EX-99.2 3 bcke_ex992.htm bcke_ex992.htm
 
Exhibit 99.2
 
MERIDIAN WASTE SERVICES, LLC

Financial Statements
 
For the Years Ended December 31, 2013 and 2012
 
 

 
 

 

MERIDIAN WASTE SERVICES, LLC
Table of Contents
For the Years Ended December 31, 2013 and 2012

FINANCIAL STATEMENTS
 
Page
       
 
Report of Independent Registered Public Accounting Firm
 
1
       
 
Balance Sheets
 
2
       
 
Statements of Income
 
4
       
 
Statements of Members' Equity
 
5
       
 
Statements of Cash Flows
 
6
       
 
Notes to Financial Statements
 
7 - 14

 
 
 

 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Stockholder and Board of Directors
Meridian Waste Services, LLC


We have audited the accompanying balance sheets of Meridian Waste Services, LLC as of December 31, 2013 and 2012 and the related statements of operations, changes in members’ equity, and cash flows for each of the two years in the period ended December 31, 2013. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Meridian Waste Services, LLC as of December 31, 2013 and 2012 and the results of their operations and their cash flows for the each of the two years in the period ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America.
 
/s/ D’Arelli Pruzansky, P.A.
Certified Public Accountants

Boca Raton, Florida
August 7, 2014

 
1

 
 
MERIDIAN WASTE SERVICES, LLC
Balance Sheets
December 31,
 
ASSETS            
   
2013
   
2012
 
             
CURRENT ASSETS
           
Cash
  $ 1,461,372     $ 1,646,556  
Accounts receivable, less allowances for doubtful
    440,569       343,962  
accounts of $42,509 in 2013 and $0 in 2012                
Employee Advances
    2,000       -  
Note receivable - related party
    75,000       202  
Prepaid expenses
    81,128       68,459  
Prepaid insurance
    108,393       48,822  
                 
                 
Total Current Assets     2,168,462       2,108,001  
                 
PROPERTY AND EQUIPMENT
               
Equipment and fixtures
    116,429       69,162  
Furniture and fixtures
    18,351       18,351  
Containers, carts, and roll off
    3,568,631       2,727,517  
Vehicles
    8,887,425       7,686,624  
                 
Total Property and Equipment     12,590,836       10,501,654  
Less:  accumulated depreciation
    7,780,233       6,364,005  
                 
Net Property and Equipment     4,810,603       4,137,649  
                 
OTHER ASSETS
               
Loan to member
    50,000       -  
Deposits
    8,303       8,303  
                 
Total Other Assets     58,303       8,303  
                 
TOTAL ASSETS
  $ 7,037,368     $ 6,253,953  
 
 
2

 
 
MERIDIAN WASTE SERVICES, LLC
Balance Sheets - continued
December 31,
 
LIABILITIES AND MEMBERS' EQUITY
           
             
CURRENT LIABILITIES
           
Accounts payable
  $ 239,739     $ 161,660  
Accrued payroll and payroll tax
    94,620       69,595  
Current portion of long-term liabilities
    1,211,299       1,042,664  
Deferred revenue
    1,910,465       1,744,578  
Deposit
    25,000       -  
Loan from member
    25,000       -  
                 
Total Current Liabilities
    3,506,123       3,018,497  
                 
LONG-TERM LIABILITIES
               
Long-term liabilities, less current maturities
    1,991,508       1,957,365  
                 
Total Liabilities
    5,497,631       4,975,862  
                 
MEMBERS' EQUITY
    1,539,737       1,278,091  
                 
Total Members' Equity
    1,539,737       1,278,091  
                 
TOTAL LIABILITIES AND MEMBERS' EQUITY
  $ 7,037,368     $ 6,253,953  
 
 
3

 
 
MERIDIAN WASTE SERVICES, LLC
Statements of Income
For the Years Ended December 31,
 
   
2013
   
2012
 
   
Amount
   
Amount
 
             
Service revenues
  $ 11,247,773     $ 10,076,570  
Recycling income
    102,099       173,204  
Total Income
    11,349,872       10,249,774  
                 
Cost of Services
    8,380,287       7,521,583  
                 
Gross Profit
    2,969,585       2,728,191  
                 
General and Administrative Expenses
               
Compensation and related expenses
    703,688       612,578  
Rent expense
    249,793       134,778  
Advertising expense
    95,403       116,187  
Depreciation expense
    13,541       10,232  
Other general and administrative expenses
    524,197       437,256  
                 
Total General and Administrative Expenses
    1,586,622       1,311,031  
                 
Income from Operations
    1,382,963       1,417,160  
                 
Other Income (Expense)
               
Miscellaneous income
    6,995       2,605  
Interest income
    -       1,004  
Gain(Loss) on disposal of assets
    (6,250 )     15,134  
Political contributions
    -       (300 )
Loss on bad loans
    (403 )     (110,006 )
Interest expense
    (146,659 )     (159,964 )
                 
Total Other Income (Expense)
    (146,317 )     (251,527 )
                 
NET INCOME
  $ 1,236,646     $ 1,165,633  
 
 
4

 
 
MERIDIAN WASTE SERVICES, LLC
Statements of Changes in Members' Equity
For the Years Ended December 31, 2013 and 2012
 
Members' Equity - December 31, 2011
  $ 1,192,458  
         
Net Income
    1,165,633  
         
Shareholder Distributions
    (1,080,000 )
         
Members' Equity - December 31, 2012
    1,278,091  
         
Net Income
    1,236,646  
         
Shareholder Distributions
    (975,000 )
         
Members' Equity - December 31, 2013
  $ 1,539,737  
 
 
 
5

 
 
MERIDIAN WASTE SERVICES, LLC
Statements of Cash Flows
For the Years Ended December 31
 
   
2013
   
2012
 
             
Cash Flows from Operating Activities
           
Net income
  $ 1,236,646     $ 1,165,633  
Adjustments to reconcile net income to net cash
               
provided by operating activities
               
Allowance for doubtful accounts
    42,509          
Depreciation and amortization
    1,424,979       1,553,121  
Change in assets - (increase) decrease
               
Accounts receivable
    (139,117 )     (73,290 )
Other receivables
    (76,798 )     75,021  
Prepaid insurance
    (59,571 )     6,689  
Prepaid expenses
    (12,669 )     (9,241 )
Loan to member
    (50,000 )        
Letter of credit
    -       50,297  
Deposits
    -       5,000  
Gain/Loss on sale of asset
    6,250       (15,134 )
Change in liabilities - increase (decrease)
               
Accounts payable
    78,077       89,899  
Accrued expenses
    -       (9,203 )
Accrued payroll and payroll taxes
    25,025       17,358  
Deferred revenue
    165,887       (56,854 )
Deposit
    25,000       -  
Total Adjustments
    1,429,572       1,633,663  
                 
Net Cash Provided by Operating Activities
    2,666,218       2,799,296  
                 
Cash Flows from Investing Activities
               
Proceeds from sale of fixed assets
    12,415       53,622  
Purchase of property and equipment
    (705,607 )     (188,219 )
Net Cash Used in Investing Activities
    (693,192 )     (134,597 )
                 
Cash Flows from Financing Activities
               
Member distributions
    (975,000 )     (1,080,000 )
Loan from member
    25,000          
Principal payments on notes
    (1,208,210 )     (1,151,370 )
Net Cash Used in Financing Activities
    (2,158,210 )     (2,231,370 )
                 
Net Increase (Decrease) in Cash
    (185,184 )     433,329  
                 
Cash - Beginning of Year
    1,646,556       1,213,227  
                 
Cash - End of Year
  $ 1,461,372     $ 1,646,556  
 
 
 
6

 
 
MERIDIAN WASTE SERVICES, LLC
Notes to Financial Statements
For the Years Ended December 31, 2013 and 2012

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS – The Company was organized December 9, 2004 as a Limited Liability Company under the laws of the State of Missouri.  The Company is taxed as an S Corporation.  Meridian Waste Services LLC (the Company) is primarily in the business of residential and commercial waste hauling and has contracts with various cities and municipalities.  The majority of the Company’s customers are located in the St. Louis metropolitan area.

BASIS OF ACCOUNTING - The Company follows accounting principles generally accepted in the United States of America, accordingly it utilizes the accrual method of accounting whereby revenues are recorded when earned and expenses are recorded when incurred.

CONCENTRATIONS OF RISK – The Company maintains its cash balances at one financial institution located in St. Louis, MO.  At various times during the year the account balances exceed the Federally insured limits.  The Company has not experienced any losses on the accounts and management believes it is not exposed to any significant risk on cash.

The Company has significant revenue with two major municipal customers.  These customers accounted for approximately 52.66% and 57.83% of revenue for the years ended December 31, 2013 and 2012, respectively.

   
2013
   
2012
 
             
Customer A
    31.58 %     34.72 %
Customer B
    21.08 %     23.11 %
      52.66 %     57.83 %


CASH AND CASH EQUIVALENTS – For purposes of the statement of cash flows, the Company considers money market funds, certificates of deposit, Treasury bills, and any other short-term debt securities with a maturity of three months or less at the time of purchase to be cash equivalents.

USE OF ESTIMATES - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures.  Accordingly, actual results could differ from those estimates.

INCOME TAXES – The members elected to have the Company’s income taxed as an “S” Corporation under provisions of the Internal Revenue Code; therefore, taxable income or loss is reported to the individual members for inclusion on their personal tax returns.  No provision for federal and state income taxes is included in these statements.
 
 
7

 
 
MERIDIAN WASTE SERVICES, LLC
Notes to Financial Statements
For the Years Ended December 31, 2013 and 2012
 
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED

ACCOUNTS RECEIVABLE – Accounts receivable is carried at the original invoice amount.  Customers are billed every three months in advance and payment is due the 15th of the first month of their billing cycle.  If payment is not received, the customer is placed on stop service.  The previous billing cycle is reviewed for stop service accounts.  Uncollected accounts are written off at that time and charged directly against revenue.

Accounts receivable aging at December 31:
 
   
2013
   
2012
 
             
0-30 days
  $ 398,767     $ 308,338  
31-60 days
    19,796       17,813  
61-90 days
    7,836       5,680  
Over 90 days
    56,679       12,131  
Allowance
    (42,509 )     -  
    $ 440,569     $ 343,962  
 
ALLOWANCE FOR DOUBTFUL ACCOUNTS – The Company provides an allowance for doubtful accounts equal to the estimated collection losses that will be incurred in collection of receivables related to commercial project invoices.  The estimated losses are based on managements’ evaluation of outstanding accounts receivable at the end of the year.  Allowance for doubtful accounts was $42,509 and $0 at December 31, 2013 and 2012, respectively.

PREPAID EXPENSES – The Company prepays and amortizes the costs of sponsorship agreements and calendar costs over 12 months.  Software support agreements are amortized over 12 months.  The cost of performance bonds are amortized over 12 months.  Prepaid expenses at December 31, 2013 and 2012 respectively, consisted of the following:
 
   
2013
   
2012
 
             
Advertising
  $ 50,492     $ 34,146  
Software support
    7,240       5,320  
Performance bonds
    23,396       19,184  
Rent
  $ -     $ 9,809  
      81,128         68,459  

 
8

 
 
MERIDIAN WASTE SERVICES, LLC
Notes to Financial Statements
For the Years Ended December 31, 2013 and 2012
 
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED

PROPERTY AND EQUIPMENT - Property and equipment is stated at cost.  Depreciation is computed using the straight-line method over the following estimated useful lives of the assets.
 
    YEARS
Trucks
 
5 years
Containers and carts   7 years
Leasehold Improvements   7-15 years
Furniture and equipment
 
5-7 years
Office equipment
 
3-7 years
 
Depreciation expense amounted to $1,424,979 and $1,553,121 for the years ended December 31, 2013 and 2012, respectively.

Expenditures for major renewals and betterment that extend the useful lives of property and equipment are capitalized.  Expenditures for maintenance and repairs are charged to expense as incurred.

IMPAIRMENT OF LONG-LIVED ASSETSIn accordance with Accounting Standards Codification 360-10, “Property, Plant and Equipment”, the Company periodically reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable.  The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset.  The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value.  As of December 31, 2013 and 2012, the Company did not impair any long-lived assets.

FAIR VALUE OF FINANCIAL INSTRUMENTS – The Company adopted ASC topic 820, “Fair Value Measurements and Disclosures” (ASC 820), formerly SFAS No. 157 “Fair Value Measurements,” effective January 1, 2009.  ASC 820 defines “fair value” as the price that would be received for an asset or paid to transfer a liability (and exit price0 in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  There was no impact relating to the adoption of ASC 820 to the Company’s financial statements.

ASC 820 also describes three levels of inputs that may be used to measure fair value:

Level 1:  Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets.
Level 2:  Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3: Inputs that are generally unobservable.  These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

Financial instruments consist principally of cash, accounts receivable, prepaid expenses, accounts payable, accrued liabilities and other current liabilities.  The carrying amounts of such financial instruments in the accompanying balance sheets approximate their fair values due to their relatively short-term nature.  The fair value of long-term debt
 
 
9

 
 
MERIDIAN WASTE SERVICES, LLC
Notes to Financial Statements
For the Years Ended December 31, 2013 and 2012
 
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED

is based on current rates at which the Company could borrow funds with similar remaining maturities.  The carrying amounts approximate fair value.  It is management’s opinion that the Company is not exposed to any significant currency or credit risks arising from these financial instruments.

ADVERTISING - The Company expenses advertising costs as they are incurred except for Sponsorship and calendar costs which is capitalized and amortized over 12 months.  Advertising expense amounted to $95,403 and $116,187 for the years ended December 31, 2013 and 2012, respectively.

REVENUE RECOGNITION Our revenues are generated from the fees we charge for waste collection, transfer, disposal and recycling.  The fees charged for our services are generally defined in our service agreements and vary based on contract-specific terms such as frequency of service, weight, volume and the general market factors influencing a region’s rates. We generally recognize revenue as services are performed.

DEFERRED REVENUE – The Company bills one month in advance for the following three months.   The balance in this account consists of amounts billed in October, November, and December for:
 
   
2013
   
2012
 
             
January
  $ 812,515     $ 735,865  
February
    655,837       610,047  
March
    442,113       398,666  
    $ 1,910,465     $ 1,744,578  

COST OF SERVICES – Costs of services includes expenses that are directly attributable to generating service revenues.  Cost of services at December 31, 2013 and 2012 respectively, consisted of the following:
 
   
2013
   
2012
 
             
Labor costs
  $ 2,772,312     $ 2,514,803  
Landfill costs
    1,541,692       1,228,786  
Depreciation
    1,411,438       1,542,889  
Fuel costs
    1,113,879       1,000,096  
Repairs and maintenance
    1,037,037       870,726  
Vehicle insurance
    164,331       83,281  
Property taxes
    147,046       130,881  
Other direct costs
            150,121  
    $ 8,380,287     $ 7,521,583  
 
 
10

 
 
MERIDIAN WASTE SERVICES, LLC
Notes to Financial Statements
For the Years Ended December 31, 2013 and 2012
 
 NOTE B - LONG-TERM DEBT

  Long-term debt consists of the following:
 
   
2013
   
2012
 
Notes payable in monthly installments to 1st Source Bank totaling $31,405, including interest at 6%, secured by equipment. Maturing from 2014 to 2016.
  $   761,994     $   1,082,162  
                 
Note Payable to Ford Motor Credit, interest at 5%, monthly payments of $1,165, matures August 2015, secured by vehicle.
         21,405           33,983  
                 
Note Payable to KIA Motors, interest at 4.9%, monthly payments of $401, matures August 2015, secured by a vehicle.
         7,940           12,753  
                 
Notes Payable in monthly installments to TCF Equipment Finance totaling $41,755, including interest ranging from 4.42% to 4.67%, secured by equipment.  Maturing from 2014 to 2017.
    1,157,327       1,080,188  
                 
Notes Payable in monthly installments to Wells Fargo Equipment Finance, Inc. totaling $27,271, including interest ranging from 4.75% to 4.95%, secured by equipment.  Maturing from 2014 to 2017.     733,090       537,587  
                 
Notes Payable in monthly installments to US Bank Equipment Finance totaling $14,490, including interest ranging from 4.25% to 5.25%, secured by equipment.  Maturing from 2016 to 2017.
          521,051             253,356  
                 
TOTAL DEBT     3,202,807       3,000,029  
                 
     Less current maturities     1,211,299       1,042,664  
                 
         TOTAL LONG-TERM DEBT   $ 1,991,508     $ 1,957,365  
 
 
11

 
 
MERIDIAN WASTE SERVICES, LLC
Notes to Financial Statements
For the Years Ended December 31, 2013 and 2012
 
NOTE B - LONG-TERM DEBT – CONTINUED
 
The aggregate principal maturities of long-term debt at December 31, 2013 are as follows:

2014
  $ 1,211,299  
2015
    1,129,965  
2016
    671,948  
2017
    189,595  
Thereafter
     -  
         
      TOTAL DEBT
  $ 3,202,807  
 
NOTE C - RELATED PARTY TRANSACTIONS

 
As of December 31, 2013, the Company had a demand note receivable with an outstanding balance of $75,000 from BRK Holding LLC which is owned by the Company’s members.

 
As of December 31, 2013, the Company had a demand note receivable with an outstanding balance of $50,000 from J. Reich, a member of the Company.

 
In September of 2013, C. Barcom, an officer of the Company, made a loan to the Company of $25,000.  Repayment is due upon demand.

NOTE D - LEASES
 
The Company leases its office and warehouse facilities.  The lease agreement commenced September 1, 2010 and expires August 30, 2017.  Future minimum lease payments at December 31, 2013 are as follows:

2014
  $ 265,915  
2015
    271,915  
2016
    277,915  
2017
    283,915  
Thereafter
    -  
         
TOTAL
  $ 1,099,660  

Rent expense amounted to $249,793 and $134,778 for the years ended December 31, 2013 and 2012, respectively.
 
 
12

 
 
MERIDIAN WASTE SERVICES, LLC
Notes to Financial Statements
For the Years Ended December 31, 2013 and 2012
 
NOTE E - COMPENSATED ABSENCES
 
Employees are entitled to holiday and vacation time throughout the year based on length of service.  Unused vacation time is paid to employees at the end of employment.  Accrued vacation pay at December 31, 2013 and 2012 was deemed immaterial and not accrued.

NOTE F – CASH FLOW INFORMATION

 
Operating activities reflect interest paid of $146,659 and $159,964 during 2013 and 2012, respectively.

 
Noncash investing and financing activity during 2013 and 2012:

   
2013
   
2012
 
Acquisition of equipment
           
    Cost of equipment
  $ 2,058,359     $ 1,815,160  
    Less notes payable
    1,352,752       1,626,941  
                 
     Cash payments for equipment
  $ 705,607     $ 188,219  
 
NOTE G – COMMITMENTS AND CONTINGENCIES

The Company is involved in various claims against the Company, arising in the normal course of business.  Management believes that their insurance coverage will be sufficient to pay potential liabilities, if any.
 
NOTE H – BONDING

In connection with its normal activities, the Company may be required to acquire a Performance bond on contracts with customers.  There were not any performance bonds required for the years ended December 31, 2013 and 2012.
 
 
13

 
 
MERIDIAN WASTE SERVICES, LLC
Notes to Financial Statements
For the Years Ended December 31, 2013 and 2012
 
NOTE I – NEW ACCOUNTING PRONOUNCEMENTS

In February 2013, the Financial Accounting Standards Board issued an Accounting Standards Update to the Comprehensive Income Topic in the Accounting Standards Codifications.  This update requires separate presentation of the components that are reclassified out of accumulated other comprehensive income either on the face of the financial statements or in the notes to the financial statements.  This update also requires companies to disclose the income statement line items impacted by any significant reclassifications, such as the gains and losses on cash flow hedges and defined benefit pension adjustments.  The adoption of the standard did not have an impact on our consolidated financial condition, results of operations or cash flows.

Other accounting standards that have been issued or proposed by the FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.
 
NOTE J – SUBSEQUENT EVENTS

 
The Company has evaluated subsequent events through July 16, 2014, the date the financial statements were available to be issued.

 
On May 15, 2014 the Company signed an asset purchase agreement with Here To Serve – Missouri Waste Division, LLC, a Missouri limited liability company.  A down payment has been received in the amount of $25,000 which is recorded as a current liability on the Company’s books.