Ascendiant Capital Markets, LLC Initiates Coverage with Buy and $5.00 Target

Initiating with BUY: We are initiating coverage of BioHiTech Global, Inc. with a BUY rating and $5.00 price target. BHTG is an innovative waste management services company with proprietary disruptive technologies providing sustainable waste disposal and supply chain management solutions for businesses and municipalities of all sizes. Its cost-effective technology platforms can virtually eliminate landfill usage through real-time data analytics to reduce waste generation, biological disposal of food waste at the point of generation, and the processing of municipal solid waste into a valuable renewable fuel.

First HEBioT™ in the U.S. drives growth: HEBioT stands for high-efficiency biological treatment, a patented high efficiency mechanical and biological treatment process that takes in mixed municipal waste and produces an EPA recognized solid recovered fuel ("SRF") that can be used as a partial replacement for coal in various applications. While the HEBioT process is common in the EU, it has not reached the U.S. until now. BHTG has an exclusive license to use the technology 11 States. BHTG’s first HEBioT plant was completed in April 2019. The company anticipates it will generate $7 million of high margin revenue/year by processing up to 110,000 tons of municipal solid waste/year. 50% of the waste will be converted to SRF and a total of 80% of the waste entering the facility will be diverted away from landfills. The 56,000- square foot Facility is completely enclosed and fully automated with no waste being exposed to the outside environment and no workers in direct contact to the waste processing.

Large growth opportunity from multiple revenue streams: The company collects tipping fees from municipalities that dump residential and commercial waste in its facilities, it then processes 50% of the material into fuel that is sold to a local cement company thus reducing the cement company’s dependence on fossil fuels and its emission of air pollutants. It markets on-site digesters that small and large business alike can use to keep waste out of landfills. Many cities and states have already banned landfill disposal of food waste generated by large, commercial food waste generators, with pending legislation in numerous others. We anticipate this trend to continue as sustainability efforts advance. It also provides waste management services.

Topline growth could reach triple-digits. We believe the new HEBioT plant will drive topline growth of more than 100% in 2020 and if the company executes on plan, we may see similar growth for several years.

Executing on plan. The management team has a multi-year track record of meeting milestones.

Current valuation attractive: Our $5.00 price target is derived from synthetic dividend discount model and represents significant upside from the current share price. We believe this valuation balances out the company’s risks with the high growth prospects and large upside opportunity.

Company Description
BHTG provides cost-effective technology and management solutions for sustainable waste disposal using: mixed municipal waste processing and conversions facilities; on-site waste disposal and cloud-based analytics and; management services.

INVESTMENT THESIS
Initiating with BUY: We are initiating coverage of BioHiTech Global, Inc. with a BUY rating and $5.00 price target. BHTG is an innovative waste management services company with proprietary disruptive technologies providing sustainable waste disposal and supply chain management solutions for businesses and municipalities of all sizes. Its cost-effective technology platforms can virtually eliminate landfill usage through real-time data analytics to reduce waste generation, biological disposal of food waste at the point of generation, and the processing of municipal solid waste into a valuable renewable fuel.

First HEBioT™ in the U.S. drives growth: HEBioT stands for high-efficiency biological treatment, a patented high efficiency mechanical and biological treatment process that takes in mixed municipal waste and produces an EPA recognized solid recovered fuel ("SRF") that can be used as a partial replacement for coal in various applications. While the HEBioT process is common in the EU, it has not reached the U.S. until now. BHTG has an exclusive license to use the technology 11 States. BHTG’s first HEBioT plant was completed in April 2019. The company anticipates it will generate $7 million of high margin revenue/year by processing up to 110,000 tons of municipal solid waste/year. 50% of the waste will be converted to SRF and a total of 80% of the waste entering the facility will be diverted away from landfills. The 56,000-square foot Facility is completely enclosed and fully automated with no waste being exposed to the outside environment and no workers in direct contact to the waste processing.

Executing on plan. The management team has a multi-year track record of meeting milestones.

VALUATION
We are initiating coverage of BioHiTech Global, with a BUY rating and a 12-month price target of $5.00, which is based on a synthetic- dividend discount model. The model target is $5.06 which we round down to $5.00.

Our valuation model sums up all earnings per share, discounted at 15% to arrive at a per share value and terminal value growth is assumed to be GDP. Note, this model understates future growth through new products and acquisitions, probably understates the tax benefits, but offsetting that, the earnings never have a down year after 2020.

COMPANY DESCRIPTION
BHTG provides cost-effective technology and management solutions for sustainable waste disposal using: mixed municipal waste processing and conversions facilities; on-site waste disposal; and cloud-based analytics. The mixed municipal waste processing and conversion is a licensed technology called HEBioT™. BHTG controls the exclusive development rights to build and operate HEBioT facilities in 11 Northeast states and the District of Columbia. We believe this is the engine of growth for BHTG. The on-site waste disposal segment and cloud-based analytics are the legacy segments of the business. These meet the needs of companies who want to control and manage their waste streams, by keeping them out of landfills, addressing stakeholder concerns about sustainability and in the end, saving money.

PRODUCT OFFERINGS
Specifically, there are three revenue streams that fuel growth, with the largest near-term growth opportunity in building out HEBioT facilities, the first one of with is up and running in Martinsburg W. VA.

The legacy business includes on-site waste digesters which come in different sizes. The Eco-Safe Digester® is designed for mid- to large-level food waste generators that provides information allowing customers to reduce and eliminate or minimize their food waste through improved supply chain management and other efficiencies. The company developed proprietary technologies that improve the operation and monitoring of its digesters on the cloud. This allows customers access to critical data and information that can help its clients change their waste generation practices with a view of reducing the generation of waste at the source. The Eco-Safe Digester® can digest up to 3,500 pounds of food waste every day.

The Eco-Safe Digester® is currently available in three sizes to fit varying customer requirements. The appliance is manufactured using the high-quality components and materials. It is wrapped in durable stainless steel to complement industrial kitchen equipment, provide long life and resist corrosion. The Eco-Safe Digester® targets businesses that generate a high volume of waste including food service, hospitality, healthcare, government, conference centers, education centers, and stadiums. The Company estimates that the US addressable market for this type of digester is in excess of 250,000 locations and an additional 250,000 internationally.

Beginning in late 2017, it began selling its Revolution Series of Digesters. The Revolution is a technologically advanced digester targeting smaller food waste generators. It is smaller in size, easy to install, and offered at a lower price point. The Revolution Series Digesters are available in three models, the Seed, the Sprout and the Sapling, each offering a compact footprint. The Company also markets an add-on pre-processer that allows for a broader range of food waste feed stocks. The Series is capable of handling 100 to 800 pounds per day depending on the model size. The Compact footprint allows access through standard doorways, eliminating one barrier to entry of the larger Eco-Safe units. The units can be delivered through standard shipping and installed efficiently in fewer than two hours with no need for specialty utilities or hook-ups required. The Revolution Series Digesters are mainly available on a rental basis except in certain international markets where they are offered for direct sale. Under the rental model, it bundles the digester, customary maintenance service, consumables and an annual cloud license for one monthly charge. These contracts generally range from three to five years in duration.

In addition to the US domestic marketplace, the Company anticipates growth internationally with a primary focus on the United Kingdom, Singapore, Mexico and Latin America. As international communities continue to strive toward more sustainable options, the Company has identified a need for its digester platforms and BioHiTech Cloud, which is serviced by its London office and various qualified resellers in the target markets.

The Company targets municipalities that enact ordinances prohibiting commercial food waste from being disposed of in landfills. Many cities and states have already banned landfill disposal of food waste generated by large, commercial food waste generators, with pending legislation in numerous others. We anticipate this trend to continue as sustainability efforts advance. BHTG’s digester business is environmentally sustainable

SERVICES

Participating in traditional waste management services provides several integration opportunities for the Company to integrate with its other lines of business. Traditional services providers typically have existing direct relationships with customers targeted for its digesters. By being aligned with the traditional waste collector, the Company can leverage those existing relationships through customized service agreements that can result in installations of digesters that benefit the Company, the waste collector and their customers. Additionally, municipal solid waste that is typically delivered to transfer stations or directly to landfills can provide a reliable source feedstock for its planned HEBioT plants.

On January 25, 2018, the Company made its first investment in waste collection by entering into a Membership Interest Purchase Agreement (the “Purchase Agreement”) to a non-controlling number of membership units (the “Units”) of Gold Medal Group, LLC (“GM Group”), a traditional waste collection company with a materials recovery facility located in southern New Jersey and eastern Pennsylvania, which through subsequent acquisitions at the GM Group level have been expanded to West Virginia and Maryland.

The Company also entered into an Advisory Services Agreement (the “Advisory Agreement”) with Gold Medal Holdings, Inc. (“Holdings”). Pursuant to the Advisory Services Agreement, the Company will provide Holdings with advisory services relating to corporate development, strategic planning, operational and sales oversight and other general administrative and support services, as more particularly described within the Advisory Agreement. As consideration for providing these services, the Company, will be compensated with an annual advisory services fee equal to the greater of (i) $750,000 and (ii) 10% of Holdings’ annual ordinary earnings before interest, taxes, depreciation and amortization. The initial term of the Advisory Agreement is for one year. During 2018, this Advisory Agreement has subsequently been renegotiated to provide for annual fees of $1,000,000 per year and renewal beyond the initial term.

MARKET SIZE
There is a large market opportunity, which the company believes meets or exceeds $2.75 billion/year and does so while improving the environment. Digesters are the larger part of the estimate, however near-term the majority of growth is in the HEBioT product

EXECUTING ON PLAN
Since 2017, the Company has shown a solid track record in executing its business plan including the construction of a major waste processing facility that has never been built in the U.S. The next milestone we expect is revenue from its W. VA plant.

MANAGEMENT
Frank E. Celli, Chief Executive Officer. Mr. Celli is a lifelong waste industry veteran. Most recently he was co-founder and CEO of Interstate Waste Services from October 2000 until November 2006, during which time the company achieved growth of over $150 million in revenue. During his time at Interstate Waste he was responsible for all aspects of the business including collection, recycling, landfills and emerging technologies.

After selling his interests in Interstate Waste he transitioned to BioHiTech America. With over 25 years of Waste Industry experience, Mr. Celli has leveraged his knowledge of the traditional waste industry to facilitate the development of the Eco-Safe Digester and BioHiTech Cloud to begin the transformation of the organic waste industry.

He also serves as a director and officer of Entsorga West Virginia, the first resource recovery facility currently being constructed in the United States that will utilize Entsorga’s proprietary HEBioT mechanical biological treatment (“MBT”) system. Mr. Celli graduated from Pace University’s Lubin School of Business.

Robert A. Joyce, President. Bob has spent the last 30 years in the technology and engineering workplace. His diverse background includes design and development of one of the original 3D CAD systems, implementation support of some of the world’s largest cable networks, development of patent pending mobile location technologies and leadership of Inc 500 listed private companies. Previous employment includes industry leaders Arthur D. Little, Inc., Sun Microsystems, Perfect Order and Versatile Systems.

In Bob's role as President, his responsibilities include day to day management of the company’s expanding channel partner network, research and development direction, engineering, manufacturing execution, sales growth, marketing and service to its customers.

Bob is a trustee of Harrisburg University and sits on the boards of The Technology Council of Central Pennsylvania, WorkXpress and Telkore.

Brian C. Essman, Chief Financial Officer. Mr. Essman has over 30 years of experience as a senior financial executive with a wide range of industry experiences that have included strategic, operational and financial leadership roles.

Most recently, he was the CEO of Data Communiqué, Inc. a Havas Company from 1997-2014 where he was responsible for overall leadership, including strategy and tactics of the Software-as-a-Service company. From 1997 to 2007 he was COO – CFO and contributed to the growth of the company’s technology/data, printing and letter shop services and developed pricing and cost structures that created efficiencies within the company that increased gross margin rates and technology sales threefold.

Mr. Essman was previously the Chief Financial Officer at a Fidelity portfolio company and a Senior Manager and CPA at PricewaterhouseCoopers. Brian graduated with a BS in Accounting with High Honors from Boston College’s School of Management.

William M. Kratzer, Chief Technology Officer. Bill is a 20-year veteran of the IT field with extensive experience in large scale web- infrastructure, machine-to-machine computing, and mobile touch devices. In prior roles, Bill has designed, built, and supported software used by some of the world’s largest and most-demanding customers, including Comcast, GE Capital, HSBC, and MBNA Canada to name a few. Bill leads the vision and execution of BioHiTech machine-to-machine and Big Data technology strategy. Bill holds a Bachelor degree in Computer Science and Engineering from the Pennsylvania State University.

Dennis Soriano, Director of Business Development. Dennis has 43 years of experience in the Waste, Recycling and Concrete industries. Dennis has held executive level management positions at Waste Management Inc. at both the regional and corporate levels. Additionally, he served as COO of Greenstar North America and most recently CEO of Waste to Water LLC. Dennis has extensive experience in operations, business development and management of municipal contracts. Mr. Soriano’s career in the Waste and Recycling Industries has focused on working with public, private and municipal entities on projects aimed at the long-term preservation of our environment.

As Director of Business Development for Entsorga North America, Dennis will cooperatively work with the management team to advance their efforts to provide alternatives for the disposal of waste into landfills. Entsorga’ s long-term goal is the development of a network of MBT processing facilities that will provide an acceptable alternative to landfill disposal, while producing an SRF fuel substitute for coal. Mr. Soriano will draw on his years of experience to help the Entsorga team formulate and implement a successful marketing plan to achieve their goal of providing long-term sustainable solutions.

ANALYST CERTIFICATION
Each analyst hereby certifies that the views expressed in this report reflect the analyst’s personal views about the subject securities or issuers. Each analyst also certifies that no part of the analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. The analyst who prepared this report is compensated based upon the overall profitability of Ascendiant Capital Markets, LLC, which may, from time to time, include the provision of investment banking, financial advisory and consulting services. Compensation for research is based on effectiveness in generating new ideas for clients, performance of recommendations, accuracy of earnings estimates, and service to clients.

BioHiTech Global, Inc.

Ascendiant Capital Markets, LLC has not received compensation for advisory or investment banking services from the company in the past 12 months.

IMPORTANT DISCLOSURES

This report has been distributed by Ascendiant Capital Markets, LLC and is for the sole use of our clients. This report is based on current public information that we consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. This report contains information from various sources, including United States government publications, The Wall Street Journal and other periodicals, Yahoo! Finance and other sources, and is for informational purposes only and is not a recommendation to trade in the securities of the companies mentioned within the report. We seek to update our research and recommendations as appropriate, but the large majority of reports are published at irregular intervals as we consider appropriate and, in some cases, as constrained by industry regulations.

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Following are some general risks that can adversely impact future operational and financial performance and share price valuation:

(1) industry fundamentals with respect to legislation, mandates, incentives, customer demand, or product pricing; (2) issues relating to competing companies or products; (3) unforeseen developments with respect to management, financial condition or accounting policies or practices; or (4) external factors that affect the interest rates, currency, the economy or major segments of the economy. Past performance is not a guide to future performance, future returns are not guaranteed, and loss of original capital may occur. Certain transactions, including those involving futures, options, and other derivatives, give rise to substantial risk and are not suitable for all investors. Our report is disseminated primarily electronically, and, in some cases, in printed form. The information contained in this report is not incorporated into the contents of our website and should be read independently thereof. Copyright 2019 Ascendiant Capital Markets, LLC. No part of this material may be copied, photocopied or duplicated by any means or redistributed without the prior written consent of Ascendiant Capital Markets, LLC.

Risks & Considerations
Risks to attainment of our share price target include the ability to commercialize the HEBioT facility, receiving regulatory bodies approval, competition, changing macroeconomic factors, investor sentiment for investing in stocks, and changes in consumer or government priorities for waste disposal.

Ascendiant Capital Markets, LLC Rating System
BUY: We expect the stock to provide a total return of 15% or more within a 12-month period.

HOLD: We expect the stock to provide a total return of negative 15% to positive 15% within a 12-month period

SELL: We expect the stock to have a negative total return of more than 15% within a 12-month period. Total return is defined as price appreciation plus dividend yield.

Ascendiant Capital Markets, LLC Rating System
Prior to January 31, 2014, ASCM used the following rating system:

Strong Buy: We expect the stock to provide a total return of 30% or more within a 12-month period.

Buy: We expect the stock to provide a total return of between 10% and 30% within a 12-month period.

Neutral: We expect the stock to provide a total return of between minus 10% and plus 10% within a 12-month period.

Sell: We expect the stock to provide a total return of minus 10% or worse within a 12-month period.

Speculative Buy: This rating is reserved for companies we believe have tremendous potential, but whose stocks are illiquid or whose equity market capitalizations are very small, often in the definition of a nano cap (below $50 million in market cap). In general, for stocks ranked in this category, we expect the stock to provide a total return of 50% or more within a 12-month period. However, because of the illiquid nature of the stock’s trading and/or the nano cap nature of the investment, we caution that these investments may not be suitable for all parties.

Total return is defined as price appreciation plus dividend yield.

Other Important Disclosures
Our analysts use various valuation methodologies including discounted cash flow, price/earnings (P/E), enterprise value/EBITDAS, and P/E to growth rate, among others. Risks to our price targets include failure to achieve financial results, product risk, regulatory risk, general market conditions, and the risk of a change in economic conditions.

Dissemination of Research
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General Disclaimer
The information and opinions in this report were prepared by Ascendiant Capital Markets, LLC. This information is not intended to be used as the primary basis of investment decisions and because of individual client objectives it should not be construed as advice designed to meet the particular investment needs of any investor. This material is for information purposes only and is not an offer or solicitation with respect to the purchase or sale of any security. The reader should assume that Ascendiant Capital Markets, LLC may have a conflict of interest and should not rely solely on this report in evaluating whether or not to buy or sell securities of issuers discussed herein. The opinions, estimates, and projections contained in this report are those of Ascendiant Capital Markets, LLC as of the date of this report and are subject to change without notice. Ascendiant Capital Markets, LLC endeavors to ensure that the contents have been compiled or derived from sources that we believe are reliable and contain information and opinions that are accurate and complete. However, Ascendiant Capital Markets, LLC makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions contained herein, and accepts no liability whatsoever for any loss arising from any use of, or reliance on, this report or its contents. Information may be available to Ascendiant Capital Markets, LLC, or its affiliates that is not reflected in this report. This report is not to be construed as an offer or solicitation to buy or sell any security.

Additional Disclosures
Ascendiant Capital Markets, LLC is a broker-dealer registered with the United States Securities and Exchange Commission (SEC) and a member of the FINRA and SIPC. Ascendiant Capital Markets, LLC is not a Registered Investment Advisor nor is it an investment advisor registered with the Securities and Exchange Commission or with the securities regulators of any state, and at the present time is not eligible to file for federal registration.

Theodore R. O’Neill, IRC.
(949) 294-7601
[email protected]

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