Attached files
| file | filename |
|---|---|
| EX-99.3 - GlyEco, Inc. | ex99-3.htm |
| 8-K/A - GlyEco, Inc. | glyeco8ka2011813.htm |
| EX-99.2 - GlyEco, Inc. | ex99-2.htm |
Exhibit 99.1
Antifreeze Recycling, Inc.
Financial Statements
December 31, 2011
Antifreeze Recycling, Inc.
|
Index to Financial Statements
|
||
|
Page
|
||
|
Report of Independent Registered Accountants
|
1
|
|
|
Balance Sheet
|
2
|
|
|
Statement of Operations
|
3
|
|
|
Statement of Shareholders' Deficit
|
4
|
|
|
Statement of Cash Flows
|
5
|
|
|
Notes to the financial statements
|
6
|
Report of Independent Registered Public Accounting Firm
Shareholder and Board of Directors
Antifreeze Recycling, Inc.
Tea, South Dakota
We have audited the accompanying balance sheet of Antifreeze Recycling, Inc. a South Dakota corporation, as of December 31, 2011, and the related statements of operations, shareholder deficit and cash flows for the year then ended. 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 audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. 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 audit provides 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 Antifreeze Recycling, Inc. as of December 31, 2011, and the results of its operations and its cash flows for the two years then ended in conformity with accounting principles generally accepted in the United States of America.
Jorgensen & Co.
(a registered public accounting firm)
/s/Jorgensen & Co.
January 7, 2013
Lehi, UT
1
Antifreeze Recycling, Inc.
Balance Sheet
As of December 31, 2011
|
Assets
|
||||
|
Current Assets
|
||||
|
Cash
|
$ | 6,678 | ||
|
Accounts receivable (net)
|
6,890 | |||
|
Inventory
|
37,233 | |||
|
Total current assets
|
50,801 | |||
|
Fixed Assets
|
||||
|
Plant and equipment
|
166,743 | |||
|
Accumulated depreciation
|
(108,405 | ) | ||
|
Net plant and equipment
|
58,338 | |||
|
Other Assets
|
||||
|
Due from Officer
|
17,425 | |||
|
Total assets
|
126,565 | |||
|
Liabilities and Shareholder Deficit
|
||||
|
Current Liabilities
|
||||
|
Accounts payable
|
4,460 | |||
|
Line of credit
|
35,332 | |||
|
Other payables and accrued expenses
|
3,491 | |||
|
Due to related party
|
12,150 | |||
|
Current portion of long-term debt
|
18,802 | |||
|
Total current liabilities
|
74,235 | |||
|
Long-term debt less current maturities
|
59,173 | |||
|
Total liabilities
|
133,408 | |||
|
Shareholder Deficit
|
||||
|
Capital stock: 25,000, $1.00 par value common shares authorized, 2,000 shares issued and outstanding
|
2,000 | |||
|
Accumulated deficit
|
(8,843 | ) | ||
|
Total shareholder deficit
|
(6,843 | ) | ||
|
Total liabilities and shareholder deficit
|
$ | 126,565 | ||
See accompanying notes to the financial statements
2
Antifreeze Recycling, Inc.
Statement of Operations
For the Year Ended December 31, 2011
|
Net Sales
|
$ | 330,734 | ||
|
Cost of goods sold
|
226,643 | |||
|
Gross profit
|
104,092 | |||
|
Operating Expenses
|
||||
|
Executive consulting compensation fees
|
55,000 | |||
|
General and administrative
|
39,814 | |||
|
Total operating expenses
|
94,814 | |||
|
Other Income and Expenses
|
||||
|
Interest expense
|
8,874 | |||
|
Income from operations before income tax
|
404 | |||
|
Income taxes
|
- | |||
|
Net income
|
$ | 404 | ||
|
Primary and fully diluted loss per share
|
$ | 0.02 | ||
|
Weighted average shares outstanding
|
2,000 |
See accompanying notes to the financial statements
3
Antifreeze Recycling, Inc.
Statement of Shareholder Deficit
For the year ended December 31, 2011
|
Common shares
|
Paid-in Capital
|
Accumulated Deficit
|
||||||||||||||
|
Totals
|
||||||||||||||||
|
Balances 12/31/10
|
2,000 | $ | 2,000 | $ | (9,246 | ) | $ | (7,246 | ) | |||||||
|
Net income for the year
|
404 | 404 | ||||||||||||||
|
Balances 12/31/11
|
2,000 | $ | 2,000 | $ | (8,843 | ) | $ | (6,843 | ) | |||||||
See accompanying notes to the financial statements
4
Antifreeze Recycling, Inc.
Statement of Cash Flows
For the Year Ended December 31, 2011
|
Net Cash Flow From Operating Activities
|
||||
|
Net income from operations
|
$
|
404
|
||
|
Adjustments to reconcile net income to net cash provided by operating activities
|
||||
|
Depreciation
|
9,517
|
|||
|
Bad debt expense
|
140
|
|||
|
Decrease in accounts receivable
|
13,434
|
|||
|
Increase in inventory
|
(10,971
|
) | ||
|
Decrease in accounts payable
|
(418
|
) | ||
|
Increase in other payables and accrued expenses
|
1,037
|
|||
|
Net cash provided by operating activities
|
13,142
|
|||
|
Investing Activities
|
-
|
|||
|
Net cash from (used in) investing activities
|
-
|
|||
|
Financing Activities
|
||||
|
Payment on due to officer
|
(7,196
|
) | ||
|
Payment on related party note payable
|
(5,380
|
) | ||
|
Net payments on line of credit
|
(12,908
|
) | ||
|
Payments on notes payable
|
(40,271
|
) | ||
|
Proceeds from notes payable
|
62,736
|
|||
|
Net cash used by financing activities
|
(3,019
|
) | ||
|
Increase in cash during 2011
|
10,123
|
|||
|
Cash at the beginning of the year
|
(3,445
|
) | ||
|
Cash at end of year
|
$
|
6,678
|
||
|
Interest paid during year
|
$ |
8,074
|
||
|
Taxes paid during year
|
$ |
0
|
||
See accompanying notes to the financial statements
5
Antifreeze Recycling, Inc.
December 31, 2011
Notes to the financial statements
NOTE 1 - Organization and Nature of Business
Antifreeze Recycling, Inc. (“Company”) is organized as a limited liability company incorporated in the state of South Dakota on June 6, 1996. The Company’s production facilities and administrative offices are located in Tea, South Dakota. The Company collects recyclable antifreeze, processes and sells recycled antifreeze to business customers mostly in South Dakota.
NOTE 2 – Accounting Policies
The following summary of significant accounting policies of the Company is presented to assist in understanding the financial statements.
Basis of Presentation.
The preparation of the Company’s financial statements are in conformity with U.S. generally accepted accounting principles. Such principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates
Use of Estimates
The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses and may differ from actual results and may have an adverse impact on the financial condition. Management’s estimates relating to the valuation of inventory were critical to the preparation of these financial statements.
Revenue Recognition
Revenue is recognized as product is shipped and collection is reasonably assured.
Cost of Goods Sold
Cost of goods sold includes the cost paid for any products sold, including any costs for freight. Shipping costs passed to the customer, are netted against freight expenses, reducing cost of goods sold. This net results of this accounting is not considered material to the financial statement presentation.
Advertising Costs
Advertising costs are expensed as incurred. For the year ended December 31, 2011 advertising expense was $5,260.
Cash and Cash Equivalents
Cash and liquid debt instruments purchased with a remaining maturity of three months or less are considered cash for financial reporting purposes. At December 31, 2011, the Company held only demand deposits.
Accounts Receivable
Accounts receivable are uncollateralized customer obligations due under normal trade terms requiring payment within 30 days from the invoice date. Management provides for an allowance for uncollectable accounts to reflect uncertainties about collection based upon management's periodic assessment of the quality of the receivables. The allowance for doubtful accounts was $140 as of December 31, 2011.
6
Antifreeze Recycling, Inc.
December 31, 2011
Notes to the financial statements
Inventory
The Company’s inventories consist of raw materials, work-in-process, finished goods and supplies. Inventories are valued at the lower of cost (first-in, first-out method) or market. Raw materials, principally used glycol and additives, are stated at acquisition cost. Cumulative costs for the work-in-process inventory includes the cost of the raw materials plus costs added through the Company’s process of cleaning the used glycol. Finished goods valuation includes the aggregated work-in-process costs plus the costs associated processing the work-in-process with specific additives for the final salable product.
Basic and Diluted Earnings (Loss Per Share)
The Company computes net income (loss) per share in accordance with FASB Codification 260, "Earnings per Share". FASB Codification 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-con converted method. In computing Diluted EPS the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive, which is the case for the Company for the years ended December 31, 2011. There were no dilutive securities outstanding at December 31, 2011.
Property and Equipment
Property and Equipment is stated at cost and consist of plant equipment and vehicles. Depreciation is computed using the straight-line method over the estimated useful lives of the property (5 to 7 years). For the year ended December 31, 2011 depreciation expense was $9,511. Purchases of less than $5,000 and less than 2 years life expectancy are expensed in the period acquired.
Provision for Taxes
The Company is organized as a tax pass through Subchapter S Corporation. For the year ended 12/31/11, Federal and state income otherwise due from the corporation is not reflected in the Company’s financial statements. Rather, any such amounts are passed through to, and are the responsibility of, the owners of the Company’s capital stock.
NOTE 3 – Accounts Receivable
At December 31, 2011, the Company’s net accounts receivable was $6,890. Management estimates the allowance for doubtful accounts by analyzing the age of the accounts. The allowance for bad debt account at December 31, 2011 was $140.
NOTE 4 – Inventory
At December 31, 2011, the Company’s inventories consisted of the following.
|
12/31/11
|
||||
|
Raw material
|
$ | 16,213 | ||
|
Finished goods
|
8,956 | |||
|
Supplies
|
12,065 | |||
|
Total inventory
|
$ | 37,233 | ||
NOTE 5 – Equipment
The following is a schedule of fixed assets as of December 31, 2011.
|
12/31/11
|
||||
|
Plant equipment
|
$ | 110,618 | ||
|
Trucks
|
56,125 | |||
|
Accumulated depreciation
|
(108,405 | ) | ||
|
Net plant equipment
|
$ | 58,338 | ||
7
Antifreeze Recycling, Inc.
December 31, 2011
Notes to the financial statements
NOTE 6 – Major Customers and Suppliers
For the year ended December 31, 2011, no customer accounted for 5% or more of the Company’s revenues. Two suppliers provided 100% of the Company’s additive used in processing raw material to finished goods.
NOTE 7 – Debt
Notes Payable
The following schedule list information related to the Company’s notes payable.
| Principal Amount | Interest Rate | Maturity | Installment | Due | |||||||||||||
|
Note payable to US Bank, secured by Dodge truck
|
$ | 16,261 | 3.49 | % |
8/10/15
|
390.17 |
Monthly
|
||||||||||
|
US Bank note payable, secured by equipment, inventory and receivables
|
22,680 | 10.12 | % |
4/20/16
|
536.03 |
Monthly
|
|||||||||||
|
Note payable to US Bank, secured by equipment
|
21,565 | 5.99 | % |
12/25/15
|
505.60 |
Monthly
|
|||||||||||
|
Note payable to US Bank, secured by equipment
|
4,617 | 5.24 | % |
11/12/12
|
429.66 |
Monthly
|
|||||||||||
|
Related party note payable
|
12,150 | 0.00 | % | - | - | ||||||||||||
|
Solid Waste Management
Program note payable
|
12,882 | 3.00 | % |
12/1/12
|
6,586.00 |
Semi-annual
|
|||||||||||
|
Total notes payable
|
$ | 90,155 | |||||||||||||||
|
Portion due in 2012
|
(18,802 | ) | |||||||||||||||
|
Related party demand note
|
(12,150 | ) | |||||||||||||||
|
Net long term debt
|
$ | 59,203 | |||||||||||||||
Line of Credit and Short Term Financing
As of December 31, the Company owed $35,332 on a $60,000 line of credit with US Bank. The note bears interest at a variable rate currently at 8.25% and is payable in monthly installments of 2.5% of the outstanding balance. The proceeds are to be used to fund operating costs as the need for short-term cash arises. Additionally, the Company finances operations through Capital One Visa and American Express. The balances for these sources were $2,437 and $2,023, respectively.
All of the Company’s assets are pledges as security for the Company’s debt obligations.
NOTE 8 – Common Stock
On December 31, 2011, the Company had 25,000, non-assessable, $1.00 par value shares of common stock authorized, of which 2,000 shares were issued and outstanding. As of December 31, 2011, there were no dilutive securities outstanding.
8
Antifreeze Recycling, Inc.
December 31, 2011
Notes to the financial statements
NOTE 9 – Commitments and Contingencies
Operating Lease
In February 2011, the Company renewed the lease for its operating facilities in Tea, South Dakota. The terms of the lease extend for 24 months (expiring January 2013) with monthly payments of $1,800.
Scheduled Debt Payments
Following is a schedule of debt maturities for each of the next five years and thereafter:
|
Year
|
Amount
|
|||
|
2012
|
$ | 30,952 | ||
|
2013
|
14,366 | |||
|
2014
|
15,350 | |||
|
2015
|
15,018 | |||
|
2016
|
2,289 | |||
|
After 2016
|
12,150 | |||
| $ | 90,125 | |||
NOTE 10 – Related Party Transactions
One December 31, 2011, the Company owed $12,500 to an individual related to the Company’s 51% owner. The terms loan is due on demand and carries zero interest.
During 2011, the Company borrowed $17,300 to purchase a Dodge truck for the Company’s president. This debt is recorded as a note payable by the Company, and as an amount ($17,425 at December 31, 2011) due from an officer. The balance of this loan at December 31, 2011 is $16,231.
WEBA Technologies, Inc., one of two suppliers of additive in the Company’s antifreeze recycling process, is a significant shareholder and supplier of the Company’s merger partner.
NOTE 11 – Concentrations of Credit Risk
The Company did not have cash deposits at financial institutions in excess of the federally insured limit of $250,000 as of December 31, 2011. Credit concentrations are reflected in the analysis of notes payable above. At December 31, 2011, US Bank holds approximately 72% of the Company’s notes payable. See note 6 to the financial statements
NOTE 12 – Subsequent Events
Subsequent to December 31, 2011, the Company has agreed to a merger with a larger company in its industry with an effective merger date of November 1, 2012.
9