cash operating assets and liabilities, as well as other supplemental cash flow disclosures, are as follows.

	Nine Months Ended September 30,
	2020			2019
Changes in operating assets and liabilities:
Accounts receivable	$	(1,302,729	)	$	(1,335,024	)
Inventory		(210,886	)		(181,979	)
Prepaid expenses and other assets		(94,156	)		(3,300	)
Accounts payable		1,149,030			3,111,285
Accrued interest payable		(322,753	)		(260,046	)
Accrued expenses		(843,188	)		(2,504,724	)
Deferred revenue		6,921			(1,131	)
Customer deposits		708,254			37,109
Net change in operating assets and liabilities	$	(909,507)		$	(1,137,810	)

Supplementary cash flow information:
Cash paid during the periods for:
Interest	$	1,596,332		$	2,625,018
Income taxes		-			-

BioHiTech Global, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2020 and 2019 and as of September 30, 2020 and December 31, 2019

	2020		2019
Supplementary Disclosure of Non-Cash Investing and Financing Activities:
Transfer of inventory to leased equipment	$	84,501	$	259,449
Accrual of Series A preferred stock dividends		52,654		140,631
Conversion of preferred stock into common		239,566		90,000
Payment of preferred stock dividends in common stock		21,732		50,000
Acquisition of right of use leased asset and creation of lease liability		412,647		-

Reconciliation of Cash and Restricted Cash:
Cash	$	4,950,112	$	3,434,089
Restricted cash (current)		1,287,138		1,128,716
Restricted cash (non-current)		2,646,448		2,544,948
Total cash and restricted cash at the end of the period	$	8,883,698	$	7,107,753

Note 16. Subsequent Events

The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the financial statements are available to be issued. Any material events that occur between the balance sheet date and the date that the financial statements were available for issuance are disclosed as subsequent events, while the financial statements are adjusted to reflect any conditions that existed at the balance sheet date. Based upon this review, except as disclosed within the footnotes or as discussed below, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial statements.

On October 19, 2020, the Company entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) to purchase 49% of newly-issued membership interests (the “Interests”) of East Shore Port Ventures, LLC, a New York limited liability company (“East Shore”). Pursuant to the Purchase Agreement, the Company purchased the Interests in consideration for $650,000 to East Shore and warrants (the “Warrants”) to purchase an aggregate of 100,000 shares of the Company’s common stock, par value $0.0001 per share issued to East Shore’s existing members. The Purchase Agreement contains customary provisions, including representations, warranties, and indemnities, and closed upon the satisfaction of customary closing conditions.

Note 17. Condensed Consolidating Financial Information

The WVEDA Solid Waste Disposal Revenue Bond obligations of Entsorga West Virginia LLC are not guaranteed by its members, including the Company, however the membership interests of Entsorga West Virginia LLC are pledged, and the debt agreements provide restrictions prohibiting distributions to the members, including equity distributions or providing loans or advances to the members.

The following pages present the Company’s condensed consolidating balance sheet as of September 30, 2020 and December 31, 2019, the condensed consolidating statements of operations for the three and nine months ended September 30, 2020 and 2019, and condensed consolidating cash flows for the nine months ended September 30, 2020 and 2019 of Entsorga West Virginia LLC and the Parent consolidated with other Company subsidiaries not subject to the WVEDA Solid Waste Disposal Revenue Bond restrictions and the elimination entries necessary to present the Company’s financial statements on a consolidated basis. The following condensed consolidating financial information should be read in conjunction with the Company's consolidated financial statements.

Condensed Consolidating Balance Sheet as of September 30, 2020

	Parent and other Subsidiaries		Entsorga West Virginia LLC			Eliminations			Consolidated
Assets
Cash	$	4,948,342	$	1,770		$	-		$	4,950,112
Restricted cash		-		1,287,138			-			1,287,138
Other current assets		2,085,508		2,094,211			-			4,179,719
Current assets		7,033,850		3,383,119			-			10,416,969
Restricted cash		-		2,646,448			-			2,646,448
HEBioT facility and other fixed assets		1,438,255		36,317,732			-			37,755,987
Operating lease right of use assets		396,562		888,730			-			1,285,292
MBT facility development and license costs		6,317,853		1,701,000			-			8,018,853
Investment in subsidiaries and intercompany accounts		16,444,214		-			(16,444,214	)		-
Goodwill		-		58,000			-			58,000
Other assets		33,749		-			-			33,749
Total assets	$	31,664,483	$	44,995,029		$	(16,442,214	)	$	60,215,298

Liabilities and stockholders’ equity
Line of credit	$	1,497,950	$	-		$	-		$	1,497,950
Current portion of Debts and Bonds		4,670,301		2,860,000			-			7,530,301
Other current liabilities		3,716,174		13,081,770			(5,948,711	)		10,849,233
Current liabilities		9,884,425		15,941,770			(5,948,711	)		19,877,484
Notes payable and other debts		1,234,656		-			-			1,234,656
Accrued interest		1,729,605		-			-			1,729,605
Non-current lease liabilities		286,314		944,830			-			1,231,144
WV EDA bonds		-		28,448,484			-			28,448,484
Total liabilities		13,135,000		45,335,084			(5,948,711	)		52,521,373
Redeemable preferred stock		626,553		-			-			626,553
Stockholders’ equity:
Attributable to parent		15,748,136		(340,055	)		(10,495,503	)		4,912,578
Attributable to non-controlling interests		2,154,794		-			-			2,154,794
Stockholders’ equity		17,902,930		(340,055	)		(10,495,503	)		7,067,372
Total liabilities and stockholders’ equity	$	31,664,483	$	44,995,029		$	(16,444,214	)	$	60,215,298

Condensed Consolidating Statement of Operations for the three months ended September 30, 2020

	Parent and other Subsidiaries			Entsorga West Virginia LLC			Eliminations		Consolidated
Revenue	$	742,252		$	625		$	-	$	742,877
Operating expenses
HEBioT		-			945,810			-		945,810
Rental, service and maintenance expense		139,665			-			-		139,665
Equipment		171,002			-			-		171,002
Selling, general and administrative		1,430,095			494,198			-		1,924,293
Impairment expense		-			917,420			-		917,420
Depreciation and amortization		124,759			437,384			-		562,143
Total operating expenses		1,865,521			2,794,812			-		4,660,333
Loss from operations		(1,123,269	)		(2,794,187	)		-		(3,917,456	)
Other (income) expenses, net		336,749			686,308			-		1,023,057
Net loss	$	(1,460,018	)	$	(3,480,495	)	$	-	$	(4,940,513	)

Condensed Consolidating Statement of Operations for the nine months ended September 30, 2020

	Parent and other Subsidiaries			Entsorga West Virginia LLC			Eliminations		Consolidated
Revenue	$	1,992,494		$	1,383,656		$	-	$	3,376,150
Operating expenses
HEBioT		-			2,778,514			-		2,778,514
Rental, service and maintenance expense		552,195			-			-		552,195
Equipment		317,406			-			-		317,406
Selling, general and administrative		4,713,923			1,026,235			-		5,740,158
Impairment expense		-			917,420			-		917,420
Depreciation and amortization		374,105			1,373,004			-		1,747,109
Total operating expenses		5,957,629			6,095,173			-		12,052,802
Loss from operations		(3,965,135	)		(4,711,517	)		-		(8,676,652	)
Other (income) expenses, net		1,063,714			1,979,331			-		3,043,045
Net loss	$	(5,028,849	)	$	(6,690,848	)	$	-	$	(11,719,697	)

Condensed Consolidating Statement of Cash Flows for the nine months ended September 30, 2020

	Parent and other Subsidiaries			Entsorga West Virginia LLC			Eliminations		Consolidated
Cash flows used in operating activities:
Net loss	$	(5,028,849	)	$	(6,690,848	)	$	-	$	(11,719,697	)
Non-cash adjustments to reconcile net loss to net cash used in operations		2,693,646			2,424,869			-		5,118,515
Changes in operating assets and liabilities		(5,625,051	)		4,715,544			-		(909,507	)
Net cash used in operations		(7,960,254	)		449,565			-		(7,510,689	)

Cash flow used in investing activities:
Purchases of construction in-progress, equipment, fixtures and vehicles		(3,538	)		(203,635	)		-		(207,173	)
Other investing activities		(57,949	)		-			-		(57,949	)
Net cash used in investing activities		(61,487	)		(203,635	)		-		(265,122	)

Cash flows from financing activities:
Issuances of debt and equity		11,144,230			-			-		11,144,230
Repayments of debt		(3,544	)		-			-		(3,544	)
Net cash provided by financing activities		11,140,686			-			-		11,140,686
Effect of exchange rate on cash		(18,129	)		-			-		(18,129	)
Cash – beginning of period (restricted and unrestricted)		1,847,526			3,689,426			-		5,536,952
Cash – end of period (restricted and unrestricted)	$	4,948,342		$	3,935,356		$	-	$	8,883,698

Condensed Consolidating Balance Sheet as of December 31, 2019

	Parent and other Subsidiaries		Entsorga West Virginia LLC		Eliminations			Consolidated
Assets
Cash	$	1,847,526	$	-	$	-		$	1,847,526
Restricted cash		-		1,133,581		-			1,133,581
Other current assets		1,697,910		1,116,821		(64,669	)		2,750,062
Current assets		3,545,436		2,250,402		(64,669	)		5,731,169
Restricted cash		-		2,555,845		-			2,555,845
HEBioT facility and other fixed assets		1,753,730		37,392,601		-			39,146,331
Operating lease right of use assets		48,021		897,026		-			945,047
MBT facility development and license costs		6,254,429		1,795,500		-			8,049,929
Investment in subsidiaries		10,864,783		-		(10,864,783	)		-
Goodwill		-		58,000		-			58,000
Other assets		53,726		-		-			53,726
Total assets	$	22,520,125	$	44,949,374	$	(10,929,452	)	$	56,540,047

Liabilities and stockholders’ equity
Line of credit	$	1,479,848	$	-	$	-		$	1,479,848
Current portion of WV EDA Bonds		-		1,390,000		-			1,390,000
Other current liabilities		2,387,916		6,475,985		(650,894	)		8,213,007
Current liabilities		3,867,764		7,865,985		(650,894	)		11,082,855
Notes payable and other debts		5,118,125		-		-			5,118,125
Accrued interest		1,510,193		-		-			1,510,193
Non-current lease liabilities		-		915,170		-			915,170
WV EDA bonds		-		29,817,426		-			29,817,426
Total liabilities		10,496,082		38,598,581		(650,894	)		48,443,769
Redeemable preferred stock		726,553		-		-			726,553
Stockholders’ equity:
Attributable to parent		2,024,143		-		-			2,024,143
Attributable to non-controlling interests		9,273,347		6,350,793		(10,278,558	)		5,345,582
Stockholders’ equity		11,297,490		6,350,793		(10,278,558	)		7,369,725
Total liabilities and stockholders’ equity	$	22,520,125	$	44,949,374	$	(10,929,452	)	$	56,540,047

Condensed Consolidating Statement of Operations for the three months ended September 30, 2019

	Parent and other Subsidiaries			Entsorga West Virginia LLC			Eliminations		Consolidated
Revenue	$	816,870		$	609,905		$	-	$	1,426,775
Operating expenses
HEBioT		-			786,680			-		786,680
Rental, service and maintenance expense		176,651			-			-		176,651
Equipment sales		17,776			-			-		17,776
Selling, general and administrative		1,203,519			246,026			-		1,449,545
Depreciation and amortization		120,899			490,469			-		611,368
Total operating expenses		1,518,845			1,523,175			-		3,042,020
Loss from operations		(701,975	)		(913,270	)		-		(1,615,245	)
Other (income) expenses, net		(180,837	)		600,402			-		419,565
Net loss	$	(521,138	)	$	(1,513,672	)	$	-	$	(2,034,810	)

Condensed Consolidating Statement of Operations for the nine months ended September 30, 2019

	Parent and other Subsidiaries			Entsorga West Virginia LLC			Eliminations			Consolidated
Revenue	$	2,325,742		$	886,947		$	-		$	3,212,689
Operating expenses
HEBioT		-			1,309,176			-			1,309,176
Rental, service and maintenance expense		508,164			-			-			508,164
Equipment sales		56,502			-			-			56,502
Selling, general and administrative		4,678,415			771,867			-			5,450,282
Depreciation and amortization		369,843			980,937			-			1,350,780
Total operating expenses		5,612,924			3,061,980			-			8,674,904
Loss from operations		(3,287,182	)		(2,175,033	)		-			(5,462,215	)
Other expenses		273,851			1,361,221			86,362			1,721,434
Net loss	$	(3,561,033	)	$	(3,536,254	)	$	(86,362	)	$	(7,183,649	)

Condensed Consolidating Statement of Cash Flows for the nine months ended September 30, 2019

	Parent and other Subsidiaries			Entsorga West Virginia LLC			Eliminations			Consolidated
Cash flows used in operating activities:
Net loss	$	(3,561,033	)	$	(3,536,254	)	$	(86,362	)	$	(7,183,649	)
Non-cash adjustments to reconcile net loss to net cash used in operations		1,153,022			1,064,563			86,362			2,303,947
Changes in operating assets and liabilities		(697,598	)		(440,212	)		-			(1,137,810	)
Net cash used in operations		(3,105,609	)		(2,911,903	)		-			(6,017,512	)

Cash flow used in investing activities:
Construction of HEBioT facility and acquisitions of equipment		98			(4,619,981	)		-			(4,619,883	)
Capital contribution to Entsorga West Virginia, LLC		(4,586,362	)		-			4,586,362			-
Other investing activities		2,256,987			-			-			2,256,987
Net cash used in investing activities		(2,329,277	)		(4,619,981	)		4,586,362			(2,362,896	)

Cash flows from financing activities:
Issuances of debt and equity		6,418,057			4,586,362			(4,586,362	)		6,418,057
Repayments of debt		(6,846	)		-			-			(6,846	)
Deferred financing costs incurred		-			(62,151	)		-			(62,151	)
Net cash provided by financing activities		6,411,211			4,524,211			(4,586,362	)		6,349,060
Effect of exchange rate on cash		12,721			-			-			12,721
Cash – beginning of period (restricted and unrestricted)		2,410,708			6,715,672			-			9,126,380
Cash – end of period (restricted and unrestricted)	$	3,399,754		$	3,707,999		$	-		$	7,107,753

Item 2.

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

The following discussion and analysis should be read in conjunction with our unaudited interim condensed consolidated financial statements and related notes appearing elsewhere in this report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to those set forth under “Risk Factors” in our Form 10-K, as filed with the United States Securities and Exchange Commission, or the SEC, on May 22, 2020.

Cautionary Note Regarding Forward-Looking Statements

The information in this report contains forward-looking statements. All statements other than statements of historical fact made in this report are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. These forward-looking statements can be identified by the use of words such as “believes,” “estimates,” “intends”, “plans”, “could,” “possibly,” “probably,” anticipates,” “projects,” “expects,” “may,” “will,” or “should,” “designed to,” “designed for,” or other variations or similar words or language. No assurances can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Our actual results may differ significantly from management’s expectations.

Although these forward-looking statements reflect the good faith judgment of our management, such statements can only be based upon facts and factors currently known to us. Forward-looking statements are inherently subject to risks and uncertainties, many of which are beyond our control. As a result, our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth below under the caption “Risk Factors.” For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You should not unduly rely on these forward-looking statements, which speak only as of the date on which they were made. They give our expectations regarding the future but are not guarantees. We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law.

Impact of COVID-19

Company Overview

The Company’s mission is to reduce the environmental impact of the waste management industry through the development and deployment of cost-effective technology solutions. The Company’s suite of technologies includes on-site biological processing equipment for food waste, patented processing facilities for the conversion of municipal solid waste into an E.P.A. recognized renewable fuel, and proprietary real-time data analytics tools to reduce food waste generation. These unique proprietary solutions may enable certain businesses and municipalities of all sizes to lower disposal costs while having a positive impact on the environment. When used individually or in combination, the Company’s solutions can reduce the carbon footprint associated with waste transportation, repurpose non-recyclable plastics, and significantly reduce landfill usage.

Revolution Series™ Digesters

The Company currently markets an aerobic digestion technology solution for the disposal of food waste at the point of generation. Its line of Revolution Series Digesters has been described as self-contained, robotic digestive systems that are as easy to install as a standard dishwasher with no special electrical or plumbing requirements. Units range in size depending upon capacity, with the smallest unit approximately the size of a residential washing machine. The digesters utilize a biological process to convert food waste into a liquid that is safe to discharge down an ordinary drain. This process can result in a substantial reduction in costs for customers including restaurants, grocery stores, cruise lines and hotel/hospitality companies by eliminating the transportation and logistics costs associated with food waste disposal. The process also reduces the greenhouse gases associated with food-waste transportation and decomposition in landfills that have been linked to climate change. The Company offers its Revolution Series Digesters in several sizes targeting small to mid-sized food waste generators with both sale and rental options that are often more economical than traditional disposal methods. The Revolution Series Digesters are manufactured and assembled in the United States.

In an effort to expand the capabilities of its digesters, the Company developed a sophisticated IoT technology platform to provide its customers with transparency into their waste generation and operational practices. This patented process collects weight related data from the digesters to deliver real-time data that provides valuable information that when analyzed, can improve efficiency and validate corporate sustainability efforts. The Company provides its IoT platform through a SaaS (“Software as a Service”) model that is either bundled in its rental agreements or sold through a separate annual software license. Prior to the launch of its Revolution Series Digesters, the Company marketed earlier generations of its digesters under the Eco-Safe brand. These units were larger sized and typically marketed to mid- and large-sized food waste generators, including the Federal Government. The Company continues to add new capacity sizes to its line of Revolution Series Digesters to meet customer needs.

HEBioT Resource Recovery Technology

The Company expanded its technology business in 2016 through the acquisition of certain development rights to a patented Mechanical Biological Treatment (“MBT”) technology developed by a European engineering firm that relies upon High Efficiency Biological Treatment (“HEBioT”) to process waste at the municipal or enterprise level. The technology results in a substantial reduction in landfill usage by converting a significant portion of intake, including organic waste and non-recyclable plastics, into a United States EPA recognized alternative fuel that can be used as a partial replacement for coal. The Company is currently exploring additional uses for its solid recovered fuel (“SRF”) such as fuel for cogeneration and as a feedstock for bio-plastics.

The Company also, through a series of transactions in 2017 and 2018, acquired a controlling interest in the Nation’s first municipal waste processing facility utilizing the HEBioT technology located in Martinsburg, West Virginia (the “Martinsburg Facility”). The Martinsburg Facility, which commenced operations in 2019, is capable of processing up to 110,000 tons of mixed municipal waste annually. At full capacity, the Martinsburg Facility can achieve an annual savings of over 2.3 million cubic feet of landfill space and eliminate many of the greenhouse gases associated with landfilling that waste. The Company plans to build additional HEBioT facilities in the coming years and is currently in the permitting process to build a second facility in New York State.

Combined Offering

The Company’s suite of products and services positions it as a leading provider of cost-effective, technology-based alternatives to traditional waste disposal in the United States. The use of the Company’s technology solutions independently or in combination, can help its customers meet sustainability goals by achieving a significant reduction in greenhouse gases associated with waste transportation and landfilling. In addition, the repurposing of municipal waste into a cleaner burning, EPA recognized, renewable fuel can further reduce potentially harmful emissions associated with traditional means of disposal. The overall reduction in carbon and other greenhouse gases that are linked to climate change that could be achieved through the utilization of the Company’s technology can serve as a model for the future of waste disposal in the United States.

New Product Offering

In addition to the Company’s products focused on reducing the environmental impact of the waste management industry through the development and deployment of cost-effective technology solutions, as a result of symmetry with our customers and prospects and a new demand for post COVID-19 environmental technologies, on May 12, 2020, the Company entered into an agreement with Altapure, LLC (“Altapure”). Altapure is a technology developer and manufacturer of ultrasonic based disinfecting products, to distribute its patented line of environmentally-friendly, high-level disinfecting products, including its newest product, the AP-4™, an enhanced, automated and touchless high-level disinfection sub-micron aerosol system providing a safe process and rapid elimination of spores, viruses, and vegetative bacteria, such as but not limited to: COVID-19, Acinetobacter baumannii, Pseudomonas aeruginosa, VRE, MRSA, Bacillus atrophaeus, Geobacillus stearothermophilus, Polio virus, C. auris and Clostridium difficile (C. difficile); and commenced live product demonstrations in June 2020 and sold its first unit in October 2020.

Results of operations for the three months ended September 30, 2020

compared to the three months ended September 30, 2019

Overview

	Three Months Ended September 30,
	2020			2019

Revenue	$	742,877		$	1,426,775
Operating expenses		4,660,333			3,042,020
Loss from operations		(3,917,456	)		(1,615,245	)
Other expenses		1,023,057			419,565
Net loss	$	(4,940,513	)	$	(2,034,810	)

Revenue decreased $683,898 (47.9%) due to a reconfiguration process conducted at the HEBioT facility during the quarter by its new management team that temporarily reduced production causing its revenue to decrease by 59.3% prior to a $247,649 negative adjustment in previously estimated take or pay contract revenue, offset in-part by a 30.0% increase in overall digester sales, rentals and service, while recognizing lower (90.0%) management advisory fees as the Company reduces the level of support provided under the agreement in order to maintain adequate focus on the Company’s core services.

Operating expenses increased by $1,618,313 (53.2%) to $4,660,333 for the third quarter as compared to the quarter of 2019 due primarily to an impairment expense of $917,420 relating to costs associated with the construction of the HEBioT facility, a $159,130 (20.2%) increase in HEBioT production costs and a $474,748 (32.8%) increase in selling general and administrative expenses. Equipment sales costs within operating costs increased $153,226 due to the increased level of sales.

The loss from operations increased by $2,302,211 (142,5%) as a result of the $683,898 decrease in revenues and by increased operating expenses.

Net other expenses increased by $603,492 (143.8%) primarily due a non-recurring gain in 2019. Excluding the 2019 gain, net other operating expenses increased by $40,875 (4.2%).

Net loss increased by $2,905,703 (142.8%) ($1,988,283 (97.7%), excluding the impairment charge) due to the increase in operating loss and the increase in other expenses.

Revenue and Related Expenses

	Three Months Ended September 30,
	2020			2019

Revenue
HEBioT (related entity)	$	625		$	609,905
Rental, service and maintenance		423,996			489,555
Equipment sales		293,876			62,565
Management advisory and other fees (related entity)		24,380			264,750
Total revenue		742,877			1,426,775
Operating expenses
HEBioT processing (related entity)		945,810			786,680
Rental, service and maintenance		139,665			176,651
Equipment sales		171,002			17,776
Total related expenses		1,256,477			981,107
Contribution		(513,600	)		445,668
Contribution margins
HEBioT (related entity)		n.m.			(29.0	)%
Rental, service and maintenance		67.1	%		63.9
Equipment sales		41.8			71.6

HEBioT – During the third quarter of 2020, a new management team was put in place at the HEBioT facility. This new team conducted a full analysis of the operation to determine ways to improve efficiencies, streamline operations and achieve planned capacity. During this process, certain mechanical and electrical processes and components were reconfigured to improve processing, capacity and to allow for potential additional revenue streams to be introduced As such, production was significantly reduced while this reconfiguration process took place during the quarter and through October 2020. With that reconfiguration process having been completed in the fourth quarter, the facility is returning to normal operations. As a result of the reduced production during the reconfiguration process, revenue decreased by $361,631 (59.3%) during the third quarter of 2020 to $248,274 (prior to a $247,649 negative adjustment in previously estimated take or pay contract revenue) as compared with $609,905 during the third quarter of 2019. As the nature of the operating costs associated with the plant include a significant level of fixed costs, during the third quarter of 2020, HEBioT processing cost totaled $945,810, an increase of $159,130 (20%) over the third quarter of 2019.

Rental, service and maintenance – Rental, service and maintenance revenue decreased by $65,559 (13.4%) to $423,996 in the third quarter of 2020, as compared to $489,555 in the third quarter of 2019. This decrease was primarily due to a decrease of $13,435 (3.6%) in rental income during the third quarter of 2020 as compared to the third quarter of 2019 as a result of customers that were impacted by COVID-19 and a decrease of $12,380 (15.4%) in the third quarter of 2020 in parts, consumables and other digester related sales and services (also impacted by COVID-19) as compared to the third quarter of 2019 and a $39,744 (100.0%) decrease resulting from non-recurring consulting that occurred in 2019. Rental, service and maintenance expenses decreased by $36,986 (20.9%) primarily due to decreased third party servicer costs and in other service and related areas.

Equipment sales – Equipment sales increased by $231,311 (369.7%) to $293,876 in the third quarter of 2020, as compared to $62,565 in the third quarter of 2019. All of the equipment sales in the third quarter of 2020 were to Carnival Cruise Lines under their master purchase contract.

Management advisory and other fees – In order to maintain adequate focus on the Company’s core services as demand continues to grow for the Company’s products, it has reduced the level of support provided under a management advisory agreement with Gold Medal. As a result, management advisory and other fees decreased by $225,000 (90.0%) to $25,000 in the second quarter of 2020, as compared to $240,370 in the third quarter of 2020. Effective April 1, 2020, the annual fee was reduced to $100,000 per year. As the services are provided by the executive management of the Company, no incremental expenses are incurred or allocated as expenses of the services.

Selling, General and Administrative Expenses

	Three Months Ended September 30,
	2020		2019

Staffing	$	947,197	$	900,358
Professional fees		270,713		156,878
Other expenses		686,212		361,145
Other costs		20,171		31,164
Total selling, general and administrative expenses	$	1,924,293	$	1,449,545

Staffing – Staffing expense increased by $46,839 (5.2%) to $947,197 in the third quarter of 2020 as compared to $900,358 in the third quarter of 2019 and decreased by $107,926 as compared to $1,055,123 in the second quarter of 2020. The increase from 2019 to 2020 was the result of a $149,286 increase in stock based compensation, offset in part by a $102,447 decrease in cash based payroll, fringe and taxes, while the decrease between the third and second quarter was the result of a $68,928 decrease in stock based compensation and a decrease of $38,998 in cash based payroll, fringe and taxes.

Professional fees – Professional fees increased by $113,835 (72.6%) to $270,713 in the third quarter of 2020, as compared to $156,878 in the third quarter of 2019. The increase from 2019 was primarily the result of an increase in legal expenses of $85,390 (223.6%) to $123,578 in the third quarter of 2020, as compared to $38,188 in the third quarter of 2019 relating to several strategic initiatives and increase in social media consulting of $25,500 in the third quarter of 2020, an increase of 100%.

Other expenses – Other expenses increased by $325,067 (90.0%) to $686,212 in the third quarter of 2020, as compared to $361,145 in the third quarter of 2019. The majority of the increase ($188,894) was the result of increased insurance costs at the HEBioT facility and the Company’s Directors and Officers insurance. In addition, during the third quarter of 2020, the Company initiated transitioning a new management team into the HEBioT facility that resulted in a $62,085 increase in consulting and management fees.

Impairment Expense

During the third quarter of 2020, the Company recognized an impairment expense of $917,420 relating to services that were initially contracted for in connection with the constructions, equipping and initial operation set up of the HEBioT facility. These services were not provided as contracted and the Company incurred costs in completing the required services. The impairment expense is the result of further claims made by the contractor that, if successful against the Company’s counterclaims, would not result in an increase in the HEBioT facility cost basis as the Company has already mitigated for those services that were not provided.

Depreciation and Amortization

Depreciation and amortization decreased by $49,225 (8.1%) to $562,143 in the third quarter of 2020, as compared to $611,368 in the third quarter of 2019. This decrease was primarily the result of finalizing the allocation of costs of the HEBioT facility between the plant and equipment, which resulted in a reduction in depreciation expense.

Other Expenses

Other expenses of $1,023,057 during the third quarter of 2020 was comprised of net interest expense, as compared to net interest expense of $933,022 for the third quarter of 2019, an increase of $90,035, of which $46,072 is the result of a decrease in interest income relating to trust funds associated with the HEBioT facility bonds. Interest expense has also increased as a result of increases in amortization of deferred financing costs and accretion of debt discounts that are calculated on an effective interest method, as well as increases resulting from compounding of interest on an increased balance of non-current accrued interest. Other expense in the third quarter of 2019 also included a $562,617 gain on the sale of an affiliate investment and a $49,160 expense relating to warrant valuations.

Results of operations for the nine months ended September 30, 2020

compared to the nine months ended September 30, 2019

Overview

	Nine Months Ended September 30,
	2020			2019

Revenue	$	3,376,150		$	3,212,689
Operating expenses		12,052,802			8,674,904
Loss from operations		(8,676,652	)		(5,462,215	)
Other expenses		3,043,045			1,721,434
Net loss	$	(11,719,697	)	$	(7,183,649	)

Revenue increased $163,461 (5.1%) due to a $304,122 increase in the combined digester equipment sales and rental, service and maintenance revenues and an increase in HEBioT revenues of $496,709 (56.0%) primarily driven by the first half of 2020 as HEBioT revenue decreased during a reconfiguration process conducted at the HEBioT facility during the third quarter the by its new management team that temporarily reduced production causing its revenue to decrease, as well as by a $247,649 negative adjustment in previously estimated take or pay contract revenue during the third quarter of 2020, offset by a decrease in management advisory fees of $637,370 (83.7%). The overall contribution of HEBioT and digesters decreased $1,610,812 (120.3%) primarily due to the decrease in HEBioT during the third quarter and HEBioT costs during the third quarter reconfiguration process, while the digester contribution was flat.

Operating expenses increased by $3,377,898 (38.9%) in total, including an impairment expense of $917,420, with revenue related costs increasing $1,774,273 (94.7%), selling general and administrative increasing $289,876 (5.3%) and depreciation and amortization increasing by $396,329 (29.3%).

The loss from operations increased by $3,214,437 (58.8%) as a result of the decrease in third quarter revenue without offsetting reductions in costs at the HEBioT facility during recommissioning, a decrease in management advisory fees and an increase in other operating expenses, including the $917,420 impairment expense.

Other expenses increased by $1,321,611 (76.8%) primarily due to an increase in interest related to the non-recourse municipal bond financing the HEBioT facility of $618,110 which was under construction in the first quarter of 2019 and a $562,617 gain on the sale of an affiliate investment during 2019.

Net loss increased by $4,536,048 (63.1%) due to the increase in operating loss and the increase in other expenses.

Revenue and Related Expenses

	Nine Months Ended September 30,
	2020			2019

Revenue
HEBioT (related entity)	$	1,383,656		$	886,947
Rental, service and maintenance		1,251,122			1,426,193
Equipment sales		616,992			137,799
Management advisory and other fees (related entity)		124,380			761,750
Total revenue		3,376,150			3,212,689
Operating expenses
HEBioT processing (related entity)		2,778,514			1,309,176
Rental, service and maintenance		552,195			508,164
Equipment sales		317,406			56,502
Total related expenses		3,648,115			1,873,842
Contribution		(271,965	)		1,338,847
Contribution margins
HEBioT (related entity)		(100.8	)%		(47.6	)%
Rental, service and maintenance		55.9			64.4
Equipment sales		48.6			59.0

HEBioT – The HEBioT facility commenced initial operations in the second quarter of 2019. Through the six months ended June 30, 2020 total revenue amounted to $1,383,031 and related costs amounted to $1,832,704, resulting in a negative contribution of $449,673. During the third quarter of 2020, a new management team was put in place at the HEBioT facility. This new team conducted a full analysis of the operation to determine ways to improve efficiencies, streamline operations and achieve planned capacity. During this process, certain mechanical and electrical processes and components were reconfigured to improve processing, capacity and to allow for potential additional revenue streams to be introduced As such, production was significantly reduced while this reconfiguration process took place during the quarter and through October 2020. With that reconfiguration process having been completed in the fourth quarter, the facility is returning to normal operations. As a result of the reduced production during the reconfiguration process, revenue decreased by $361,631 (59.3%) (prior to a $247,649 negative adjustment in previously estimated take or pay contract revenue) during the third quarter of 2020 to $248,274 as compared with $609,905 during the third quarter of 2019. As the nature of the operating costs associated with the plant include a significant level of fixed costs, during the third quarter of 2020, HEBioT processing cost totaled $945,810, an increase of $159,130 (20%) over the third quarter of 2019.

Rental, service and maintenance – Rental, service and maintenance revenue decreased by $175,071 (12.3%) to $1,251,122 during the nine months ended September 30, 2020, as compared $1,426,193 during the nine months ended September 30, 2019. Rental contract revenue decreased by $6,755 (0.6%) to $1,054,534 during the nine months ended September 30, 2020, as compared $1,061,289 during the nine months ended September 30, 2019, representing 84.3% and 74.4% of the category for the nine months ended September 30, 2020 and 2019, respectively. The remainder of the category, service and maintenance related revenue decreased by $168,316 (46.1%) to $196,588 during the nine months ended September 30, 2020, as compared $364,904 during the nine months ended September 30, 2019. These decreases are primarily driven by COVID-19 restrictions on many of our customers during 2020. Rental, service and maintenance expenses increased by $44,031 (8.7%) primarily due to increased personnel costs in anticipation of staffing up for the Carnival Cruise contract that were reversed in the second quarter of 2020 but reinitiated during the third quarter of 2020.

Equipment sales – During the nine months ended September 30, 2020 equipment sales revenue increased by $479,193 (347.7%) to $616,992 as compared to $137,799 during the nine months ended September 30, 2019. This increase was primarily driven by the re-initiation of sales under our contract with Carnival Corporation during the third quarter. Sales expense, like wise increased by $260,904 (461.8%) to $317,406 during the nine months ended September 30, 2020, as compared to $56,502 during the nine months ended September 30, 2019. The contribution margin of 48.6% is in-line with historical rates for new equipment sales.

Management advisory and other fees – In order to maintain adequate focus on the Company’s core services as demand continues to grow for the Company’s products, it has reduced the level of support provided under a management advisory agreement with Gold Medal. As a result, management advisory and other fees decreased by $637,370 (83.7%) to $124,380 during the nine months ended September 30, 2020, as compared to $761,750 during the nine months ended September 30, 2019. Effective April 1, 2020, the annual fee was reduced to $100,000 per year. As the services are provided by the executive management of the Company, no incremental expenses are incurred or allocated as expenses of the services.

Selling, General and Administrative Expenses

	Nine Months Ended September 30,
	2020		2019

Staffing	$	3,080,856	$	3,233,617
Professional fees		929,771		809,706
Other expenses		1,485,121		925,800
Other costs		244,410		481,159
Total selling, general and administrative expenses	$	5,740,158	$	5,450,282

Staffing – Staffing expense decreased by $152,761 (4.7%) to $3,080,856 during the nine months ended September 30, 2020, as compared to $3,233,617 during the nine months ended September 30, 2019. The decrease from 2019 to 2020 was the result of a $328,090 (45.0%) increase in stock based compensation, offset by a $480,851 (19.2%) decrease in cash based payroll, fringe and taxes.

Professional fees – Professional fees increased by $120,065 (14.8%) to $929,771 during the nine months ended September 30, 2020, as compared to $809,706 during the nine months ended September 30, 2019. This increase was primarily the result of an increase in investor relations, public relations, strategy and social media of $149,735 to $119,684 during the nine months ended September 30, 2020, as compared to a negative $(30,051) during the nine months ended September 30, 2019 (2019 included a $45,000 favorable decrease resulting from the settlement of a litigation matter), an increase in investment banking of $76,148 (52.7%) to $220,565 during the nine months ended September 30, 2020 driven by strategic initiatives, as compared to $144,418 during the nine months ended September 30, 2019, and an increase in legal expenses of $61,804 (25.3%) to $306,004 during the nine months ended September 30, 2020 driven by strategic initiatives and other general matters, as compared to $244,200 during the nine months ended September 30, 2019. These increases were offset in-part by a $167,622 (37.2%) decrease in accounting fees due to reduced acquisition activity during the nine months ended September 30, 2020, as compared to $451,139 during the nine months ended September 30, 2019.

Other expenses – Other expenses increased by $559,321 (60.4%) to 1,485,121 during the nine months ended September 30, 2020, as compared to $925,800 during the nine months ended September 30, 2019. The majority of the increase ($271,658) was the result of increased insurance costs at the HEBioT facility and the Company’s Directors and Officers insurance. In addition, transitioning a new management team into the HEBioT facility was the primary factor that resulted in a $135,493 increase in consulting and management fees.

Other costs – Other costs decreased by $236,749 (49.2%) to $244,410 during the nine months ended September 30, 2020, as compared to $481,159 during the nine months ended September 30, 2019. This increase was primarily the result of an increase of $81,155 in provisions for bad debts during the nine months ended September 30, 2020 offset by a non-recurring loss on the write-off of a HEBioT facility site amounting to $346,654 during the nine months ended September 30, 2019.

Impairment Expense

Depreciation and Amortization

Depreciation and amortization increased by $396,329 (29.3%) to $1,747,109 during the nine months ended September 30, 2020, as compared to $1,350,780 during the nine months ended September 30, 2019. This increase was primarily the result of the HEBioT facility becoming operational in the second quarter of 2019, as no depreciation and amortization was expensed while the facility was under construction. Total depreciation and amortization relating to the HEBioT facility increased by $392,067 to $1,373,004 during the nine months ended September 30, 2020, as compared to $980,937 during the nine months ended September 30, 2019.

Other Expenses

Other expenses of $3,043,045 during the nine months ended September 30, 2020 was comprised of net interest and expense, as compared to net interest expense of $2,234,891 for the nine months ended September 30, 2019, an increase of $808,154, of which $618,110 is the result of an increase in interest expense relating to the HEBioT facility, which in 2019 had capitalized the first quarter of interest as the facility was under construction at that time. Interest expense has also increased as a result of increases in amortization of deferred financing costs and accretion of debt discounts that are calculated on an effective interest method, as wells as increases resulting from compounding of interest on an increased balance of non-current interest. Other expense in 2019 also included a $562,617 gain on the sale of an affiliate investment and a $49,160 expense relating to warrant valuations.

Liquidity and Capital Resources

For the nine months ended September 30, 2020, the Company had a consolidated net loss of $(11,719,697), incurred a consolidated loss from operations of $8,676,652 and used net cash in consolidated operating activities of $7,510,689. At September 30, 2020, consolidated total stockholders’ equity amounted to $7,067,372, consolidated stockholders’ equity attributable to parent amounted to $4,912,578, and the Company had a consolidated working capital deficit of $9,460,515. While the Company had not met certain of its senior secured note’s financial covenants as of September 30, 2020, the Company has favorably renegotiated those covenants and has received a waiver for such non-compliance through September 30, 2020. Despite its current compliance under the waiver, until such time as the Company regains compliance or receives a waiver of such covenants for a year beyond the balance sheet date, under current GAAP accounting rules the senior secured notes amounting to $4,408,514 have been classified as current debt. The Company does not yet have a history of financial profitability. In March and April of 2020 the Company raised $1,560,450 through a private convertible preferred stock offering and on May 13, 2020 one of the Company’s subsidiaries was funded $421,300 through the Paycheck Protection Program. On July 27, 2020 the Company used its Shelf Registration on Form S-3 to raise gross proceeds of $8,235,500 through an underwritten public offering of 4,550,000 common shares at $1.81 per share. On August 11, 2020 the underwriter provided notice that they would be exercising their over-allotment provision of the Underwriting Agreement to purchase an additional 682,500 shares of the Company’s common stock at $1.81 per share for a gross purchase price of $1,235,325. The net proceeds to the Company of the July 27, 2020 and August 11, 2020 offerings, after underwriter’s commission and other costs amounted to $8,437,480. There is no assurance that the Company will continue to raise sufficient capital or debt to sustain operations or to pursue other 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.

Impact of COVID-19 on Liquidity and Capital Resources

Cash

As of September 30, 2020 and December 31, 2019, the Company had unrestricted cash balances of $4,950,112 and $1,847,526, and restricted cash balances of $3,933,586 and $3,689,426, respectively.

Borrowings and Debt

Year Ending December 31,	Amortizing		Non- Amortizing		Total
2020 (Remaining)	$	1,061	$	23,406	$	24,467
2021		4,380		2,155,866		2,160,246
2022		3,821		2,717,028		2,720,849
2023		-		625,000		625,000
2024 and thereafter		-		1,044,477		1,044,477
Total	$	9,262	$	6,565,777	$	6,575,039

Entsorga West Virginia, LLC WVEDA Solid Waste Disposal Revenue Bonds — As of September 30, 2020 the future sinking fund payments are as follow:

Year Ending December 31,	2016 Issue 2026 Series		2016 Issue 2036 Series		2018 Issue 2036 Series		Total
2020 (remaining)	$	1,160,000	$	-	$	230,000	$	1,390,000
2021		1,215,000		-		255,000		1,470,000
2022		900,000		-		275,000		1,175,000
2023		965,000		-		300,000		1,265,000
2024 and thereafter		3,295,000		17,465,000		6,940,000		27,700,000
Total	$	7,535,000	$	17,465,000	$	8,000,000	$	33,000,000

Cash Flows

Cash Flows from Operating Activities

We used $7,510,689 of cash in operating activities during the nine months ended September 30, 2020 as compared to a use of $6,017,512 during the nine months ended September 30, 2019. Our net loss during the nine months ended September 30, 2020 of $11,719,697 was reduced by non-cash expenses of $5,118,515.

Cash Flows from Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2020 amounted to $265,122, as compared to $2,362,896 in net cash used in investing activities for the nine months ended September 30, 2019 which was primarily related to the construction of the HEBiot facility and other HEBioT projects totaling $4,619,981, offset in part by proceeds of $2,250,000 from the sale of an investment in an affiliate.

Cash Flows from Financing Activities

Cash provided by financing activities for the nine months ended September 30, 2020 amounted to $11,140,686 and is primarily the result net proceeds of $8,437,480 from an underwritten offering of common stock, net proceeds of $1,560,450 from a preferred stock issuance, $421,300 in proceeds under the Payroll Protection Act and net advances amounting to $725,000 from related parties. During the comparable 2019 period, the Company received net proceeds of $3,035,557 from a registered common stock offering, $1,772,500 from a preferred stock issuance, $1,400,000 investment by an affiliate in a consolidated subsidiary and $210,000 in advances from a related party.

Off Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements during the three months ended September 30, 2020.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company as defined by 17 C.F.R. 229 (10)(f)(i) and are not required to provide information under this item.

Item 4.

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management carried out an evaluation, with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”).

Based upon their evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that a material weakness existed and that the Company’s disclosure controls and procedures are not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Because of our limited operations we have a small number of employees which prohibits a segregation of duties. As we grow and expand our operations, we will engage additional employees and experts as needed. However, there can be no assurance that our operations will expand.

Changes in Internal Controls Over Financial Reporting

There have not been any significant changes in our internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II -

OTHER INFORMATION

Item 1.

Legal Proceedings.

On February 7, 2018, Lemartec Corporation (“Lemartec”) filed a complaint against the Company in the United States District Court for the Northern District of West Virginia arising out of the construction of the Company’s resource recovery facility in Martinsburg, West Virginia alleging breach of contract and unjust enrichment. The Company has filed its answer and counterclaims for damages against Lemartec and cross claims against Lemartec’s performance bond surety, Philadelphia Indemnity Insurance Company. The trial was scheduled to begin in August 2020. Subsequent to year end and prior to the start of the trial, on March 12, 2020 the Company entered into a settlement agreement that detailed the full and final mutual release. The settlement agreement provides that the Company pay Lemartec $775,000 in installments of $475,000 within 60 days of the execution of the settlement agreement and $25,000 each month thereafter for 12 months.

It is management’s opinion that the resolution of these matters will not materially affect the Company’s future financial position, results of operations, or cash flows.

From time to time, we are a party to, or otherwise involved in, legal proceedings arising in the normal and ordinary course of business. As of the date of this report, we are not aware of any other proceeding, threatened or pending, against us which, if determined adversely, would have a material effect on our business, results of operations, cash flows or financial position.

Item 1A.

Risk Factors.

We are a smaller reporting company as defined by 17 C.F.R. 229 (10)(f)(i) and are not required to provide information under this item.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

On July 10, 2020, 95,259 shares of the Company’s common stock were issued to its senior secured note holder at market in lieu of cash payments for $64,062 for interest and $60,000 in expenses relating to waivers and renegotiating financial covenants.

On July 10, 2020, 21,000 shares of the Company’s common stock were issued to a vendor in lieu of a cash payment of an outstanding professional services invoice.

On July 13, 2020, a Series D Convertible Preferred Stock (“Sr. D PS”) holder converted, in accordance with the terms of the Sr. D PS, 1,500 shares of Sr D PS into 55,556 shares of the Company’s common stock. In connection with the conversion, the holder was also paid accumulated dividends on the Sr. D PS through the conversion date amounting to $14,388 through the issuance of 7,994 shares of the Company’s common stock.

On July 30, 2020 a Series A Redeemable Convertible Preferred Stock (“Sr. A PS”) holder converted, in accordance with the terms of the Sr. A PS, 20,000 shares of Sr. A PS into 55,556 shares of the Company’s common stock. In connection with the conversion, the holder was also paid accrued dividends on the Sr. A PS through the conversion date amounting to $7,350 through the issuance of 4,083 shares of the Company’s common stock.

On September 18, 2020, 25,000 shares of the Company’s common stock were issued to its senior secured note holder at market in lieu of cash payments for consent of the Company’s investment in East Shore Port Ventures, LLC.

All of the securities referred to, above, were issued without registration under the Securities Act of 1933, as amended (the “Securities Act”) in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act as provided in Rule 506(b) of Regulation D promulgated thereunder. All of the foregoing securities as well the Common Stock issuable upon conversion or exercise of such securities, have not been registered under the Securities Act or any other applicable securities laws and are deemed restricted securities, and unless so registered, may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Securities Act.

The sale of securities did not involve a public offering; the Company made no solicitation in connection with the sale other than communications with the investors; the Company obtained representations from the investors regarding their investment intent, experience and sophistication; and the investors either received or had access to adequate information about the Company in order to make an informed investment decision.

Item 3.

Defaults Upon Senior Securities.

None.

Item 4.

Mine Safety Disclosures.

Not Applicable.

Item 5.

Other Information.

Not Applicable.

Item 6.

Exhibits.

See the exhibits listed in the accompanying “Index to Exhibits.”

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		BioHiTech Global, Inc.

November 19, 2020	By:	/s/ Anthony Fuller
	Name:	Anthony Fuller
	Title:	Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ Brian C. Essman
	Name:	Brian C. Essman
	Title:	Chief Financial Officer and Treasurer
		(Principal Financial and Accounting Officer)

INDEX TO EXHIBITS

Exhibit		Incorporated by Reference			Filed or Furnished
No.	Exhibit Description	Form	Date	Number	Herewith
31.1	Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended				Filed
31.2	Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended				Filed
32.1	Certification of Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				Furnished*
32.2	Certification of Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				Furnished*
101.INS	XBRL Instance Document				Filed
101.SCH	XBRL Taxonomy Extension Schema Document				Filed
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document				Filed
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document				Filed
101.LAB	XBRL Taxonomy Extension Label Linkbase Document				Filed
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document				Filed

* This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-X.

Copies of this report (including the financial statements) and any of the exhibits referred to above will be furnished at no cost to our shareholders who make a written request to our Corporate Secretary at 80 Red Schoolhouse Road, Chestnut Ridge, New York 10977.