Item 1A. Risk Factors
ITEM
1A. RISK FACTORS
You
should carefully consider the following risks. These risks could materially affect our business, results of operations or financial
condition, cause the trading price of our common stock to decline materially or cause our actual results to differ materially
from those expected or those expressed in any forward-looking statements made by us or on our behalf. In addition, there
may be additional risks of which we
are not presently aware or that we currently believe are immaterial that could have an adverse impact on our business.
Risks
Related to Our Business
Our
auditors have expressed substantial doubt about our ability to continue as a going concern.
The
accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern. As discussed
in Note 1 to the consolidated financial statements included in this report, we have incurred significant losses since inception
and have an accumulated deficit of approximately $26.9 million as of December 31, 2019 and need to raise substantial amounts of
additional funds to meet our obligations and afford us time to develop profitable operations. There can be no assurance that we
will be able to raise capital, obtain debt financing, or improve operating results sufficiently to continue as a going concern,
if at all. The consolidated financial statements included in this report do not include any adjustments that might result from
the outcome of this uncertainty.
We
are subject to extensive governmental regulation, which is frequently difficult, expensive, and time-consuming with which to comply;
noncompliance could adversely affect our operations and efforts to grow our business results.
The
industries in which we operate are subject to extensive federal, state and local laws and regulations. Our business requires us
to obtain many approvals, certificates, licenses, permits and other types of governmental authorizations and to comply with various
laws and regulations in every jurisdiction in which we operate. Federal, state and local regulations change often, and new regulations
are frequently adopted. Changes in the regulations could require us to obtain new authorizations or to change the way in which
we operate our business. We might be unable to obtain the new authorizations that we require, and the cost of compliance with
new or changed laws and regulations could be significant.
Many
of the authorizations that we require, especially those to build and operate facilities, are difficult and time-consuming to obtain.
They may also contain conditions or restrictions that limit our ability to operate efficiently, and they may not be issued as
quickly as we need them or at all. If we cannot obtain the authorizations, or if they contain unfavorable conditions, it could
substantially impair our operations and reduce our revenues and have a material adverse effect on our business, results of operations
and financial condition.
If
we encounter regulatory compliance issues in the course of operating our businesses, we may experience adverse publicity, which
may intensify if such non-compliance results in civil or criminal liability. This adverse publicity may harm our reputation, and
result in difficulties in attracting new customers, or retaining existing customers.
The
level of governmental enforcement of environmental and other regulations has an uncertain effect on our business and could reduce
the demand for our services.
We
believe that strict enforcement of laws and regulations relating to regulated industrial
cleaning, environmental compliance, renewable energy and waste minimization/management can have a
positive effect on our business, as these laws and regulations may increase the demand for our products and services. Relaxation
of enforcement, government shutdowns, or other changes in governmental regulation of the industries in which we operate could
increase the number of competitors we face or reduce or delay the need for our services.
11
We
may incur significant charges as a result of divestitures.
During
the third quarter of 2017, we sold our fixed railcar cleaning division which includes substantially all assets and liabilities
of Tactical (except for cash) as well as three locations in REGS, including Illinois, Maryland and Pennsylvania. In the fourth
quarter of 2019, we ceased bidding on or accepting all new contracts in the REGS industrial cleaning activities and discontinued
the operations of REGS going forward. We continue to evaluate the performance of our assets and businesses.
Based on this evaluation, we may sell certain assets or businesses or exit particular markets. Any impairments and losses on divestiture
resulting from this process may cause us to record significant charges, including those related to goodwill and other intangible
assets. In addition, divestitures may not yield the targeted improvements in our business. Divestitures involve risks, including
difficulties in the separation of operations, services, products and personnel, disruption in our operations or businesses, finding
a suitable purchaser, the diversion of management’s attention from our other businesses, the potential loss of key employees,
the erosion of employee morale or customer confidence, and the retention of contingent liabilities related to the divested business.
Any charges that we are required to record or the failure to achieve the intended financial results associated with divestitures
of businesses or assets could have a material adverse effect on our business, financial condition or results of operations.
Our
substantial indebtedness could adversely affect our financial condition and ability to fulfill our obligations .
We
currently have a substantial amount of outstanding indebtedness. As of December 31, 2019, we had an accumulated deficit of approximately
$27.0 million, with total current assets and liabilities of approximately $1.6 million and $8.6 million respectively. Included
in the liabilities are approximately $2.4 million of short-term notes, $155,000 of short-term notes to a related party and approximately
$1.6 million of convertible notes. In addition, as of December 31, 2019, the amounts owed for past due payroll taxes, penalty
and interest was approximately $1.1 million. There can be no assurance that the IRS will not demand immediate payment of the amounts
owed.
There
can be no assurance that we will secure additional financing for working capital, increase revenues and achieve the desired result
of net income and positive cash flow from operations in future years. As of December 31, 2019, we have cash and cash equivalent
assets of $354,700. If we are unable to generate sufficient cash flow in the future to service our debt, we may be required to
refinance all or a portion of our existing debt or to obtain additional financing. There can be no assurance that any refinancings
will be possible or that any additional financing could be obtained on terms acceptable to us. The inability to obtain additional
financing could have a material adverse effect on our financial position, liquidity and results of operations. Our substantial
indebtedness subjects us to various risks, including:
●
we
may be unable to satisfy our obligations under our outstanding indebtedness;
●
we
may be more vulnerable to adverse general economic and industry conditions;
●
we
may find it more difficult to fund future working capital, capital expenditures, acquisitions, general corporate purposes
or other purposes; and
●
we
may have to dedicate a substantial portion of our cash resources to the payments on our outstanding indebtedness, thereby
reducing the funds available for operations and future business opportunities.
We
have a history of losses and we may not be able to achieve profitability in the future.
We
continue to incur losses in operations. We have experienced recurring losses and have accumulated a deficit of approximately $27.0
million as of December 31, 2019. For the year ended December 31, 2019, we incurred net losses from continuing operations of approximately
$0.9 million. We had a working capital deficit of approximately $7.1 million at December 31, 2019. These factors raise substantial
doubt about the ability of the Company to continue to operate as a going concern. It may be necessary for us to rely on external
financing to supplement working capital to meet our liquidity needs in the fiscal years ended 2020 and 2021. The success of securing
such financing on terms acceptable to us, if at all, cannot be assured. If we are unable to achieve the financing necessary to
continue our plan of operations, our stockholders may lose their entire investment in the Company.
We
are subject to operating and litigation risks that may not be covered by insurance.
Our
business operations are subject to all of the operating hazards and risks normally incidental to the handling, storage and disposal
of hazardous products. These risks could result in substantial losses due to personal injury and/or loss of life, and severe damage
and destruction of property and equipment arising from explosions or other catastrophic events. As a result, we may become a defendant
in legal proceedings and litigation arising in the ordinary course of business. Additionally, environmental contamination could
result in future legal proceedings. There can be no assurance that our insurance coverage will be adequate to protect us from
all material expenses related to pending and future claims or that such levels of insurance would be available in the future at
acceptable prices, if at all.
12
In
addition, a disruption of our business caused by a casualty event at a facility of ours or one of our customers may result in
the loss of business, profits or customers during the time of the disruption. As such, our insurance policies may not fully compensate
us for these losses.
We
have substantial customer concentration, with a limited number of customers accounting for a substantial portion of our 2019 revenues .
As
of December 31, 2019, we had two customers with sales in excess of 10% of our revenues. There are risks whenever a large percentage
of total revenues are concentrated with a limited number of customers. It is not possible for us to predict the future level of
demand for our services that will be generated by these customers or the future demand for the products and services of these
customers in the end-user marketplace. In addition, revenues from these larger customers may fluctuate from time to time based
on the commencement and completion of projects, the timing of which may be affected by market conditions or other facts, some
of which may be outside of our control. These customers may pressure us to reduce the prices we charge for our products and services
which could have an adverse effect on our margins and financial position and could negatively affect our revenues and results
of operations. If either of our two largest customers terminates our arrangements, such termination would negatively affect our
revenues and results of operations.
Aggressive
pricing by existing competitors and the entrance of new competitors could significantly and adversely affect our results of operations.
The
industries in which we participate are highly competitive. This competition may require us to reduce our prices in the future
or may affect our ability to increase prices in the future. Price reductions or our inability to increase prices could significantly
and adversely affect our results of operations.
We
face direct competition from a large number of small, local competitors. We
face competition from companies with greater resources than us, companies with closer geographic proximity to our customers and
potential customers, companies with service offerings we do not provide and companies that can provide lower pricing than we can
in certain instances. An increase in the number or location of commercial treatment or disposal facilities for waste, significant
expansion of existing competitor permitted capabilities, acquisitions by competitors or a decrease in the treatment or disposal
fees charged by competitors could materially and adversely affect our results of operations. We face
competition from these businesses, and competition from them is likely to exist in new locations to which we may expand in the
future. In addition, large national companies with substantial resources operate in the markets we serve.
Adverse
economic conditions, government funding or competitive pressures affecting our customers could harm our business.
We
serve a diverse customer base that includes oil and gas refineries, regional landfills,
medical waste destruction operations, agricultural companies and food and beverage companies and other commercial and industrial
customers that are, or may be, affected by changing economic conditions and competition. These customers may be significantly
impacted by deterioration in the general economy and may curtail waste production and/or delay spending on plant maintenance,
waste cleanup projects and other discretionary work. Factors that can impact general economic conditions and the level of spending
by customers include the general level of consumer and industrial spending, increases in fuel and energy costs, residential and
commercial real estate and mortgage market conditions, labor and healthcare costs, access to credit, consumer confidence and other
macroeconomic factors affecting spending behavior. Market forces may also compel customers to cease or reduce operations, declare
bankruptcy, liquidate or relocate to other countries, any of which could adversely affect our business.
Our
operations are significantly affected by potential seasonal fluctuations due to weather; budgetary decisions and cash flow limitations
influencing the timing of customer spending for the products and services we provide; the timing of regulatory agency decisions
and judicial proceedings; changes in government regulations and enforcement policies and other factors that may delay or cause
the cancellation of projects involving our products and services. We do not control such factors, which can cause our revenue
and income to vary significantly from quarter to quarter and year to year.
13
Our
proprietary rights may be difficult to enforce.
We
generally rely on patents, copyrights, trademarks, and trade secret laws to establish and maintain proprietary rights in our technology
and products. Although we hold several patents and other patent applications are currently pending, there can be no assurance
that any of these patents or other proprietary rights will not be challenged, invalidated, or circumvented or that our rights
will, in fact, provide competitive advantages to us. In addition, there can be no assurance that patents will be issued from pending
applications or that claims allowed on any patents will be sufficiently broad to protect our technology. If we are unable to protect
our proprietary rights, we may find ourselves at a competitive disadvantage to others who need not incur the substantial expense,
time and effort required to create innovative products that have enabled us to be successful, which could have a material adverse
effect on our business, financial condition and results of operations.
We
may be found to infringe on intellectual property rights of others.
Third
parties may assert claims or initiate litigation related to exclusive patent, copyright, trademark, and other intellectual property
rights that are relevant to us. The asserted claims and/or initiated litigation can include claims against us or our manufacturers,
suppliers, or customers, alleging infringement of their proprietary rights with respect to our existing or future products or
components of those products. Regardless of the merit of these claims, they can be time-consuming, result in costly litigation
and diversion of technical and management personnel, or require us to develop a non-infringing technology or enter into license
agreements. Where claims are made by customers, resistance even to unmeritorious claims could damage customer relationships. There
can be no assurance that licenses will be available on acceptable terms and conditions, if at all, or that any arrangements with
our suppliers will be available or adequate to cover our costs if a claim were brought directly against us or our customers. Furthermore,
because of the potential for high court awards that are not necessarily predictable, it is not unusual to find even arguably unmeritorious
claims settled for significant amounts. If any infringement or other intellectual property claim made against us by any third
party is successful, if we are required to indemnify a customer with respect to a claim against the customer, or if we fail to
develop non-infringing technology or license the proprietary rights on commercially reasonable terms and conditions, our business,
operating results, and financial condition could be materially and adversely affected.
Our
success in the future may depend on our ability to establish and maintain strategic alliances, and any failure on our part to
establish and maintain such relationships could adversely affect our market penetration and revenue growth.
Our
ability to establish strategic relationships will depend on a number of factors, many of which are outside our control, such as
the competitive position of our technology and our products relative to our competitors. We can provide no assurance that we will
be able to establish strategic relationships successfully. In addition, strategic alliances that we may establish could subject
us to a number of risks, including risks associated with sharing proprietary information and loss of control of operations that
are material to our business and profit-sharing arrangements. Moreover, strategic alliances may be expensive to implement, require
us to issue additional shares of our common stock and subject us to the risk that the third party will not perform its obligations
pursuant to the arrangement, which may subject us to losses over which we have no control or expensive termination arrangements.
Due
to financial and experience constraints, we expect to rely on strategic relationships to develop our business, including those
relating to product development, manufacturing, marketing and sales. Identifying and developing strategic alliance candidates
is expensive and time-consuming. In addition, these arrangements may leave us vulnerable to capacity constraints and reduced component
availability, and our control over customer relationships, product delivery schedules, manufacturing and costs would be limited.
In addition, we may have limited control over quality systems and controls, and therefore must rely on our relationships to manufacture
our products to our quality and performance standards and specifications. Delays, component shortages, including custom components
that are manufactured for us at our direction, and other manufacturing and supply problems, could impair the manufacture and distribution
of our products and ultimately our company’s reputation. Furthermore, any adverse change in the financial or business condition
of our strategic alliance counterparts could disrupt our ability to develop, manufacture, market and sell our products. If we
are required to change our strategic alliance counterparts or bring those functions in-house, we may lose revenue, incur increased
costs, and damage our relationships with other customers and strategic alliances.
14
Attacks
on our information technology systems could damage our reputation, negatively impact our businesses and expose us to litigation
risk.
We
use computers in substantially all aspects of our business operations. We also use mobile devices, social networking and other
online activities to connect with our employees and our customers. We rely heavily on various proprietary and third-party information
systems. Our reputation for the secure handling of customer and other sensitive information is critical to the success of our
business. We are potentially subject to cyber-attacks, including state-sponsored cyber-attacks, industrial espionage, insider
threats, computer denial-of-service attacks, computer viruses, ransomware and other malware, wire fraud and other cyber incidents.
Our incident response efforts, business continuity procedures and disaster recovery planning may not be entirely effective as
our information technology and network infrastructure may still be vulnerable to attacks by hackers or breaches due to employee
error, malfeasance, computer viruses, power outages, natural disasters, acts of terrorism, breaches with respect to third-party
systems or other disruptions. A cybersecurity incident and breach of our information systems could lead to theft, destruction,
misappropriation or release of sensitive and/or confidential information or intellectual property, which could result in business
disruption, negative publicity, violation of privacy laws, loss of customers, brand damage, adverse financial and operational
results, and potential litigation.
Our
management depends on relevant and reliable information for decision-making purposes, including key performance indicators and
financial reporting. Any significant loss of data, failure to maintain reliable data, disruptions affecting our information systems,
or delays or difficulties in transitioning to new systems could adversely affect our business, financial condition and results
of operations. In addition, our ability to continue to operate our businesses without significant interruption in the event of
a disaster or other disruption depends in part on the ability of our information systems to operate in accordance with our disaster
recovery and business continuity plans. If our information systems fail and our redundant systems or disaster recovery plans are
not adequate to address such failures, or if our business interruption insurance does not sufficiently compensate us for any losses
that we may incur, our revenues and profits could be reduced and the reputation of our brands and our business could be adversely
affected. In addition, remediation of such problems could result in significant, unplanned capital investments.
The
handling of regulated waste exposes us to the risk of environmental liabilities.
As
a company engaged in regulated waste management, we face risks of liability for environmental contamination. CERCLA and similar
state laws impose strict liability on current or former owners and operators of facilities that release hazardous substances into
the environment as well as on the businesses that generate those substances and the businesses that transport them to our facilities.
Responsible parties may be liable for substantial investigation and clean-up costs even if they operated their businesses properly
and complied with applicable federal and state laws and regulations. Liability under CERCLA may be joint and several, which means
that if we were found to be a business with responsibility for a particular CERCLA site, we could be required to pay the entire
cost of the investigation and clean-up even if we were not the party responsible for the release of the hazardous substance and
other companies might also be liable.
If
we were to incur liability under CERCLA and if we could not identify other parties responsible under the law whom we are able
to compel to contribute to our expenses, the cost to us could be substantial and could have a material adverse effect on our business,
results of operations and financial condition and reduce our liquidity. If there were a claim against us that a customer might
be legally liable for, we might not be successful in recovering our damages from the customer.
15
We
have significant deferred tax assets, and any impairments of or valuation allowances against these deferred tax assets in the
future could materially adversely affect our results of operations and financial condition.
We
intend to use significant deferred tax assets to offset income. The extent to which we can use deferred tax assets may be limited
for various reasons, including but not limited to changes in tax rules or regulations and if projected future taxable income becomes
insufficient to recognize the full benefit of our net operating loss (“NOL”) carryforwards prior to their expiration.
Additionally, our ability to fully use these tax assets will also be adversely affected if we have an “ownership change”
within the meaning of Section 382 of the U.S. Internal Revenue Code of 1986, as amended. An ownership change is generally defined
as a greater than 50% increase in equity ownership by “5% stockholders” (as that term is defined for purposes of Section
382) in any three-year period. Future changes in our stock ownership, depending on the magnitude, including the purchase or sale
of our common stock by 5% stockholders, and issuances or redemptions of common stock by us, could result in an ownership change
that would trigger the imposition of limitations under Section 382. Accordingly, there can be no assurance that in the future
we will not experience limitations with respect to recognizing the benefits of our NOL carryforwards and other tax attributes
for which limitations could have a material adverse effect on our results of operations, cash flows or financial condition.
Our
businesses are subject to operational and safety risks.
Provision
of environmental, energy and industrial services to our customers involves risks such as equipment defects, malfunctions and failures
and natural disasters, which could potentially result in releases of hazardous materials, damage to or total loss of our property
or assets, injury or death of our employees or a need to shut down or reduce operations while remedial actions are undertaken.
Our employees often work under potentially hazardous conditions. These risks expose us to potential liability for pollution and
other environmental damages, personal injury, loss of life, business interruption and property damage or destruction. We must
also maintain a solid safety record in order to remain a preferred supplier to our major customers. While we seek to minimize
our exposure to such risks, such efforts and insurance may not be adequate to cover all of our potential liabilities, which would
have a material adverse effect on our operations, financial condition and financial results.
The
extensive environmental regulations to which we are subject may increase our costs and potential liabilities and limit our ability
to expand our facilities.
Our
operations and those of others in the environmental services industry are subject to extensive federal, state and local environmental
requirements. In particular, if we fail to comply with government regulations governing the handling and transport of hazardous
materials, such failure could negatively impact our ability to operate our business. Efforts to conduct our operations in compliance
with all applicable laws and regulations, including environmental rules and regulations, require programs to promote compliance,
such as training employees and customers and purchasing health and safety equipment. Even with these programs, we and other companies
in the environmental services industry are routinely faced with government enforcement proceedings, which can result in fines
or other sanctions and require expenditures for remedial work on waste management facilities and contaminated sites. Certain of
these laws impose strict and, under certain circumstances, joint and several liability on current and former owners and operators
of facilities that release regulated materials or that generate those materials and arrange for their disposal or treatment at
contaminated sites. Such liabilities can relate to required cleanup of releases of regulated materials and related natural resource
damages. The landscape of environmental regulation to which we are subject can change. Changes to environmental regulation may
result in increased operating and compliance costs or, in more significant cases, changes to how our facilities are able to operate.
We constantly monitor the landscape of environmental regulation; however, our ability to navigate through any changes to such
regulations may result in a material effect on our operations, cash flows or financial condition.
Some
environmental laws and regulations impose liability and responsibility on present and former owners, operators or users of facilities
and sites for contamination at such facilities and sites without regard to causation or knowledge of contamination. Releases of
regulated materials at and from our facilities and those of our customers, or the disposal of regulated materials at third-party
sites, which may require investigation and remediation, and potentially result in claims of personal injury, property damage and
damages to natural resources. Investigations undertaken in connection with these activities may lead to discoveries of contamination
that must be remediated, and closures of facilities might trigger compliance requirements that are not applicable to operating
facilities. Remedial activities could result in a material effect upon our operations or financial condition and result in material
costs.
16
We
may not be able to obtain timely or cost-effective transportation services which could adversely affect our profitability.
Revenue
at each of our facilities is subject to potential risks from disruptions in rail or truck transportation services relied upon
to deliver waste. Increases in fuel or labor costs, shortages of qualified drivers and unforeseen events such as labor disputes,
public health pandemics, severe weather, natural disasters and other acts of God, war or terror could prevent or delay shipments
and reduce both volumes and revenue. Transportation services may also be limited by economic conditions, including increased demand
for rail or trucking services, resulting in periods of slower service to the point that individual customer needs cannot be met.
No assurance can be given that we can procure transportation services in a timely manner at competitive rates or pass through
fuel cost increases in all cases. Such factors could also limit our ability to achieve revenue and earnings objectives.
We
may not be able to effectively adopt or adapt to new or improved technologies.
We
expect to continue implementing new or improved technologies at our facilities to meet customer service demands and expand our
business. If we are unable to identify and implement new technologies in response to market conditions and customer requirements
in a timely, cost effective manner, our financial condition and results of operations could be adversely impacted.
In
the event that we undertake future acquisitions, we may not be able to successfully execute our acquisition strategy.
We
may experience delays in making acquisitions or be unable to make acquisitions we desire for a number of reasons. Suitable acquisition
candidates may not be available at purchase prices that are attractive to us or on terms that are acceptable to us. In pursuing
acquisition opportunities, we typically compete with other companies, some of which have greater financial and other resources
than we do. We may not have available funds or common stock with a sufficient market price to complete an acquisition. If we are
unable to secure sufficient funding for potential acquisitions, we may not be able to complete acquisitions that we otherwise
find advantageous.
Acquisitions
that we undertake could be difficult to integrate, disrupt our business, dilute stockholder value and adversely affect our results
of operations.
Acquisitions
involve multiple risks. Our inability to successfully integrate an acquired business could have a material adverse effect on our
financial condition and results of operations. These risks include but are not limited to:
●
failure
of the acquired company to achieve anticipated revenues, earnings or cash flows;
●
assumption
of liabilities, including those related to environmental matters, that were not disclosed to us or that exceed our estimates;
●
problems
integrating the purchased operations with our own, which could result in substantial costs and delays or other operational,
technical or financial problems;
●
potential
compliance issues relating to the protection of health and the environment, compliance with securities laws and regulations,
adequacy of internal controls and other matters;
●
diversion
of management’s attention or other resources from our existing business;
●
risks
associated with entering markets or product/service areas in which we have limited prior experience;
●
increases
in working capital investment to fund the growth of acquired operations;
●
unexpected
capital expenditures to upgrade waste handling or other infrastructure or replace equipment to operate safely and efficiently;
●
potential
loss of key employees and customers of the acquired company; and
●
future
write-offs of intangible and other assets, including goodwill, if the acquired operations fail to generate sufficient cash
flows.
If
we are not able to achieve these objectives, the anticipated benefits of the acquisition may not be realized fully, if at all,
or may take longer to realize than expected. It is possible that the integration process could result in the loss of key employees,
the disruption of our ongoing business, failure to implement the business plan for the combined businesses, unanticipated issues
in integrating service offerings, logistics information, communications and other systems or other unanticipated issues, expenses
and liabilities, any or all of which could adversely affect our ability to maintain relationships with customers and employees
or to achieve the anticipated benefits of the acquisition.
17
We
face risks associated with project work and services that are provided on a non-recurring basis.
A
portion of our revenue is derived from short-term projects or services that we provide on a non-recurring basis, which are not
predictable in terms of frequency, size or duration. Our customers’ need for these services could be influenced by regulatory
changes, fluctuations in commodity market performance, natural disasters and acts of God, or other factors beyond our control.
Variability in the demand for these services could adversely affect our business, financial condition and results of operations.
Some
of our customers have suffered financial difficulties, which could negatively impact our operating results.
We
provide service to a number of customers, some of which have suffered significant financial difficulties in recent years. Some
of these entities could be unable to pay amounts owed to us or renew contracts with us at previous or increased rates. The inability
of our customers to pay us in a timely manner or to pay increased prices, particularly our larger accounts, could negatively affect
our operating results.
Our
success depends on our executive officers and other key personnel. If we lose key personnel or are unable to hire additional qualified
personnel, our business may be harmed.
We
have traditionally operated with limited resources and infrastructure. As of the date of this report, we have a total of twenty-two
employees, including our management team. We believe our success will depend in large part on our ability to attract and retain
highly skilled administrative, technical, managerial, sales, and marketing personnel. Competition for these personnel is intense.
Our financial condition or volatility or lack of positive performance in our stock price or equity incentive awards may also adversely
affect our ability to hire and retain key employees. In addition, there is some seasonality to our business which requires us
to use day laborers. The loss of services of any of our key personnel, the inability to retain and attract qualified personnel
in the future, or delays in hiring required personnel, particularly engineering and sales personnel, could make it difficult to
meet key objectives, such as timely and effective product development, manufacturing and sales.
Natural
disasters, terrorist attacks or other catastrophic events could negatively affect our business, financial condition, and results
of operations.
Natural
disasters such as hurricanes, typhoons or earthquakes could negatively affect our operations and financial performance. Such events
could result in physical damage to one or more of our facilities or equipment, the temporary lack of an adequate work force in
a market, and the temporary disruption in transportation services which we rely on to deliver waste to our facilities. These events
could prevent or delay shipments and reduce both volumes and revenue. Weather conditions and other event driven special projects
may also cause variations in our results. We may be required to suspend operations in some of our locations, which could have
a material adverse effect on our business, financial condition, and results of operations.
The
long-term impact of terrorist attacks, such as the attacks that occurred on September 11, 2001, and the magnitude of the threat
of future terrorist attacks are not known at this time. Uncertainty surrounding hostilities in the Middle East or other sustained
military campaigns may affect our operations in unpredictable ways. Changes in the insurance markets attributable to terrorist
attacks may make certain types of insurance more difficult for us to obtain. Moreover, the insurance that may be available to
us may be significantly more expensive than our existing insurance coverage. Instability in the business and financial markets
as a result of terrorism or war could also affect our ability to raise capital and conduct business.
In
late 2019, a novel strain of coronavirus, COVID-19, was reported to have surfaced in Wuhan, China. Since then, the COVID-19 coronavirus
has spread to multiple countries, including the United States. If the COVID-19 coronavirus continues to spread, we may experience
disruptions that could severely impact our business, including; availability of necessary items or availability of workforce in
a non-essential business either due to voluntary or mandated quarantine. The global outbreak of the COVID-19 coronavirus continues
to rapidly evolve. The extent to which the COVID-19 coronavirus may impact our business will depend on future developments, which
are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration
of the outbreak, travel restrictions and social distancing in the United States and other countries, business closures or business
disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.
18
Risks
Related to Our Common Stock
The
material weaknesses in our internal control over financial reporting may adversely impact our company.
As
discussed in Part II, Item 9A, entitled “Controls and Procedures,” in this report, we have concluded that our internal
control over financial reporting was not effective.
We are currently working to remediate the
material weaknesses. We cannot be sure when we will successfully remediate the material weakness or whether compensating
controls will be effective in preventing or detecting material errors. The remediation may require substantial time and resources
to successfully implement. We may be unable to remediate these weaknesses until we have received additional funding that
may be necessary to hire additional personnel. Until we have sufficient internal finance and accounting staff, we plan to work
closely with external financial advisors to document the existing financial processes, risk assessment, and internal controls
systematically. These material weaknesses could cause creditors, customers, investors, regulators, strategic alliances
and others to lose confidence in the effectiveness of our internal controls and the accuracy of our financial statements and other
information, all of which could have a material adverse impact on our business, results of operations and financial condition.
We
are subject to the reporting requirements of the federal securities laws, which can be expensive .
We
are a public reporting company in the United States and therefore, we are subject to the information and reporting requirements
of the Securities Exchange Act of 1934 and other federal securities laws, and the compliance obligations of the Sarbanes-Oxley
Act. The costs of preparing and filing annual and quarterly reports and other information with the SEC will cause our expenses
to be higher than they would be if we were a privately held company.
The
issuance or sale of equity, convertible or exchangeable securities in the market, or the perception of such future sales or issuances,
could lead to a decline in the price, if any, of our common stock.
Our
board of directors has the authority to issue up to 70,000,000 shares of our common stock. Any issuance of equity or securities
convertible into or exchangeable for our equity securities, including for the purposes of expansion of our business, may have
a dilutive effect on our existing stockholders.
The
perceived risk associated with the possible issuance of a large number of shares of common stock or securities convertible into
or exchange for a large number of shares of our common stock could cause some of our stockholders to sell their stock, thus causing
the price of our stock to decline. Subsequent sales of our common stock in the open market or the private placement of our common
stock or securities convertible into or exchangeable for our common stock could also have an adverse effect on the market price,
if any, of our shares. If our stock price declines, it may be more difficult for us to or we may be unable to raise additional
capital.
Over
the course of meeting our capital needs, we have entered into various instruments that are convertible into shares of our common
stock. We may conduct further equity offerings in the future. If common stock is issued in return for additional funds, property
or services, the price per share could be lower than that paid by our current stockholders. Also, any stock we sell in the future
may be valued on an arbitrary basis by us and the issuance of shares of common stock for future services, acquisitions or other
corporate actions may have the effect of diluting the value of the shares held by our existing stockholders.
Future
sales of substantial amounts of our currently outstanding common stock in the public market, or the perception that such sales
could occur, could adversely affect prevailing trading prices of our common stock and could impair our ability to raise capital
through future offerings of equity or equity-related securities. We cannot predict what effect, if any, future sales of our common
stock, or the availability of shares for future sales, will have on the market price of our stock.
19
We
may experience volatility in our stock price, which could negatively affect your investment, and you may not be able to resell
your shares at or above the offering price.
Our
common stock has traded in the over-the-counter marketplace on the OTCQB under the symbol “SENR.”. There can be no
assurance that our common stock will continue to be, or be admitted to, trade on any established trading market or exchange. Additionally,
there can be no assurance that we will maintain the requirements for continued listing or trading on an established trading market
or exchange.
Our
common stock may not be traded actively. An illiquid market for shares of our common stock may result in lower trading prices
and increased volatility, which could negatively affect the value of your investment or your ability to sell your shares. If an
active trading market does develop, it may not last and the trading price of the shares may fluctuate widely as a result of a
number of factors, many of which are outside our control. The market price of our common stock may fluctuate significantly in
response to a number of factors, some of which are beyond our control, including:
●
our
ability to commercialize our products, services and technologies;
●
the
amount and timing of expenses associated with our research and development programs and our ability to develop enhancements
to our products and services;
●
additions
or departures of key personnel;
●
our
ability to effectively manage our growth;
●
our
ability and the terms upon which we are able to raise capital sufficient to continue our operations;
●
our
cash position;
●
sales
of our common stock by us or our stockholders in the future;
●
trading
volume of our common stock;
●
changes
in accounting practices;
●
ineffectiveness
of our internal controls;
●
disputes
or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent
protection for our technologies;
●
significant
lawsuits, including creditor, customer, patent or stockholder litigation;
●
industry
adoption of our technology or other new competing technologies;
●
our
ability to establish and expand key distribution partners;
●
our
ability to establish strategic relationships with third parties to accelerate our growth plans;
●
announcements
of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors;
●
developments
in the competitive environment, including the introduction of improved products or services by our competitors;
●
overall
performance of the equity markets;
●
publication
of research reports about us or our industry or positive or negative recommendations or withdrawal of research coverage by
securities analysts;
●
our
failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public;
●
changes
in the market valuations of similar companies;
●
general
political and economic conditions; and
●
other
events or factors, many of which are beyond our control.
We
anticipate that our operating expenses will increase significantly. If our revenues in any quarter do not increase correspondingly,
our net losses for that period will increase. Moreover, given that a significant portion of our operating expenses cannot be quickly
reduced, if we cannot obtain revenues from operations or our revenues are delayed or below expectations, our operating results
are likely to be adversely and disproportionately affected.
20
The
stock market in general, and the market for technology companies in particular, has experienced extreme price and volume fluctuations
that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry
factors may seriously affect the market price of companies’ stock, including ours, regardless of actual operating performance.
In addition, in the past, following periods of volatility in the overall market and the market price of a particular company’s
securities, securities class action litigation has often been instituted against these companies. This
type of litigation, if instituted, could result in substantial costs and a diversion of management’s attention and resources,
which would harm our business, operating results or financial condition.
We
do not presently intend to pay any cash dividends on or repurchase any shares of our common stock.
We
do not presently intend to pay any cash dividends on our common stock. Any payment of future dividends will be at the discretion
of the board of directors and will depend on, among other things, our earnings, financial condition, capital requirements, level
of indebtedness, statutory and contractual restrictions applying to the payment of dividends and other considerations that our
board of directors deems relevant. Cash dividend payments in the future may only be made out of legally available funds and, if
we experience substantial losses, such funds may not be available. Accordingly, you may have to sell some or all of your common
stock in order to generate cash flow from your investment and there is no guarantee that the price of our common stock that will
prevail in the market after this offering may never exceed the price paid by you in this offering.
Because
our shares are deemed “penny stock,” you may have difficulty selling them in the secondary trading market.
The
SEC has adopted regulations which generally define a “penny stock” to be any equity security that has a market price
of less than $5.00 per share or with an exercise price of less than $5.00 per share. Additionally, if the equity security is not
registered or authorized on a national securities exchange, the equity security also would constitute a “penny stock.”
As our common stock falls within the definition of penny stock, these regulations require the delivery, prior to any transaction
involving our common stock, of a risk disclosure schedule explaining the penny stock market and the risks associated with it.
Disclosure is also required to be made regarding compensation payable to both the broker-dealer and the registered representative
and current quotations for the securities. In addition, monthly statements are required to be sent disclosing recent price information
for the penny stocks. The ability of broker-dealers to sell our common stock and the ability of stockholders to sell our common
stock in the secondary market would be limited. As a result, the market liquidity for our common stock would be severely and adversely
affected. We can provide no assurance that trading in our common stock will not be subject to these or other regulations in the
future, which would negatively affect the market for our common stock.
ITEM
1B. UNRESOLVED STAFF COMMENTS
None
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.